CES startups face wary investors amid economic woes | Business

LAS VEGAS (AP) — More than a thousand startups are showing off their wares at the annual CES technology show in Las Vegas, hoping to generate buzz about their gadgets and attract the attention of investors who can help their businesses grow.

But amid a flurry of layoffs in the tech industry and an economic landscape plagued by high inflation and interest rates, many may face wary investors looking for products that can deliver quick returns instead of hype.

Analysts say this year’s event has a somewhat subdued tone compared to previous trade shows, when many companies routinely unveiled big projects that never saw the light of day. Carolina Milanesi, president and chief analyst at consumer technology research firm Creative Strategies, said this time around many of the tech items on display during the show’s media preview days, which took place on Tuesday and Wednesday, were less “incendiary” compared to last time. for years , which has featured things like talking microwaves and smart jeans that vibrate to direct users.

“The economy — and I think the mood in general — is a little negative about technology,” Milanesi said. “It really gets companies to focus on real value for customers.”

CES, the world’s most influential technology gathering, officially kicks off Thursday for industry attendees. About 3,000 companies are registered to attend the event, including giants like Amazon that are laying off thousands of employees and cutting unprofitable areas of their operations due to uncertainty in the broader economy.

At the same time, many startups are trying to find their wings at a time when consumers are tightening their belts and becoming more choosy about spending money. And experts note that the bleak economic climate can be particularly difficult for hardware companies — they typically require heavy investment to manufacture their gadgets and often face challenges securing the cash they need.

Marco Snikkers, founder and CEO of maturity-testing startup OneThird, said investors have been much more critical this year about which companies to fund. Securing investment for his own company took much longer than expected, but luckily, he said, some existing investors stepped in and the company didn’t run out of money. They managed to secure additional funds last month.

“Let’s hope we can survive 2023 with what we have today,” Snikkers said, adding that the Dutch company, which also has an app, hopes to expand its products to the U.S.

Another CES attendee, Mohamed Soliman, founder of French electric skate startup AtmosGear, said investors have been more afraid to put money into projects throughout the pandemic and are looking for a higher level of maturity from companies before putting some skin in the game. .

“I think CES could be a do-or-die time for a lot of startups,” Wedbush analyst Dan Ives said. “The clock has struck midnight in terms of tech investors just giving away free money. There is a lot more competition for capital.”

Saving money has now become a big priority for the tech industry, a shift from the past when more analysts and investors were more focused on how companies grow. Ives said that unlike products that got a lot of buzz during previous shows but didn’t have a clear revenue path, like drones, investors now want to fund things that can be applied, like artificial intelligence, chip technology and electric vehicles.

The exhibition also showcases transformative technology themes, such as the wider use of virtual reality and immersive experiences in the metaverse. While the metaverse has its skeptics, Ives said he believes all of these technologies could lay the groundwork for what is likely to be the fourth industrial revolution.

But as of now, a recession is potentially on the horizon, he said. “And I think that’s the elephant in the room at this year’s CES.”

The organizers of the event, for their part, say that the excitement has not subsided. Brian Comiskey, director of theme programs at the Consumer Technology Association, the trade group that organized the show, said many startups are excited to return to the event and meet investors in person after COVID kept many of them away from the last two shows.

The organization also has a program, called CTA Match, that matches startups with investors who might be interested in their products, he said, adding that many of the companies have pitched items that could be rolled out soon or are innovations that could be implemented if they meet the right people. investors.

But even entrepreneurs who raise money face higher costs due to inflation. That, along with a more challenging investment scene, could mean more companies won’t make it — or won’t be able to with the cash they have on hand, a scenario that could lead to more mergers with big companies, said Peter Csathy, president of the media and technology advisory firm Creative Media.

Still, startups are trying to get the most out of the show and will try to create buzz around their products in an effort to grab headlines and get free marketing, Csathy said.

“I don’t think the amazing, ultra-cool, ultra-new devices are going to go away,” he said. “It just might not get the emphasis it would have in a buoyant economic environment.”

Associated Press writers Adriana Morga, Brittany Peterson and Cara Rubinsky contributed to this report.

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