We've gained popularity with all public entities. The European Union keeps announcing increased funding plans such as the Chips Act. France, for example, is rooting for more industrial companies within its borders with the France 2030 program.
It’s no surprise that the most active deep tech investors in the EU are the European Innovation Council and BPI France, the French Public Investment Bank (Sifted).
At the same time, when I exchange ideas with my fellow hardware entrepreneurs, I hear a very different story. The initial remarks we all got when we started pitching our companies were:
“Can you strip the hardware away?” ”Can you make it a software play?” “Sorry, hardware is too time-consuming and expensive for us…”
From there, if you merely mention the word “consumer” next to “hardware” in your pitch, you know you’ve lost 99.99% of your audience in the first 10 seconds of discussion.
This is materialized by the fact that no worldwide European consumer electronics company has emerged after the Internet and mobile revolutions. As recently written by Louis Carle in his interviews, "When it comes to hardware, France [and Europe] are invisible" (Maddyness).
As Wisear moves towards its next development phase, I’ve been wondering: where does this gap come from?
And more selfishly: does being a European company really matter (editor’s note: we’ve benefitted from BPIFrance deep tech funding)? Or should we pursue our product development wherever it’s most likely to succeed (i.e., in the US)?
Earlier this year, we attended CES and caught up with our fellow neurotech entrepreneurs—all from the US, except for our friends from IDUN Technologies. We wondered: why is it that most entrepreneurs in this disruptive frontier tech are based in the US? On paper, Europe has a larger population than the US and a similar percentage of people with higher education degrees. There should be no demographic reason for this.
As the night went on, we discussed our roadmaps and fundraising plans. One thing stood out: we were all seriously talking about a world where a large part of the global population would wear our neurotech devices on the daily. We were aware that we'd need to fund four or five years of product development before releasing a device that could make a dent in the consumer and business electronics markets.
Our American colleagues understand this approach, as they’re surrounded by examples of successful companies heavily investing in R&D to deliver groundbreaking products (Meta spends $22.5B a year on the development of XR headsets to build the next generation of personal computing (Upload VR); Tesla spent five years and $100M to release its first Roadster model (Crunchbase); CTRL-Labs raised $65M and was in development for four years before being acquired by Meta for its neural-interface wristband (TheVerge)).
As Europeans, we have to fight our natural tendency towards practicality and aim higher. We’re good at building B2B SaaS companies, but we struggle to create inspiring, must-have products. This mindset often leads us to undersell our technological development, as we want to generate revenue quickly. As a result, we become a small part of a bigger product, disconnecting us from end-users and limiting our ability to create a unique experience and capture the value of what we're building.
We often hear that the EU lacks a sovereign operating system or platform, and that we have no control over our data. But does it really matter? And to whom?
As users & start-up founders, we don't have any strong incentives to stick to European companies
Who wakes up each day worrying about the design of the smartphone they're using? As long as they can watch TikTok videos and post stories! Who cares who owns the satellite navigation service they're using? As long as it provides the quickest route from point A to point B!
As device users, whether in a personal or professional setting, we judge a device's quality based on its value rather than its designer.
As start-up founders, we have some limited incentives to stay in Europe
As start-up founders, our primarily goal is to focus on adding value to meet our target audience's expectations, regardless of our funding source or company location. Achieving such product-market fit is what leads revenue generation further down the road.
This can be biased - to a limit - if the political power is not only offering advantageous funding but also supporting us in expanding our business.
The close connection between political and economic power, like what exists in China, can be attractive as it has enabled the emergence of corporate giants like Huawei, Baidu or Alibaba. From the perspective of entrepreneurs, it can be very productive at first but also quite concerning:
Though the EU system is very different from China’s, having too much of a support coming from a public entity can actually put your company at risk or even hamper its worldwide development.
Public entities seem to have strong reasons to advocate for a European hardware platform
Beyond the obvious economic value of having large European companies—job creation, sales tax—why are public entities pushing hard to create European hardware champions? Are they correct in their assumptions and solutions?
“European champions would respect EU principles, values & laws"
Apple and Google very likely had a deeper impact on people's privacy with their changes on third-party cookie tracking over the past few years than GDPR ever did. Sure, they’ve used their hegemonic position to completely change the face of the advertising industry. In some ways, these companies are above any state law and if we are to build European champions, we should hope that they’ll one day have the power to act the same way. If or when that happens, how certain can we be that EU principles and values will remain central to them?
“The EU population can be protected by European champions”
Chip shortages, data centre leaks, network surveillance… All of these modern problems can have a major impact and destabilize a region, as we’ve become heavily reliant on technology. It makes sense that our governments are trying to prevent these issues as much as possible by pushing for re-industrialization in the EU.
It’s unclear, however, if owning the means of production—such as chipset factories and data centres—is enough, as is the case with TSMC in Taiwan, or if we also need to push for the creation of local, full-stack, deep tech hardware companies.
On the other hand, how much sovereignty and protection does a European "Apple" provide if its data centres are in the US and its factories, in China?
Ideally, you'd like to create a European hardware platform that runs on European hardware infrastructure. However, this would increase complexity and reduce the already slim chance of success for the project.
Hardware is indeed a difficult challenge for start-ups and investors alike, and many, many, many people have discussed this topic in depth. Here’s a short summary:
Yes, hardware is expensive. Apple product cost for instance accounts for 70% of its expenses. No software P&L looks like that.
Yes, hardware takes longer to develop. New versions can’t be released every Thursday like with software.
Yes, hardware is difficult to protect. Once released, it can be taken apart to understand how it works, which isn’t as easy with well-protected software. To stay ahead of the competition, hardware start-ups need to have a complex core technology, a network effect or strong brand recognition.
