By Michal Lev-Ram
June 22, 2011

FORTUNE — There’s a new player in the camera market: Lytro, a Mountain View, Calif.-based startup with just 45 employees, is hoping to disrupt the industry with an innovative camera that lets users focus a picture after it’s been taken.

The tiny company came out of stealth mode earlier this week, unveiling its master plan to take on heavyweights like Canon and Nikon. According to Lytro, its new “light field” cameras will capture more data than your average digital camera by using a special sensor that records the color, intensity and direction of every beam of light. Because all of this extra information is saved in each image file, users will be able to edit and play with their photos in new ways — including refocusing a picture and changing its orientation after it’s been taken. They’ll also be able to take photos in low light conditions without using flash.

After seeing Lytro’s editing capabilities in action, I can tell you it’s much, much cooler than anything current cameras and image editing software will let you do. And yes, the company’s technology even has the potential to become a breakthrough innovation in the camera industry — not on par with the move to digital but significant nonetheless.

But Lytro isn’t planning on licensing its technology to existing camera makers, at least not anytime soon (founder and CEO Ren Ng says “never say never”). The startup is planning on coming out with its own Lytro-branded camera later this year because it believes “we can do it better.” But as any other small company that has tried cracking the consumer electronics industry knows, going up against the giants will be anything but easy.

CEO Ng says it’s much easier launching a camera company today than it would have been just a few years ago. A Taiwanese company will manufacture Lytro’s cameras, which will be sold through online retailers and marketed on Facebook and other websites. Still, getting the word out beyond the early adopters, techies and photography fanatics could prove tricky. Pricing — which Lytro has yet to announce — will also be key, because it’s unlikely your average picture-taker will pay a big premium for a commoditized piece of hardware, no matter how cool its features.

And here’s another possible hurdle for Lytro’s plan to go at it alone — cell phones. More and more people are ditching dedicated cameras and snapping pictures with their mobile device. So it would make sense for Lytro to someday license its technology to existing cell phone makers instead of jumping into yet another cutthroat, saturated and commoditized consumer electronics market.

Lytro’s light field technology is promising, and it’s come a long way since its roots in a Stanford University lab, where it started out as a research project in the mid-1990s. Up until recently, capturing all of the light traveling in every direction in a particular scene required hundreds of cameras tied to a series of computers. But Ng, whose research in light field photography won best PhD dissertation in computer science at Stanford back in 2006, has spent the last few years getting the company’s signature sensors small enough for mass production.

But even Ben Horowitz, one-half of Andreessen Horowitz and a Lytro investor, says developing the sensor that captures the light field may have been the easy part.

“Building software that generates a beautiful picture, or thousands of different beautiful pictures, from the light field may be the most difficult task,” Horowitz wrote in a blog post on Tuesday. “As cameras become primarily software products in the same way that phones became primarily software products over the past several years, new industry leaders with world-class software capabilities will emerge in the same way that the phone industry has turned upside down over the past 5 years.”

This focus on software — not hardware — is another reason Lytro might want to skew towards the software/licensing business and away from consumer electronics.

For now, the company is remaining mum on exactly when its new cameras will launch (Ng says it will happen later this year) or how much they will cost. To date, the company has raised about $50 million from an impressive list of investors, including Andreessen Horowitz, Greylock Partners and K9 Ventures and individual funders like VMWare cofounder Diane Greene and Sling Media cofounder Blake Krikorian. And its launch is already making a big splash in the media.

So will Lytro’s cameras someday be as commonplace as Canons and Nikons? Doubtful, though I’m guessing its (very cool) underlying technology will.

You May Like