A new funding venture has emerged with an unusual goal for the world of technology venture capital funding -- a focus entirely on hardware and core technologies as opposed to the more recent popular investments in cloud, software and applications.
The goal of the SKTA Innovation Accelerator is to to revive core technology startups to reinvigorate the hardware ecosystem. The Innovation Accelerator, unveiled Thursday and funded by SK Telecom Americas, is looking to invest $1 million in services, facilities and administrative support in semiconductors, telecom, health care, telemedicine, the Internet of Things, wearable technology and more.
The Innovation Accelerator isn't being dismissive of the potential of cloud and software technologies but is, rather, looking to ultimately support their growth, said Angel Orrantia, business development director of SKTA Innopartners. While the buzz is all around the cloud, he said, without building out the underlying core technologies, cloud and other growing technologies will not be able to reach their full potential.
"I think the loss, it's hard to speak to other markets, but certainly here in [Silicon Valley], innovation is going to be required. The position of the cloud is going to drive this innovation, whether it happens here or happens elsewhere, it's going to happen. It has to," Orrantia said. "The loss in the U.S. is that those jobs likely will go overseas. More importantly than that, it will likely slow the expansion of the cloud, the Internet of Things and some of these other technologies that look like they could really explode provided there is the underlying technology."
The problem is that the industry has created a cycle where consolidation in the hardware market has limited the number of companies out there producing core offerings such as chips and networking components, Orrantia said. In turn, that limits the exit potential for startups, either through IPO or acquisition, by limiting prospects to handful of options. With those end-goal options diminished, venture capital funds are less inclined to invest, Orrantia said. This then cycles to even fewer core technologies in the market to invest in hardware startups down the line.
"It just creates disincentive upon disincentive for those entering to take the risk," he said.
The bigger problem, according to Orrantia, is that diminishing investments in core technologies will create a ripple effect that ultimately will affect rapidly evolving technologies such as cloud, applications and software. Those technologies are currently building on current data centers and other core technologies, but as more smartphones and other connected devices push more data into those centers, the investments at the base level will become even more important.
"To continue that kind of growth you have to change the fundamental architecture of what's being done," Orrantia said.
NEXT: Where Is It Coming From, And How Do We Fix It?