Niche features, affordability, and ecosystem agnosticism are key to this IoT company’s growth strategy

- July 14, 2015 8 MIN READ

Powerhouse companies like Apple and Google can certainly attribute some of their growth to having an open Application Programming Interface (API). APIs are not only powerful customer acquisition tools, but are relied upon by hundreds of thousands of startups globally, whose business models can boom or bust on the back of tweaks or changes to the ‘mother’ company’s API. A simple change in the ability to access an API can cause a crushing blow to any startup. For example, Meerkat, a live video streaming application, was heavily affected when Twitter decided to choke off access to its API, following the acquisition of Meerkat’s competitor Periscope. Although these changes can have an impact on businesses dependent on APIs, a newly incorporated consumer hardware company, the IoT Group, believes the way forward is to create products that are ‘ecosystem agnostic’.

Founded by Simon Kantor, Ian Duffell, Sean Neylon and Valery Lipkin, the Sydney-based company is the amalgamation of three existing businesses – OK Watch, a company that creates affordable smartwatches, ROAM Systems, a technology design and development company, and InnovativePTV, an internet-based TV network. The company is now gearing up to release a set of new products in the upcoming months – a smart watch for tradies called the ‘Trademaster’, a sports luxury smartwatch, a selfie drone and augmented reality headsets – ahead of listing on the ASX at the end of the year.

Although brands like Apple want to bind consumers to their technology ecosystem, IoT Group’s CEO Kantor believes that, ultimately, everything is connected and there are ways to move past those boundaries.

“Everything is already connected behind the scenes – through the cloud, through apps, through APIs, and so all we do is we make little software modules that take care of the difficulty in that connection. Most people don’t know how to set up a VPN channel between one device and another; to get two devices talking to each other is difficult. We make that process simple,” said Kantor.

He didn’t deny that creating wearable and smart devices that are ecosystem agnostic is a growth strategy for the company, but felt it was more about removing restrictions at a time when large companies are looking at ways to ‘own’ a large portion of the consumer market.

“Every company tries to get you into their ecosystem, so if you have Apple products, they want to bind the consumer to their ecosystem. If you have an Apple phone, you need an Apple watch; if you have a Macbook, you need Apple TV; you need Apple Air for your wireless; so everything becomes Apple. That being said, it’s quite similar with PC as well, so if you have PCs and you’re running Windows, you need to have a Windows compatible router, and so forth,” said Kantor.

“That being said, Microsoft is actually taking leaps and bounds forward by making an operation system that works across mobile devices as well as desktops, so essentially they’re also moving in the same direction. But obviously they’re trying to target their consumers into the Microsoft ecosystem, so with in-app purchases, there’s this whole sense of ‘we’ll give it to you for free, but then you have to buy all these other things online for it to work properly’. We’re the opposite; we give it to you for an affordable price, and you don’t need to buy anything. It all works for you straight away.”

Though it may appear that the IoT Group is taking on the likes of Apple, Samsung, and Microsoft, Kantor said the company is not looking to threaten their ecosystems or undermine their interests.

“We want to complement [them] and actually get more people using their products by removing barriers to entry. Apple may be stricter than Android, but I think we’ll work well together. At the same time, if people want to use a Windows product, our devices could link the ecosystems together,” he explained.

“That said, if Apple really wanted to, I’m sure they could find ways to cut us off if they consider us a threat. When you want your apps to be on Apple App store, you have to submit your code and all your intellectual property for Apple to approve it, so they can definitely find ways to do it. But we’re not worried about that.”

Kantor believes the value in the company’s offerings lies in their affordability. In fact, the company is firmly positioning itself as an affordable, mass-market consumer hardware supplier, with most of its devices costing under $300. Kantor said IoT Group’s mission statement is “to make tomorrow’s technology affordable today”.

The company doesn’t necessarily invent new technologies, but recreates what already exists and makes it accessible to the general consumer.

“We have innovations that have been concocted and thought of in the past six months or so, or cutting edge technology that’s just coming out, and make it available to the general consumer at an affordable price. Google had a similar model with their early devices, however with the latest Nexus they’ve obviously gone with the high-price model,” Kantor said.

