- Jack Lau
A $100M times X Startup on Internet of Things
Going back to San Francisco, despite the internet age and the temptation to buy everything on line, we always go to a few brick and mortar stores --- some of them our old clients, to see what are the hot items. (Of course, almost then by definition, we look for things which are a bit more physical and less virtual like software.)
And, during dinner time, when we were chatting to our geek friends who had been in the States for a few decades and frankly are some of the smartest shoppers in the universe. Yes, everyone who lives in the States for a while automatically become well trained in buying on sale, clipping coupons, and performing incessant product comparisons.
One topic surprisingly keeps coming back: video security camera of some of sort. One of the products is a DOOR BELL. We kid you not! There is a company called Ring, founded near Los Angeles (https://ring.com/). The concept is very simple. You buy a new doorbell out of the box for US$199. Install an app on your smart phone. Every time someone comes to ring you, even if you are not home, through the app you can see visitors. The video is recorded as well and will be sent to the web cloud.
Photo Source: http://fortune.com/2015/08/19/ring-richard-branson/
A ton of thoughts probably cross your mind now. $199 US dollars? When was the last time any of us go ahead and buy a new door bell (notice this is not a door lock)? So, honestly, when we ask people, they have no idea how much it should cost. But, to give you an idea, you can go get a pretty respectable piece of hardware on a low end smart phone probably on that order. And, of course, pundits will tell you that writing a piece of software app and have it installed should be a piece of cake. So, $199 should be quite a bit. And please don't even start comparing the doorbell which only plays a tune when someone rings. They are probably $1.99 (two orders of magnitude less expensive.) Forgot to mention that the Ring Doorbell would automatically alert you if some comes to your house based on motion detection, and through the app on your smart phone you can actually talk to the visitor as well.
But, here is the thing. When a piece of device works well, people are willing to pay. Think from another angle. You own a million-dollar home in America. But, a lot of time no one is at home. You want to make sure that you are alerted when someone comes up to your door (amazon delivery person for instance). You have no other way of knowing when the visitor will come Now, with this new doorbell, you can even talk to the delivery person when he comes and instructs him.
And, how well are they doing? Well, Ring has raised more than US$100M so far. The latest rounds include Richard Branson and the venerable Kleiner Perkin. Ring was founded only with a US$1M seed funding in December 2013. Of course to be fair most US startups use their own raised amount to build inventory (unlike that in Asia where many startups use commercial bank to borrow an amount to build inventory). So, the $100M would include the working capital. But if you can raise $100M, you are probably worth X times that!
This is a clear case of fantastic product development based more on intelligent software (motion detection, streaming, cloud etc.) than probably hardware design.
This is a case in which user experience and user interface are very important.
But, wasn't Asia known for building great hardware? So, how hard is it to add intelligent software to the hardware? We know iPhone is hard since the software stack such as iOS is hard. But, for the Ring kind of product, there should be enough talent in this region to do.
We do not know for sure, but would imagine that the hardware ends up being manufactured in China. So, there is a home court advantage for start-ups here to create.
There is a name for intelligent hardware like this. It is called iOT (internet of things). Is this one of the areas start-ups in this region can really take a look again?
Yes, marketing and sales in an overseas market is hard. But, with the advent of e commerce, there are at least ways to start without too heavy an investment.
The doorbell is not a unique phenomenon. During the trip, on similar technologies, we see a proliferation of wireless security camera that runs on batteries. (They use motion detection, and only records when there is movement so to save power.) The Netgear security camera product is also much talked about. http://www.arlo.com/en-us/
We really think that in terms of the ability to develop a product of this kind of sophistication should be within grasp for startups in this region.