Hasta La Gadget!

James Park and his partner Eric Friedman stood out like a couple of sore thumbs.

They were in the middle of a crowd of other entrepreneurs at TechCrunch50, a small conference for startups, held in San Francisco last September.

But unlike most of their peers, the duo weren’t touting a web-based mashup, a new advertising platform or a collection of 3-D avatars for customer service. They sought attention for their hardware company, which was building a fitness gadget called Fitbit that would be part pedometer, part wellness tracker.

"We have three full-time employees and everything else is outsourced," says Park. "But we have a great idea and we have a flexible work force, and we want to build the next big thing in the gadgets business."

Consumer electronics startups are the new frontier for enterprising entrepreneurs. Once thought to be an expensive business skewed in favor of large companies with nearly unlimited access to capital, giant manufacturing facilities and armies of engineers, the business is attracting entrepreneurs who think small and move quickly. And they’re changing the consumer electronics landscape: the Chumby, LiveScribe Pulse Pen, Roku media player and Pure Digital’s Flip camcorder all owe their existence to scrappy, independents, not big corporate R&D departments. In some cases, these gadget startups have led to multimillion-dollar paydays for their founders.

Fueling this change is the explosion of the PC and cellphone industries, which have created an ecosystem of boutique industrial designers, contract manufacturing shops and online retailers that support this new generation of guerrilla hardware entrepreneurs.

Neither Park nor Friedman have experience in consumer electronics. Consummate software geeks, they studied computer science in college. Their last company was the photo-sharing startup Windup Labs that was eventually acquired by CNET. But together they’re creating a consumer hardware company on the cheap. Fitbit has raised just $2.5 million in its first round of venture financing, and the company hopes to start shipping its $100 devices this summer.

"Today with a guy or two, a good idea and about $1.5 million you can get a contract manufacturer in Asia to do your gadget," says Gadi Amit, founder of New Deal Design, a San Francisco-based industrial design firm. "About 10 years ago that would have taken 20 engineers and $10 million."

There are caveats. A cellphone can be tricky for new entrants because it requires extremely sophisticated design, specialized chips and custom software. But smaller, simpler products like the Fitbit are easier, say industry watchers.

For engineers to switch between hardware and software companies isn’t new. But Park and Friedman are different, says Amit. "James is kind of the quintessential profile of the internet entrepreneur," he says. "Now he’s doing hardware and that’s a novelty."

So what are two dot-com era survivors doing in the hardware business?

Chasing the Dream

It’s no secret in Silicon Valley that almost every engineer, venture capitalist or dot-com executive loves gadgets. IT geeks rush to Fry’s and Amazon to get their latest cellphone, e-book reader or personal planetarium. Their homes are filled with gadgets, and showing off gadgets is as much a part of networking and social bonding as drinking beer and exchanging business cards. 

Park and Friedman are no exception. About a year and a half ago, the fitness junkies were casually tossing ideas around a gadget that would track not just physical activities (walking, biking) but could also log sleep patterns. In effect, they wanted device that would produce a complete picture of a user’s physical well being.

And just like that, they decided to build one. "We like gadgets and we like building things so we thought why not make a go of this one?" says Park.

But getting Silicon Valley VCs to fund a consumer electronics hardware startup isn’t easy. "Money flows where money knows," says Jason Krikorian, former founder of Sling Media. Krikorian, together with his brother Blake, founded Sling Media in 2004 and last year sold it to EchoStar Communications for $380 million.

"The consumer electronics space is one that a lot of VCs have a bit of an allergic reaction to," says Krikorian. "VCs see the gadget consumer as hard to predict. And when it comes to the product itself, they see a lot of challenges, from cash requirements to distribution and dealing with retail."

Sling Media ultimately raised $57.5 million in funding from DCM and Mobius Capital, among others. It’s a fair chunk of change but many software startups draw as much. Take the Marc Andreesen-backed social networking site Ning, which has raised about $60 million so far.

Park and Friedman knew the odds were stacked against them as they pitched a gadget company. But they were counting on a new kind of strategy. Instead of asking for millions, they would start low. All they needed was a modest first round to kick off operations.

That’s how they found True Ventures. A venture firm focused on early stage companies, True Ventures has funded companies such as tech blog Gigaom, web-based instant messaging platform Meebo, and online gaming company Hive7.

