Behind the scenes at R/GA’s Connected Device accelerator
FORTUNE – Venture investors have a worn-out saying for hardware startups: There’s a reason they call it hardware. It’s hard.
For the past few decades, they’ve mostly heeded that saying and avoided investing in the category. Software has produced big wins for venture capital, and they’ve stuck with what works.
Until recently, that is, when cheaper materials and crowdfunding sites like Kickstarter fueled resurgence in hardware makers, hackers and DIY-ers. The new hardware movement has created valuable companies like Pebble, which raised more than $10 million on Kickstarter after venture capitalists rejected it, and Nest, which sold to Google (GOOG) earlier this year for $3.2 billion.
With its new hardware accelerator, TechStars and ad agency R/GA hope to help build the next Nest or Pebble. The first class of ten companies beat out hundreds of applicants to participate in the three-month program. They make their debut at a demo day to a sold-out room in New York this evening.
Because hardware requires making actual physical objects, this program looks different than a typical accelerator program. The office space, located at R/GA’s midtown headquarters, is scattered with with circuit boards, batteries, a finishing room for cleaning protypes fresh off the one of seven Makerbot 3D printers. Managing director Calvin Chu bounces from table to table, checking in with startups and as they clean prototypes, piece together devices, and practice their demos. A flat screen TV on one wall monitors the floor’s energy use, courtesy of Enertiv, one of the program’s startups which manages a building’s energy use. Two weeks before demo day, the screen showed activity until 6 a.m. on recent nights.
An ad agency might be an unusual choice for an accelerator focused on the Internet of Things. But Chu insists R/GA — which is part of Interpublic Group (IPG) — is the perfect partner because the agency has a track record of related innovation. R/GA helped Nike develop its Fuelband bracelet, which tracks how many calories its wearer burns during a day. The space TechStars occupies was formerly used by R/GA’s skunkworks department for developing the Fuelband, Chu says. “R/GA felt the innovation bug after that,” he says. Likewise, the firm’s executives have been eager to mentor the startups, offering help with their apps, websites, copy, Kickstarter campaigns, and pitch decks. “These are people who service Fortune 500 brands, and they’re helping these startups,” he says.
In addition to R/GA mentors, the Connected Devices program counts big names in hardware among its mentors, including the CEOs and founders of of Orbotix, SmartThings, Boxee and Ouya. At most accelerator programs, there is maybe one hardware company in each class, and they typically don’t get very good mentorship, since they need help on very specific things, like debugging, suppliers and prototyping, Chu says. This program helps them by combining resources.
Chu is also quick to make the distinction between this program and other hardware-focused accelerators, such as Highway1 in San Francisco, run by the Chinese manufacturer PCH international, or HAXLR8R, located in San Francisco and Shenzhen. Representatives from both of those programs serve as mentors to the R/GA and TechStars’ program, which is more narrowly focused on what’s called the “Internet of Things.”
That term describes any device using an Internet or Bluetooth connection to collect and analyze data, thus making it “smart.” Wearable devices and “smart” objects were a big theme at South by Southwest Interactive festival this year, where the TechStars and R/GA group also held a demo day. (In Boston, a six-month program called Bolt is also dedicated specifically to connected devices.)
R/GA and TechStars’ inaugural class includes a “smart sock” for babies called Owlet Baby Care, which uses sensors to monitor a baby’s breathing and heart rate. There’s also RingBlingz, a “smart ring,” which lights up when you receive a text message or email from a family member or close friend, using a specific color to identify the sender and one touch to respond. Hammerhead offers GPS navigation for bikes. Keen Home offers a connected air vent.
Earlier this year, TechStars announced it would partner with Disney (DIS) to run a media and entertainment-focused accelerator based in Los Angeles. The company has also worked with Nike (NKE), Kaplan, Sprint (S), and Barclays (BCS) for vertical-focused programs.