Hardware start-ups and investors have different incentives. Investing $8M in a hardware start-up that may take longer to generate cash than the fund's life expectancy isn’t as appealing as investing eight times $1M in software start-ups that can show revenue and traction from day one.
Hardware deep tech investments aren’t aligned with the traditional risk/return on investment sought by the current European investment ecosystem. Hardware start-ups require specialized investors with different incentives on the targeted return on investment, the timeframe for this return, and the strategic value of the investment.
In the coming years (”5 to 10 years…” according to Vitillo’s law of technology), a new generation of hardware platforms will emerge around augmented and virtual reality powered by next-gen AI-based tools (ChatGPT 120, Dall-E v14, etc.). These moments in time favour the emergence of new major corporations. If Europe wants to seize this opportunity to cradle the next consumer tech giant, what are the necessary steps to thrive in a European context?
We already have European hardware champions, both old and newly-established, such as Jabra, Sennheiser, Devialet, Ledger, and Nothing, who’ve been leading the way for years. But to really have a significant impact on the world of technology, we must think bigger. Companies like Ultraleap, Tobii Dynavox, Lynx Mixed Reality, and Iristick, who are actively exploring the XR platform, are paving the way for the future. We need these companies to be as ambitious as Meta or Apple.
As for Wisear, we’re eager to collaborate and build a European platform that could potentially become the next generation of ubiquitous devices, and aims to provide a platform for developers to create innovative, revolutionary experiences. However, we’re not willing to compromise on our global ambition and we’ll move on whether or not this happens.
Aligning strategic & start-up incentives
Previously, we noted that aligning strategic and economic incentives isn’t always easy. However, in some industries like defence and space, it can be more straightforward. Governments in the EU can provide the initial funding and then become clients of the tech start-ups they support, creating viable economic activity.
But how can the EU incentivize hardware deep tech start-ups to get funded and scale their business across the 27 states? US public entities offer a good example. Beyond funding, the EU could also support its hardware start-ups through:
Aligning strategic & individual incentives
It is difficult to achieve such alignment in the capitalist system we live in. We can assume that the only way to do this is to ensure that the best products come from European start-ups. In return, European consumers would choose these products over non-EU ones.
However, there's one key joker card that can sometimes be used by governments to influence consumers behaviors: Protectionism.
I’m not a huge fan of this one but I wouldn’t be exhaustive if I wasn’t listing it. The EU could temporarily support local hardware champions by creating such a high import tax barrier that any foreign competitor’s device price would be so high, it would deter anyone from buying that device. Such mechanisms have been applied on both side of the Atlantic in the past to support local aircraft makers (Boeing for the US & Airbus for the EU). Both had been heavily subsidized by governments.
The EU is skilled at deploying early-stage public capital and financing for deep tech, but it hasn’t yet become adept at transforming these investments into successful, profitable deep tech companies.
Recently, I came across a very clear diagram by Alexandre Dewez that perfectly shows what’s missing. As we have yet to see significant deep tech hardware exits in Europe, we lack the right investor ecosystem with the right expertise to work with post-seed start-ups and bring them to maturity. We don't have EU-based Lux Capital stating that they provide their start-ups with 30 months of runway when they invest, as they understand how long and complex deep tech can be. We neither have Cantos-like investors explaining they're comfortable funding companies who would need $100-$150M pre-revenue CapEx to bring a DeepTech product to market.
This is a weakness, but also an opportunity for expert investors to thrive in Europe, where they would face less competition to acquire the best deep tech hardware deals. Tony Fadell and Future Shape LLC also highlight this.
We should also incentivize existing hardware companies to set up proper corporate funds specialized in spotting and operationally coaching emerging start-ups. Why don't we have Jabra Ventures or Sonova Capital, in addition to Bose Ventures, Intel Capital and Qualcomm Funds?
This article was written while working with my co-founder and determining Wisear’s best course of action for 2023 and beyond. I was trying to figure out whether there was a clear path in Europe that would align with our objectives, or if we’d have to venture to the US to achieve our goal of shaping the future of human-computer interaction.
It’s obvious that, nowadays, starting a deep tech hardware company with the ambition of building an actual product that people will use seems easier in the US. However, it’s just as obvious that a new wave of European entrepreneurs with that exact goal in mind is emerging. We have access to an amazing talent pool (hello, WisearZ!) and we’re benefitting from a robust public funding ecosystem to establish our companies. As Wisear grows to become the one true human-computer interface everyone will use in the future, we'll see how we can blend this European DNA of ours with our global aspirations and where the next page of our story will be written.
As always, I'm open to feedback. If you're building or already built a hardware company and have faced similar challenges, please feel free to reach me at email@example.com.
Special thanks to:
Ramses (Neurable), Andreas (Cognixion), Conor (OpenBCI), Simon (IDUN Technologies) & Neo Mohsenvand (BrainCo Inc) for pushing our ambition forward.Timothée Le Quesne (energysquare), Stan Larroque (Lynx Mixed Reality), Tom Carter (Ultraleap) and Anand Srivatsa (Tobii Dynavox) for pushing hardware innovation in Europe forward.Lauren, Alain, Quentin, Cyril and Marcela for the inspiration and proofreading.
Wisear is developing the future of human-computer interfaces with the first wireless earphones equipped with a neural interface, delivering high-speed, private and accessible controls to users.
Wisear technology makes life easier:
Below are demos showing how people can already get voiceless/touchless control over their earphones and AR/VR/XR headsets.
Wisear's innovative solution was recently recognized as one of the best new technologies in 2022 by the Wall Street Journal, Techcrunch, Mint, The Telegraph, 20minutes and Sifted.