"We offered a pretty conventional business model," says Park. "We build something and sell it to people at a cost that is higher than what it takes to produce. And we don’t want too much money to get started."

Idea to Execution

Next step in their plan: finding an industrial designer to take their feature set and turn it into a hardware package.

In the last few years, a number of boutique industrial design shops
have sprung up focusing on consumer electronics. Fuseproject founder Yves Behar created the stylish Jawbone headset. MindTribe has helped engineer Pure Digital’s popular Flip Mino
camera.

Park and Friedman turned to Gadi Amit and his team at New Deal Design.
A former vice-president of design at Frog Design, one of the largest
and most well-known design companies, Amit broke away in 2000 to start
his own firm. Amit and his team of 15 engineers specialize in consumer
electronics startups. New Deal Design’s clients include Dell, Netgear,
Sling Media and electric-car service station company Better Place. 

Increasingly, says Amit, more entrepreneurs are looking towards
hardware for their next big idea. "Everyone can’t be the next Michael
Dell or Steve Jobs," he says. "But relatively speaking, there is still
a higher chance of success in consumer hardware than in yet another
social networking app."

Within two weeks Amit and his team drew the high level sketches for
Fitbit. In four months, they had the final renderings. Now it would be
up to the contract manufacturers to create the prototypes.

Building on an Idea

Electronics factories in China and Taiwan have changed manufacturing
in the same way that hundreds of software body shops in Bangalore have
reshaped the software world, by offering cheap, competitive and
high-quality labor.

"Five years ago, contract manufacturers would just be manufacturing
houses, nothing more," says Amit. "They would have major difficulties
with refinement of handheld products, difficulties working with colors,
materials and finishes, problems integrating hardware and software."

Now they are are sophisticated enough to create high-gloss products
on the cheap, he says. As compared to even five years ago, contract
manufacturers now are comfortable enough working with small volume
orders and startups. "The back end of manufacturing is relatively easy,"
says Amit. "But you still need a product manager and a lot of flights
to China."

In the last six months, Park has visited Singapore and Indonesia about
four times to meet with Fitbit’s contract manufacturers. Still, he
says, it has been a fairly smooth ride. "There are still differences,
especially with the nuances of the language — we have to be extremely
detailed in our communication and can’t just assume they understand
some things," he says. "But they seem to be pretty familiar in dealing
with Western companies."

With the first few prototypes in hand, Fibit has started wooing some retail buyers.

The rise of online buying, especially for electronics, has changed
the game for them. Old big-box stores such as CompUSA and Circuit City
have given way to online retail shops such as Amazon and Buy.com. And
the shift has brought with it changed attitudes. Online retailers have
lower joint marketing demands and lower margin requirements, so
products can be priced cheaper.

Products now get distributed from two or three central locations,
which means smaller firms need fewer distribution points. "All this
helps companies get to market with less cash," says Krikorian.

But that’s just half of the story, says Jim Marggraff, CEO of
LiveScribe. To go beyond the enthusiast market, consumer electronics
products still need to get on retail shelves. And that means old-fashioned retailers like Target, Wal-Mart and Best Buy still hold
considerable power. "For something really new, there is a huge
credibility boost associated from being on retail shelves," says
Marggraff.

When the LiveScribe pen first appeared on shelves on Target, it
exploded into consumer consciousness in a way direct retail couldn’t
have accomplished, he says. "We had lots of impulse buys from Target,"
says Marggraff. "Being on their shelves made our product feel real."

Retail sales and distribution still remain the biggest challenges
for consumer electronics startups, says Tim Twerdahl, vice president of
consumer products for Roku. For example, products have much higher
return rates through retail than when selling direct. Manufacturers
also have to pay a big premium to the retailers for shelf space, and
are often held hostage to big box stores’ timelines when it comes to
launching new products. "All this can become quite expensive for a
small company," says Twerdahl.

For Fitbit, that’s something to worry about later. They have
more pressing problems. Fitbit, which was scheduled to launch in
spring, has been delayed to summer. "We have some electrical and
mechanical bugs that we have to resolve," says Park. And that can be a
tricky business. Every bug fix requires a new prototype and it can take
up to two weeks to produce a new unit. The costs can add up quickly,
since every new Fitbit prototype can take $3,000 to $5,000 to create.
"We have to be very aggressive about testing," says Park. "Every time
we need to make a decision about what can wait for later revisions."

