In the fields of personalized healthcare, mobility, and robotics there are significant opportunities to create hardware/software systems that deliver low-power high-performance intelligence with significant differentiation. The problem is that nobody knows when these fields will transition from prototypical uses in military or aerospace to commoditized commercial markets. Given the risk and capital required, professional investors are not investing in many of these innovations, so how do we set up these innovative hardware companies so that they can innovate and survive the uncertainty of the market?
The Dutch LEI as part of Wageningen university is a.o. working on that issue.
You may want to (if you have not done already):
- check out European Union research funding http://ec.europa.eu/research/participants/portal/page/home
- look for venture capital http://finance.siemens.com/financialservices/venturecapital/
- use crowdsourcing e.g. to identify early adopters
http://www.innocentive.com/
Let's make this a little bit more specific so that we can more accurately discuss scope and scale.
To create a hardware platform with silicon differentiation is a $25-75M problem. Assuming it is a consumer market, price points are in the $5-500 range. No emerging market is big enough to earn that initial capital back in the first product cycle, so professional investors are not willing to commit that much capital to the innovation. So, what business model innovations have people been thinking about to fund these types of hardware businesses?
If you look at the traditional path for businesses that need to innovate without a working angel or venture capital market, the business teams up as a subcontractor to a larger OEM. Medical and military programs are the typical kick starter. There are several problems with this path. First, as a subcontractor it is very difficult to extract the IP from the larger project. Second, there is no channel development as the larger PM controls the customer(s) and the channel. Third, the price points of these low run-rate projects is too high to take to consumer markets. Fourth, margin in these sub-projects tends to be limited to time and material, so you really are not setting up a product business, but instead are limited to human capital businesses that do not scale well enough to bootstrap product organizations. Hence, if you look at trying to commercialize technologies that are bootstrapped in the military and aerospace you see a very low success rate, and most of these businesses become IP transfers to incumbents, and thus there is no value creation.
One of the key business innovations that Google applied to search was to leverage advertising as a means to generate revenue to fuel/accelerate the engineering innovation behind information organization and retrieval. It has lead to many other innovations in IT operations, data center design, software-based reliability, planetary computers, etc.. Are there similar adjacencies for business models that deliver medical devices or robotics applications that would help fund or accelerate the necessary innovation to further these fields so that they can produce consumer products more quickly.
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