The startup that makes kids’ stuffed toys come to lifeMonday August 29th, 2016
Like many tech entrepreneurs, Jia Shen fervently believes that his product can connect the world. Most would not have associated his industry — gaming — with such lofty goals, until this summer, when the Pokémon Go phenomenon reached astral heights. The characters that once lived on cards and devices pulled people outside, exploring their neighborhoods, reportedly even resulting in a date or two.
It’s a major shift for the gaming industry, whose reputation was made on gluing kids’ eyes to the screen. And Shen’s Tokyo- and San Francisco–based startup, PowerCore.io, is poised to cash in on the trend. Its premise is to connect offline, real-world toys to their counterparts in the gaming universe — meaning kiddies might be able to scan a favorite plush animal or a Mario Bros. figurine to activate elements of the game, unlock new levels or features, or more. For now, he’s using near field communication (NFC) chips; in the future, PowerCore will rely on the tools that come with advancing augmented-reality technology — say, image recognition.
While it may seem an odd choice to take on the toy business, subject as it is to the fickle tastes of toddlers and teens, game design expert and Schell Games CEO Jesse Schell says Shen’s in a strong position for the longer term. He pegs PowerCore among the dozen or so startups trying to corner what industry heads call the “toys-to-life” space, and he estimates PowerCore is making the most concerted push. It helps that Shen can drop the industry buzzword that Schell says can cue investors to reach for their checkbooks — the Internet of Things, or the notion that soon, devices from our homes to railroad tracks will be online-enabled, bringing the software revolution to hardware.
Now, just a year after founding PowerCore, 36-year-old Shen’s landed a $2 million round from heavyweight investors including 500 Startups and Golden Gate Ventures. Over coffee in Tokyo’s Roppongi neighborhood, Shen explains that, four years ago, he noticed phones were ready to connect to more than software when Apple’s digital wallet service gained traction. He immediately began working on PowerCore, one of the many ideas he was “incubating” at the time.
In person, Shen, a half Taiwanese-, half Chinese-American born in Chicago, is an affable game geek whose previous startup, RockYou, created widgets and apps for MySpace and Facebook. Unfortunately, he’d moved to the Valley in May 2000, just as the tech bubble was bursting; by his third paycheck, he says he was told he could only make minimum wage. The company had run out of money. The Johns Hopkins graduate (who finished in three years despite “doing nothing, just playing a ton of video games”) stayed in Palo Alto and worked with his brother, a Stanford student. Even amid the crash, “those were good times,” Shen says.
They began as “two Asian-American guys who had no business using MySpace,” he laughs, and at first he says people wondered, “Who are these jokers trying to make money off this space?” Today, it’s a given that social-media-embedded apps can be lucrative. Edith Yeung of 500 Startups met Shen while he was the RockYou CTO. “He’s a really well-respected entrepreneur in Silicon Valley,” she says.
This isn’t entirely new territory. “People have been talking about toys-to-life for about 15 years,” Schell says. Mega-companies have already made inroads in this territory, including Lego and Nintendo. There was Disney Infinity, connecting Marvel and Pixar characters to toys, which folded this year. “That scared everybody,” Schell says. He figures a major finger in the wind will come at Christmas, when industry watchers get to see how the Skylanders game series from Activision performs.(Lego, Disney, Marvel and Activision didn’t respond to requests for comment, while Nintendo’s rep referred OZY to a fact sheet.)
Shen isn’t concerned about corporate competitors, citing startup truisms about agility. Plus, he’s not in the business of making physical toys for the long run; already, he’s built a platform. (He says he’s got a couple of “epic” users but can’t announce them yet.) The model: PowerCore sells the chips or the companies source them on their own. Then those chips have to be made into an actual card at factories. Shen’s job is to “design and coordinate” that whole process. For a new company, they can hand-hold the whole process. It’s a credible business model, and Shen’s a compelling candidate to be an intercessor between toy companies and the software-gaming world. He knows both industries; he started building games at age 10 and got schooled in manufacturing by exploring the Chinese industry, which he says is “killing it” in hardware.
Taking issue with Infinity and Skylanders, which he deems “limited in scope,” Shen dreams of integrating characters across gaming universes — Ninja Turtles facing down Transformers, with the help of a PowerCore chip in their bodies. Just one obvious barrier would be penetrating the intellectual-property fortress of major companies. Yet there’s something endearing about Shen’s belief in the possibility.
PowerCore’s weak point, he concedes, is its missing connection to kiddos; none of the 20 team members has children. But I get the inkling that’s not a problem. Perhaps because of how eagerly Shen shows off his latest acquisition in the game Clash Royale — a “rare card” that pops out of a treasure chest on this grown man’s phone. Or because, fresh off a flight from the Valley, his bag is brimming with electronic toys: a raspberry Pi homegrown computer, a mini drone, Oculus Rift glasses. Best of all: his custom-made Nike sneakers. They light up when he walks. I haven’t seen those since middle school.
Original article by Sanjena Sathian, Ozymandias