But if Fitbit’s founders can get their product out to market, they
hope to leverage the worldwide community of gadget blogs and online
forums to carry it forward. Hardware-obsessed gadget heads offer
powerful word-of-mouth marketing and they can turn unknown
products into mainstream hits inexpensively, says Krikorian, pointing
to Sling’s strategy of courting bloggers and online enthusiasts.

If Fitbit can carve a successful niche for itself, there could be a
pot of gold at the end of the rainbow. Last week Cisco acquired Pure
Digital, makers of the Flip video camera, for $590 million.

"An acquisition in consumer electronics is not like winning a
lottery," says Park, ever hopeful. "If you build a good business with
strong cash flows, there are enough big companies out there interested
in you."

Photos: Jon Snyder/Wired.com

Samsung’s announcement that it plans to release an e-book reader called Papyrus means it is at least the seventh company to hop on the digital-book bandwagon.

With touchscreen capability and an e-ink screen, the Papyrus will cost just $300, Samsung says, making it even cheaper than the Sony Reader and the Amazon Kindle.

Papyrus, when it becomes available, will join an increasingly crowded field that includes the Kindle, Sony Reader, Fujitsu FLEPia, Hanlin eReader,
Foxit eSlick Reader and the yet-to-be-released Plastic Logic reader.
Almost all of them, with the possible exception of the FLEPia, are based on low-power electronic displays made by
Cambridge, Massachusetts, company E Ink.

The Papyrus launch is still a few months away. Samsung is first expected to make Papyrus available in Korea this summer, says the Pocket-Lint website, with a later launch date in the United States and Britain. The device will come with a stylus for the touch screen, 512 MB of memory but no SD card slot, says Pocket-Lint.

But the Papyrus will have to struggle to stand out. Here’s what some of the competition looks like:

Amazon Kindle

The most successful e-book reader to date, the first version of the Amazon Kindle launched in November 2007 and sold an estimated 500,000 units by the end of 2008. The Kindle got a makeover in February 2009 with a new sleeker, slimmer device that sports iPod-like curves and a metal back.

The Kindle 2 has a 6-inch display but no touchscreen. It comes with 2-GB memory that can store about 1,500 books. Other features include text-to-speech for books to be read aloud, and a basic web browser. Kindle supports text, images, mp3, doc and HTML formats. Transfer of PDF files to Kindle wirelessly costs an additional 10 cents per file. To avoid that charge users can go through a tedious conversion process that involves emailing the file to their Kindle associated account and that transferring it to the e-reader via the USB connection.

Price: $360

WIRED Good-looking design is easy on the eyes. The wireless connectivity, provided by Sprint in the U.S., makes downloading books easy — no syncing with your PC required. Amazon’s retail clout ensures a wide selection of books, blogs and periodicals.

TIRED Some users have complained about the low-contrast text. The book content is shackled by DRM that makes it impossible to use on any other device you own, unless you use Amazon’s Kindle application. Will display PDF files, but Amazon charges a conversion fee of 10 cents per file if you want to send them wirelessly. No touchscreen, and keyboard-based typing can be tedious. Available in one color only.

Wired.com product review of Amazon Kindle 2.

Sony Reader

The Sony Reader was one of the earliest e-book readers, with the first version launched almost a year before Amazon Kindle 1.0 was released. So far, Sony has three versions of the Reader including one touchscreen-based model and two with keyboards.

The latest model, the Sony Reader PRS 700-BC, comes with a touchscreen and a 6-inch display. It offers 512 MB standard storage that supports about 350 books with scope for expansion using memory cards.

Price: $350 for touchscreen model

WIRED  Sleek, attractive design. Choice of colors including silver, black and red. No extra charge to access or convert PDF files. Partnership with Google gives users access to about 500,000 public titles from Google Books.

TIRED  No wireless connectivity requires users to be tethered to their computers to download a new book. The proprietary software used to download books from the Sony store is clunky. No browser available.

Comparison: Kindle 2 vs. Sony Reader

iRex iLiad

iRex Technologies, a spinoff from Phillips, first launched its
e-book reader in 2006 and now has a second generation version of the
device. Larger than the Amazon Kindle or Sony Reader, the iLiad Book
Edition has an 8.1-inch screen. And at 15.3 ounces it is also
about 5 ounces heavier than its peers.

