CES and Grifting the Entrepreneurial Ecosystem

Grifting in the Entrepreneurial Ecosystem

I just returned from the Consumer Electronics Show in Las Vegas. I have been going for many years, and I thoroughly enjoy the show in many respects, but the grifting in the entrepreneurial ecosystem is out of hand.

CES has an area called “Eureka Park.” It is touted as the place where entrepreneurs have an affordable venue to bring their products to market, but it has turned into a grift that has been hurting “real” startup companies for the last several years. There is endless fawning about all the “innovations” that are on display, but when you look at the actual so-called “companies” that are represented, it is a government-paid junket – all from foreign governments.

I can sympathize with the Consumer Electronics Show in some respects. They are in the real estate business (they sell booth space).

Dealing with independent entrepreneurs is brutally hard. Each one has a bunch of questions. This is often their first big show and need hand holding. They take a lot of resources from CES staff, and they have the tiniest of 10×10 booths – and they are supposed to get a “discount.”

This means that “real” startup companies are a loss leader at best.

The Government-Paid Junket to Vegas.

Many governments, including France, Israel, Netherlands, Japan, Korea, Hong Kong, Turkey, Poland, Italy, Switzerland, and many others send a huge number of so-called “startups” to CES on the government dime.

For the so-called entrepreneurs, they get an all expense paid vacation to Las Vegas.

For the government bureaucrats, they get to pose for a ribbon cutting ceremony (during their all-expense paid vacation to Las Vegas).

The bureaucrats get the prestige and importance of “promoting innovation” while spending the taxpayer money with which they are entrusted.

Here’s an example of the “innovation” that the French government was promoting:

A pan-African music-tech platform integrating streaming, distribution, and mobile payments (including USSD). It innovates by combining AI recommendations, analytics for artists, and monetization solutions tailored to African realities.

The French government is promoting “innovation” that is essentially Spotify in Africa. There are countless examples of “ideas” that have no hope of angel/venture investment, let alone revenue.

One year there were several French companies with hand-held “personal air purifiers.” You would think with all the need for air purifiers in France that they were heating their houses with coal and thick, black smoke was belching from smokestacks.

CES is Grifting Off the Foreign Trade Delegations

Here’s the problem: it is much easier to sell 50 booths to a single trade delegation than it is to sell 50 individual booths to individual entrepreneurs.

Consequently, there are actual entrepreneurs with actual good ideas who are actually bringing a product to market and actually have skin in the game – but they are, literally, in the very back corner in the last row at the farthest reaches of Eureka Park.

The prime real estate is full of Y-shaped toothbrushes (that has been there several years in a row without any commercial success), grow-lettuce-at-home devices, and endless AI wrappers for the most trivial of use cases. In other words, “ideas” that are just enough to get the government-paid vacation to Las Vegas as deemed “worthy” buy a bureaucrat.

I’m not cynical enough to believe that the “entrepreneurs” just happen to be the bureaucrat’s nieces and nephews.

CES is All About the Hype

CES is about press, media, and hype. Companies go there to get recognized, and the CES brand focuses on the media coverage.

CES is a well oiled machine for treating media very well, creating “events” and headlines that catch the news cycles and work well on Twitter/X, LinkedIn, etc.

A fully-paid, 50-booth Eureka Park block from a foreign country means ribbon cutting ceremonies, interviews with CES and foreign dignitaries, and lots of pictures.

All the while, the actual innovators are pushed to the far corners of Eureka Park. It is unfortunate, but this is the reality.

What I Wish Would Happen

I wish that more startups attended. CES is a great venue – every news outlet is there. After all, CES is the only event after the holidays and kicks off the new year.

It is hard for pre-seed, seed, and early venture companies to attend, but it would make sense for angel groups, venture capital firms, and even private equity firms to bring their portfolio companies to the show.

The investors are the vehicle for selling a handful of booth spaces (maybe 20 or more booths) at one time, which addresses CES’s real estate sales concerns.

The investors need their portfolio companies to do well – after all, they invested.

The startup companies would get media exposure, but more importantly, see other companies in the same situation.

Most startup companies operate in a vacuum, with little knowledge of their market and even less knowledge of other companies in their space. Seeing the competition (or other startups in the same development cycle) will bring out the competitive nature of the entrepreneur and force them to get better in a hurry.

Why Doesn’t This Happen?

Every time a startup tells me “there is nothing like it,” I am always reminded that this is signal, not noise.

When the market does not work the way I want it to or the way that it “should” work, that is telling us something. It says I am missing something.

The entrepreneur touts “there is nothing like it” as if it were a great thing. However, that is always a red flag. It means that there can be market forces that are working directly against the entrepreneur.

For example, there may be entrenched legacy competitors with much better branding, manufacturing, distribution, support, etc. that the entrepreneur cannot possibly duplicate. It could be that consumers fail to see the need for the new product, meaning our entrepreneur would need a huge advertising/marketing campaign to get meaningful sales. (That campaign might also awaken the legacy competitors to move into the entrepreneur’s space, which is when we find out if the startup’s patents have any value.)

When things are not working like I think it should, it can be opportunity, but it is also signal.

Why don’t venture firms and angel groups promote their portfolios at CES?

The fact that investors are not actively bringing their portfolio companies to CES (or any show for that matter) tells us something.

Certainly, the investors do not see the value of the show to their portfolio. But is it due to lack of awareness, or is it a decision after carefully weighing the costs/benefits?

From my vantage point, I see the opportunity of showcasing portfolio companies, extending the investor’s brand name, and getting the entrepreneurs out of their lab and into the fresh air of the marketplace.

The short term view is that CES is expensive, not just from the booth space, but travel, lodging, etc. It is expensive from the opportunity costs, too, as it is a complete week of lost productivity.

The real benefit of shows like CES and others is not attending the first time. The benefit is attending over and over. It is meeting the person you met last year. It is seeing the same blogger/media people. It is knowing where the “good” events are where the cool kids hang out.

Bringing a portfolio company to CES (or any large show) introduces the company to the industry. They payoff is not whether a buyer will purchase a product at the show, it is the first step towards establishing a brand and reputation for years to come. It is laying the ground work for sales a year or two down the road. It is making acquirers aware of the company (or starting to build a reputation for the downstream acquisition).

My view is that shows like CES have long term benefits that do not show up on the balance sheet, but the show is a small investment in a larger arc of the company. The payoff is downstream.

I do not know if I am seeing untapped opportunity or not.