i3 - January/February 2016 - 82

Policy

BY JEFF SCHRUM

TECH UPDATE
WHAT DOES A STARTUP LOOK LIKE IN 2016?

eorge Stepancich is a seasoned executive with more than 30 years
of experience as an entrepreneur, operator and consultant. With
an abundance of international experience, he understands markets throughout North America, China and Asia. Stepancich serves on
the Consumer Technology Association's (CTA's) Accessories and Wireless
Division boards and previously served on its Executive Board. He is deeply
committed to the CTA Foundation, a not-for-profit 501(c) organization
dedicated to link seniors and people with disabilities to technology in
order to enhance their lives, and has served as a Trustee for more than five
years. Stepancich spoke with i3 about the landscape of technology startups, trends and opportunities, and the impact of the new economy for
both startups and established companies.

The term "startup" is overused. What
does a startup look like in 2016?
We can no longer just assume a startup is
two guys in a Silicon Valley garage living off
ramen. Startups are being created by people
and in places you wouldn't expect. You have
startups spinning off their own startups.
People think startups mean no money and
no talent, but this isn't the case. There are, in
fact, startups that are going out of the gate
with impressive capital and executive talent.
What are some examples of nontraditional startups?
Take Hyperloop for instance, a next-gen
mode of transportation that grew out of a
white paper written by Elon Musk. In this
paper he lays out his vision of the future of
transportation: that we're going to move
people through tube-like cylinders, like those
at a bank drive-through. From anyone else,
it sounds crazy. But when Elon says it, you
have to take it seriously. After all, this is the
guy who started Tesla and SpaceX. All of
sudden two startups took on the challenge of
turning his vision into a reality. One is doing
it the traditional way of raising capital and
hiring people-they have raised $40 million
so far in the seed round. The people involved
with it are significant too. They brought on
the former president of Cisco as CEO.
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And the second approach?
The other company is using a crowdsourcing arrangement to try and answer
the same challenge. They haven't launched
a fundraising campaign, instead they're
reaching out directly to experts whom
they want to contribute. For free. They're
reaching out to engineers and programmers employed by tech companies with the
proposition if you come on board, moonlight and contribute so many hours or lines
of code per week, we'll give you equity in the
company. It's a pure sweat-equity approach.
There are successful startups that aren't well
funded, which goes to show there's more
than one way to do it. The latter company is
going to have a lot more globally dispersed
talent pool. It will be interesting to see who
solves Musk's challenge first.
Is breaking into the CE industry as a
startup harder or easier?
Easier. I like to remind my clients, "halfa-million is the new five million." Turn
the clock back 10 years: you're looking at
companies that say we want to build the
next Amazon or Facebook. You'd go out and
purchase tons of hardware, spin up your
own server, have to hire engineers and IT to
run them, move into a building...on and on.
You can see why it took $5 million to tee up

an idea. Now cloud solutions make it easy
to create an account, spin up a server, run
prepackaged software from the cloud, and
run test simulations on different platforms.
Now it costs you $100 a month to test your
concept. Part of it is that the cost of entry is
significantly lower, but also we have redefined what "consumer technology" means.
This industry is more than gadgets, it has
become an ecosystem.
Are startups trending away from
gadgets?
No, there's an explosion of startup gadgets
coming out. You can't go on to Kickstarter
and not see dozens of completely new
ideas. The cost of entry is so much lower,
which means anyone can invent the next
big thing. Kickstarter requires you have
a working prototype. You have to make
the same investment for a prototype,
but unlike just a few years ago, you don't
have to order a minimum of 1,000 units.
Before, if you wanted to make a $100
product, you'd have to invest $100,000
without even knowing if they'd sell. Now
you can hire a company to make a single
working prototype and begin raising
funds. It minimizes the amount of capital
and time required to launch. You test it as
part of your campaign.
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