But the iLiad has built in Wi-Fi capability with an option for
external ethernet networking. It comes with 256 MB internal flash
memory, of which 128 MB is accessible to the user, and supports text,
PDF, images and HTML format.

Price: $600 for iLiad Book Edition

WIRED  Wi-Fi capability and USB/ethernet connectivity makes
it easy to download books. Allows users to add notes and sketches to
existing documents. Runs a Linux operating system that allows third-party applications to be created and run on the iLiad.

TIRED  More expensive than the Kindle and the Sony Reader.
Access to pulp fiction and best-sellers is limited, as the iLiad cannot
download files from the Sony or Amazon book stores — for commercial
books, it only supports Mobipocket files.

Ars Technica review of the iLiad

Fujitsu Flepia

The Fujitsu FLEPia is the first e-book reader to sport a color e-ink
screen. It has an 8-inch display capable of showing up to 60,000 colors
in high definition. And yet the battery life can extend up to 40 hours,
says the company.

Even better, it comes with Bluetooth and Wi-Fi support. Other
features include storage via a 4-GB SD
card, touchscreen and a stylus.

It isn’t entirely clear if the FLEPia licenses E Ink displays or uses its own proprietary technology.

Right now the FLEPia is on sale only in
Japan, with shipping scheduled to begi April 20. Japanese
FLEPia users can purchase e-books from the largest e-book online
retailer in
the country, says the company.

We hope it won’t be long before this device comes to the U.S. and British markets.

Price: $1,025 approx. (99,750 Japanese yen)

WIRED  Color screen. Wireless capability. Includes a browser and Windows Windows CE 5.0 (Japanese
version) that allows email and use of Microsoft Word, Powerpoint and other Office applications.

TIRED  Super expensive! You probably need to get a third job to support your reading habit if this is your e-book reader.

Hanlin eReader

The e-book reader from Chinese company Tianjin Jinke Electronics was
released in 2007. Featurewise there may not be much to differentiate
it from its peers. It has all the basics: a 6-inch display, 32-MB SDRAM
and support for the usual text, docs and images. It runs Linux OS but
has no wireless capability. The Hanlin eReader is available under
different brand names, such as BeBook in Netherlands.

Price: $300

WIRED  Runs a Linux-based operating system and offers an SDK so functionality can be extended.

TIRED  Zero points for looks. No wireless capability to
download books. Not clear how compatible it is with the Amazon or Sony
e-book stores. 

Foxit eSlick Reader

Foxit’s eSlick’s price tag is probably the best thing going for it
right now. The device offers features similar to the Kindle and the
Sony Reader. But at 6.4 ounces, eSlick
is among the lightest readers on the market and comes with internal
memory of 128 MB and a 2-GB SD card, and the standard 6-inch screen.

Price: $260 promotional price. Shipping starts April 10.

WIRED   Excellent PDF support — to be expected from a
company that has its roots in PDF software development. Built-in MP3
player. Low price.

TIRED   Yet another e-reader! Doesn’t support popular e-book formats. Requires  USB connection to your PC to download new titles.

Plastic Logic

Probably the most distinct of all the e-readers, Plastic Logic is closer to a digital tabloid than a Danielle Steel paperback in its
looks.

The reader is expected to measure 8.5 by 11 inches. It will be thinner
than a pad of paper, but better than many of the
electronic readers available currently, claims the company.

The Plastic Logic reader will support Microsoft Word, Excel, Powerpoint, Adobe PDFs, newspapers, periodicals and
books. It will have a gesture-based user interface and wireless capability, says the company.

The catch? The device isn’t released yet.

Price: Unknown. Trials are expected to begin in the second half of the year.

Photos: Samsung Papyrus/Pocket-Lint, Amazon Kindle/Jim Merithew, iRex iLiad (xmacex/Flickr)

Updated 03/27 with clarifications around Kindle’s PDF capability and Fujitsu’s E Ink technology

Forget copy-and-paste. The real seed of innovation planted in the upcoming iPhone
3.0 upgrade is the OS’s ability to interact with special
accessories via Bluetooth and the dock connector.

Here’s why you should care: There are endless possibilities for app-accessory combos — so many, in fact, that we’re going out on a limb and coining a phrase to describe the field: dongleware.

