January 3, 2020

As we gear up for the big CES conference next week, let's check the health of young device-making companies.

VC funding of North American consumer electronics startups dropped to $1.7 billion last year from $2.5 billion in 2018, Crunchbase News reported this week. It appears VCs were less excited to fund consumer device upstarts with expensive operations and steep competition.

When they've tried to crowdsource funding, many projects have sputtered or failed to ship their products.

Vocab time: Consumer device startups are often operating in a "kill zone," where they compete head-to-head with the device Goliaths (Apple, Samsung, Google, and Amazon). Two kill zone scenarios:

The bigger company acquires the startup (i.e. Google/Fitbit or Facebook/CTRL-labs) and integrates, repurposes, or kills off the original product. Big Tech copies the startup's product (this happens a lot with software).

A third scenario? The startup competes successfully in the kill zone and wins against all odds. It's possible, just not likely.