This post may sound too Grinchy, at this joyous time of year, but if I have my investment hat on, one thing I worry about are startups aimed at the holiday season and specifically those that build and sell “tech toys” to kids. I feel horrible writing this, especially as a new father, but these types of ventures scare me while they should be inspiring me. When it came to these mobile “connected toys,” I became no fun at all. And, I know a whole new set of connected toys have been recently funded, which all seem incredible — startups like Ubooly, Tiggly, Tangible Play, Play-i, Anki, and many more — and all created by top-notch teams. (I had incorrectly written ToyTalk here, but was pointed out it is a software-only system. Apologies.)
A few disclaimers: (1) I’m probably going to be proven wrong; (2) some of the teams in the space I’ve gotten to know are A++ teams, so some of the best people are tackling this; and (3) it’s easy to be skeptical of a category or market because most endeavors fail, though I wouldn’t be surprised if someone or something broke through. In other words, in this case truly, I will be happy to have been proven wrong. Briefly, here’s what flies through my head when I think about the real challenge of “connected toys” today:
- Where will parents hear about these toys?
- Where will parents physically buy these toys?
- Is the back of the Apple Store the best place for this?
- How long will it take for the toys to get delivered if ordered online?
- Are these one-time purchases or hits, or is a razor + razorblade model possible?
- How will parents be able to distinguish between sets of connected toys?
- Will it be easy for parents (or kids) to set up (beyond assembly)?
- Would a startup have a better chance of creating brand awareness and distributing related hardware by building (gaming) software first? (See: Angry Birds)
- Will the cost of hardware production make for unsavory early-stage financing requirements?
- Do kids actually want these, or do parents want their kids to have these?
- Can anything compete with MMOGs like Minecraft or iPhones, iPods, or Kindles?
- Will future generations want material things or will they prefer experiences?
- If the underlying technology is a platform play, who will design the showcase games?
- Should kids even have “connected toys”?
This may be a post I regret in the future — who would write something anti-toy!? — but it is what I truly feel today. There is a deep desire among many (myself included) to individually support such endeavors (especially when kickstarted by passionate, exceptional people focused on using toys as educational tools) through crowd-funding or similar mechanisms, but the thought of getting institutionally committed strikes me as risky. Of course, no risk, no reward, right? Yet, these “connected toys” pose a combination of classic startup problems — the platform versus killer app problem, the (continual) cost of manufacturing hardware problem, the physical product distribution platform, and a more fundamental “are these the toys kids want?” problem.
All of this makes me conflicted. I’m reticent to invest, yet I want everyone to succeed. Every year, there are a few toy “hits” (usually just normal toys) and that’s a fun game to play, but I wonder if what ends up striking a chord with kids are things that most adults couldn’t conceive of to begin with. Adults do make the purchasing decisions for younger kids, but at a certain point, kids start to ask for what they want — or seek it out — rather than taking what is sold. Ultimately, this is just something that’s been on my mind and I wanted to share my thought-process and solicit your reactions and feedback. I’m probably missing something big here. Please tell me what that is.