By 4 to 1, Early Adopters Pick Wearable Watches Over Glasses

By Eric Newcomer

One of the most important questions about the future of computing is this: wrist or face?

Google has been trumpeting its Glass devices, which can take photos and run applications like Facebook and Twitter on a small screen within eyesight. Apple, which is working on a secret smartwatch, has been publicly pushing the case for the wrist. “I don’t know a lot of people that wear [glasses] that don’t have to,” Apple CEO Tim Cook said at the All Things Digital conference in May. “I think the wrist is interesting. The wrist is natural.”

We thought we’d take a look at what consumers today say they would be more willing to buy as a signal of what they’re likely to find more natural. Watches had the clear win. But the largest contingent didn’t want either.

Thirty-eight percent of those surveyed opted for smart watches compared with 10% for smart glasses, according to a survey we commissioned of 417 Americans on SurveyMonkey Audience. Forty-five percent chose neither, while 6% chose both.

SurveyMonkey Smart watch or Smart glass

A majority of respondents, 62%, said they thought that it was possible that they would own a smart watch in the next five years. Only 41% of respondents thought it was possible that they would own a smart glass device in the next five years.

Survey Monkey (Graph 2) Smartwatch

Survey Monkey (Graph 3) Smart glassEven among respondents who considered themselves “quite tech savvy” or “extremely tech savvy,” smart watches won out over smart glasses, 38% to 17%, with 12% indicating that they were interested in both.

Survey Monkey (Graph 4) very tech savvy

Why does this matter?

Many app developers and hardware companies are betting that a new generation of wearable devices will create a new hardware market. In 2014, manufacturers are expected to ship 15 million smartwatches and by 2020 that number could reach 373 million, according to emerging markets research firm NextMarket. That admittedly optimistic estimate is based, in part, on the more than 1 billion yearly conventional watch shipments.

Consumer surveys, of course, have their limits. Plenty of people were initially skeptical that tablets would upend the PC market, for instance. Attitudes can change once users learn more about the full range of features offered by a new class of hardware.

For another metric on the glass versus watch debate, check out this Google Trends graph on search terms over time. The most-searched term, in blue, represents Google Glass. Green is “Samsung Galaxy Gear” and “Galaxy Gear,” red represents “smart watch” and “smartwatch,” and yellow is “smart glass” and “smartglass.”

Google Trends includes Galaxy Gear

Google Glass beats other search terms, but the smartwatch category ranks higher than smart glass. That’s why many app developers believe that the smartwatch category is still waiting for a truly dominant player like Apple to enter the market. An appealing offering from Apple could further boost interest in a smart watch.

For a dose of perspective, check out the same Google Trends graph after we add “iPhone” into the mix. The iPhone, in search as in the physical world, dominates the competition. Our old search terms are barely visible compared to the soaring purple line that represents iPhone searches. Wearables have a long way to go.

Google Trends iPhone new

Another comparison might be fairer to the early days of wearables. This graph shows first the rise and fall of the Palm Pre (blue) and then the emergence of Google Glass (red). Both had a similar level of interest in their early days, according to Google Trends.

Google Trends Palm Pre v Google Glass

Crowdfunding Shakes Off Its Stigma

by Eric P. Newcomer

In the clubby world of venture capital, crowdfunding is stepping into a leading role. The latest proof comes Tuesday when dozens of young startups are pitching themselves to investors at Y Combinator’s twice-a-year “Demo Day.”

At least nine of the current group of 53 plan to use crowdfunding, which allows certain people to invest in a company in exchange for  equity. That’s according to crowdfunding services WeFunder and AngelList. (They declined to specify which companies have signed up.) This comes as many are still firming up their plans and soliciting investors, who are attending Tuesday’s event in droves.

We spoke to 30 YC-backed companies that pitched investors during the last Demo Day in March and some crowdsourcing firms they worked with. We found that at least 12 companies used crowdfunding. They include Teespring, which makes custom T-shirts, and Goldbely, which sells gourmet food online.

Jessica Livingston, a partner at Y Combinator, an eight-year-old “incubator” for startups that helps them shape their ideas and products in exchange for an equity stake, says the firm doesn’t have complete data on the number of companies in its program that use crowdfunding. Nonetheless, she said that more companies are using it.

The number of crowdfunding services that allow startups to tap investments from random individuals who meet certain investment criteria, as opposed to just traditional venture capitalists, has been growing quickly. They include CircleUp, which lets users invest in consumer-goods companies like vitamin retailers, and MicroVentures, which brokers deals between individual investors and early-stage tech startups.

But in many ways, they have  remained on the fringes of the investing world. Some startups have been reluctant to use them, preferring the prestige of established investors. Others have worried that doing so would suggest they couldn’t raise funds from blue-chip venture capitalists.

Tuesday’s Demo Day provides a window into how those attitudes are changing. The event is closely watched as a bellwether for new categories of startups, valuations and investing patterns.

Among the companies planning to use crowdfunding this round is 7 Cups of Tea, a company that lets people talk to others for emotional support online.

Glen Moriarty, founder and CEO of 7 Cups of Tea, said they plan to raise some money through crowdfunding, which will also help generate publicity. They are doing so through WeFunder, a crowdfunding site that showcases companies it works with to investors on its website.

Moriarty said the company hasn’t yet decided how much it wants to raise through WeFunder.

The number of services that allow startups to raise equity from individuals has grown steadily, as have the dollars invested through them. In 2010, users invested $49.9 million on equity crowdfunding sites. By 2012, that number grew to $115.7 million and will be $165.9 million by the end of 2013, according to research firm Massolution.

WeFunder, which launched earlier this year and is backed by Y Combinator, believes that its user base will grow dramatically after new Security and Exchange Commission rules let crowdfunding sites publicly advertise startups that are raising money and recruit less wealthy investors.

These new rules could upend how startups raise money, helping fledgling companies raise money from less monied investors across the country and far outside the Silicon Valley bubble.

Zenefits founder Parker Conrad says his company gave crowdfunding a shot after participating in Y Combinator’s program earlier this year. The online-benefits provider raised $50,000 on WeFunder, 2.4% of the total $2.1 million it raised.

Even though they recognize that crowdfunding sites are competing with venture capitalists to raise money for startups, some VCs don’t sound too worried about the emerging source of competition.

Aydin Senkut of Felicis Ventures said sought-after companies seek investors with specific expertise and that won’t change. “I welcome the diversity,” he says.

Here’s our breakdown from the group that raised funding this spring:

Used crowdfunding Skipped crowdfunding
CircuitLab (FundersClub) Airware
Goldbely (FundersClub & WeFunder) Beatdeck
Medisas (FundersClub) Bitnami
Meldium (FundersClub) BuildZoom
Thalmic Labs (FundersClub) CrowdMed
Padlet (FundersClub) Errplane
Prizeo (FundersClub) Fivetran
Screenhero (FundersClub) FlightCar
Strikingly (FundersClub) Heap
Teespring (FundersClub) Lawdingo
WeFunder (WeFunder) Lollipuff
Zenefits (WeFunder) Microryza
PayTango
  SimplyInsured
StyleUp
SwapBox
Terascore
Watsi

Source: The companies, FundersClub and WeFunder