“Venture Capitalists Targeting Consumer Oriented Companies” By Roman Kikta
by Roman Kikta
Tue, Jan 3, 2006, 12:26 AM
In a recent Wall Street Journal article, it was reported that Venture Capitalists are betting on companies developing “consumer gadgets” following the success of several consumer electronic devices, notably the multifunctional cellphone, iPod and others. As a venture capitalist, this comes as no surprise to some of us who have backed early stage companies developing consumer focused products, services and applications. Some of these include i-Play developing content—games, ring-tones for cellphones; handheld devices such as Firefly’s cellphones for kids or Adimos, which has developed a multimedia connectivity solution for consumers which permit connecting digital devices in homes such as iPod, ZEN, TiVo, and DVD to any display device such as LCD and Plasma TV or computer.
As VCs, we have learned over the past two decades that many (but not all) new technologies, products, applications and services require an adoption period which has its genesis in the business sector. Computers, broadband Internet connectivity, cellular phones, PDAs (Palm Pilots, Blackberrys), Web services- including online auctions, text messaging, are but a few examples of technologies, products or services that had their roots in business and have now evolved into mainstream products coveted by consumers. While some new products and services are bypassing the business route going directly to consumer, these include Internet TV, such as MobiTV, satellite radio. Traditionally consumer product and service type companies have been considered risky investments by the venture capital community. This was primarily because of their high start-up costs, including, brand/ consumer awareness building, distribution channel development, customer acquisition, and inventory of products that can present significant liabilities if markets diminish.
As the Consumer Electronics Show (CES), one of the world’s largest trade shows attended by over 130,000 industry people opens in Las Vegas later this week, consumer electronic (CE) manufacturers will be enforce showcasing their latest and greatest. Having participated at the CES for the past 20 years as a wireless industry representative, I can affirm that this is one of the most exciting and enjoyable trade shows to attend. Therefore, I am delighted to hear that many of my fellow venture capital investors will be attending, and for the first time the National Venture Capital Association will sponsor a networking event to get venture firms together to share ideas and discuss new technologies and companies they have seen at the show that could turn into an investment opportunity. While a presence at CES does not make a VC an expert on consumer electronics trends and business, it does provide a glimpse into some exciting new products that may become the mega successes of tomorrow.
Having studied societal trends around the globe, and most specifically in Asia- Japan, Korea, Taiwan, Hong Kong, China, and Singapore, I have concluded that these countries have achieved extraordinary success over that past twenty years by developing and manufacturing consumer electronic products which were a result of an understanding and cultivation of societal needs. The digital consumer of today’s mobile age has an insatiable demand for connectivity, convenience, efficiency, time, mobility, quality, entertainment, and ease of use. These are powerful incentives for cost effective, more rugged, more mobile, and highly individualized systems and subsystems. The “digital teenager” is one of the most rapidly growing categories in the consumer electronics industry.
I urge both entrepreneurs and investors to better understand how society and specifically how our younger population--our children uses products and technologies, especially as daily lives gets more hectic and more mobile. As a venture capitalist, I will continue to invest in new technologies, products, applications and services that transform society to a new level of responsiveness, efficiency, and enjoyment— a better quality of life.