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Whatever your feelings may be toward the Peter Thiel Fellowship, its focus on fostering young tech entrepreneurs can’t be denied. The program takes 20 young people under the age of 20 and grants them $100,000 to build companies for two years as an alternative to attending college. That’s sparked a debate about the benefits versus the shortcomings of university education.

Beyond that debate, what the crop of young, overachieving applicants decides to focus on says something about the big ideas that are capturing the imaginations of the world’s up-and-coming entrepreneurs. As PandoDaily this month explores the ways software is changing the rest of the world, what does it say about the Thiel fellows that a quarter of them are focusing on hardware and connected-device projects?

“To some extent, it’s easier to run a software startup,” says Jonathan Cain, president of the Thiel Foundation, citing things like higher costs and finding manufacturers. “But I think we’ve reached the point where people are starting to understand you can apply software across other industries.”

It may not be surprising — considering the Founder’s Fund has famously demanded flying cars — that at least $500,000 ($100,000 for each fellow) of funding from the Thiel Foundation is going toward hardware and connected-device projects. That suggests the foundation sees some significant innovative potential beyond software. For a venture firm, that amount may be a drop in the bucket, but it’s still a good chunk of the funds stipulated for the fellowship.

The Thiel Foundation says there is more hardware in this class than before, but added that the fellowship has also seen a healthy interest in hardware in each of the past two classes. Cain also mentions that the foundation didn’t seek to fill any hardware or software quota or strive to create any balance between the two.

Riley Ennis, a 19-year-old fellow from Virginia, is building a consumer device that analyzes sweat and aims to improve diagnosing and monitoring diseases. His efforts are further along than most, having spun out of a research project he did with Georgetown University while still in high school. The sensor itself is a disposable sheet of paper that clips onto a person’s waistband, and Ennis plans to sell it to consumers starting this summer. “The future is in incorporating hardware with your phone, or things like your car, to monitor your body,” he says. “That’s the future. That’s how we’re going to lower healthcare costs.”

Among other fellows in this class, one is working on a 3D printer that prints circuitry. Another is building a sensor that enables multi-touch technology everywhere. Still another is working on his own pair of augmented reality glasses, akin to Google Glass.

Of course, as with any startup in the technology business, the Thiel Fellowship projects are subject to change. Last month, I caught up with some of the fellows from the inaugural class. Most of them said they tweaked or changed completely what they were working on. That’s just the nature of the process in a program like this.

But the connected market is a lot harder to change courses when dealing with hardware. They say you iterate ad nauseam early on, then have to commit, because things like manufacturers and licensing and inventory come into play – things that software companies generally don’t have to deal with. So while many of the fellows’ projects might change, they are likely to still remain in connected hardware.

And because the operations process is more complicated for a hardware company, the Thiel Fellowship is actually optimal for supporting them, says Mike Gibson, the vice president for grants at the foundation. That’s because the program is not an incubator, and instead of having about three months to work with the program organizers, you have two years.

Another indication that the market is headed in the connected-hardware direction: Gibson says that a group of fellows from previous classes – who focused on consumer software while in the program – have joined together to work on a hardware product for the consumer market. It’s still in stealth mode, however, so he declined to give details.

Maybe it’s finally one of those flying cars.

[Peter Thiel is a personal investor in PandoDaily]