The Grinch Of Connected Toys

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.