How do you launch a consumer gadget that doesn't fit into any established niche? While one of the biggest challenges for entrepreneurs breaking into mature markets is figuring out how to differentiate their wares, the problem with trying to pioneer a new niche is that your idea can seem too different. Venture capitalists are squeamish to back a wild card, retailers are worried that no one will buy, and consumers either don't get it or write it off as a gimmick. A handful of startups in the emerging market of wireless fitness gadgets for non-athletes have all faced these challenges in the past few years and prevailed. Here's how they did it:
When David Wang approached venture capitalist Ronald Chwang of iD Ventures America last fall to ask for an investment in his new startup, Chwang gave the same answer as the 15 other VCs Wang had hit up before him: No. "They all said it was too risky, and they didn't fund us," says Wang, who hoped to market a pocket-sized, keychain gadget embedded with motion sensors to track users' daily activity levels. But unlike the other VCs Wang had pitched, Chwang held out a small carrot. "I said build the prototype so I can believe these things can do what you claim," says Chwang.
That's when Wang, a former marketing director at the social gaming startup Booyah, learned that launching a one-of-a-kind, consumer hardware device was much tougher than getting a software startup off the ground. While buggy code can be tweaked in a matter of hours, hardware flaws need fixing weeks, if not months, before full production can begin, and manufacturers expect a hefty infusion of cash up front.
Wang's challenge was made doubly tough by the fact that he was trying to crack a market that most people don't even believe exists: portable fitness gadgets for people who don't really exercise. "It was really, really risky. Everyone who got funded before was doing technology for athletes," says Wang, who adds that he couldn't even give would-be investors projections for the potential market size for such a device because the data simply wasn't there.
As a result, he wound up using his own savings to build a working prototype before anyone gave him a dime. ID Ventures' Chwang finally agreed to invest in Striiv this summer, he says, once he was convinced that the device made it so that, "you do not look at exercise as a burden, but rather as part of your every day life." Striiv, the keychain gadget that Wang was pedaling to VCs more than a year ago, went on sale on the Home Shopping Network and the Skymall magazine in October for $99, about seven weeks after he closed some $6 million in funding.
Getting Retailers On Board
BodyMedia, which was founded in 1999 and is now a late-stage startup with some $20 million in venture funding, got stuck a decade ago when it first tried to sell to consumers an armband device weighing nearly a quarter of a pound that would estimate the total number of calories they burned each day by measuring everything from changing sweat levels to the amount of heat coming off their skin.
But there was a problem: The original $500 BodyMedia device was too clunky and expensive. "It was far too high of a price for a consumer 10 years ago and there was very little commercial traction," concedes Ivo Stivoric, a BodyMedia co-founder and chief technology officer. Instead, the company sold a high-end version of the gadget to researchers who were more interested in its capabilities than its aesthetics.