For Some Fledgling Connected Gadgets, Privacy Considerations Come After the ...

Fledgling hardware startups are often pushing the envelope when it comes to innovations in a "connected" world. Ever-present Wi-Fi and new, low-energy Bluetooth tech present new possibilities.

But these same companies could face potential issues if user privacy is not completely thought through.

Take Tile, a nifty lost-item finder that has far surpassed its initial fundraising goal of $20,000. The system works by attaching $19 physical tags, or tiles, to items such as a phone or wallet. These tiles then wirelessly connect to an app on users' smartphones using low-energy Bluetooth.

Digital "leashes" for lost items have been around for years. But Tile has a unique twist: Instead of alerting users when they stray from their belongings, the user tells the app that something has gone missing. Then Tile picks up the location data of other Tile app users - assuming that Bluetooth is turned on within their phone settings - that are near the missing object, and sends that data to the cloud. By doing that, Tile can give the missing object's owner an idea of where it is.

In the company's words, Tile uses the "Bluetooth connection of neighboring iPhones running the Tile app to cast a wider search net."

But here's where things are still a little murky: The company, started by co-founders Nick Evans and Mike Farley, is unclear what the opt-in process will be for other Tile app users, whose locations may be pinged at will.

When I asked Evans whether users might get an alert from the app that says something along the lines of, "You're near another user's lost item. Do you agree to share your anonymous location data now to help locate it?," he said he firmly believes that those kinds of alerts would be a nuisance to users.

This location data might be gathered by the company even if the users have downloaded the Tile app but aren't actively running it, Evans said. And Tile hasn't determined yet how long that location data will be stored on Tile's servers.

In other words, the company is still in the early stages of shaping its product vision and approach to privacy. Tile isn't expected to ship until the winter. And yet it has raised over $2 million from excited backers and early adopters.

Tile isn't the first crowdfunded startup to present a concept that could raise eyebrows. A $279 "life-blogging" camera called Memoto suffered some backlash when it introduced its product on Kickstarter last fall.

The concerns were more overt in nature than the back-end opacity of the Tile app: Memoto is meant to be worn on a person's lapel, or around the neck, to silently capture an image from your life every 30 seconds. Some saw this as obtrusive: What happens when the person in front of you is unaware that an image of them is being captured twice a minute?

Sweden-based Memoto, which hasn't yet shipped the camera, has stood by its product's concept. Co-founder Oskar Kalmaru said in an earlier interview with AllThingsD that Memoto had very carefully considered the privacy issues and made the camera "pretty visible," despite its small size. "We didn't design it like it was some sort of spy camera. That was really important for us," he said.

In a more recent statement, Kalmaru insisted, "There is a higher level of transparency required from the Kickstarter community ... stemming both from the nature of crowd funding, where everybody is working together toward a common goal, and from healthy scepticism towards the claims of any project creator."

And while crowdfunded health gadgets are getting more and more love - there are even entire websites devoted to funding new health-care products - data privacy remains a concern, especially when the information is being transmitted to mobile phones.

Of course, blurred lines aren't relegated to just tiny or crowdfunded startups: More established companies are regularly discovered to be gathering more data than consumers are initially aware of, or inadvertently sharing users' smartphone contacts. Or they're simply introducing new technologies to age-old devices, such as Google Glass, that present new concerns.

But bigger companies also have in-house lawyers that can guide product people through uncharted waters. Tiny startups do not. Many might be wise to focus their vision not just on product innovation, but also on privacy communication - with the same consumers that are throwing their faith and money behind a product.