Good news for hardware startups: VCs like Sequoia, Andreessen are hunting for them on crowdfunding platforms

Software may be cool, but what’s getting hot is hardware. Wearable technology, from fitness monitors to Google Glass, is in. The Internet of Things, from smart watches to intelligent shoes connected to the internet, is fuelling the trend.

Virtual reality headset maker Oculus, which got acquired by Facebook for US$2 billion this year, medical wearables startup Misfit, smart bulb maker Lifx, home security provider Canary… the list of hardware startups raising big money is getting longer.

In India too, while billion-dollar exits may still be a pipe dream, we are seeing hardware startups raise upwards of US$100,000 – Fin, which makes a ring for your thumb that acts as a numeric keypad and gesture interface, and Gecko, which makes a bluetooth device to make your smartphone smarter, are recent examples.

All these companies, from Oculus to Gecko, have one thing in common. They all began life on crowdfunding platforms, and there’s a good reason for that.

Hardware startups find it harder to raise venture capital than their software mates. Their lead time to market, from prototype to manufacture, is longer , costlier, and riskier – all of which are red signals for VCs. But, when one door is closed, another opens up.

It turns out that hardware startups do rather well on crowdfunding platforms, probably because the crowds are attracted more to real objects than esoteric concepts. Still, to get seeded is one thing; to get to the next level requires bigger funds.

And that’s where we have the good news. VCs may be reluctant to put seed money into hardware startups, but they’re happy to back the ones that get going on crowdfunded platforms. In fact, the thousands of consumer-oriented hardware startups raising money on crowdfunding platforms like Indiegogo and Kickstarter are proving to be a good source of dealflow for VCs.

See: 10 angel investors in India who bet on young tech startups

From crowdfunding to VC funding: One out of 10 make the cut

A report released today by venture capital analysis firm CB Insights says that the momentum started to build up last year: One out of every 10 hardware startups that raised US$100,000 or more on Kickstarter and Indiegogo went on to get funding from VCs.