Here’s a good example from
Apple’s recent iPhone 3.0 event: an insulin meter that
communicates with a diabetes application for the iPhone. Now, with an
iPhone in her pocket hooked to the meter, a diabetes
patient can check her glucose levels and plan out her meals and insulin injections using live data. Tell us that isn’t intriguing — and that’s just scratching the surface.

With the App Store burgeoning into a billion-dollar industry, and the iPod and iPhone accessory market also surpassing a billion dollars a year, you can be assured iPhone developers will leap on this opportunity to
push innovation to new heights. IPhone 3.0 could open doors
to significant advancements in home entertainment, the medical field and even the military.

IPhone
3.0’s huge potential fired up our imaginations, dreaming up a list of
accessory-powered apps we’d like to see. It’s not long, as we’d like
you readers to submit and vote on suggestions, too. What better way to
tell developers which apps will help them strike it rich in the App
Store?

Without further ado, here’s our dongleware wish list. But this is just the beginning. Below our suggestions, you’ll find a widget where you can vote for your favorite ideas and submit your own.

Universal Remote Adapter
Picture this: a dongle you stick in
the iPhone that turns it into a truly universal remote. On the iPhone screen, you could hit the DVD Player button and bring up a DVD control
panel. Hit the TV button and it brings up TV controls. Same applies for
controlling your TiVo, PS3 and receiver system.   

Live Heart-Rate Monitor
While
you’re jogging or hitting a punching bag, you could wear a chest strap
that hooks up to the iPhone. The iPhone exercise app monitors your
heart and tells you to slow down once you’ve surpassed your target
heart rate. And beyond that, the software could even use audio
instructions to guide you through different workout routines while it
listens to your heart. 

Game Controllers
The
accelerometer and touchscreen introduced fresh forms of gameplay, but
game-controller accessories would give the iPhone a real edge over
competing handheld consoles. Picture this: a two-piece accessory — one
half containing the directional pad and the other with the buttons —
that slips onto the iPhone. Then you could play a game using the controller
for button mashing while tilting the screen or shaking the phone to
trigger special moves. Or you could tap the screen to select objects
and control the menu. You get the picture.

Musical Effects Controller
Music
apps have been extremely impressive on the iPhone, but why not see what
the phone can do with real instruments? We’re thinking an accessory
that acts the same way as an electric-guitar effects pedal. The
software could hold a huge library of effects, and you could choose
among a large variety of electric instruments to manipulate — anything
from guitars to pianos and violins.

Your Ideas
What sorts of
accessory-powered apps would you like to see in iPhone 3.0? Here’s your chance to tell iPhone developers what sorts of accessory-powered iPhone apps you want. Submit and vote on the suggestions in the Reddit-powered widget below!

Show dongleware ideas that are: hot | new | top-rated or submit your own

Submit a Suggestion

While you can submit as many suggestions as you want, you can only submit one every 30 minutes. No HTML allowed. Remember, we’re looking for good iPhone 3.0 app-accessory combinations.

Back to top

See Also:

• Apple Bestows Cut-and-Paste, MMS on iPhone Users
• Screenshot Hints at Video Recorder in iPhone 3.0
• Pictures: iPhone 3.0 USB Tethering Already Activated

Photo: Jon Snyder/Wired.com

During Nintendo president Satoru Iwata’s GDC keynote today, the company revealed that the Wii will finally get SDHC support (that means compatibility with bigger SD cards) through an update that’s available now.

With the new Wii Menu 4.0 update, you can download content directly from the Wii Shop Channel to your SD/SDHC, and the card will show on the Wii’s main menu. You can then open the card to see your content in Channel format (up to 240 SD Channels are supported).

Given that the SDHC format reaching 32GB (12GB more than the hard drive in the original Xbox 360), supporting the open standard sounds like a much better solution than a honking standalone box anyway—at least to me. Other thoughts? [Kotaku Liveblog Here]

The new iPod Shuffle might seem innocent enough, but after having to listen to your music selection hour after hour, even it reaches its breaking point.

We teamed up with our friends over at UCBComedy.com to create this, our first original comedic video. It was written by myself and Mark Wilson, directed by Will Hines, edited by Nate Dern, and stars me.

Let us know what you think! Unless you don’t like it, in which case keep your opinions to your damn self. We’re sensitive. [UCBComedy]