Kantor said the devices the company chooses to create are not necessarily based on what’s trending in the market, but rather are based on the actual needs of the market.

“Trends allow us to capitalise on the market. But the needs are what allow us to create products that impact our audience,” said Kantor.

“We want to the give the consumer the latest tech, but with [vital functionality]. For our devices, wireless charging is standard. Interactability between environments is standard. The ability to sync multiple cloud accounts is standard. We put all that functionality into simple devices.”

To identify high-value consumer needs, the IoT Group does extensive market research. Kantor said a lot of companies talk about being consumer-focused, but they don’t actually embrace the practice of consumer-led innovation.

“We’ll go out and talk to a thousand people in different focus groups and see what it is they do on a daily basis and what they use their phones for. We ask them: if they had a smartwatch what would be the main function they would use it for?” said Kantor.

“All the larger companies are releasing smartwatches for the sake of releasing smartwatches, whereas we’re bringing out two smartwatches that would help people in their everyday lives.”

It may have been one of the most eagerly awaited products of the last few years, but a couple of months after it launched, the Apple Watch saw a steep decline in sales: about 90 percent, from 1.5 million in the first week following its launch in April to less than 20,000 a day since June, according to Californian analytics firm Slice Intelligence. Though it’s not certain why the Apple Watch has become progressively less popular, some have speculated that it might be because Apple’s advertising doesn’t clarify how the Apple Watch would be useful to consumers.

Prior to creating the smartwatch for tradies, the IoT Group spoke to tradies to identify high value pain points. All of the tradies said the same thing: they constantly break their smartphone screens and they can’t use their smartphones when their hands are dirty. From that, the company deduced that what a tradie need is a waterproof and shockproof phone on their wrist – that is, a smartwatch that can withstand falling into a bucket of water or cement, and even has a laser tape measure.

“An Apple watch isn’t that. You’re not going to wear an Apple watch if you’re laying bricks for a house. You may wear one if you go out at night, but then it becomes a fashion accessory as opposed to a device that’s useful,” said Kantor.

The sports luxury smartwatch targets the active consumer who doesn’t want to wear a watch and a Fitbit band.

Kantor said the IoT Group’s augmented reality headsets, called Focus Head Up Display (HUD), are significantly cheaper than the Oculus Rift – the former will be under $200 as opposed to $2,000. He admits however that while theirs may not be as advanced as the Oculus Rift, it will be functional.

“There are many companies that are working on augmented reality headsets – Microsoft, Oculus Rift which Facebook now owns. They’ve been talking about it for two years, and nothing has come out. And if you really want it, you can order it on Kickstarter but it will cost you an exorbitant amount of money and your functionality will be limited,” said Kantor.

“What we say is, we may not be as good as the Oculus Rift, but we’re going to be pretty close and it’ll allow you to do things that you want to do on a daily basis. If you’re an architect, you can visualise your new creation. You don’t have to wait for Microsoft to release theirs.”

Currently, the IoT Group has a portfolio of 25 to 30 devices – including its range of OK Watches which costs between $89.00 and $399.95, sold online and at selected Coles stores – and has plans to release another 20 in the next year or so.

It may not sound like a lean operation, but Kantor believes otherwise. There are 15 people working at the company’s Sydney City headquarters, including engineers and product specialists who are well-versed in the manufacturing process, having built things like naval vessels. The company also has a network of consultants, engineers, and industry specialists that it refers to when needed.

“We’ve put together a really lean company from the point of view of production and overheads. We do the design, we do the engineering, we do all the clever and intricate work that goes into innovation, but we don’t get bogged down and stuck on trying to come up with new ways to deal with everyday solutions. We take that from the industry,” said Kantor.

An example he presents is the wireless charger, which has been around for a few years now but is only starting to be integrated into the latest devices.

“It should have been in all devices made in the last four years. There’s new technology where you have passive radio frequency charging, which is where you actually take power from radio signals in the air all around us. For low power devices like our tracking card, we can actually power them indefinitely from ambient radio frequency,” said Kantor.

“That’s not something we came up with; that came out of TechCrunch Disrupt this year. But we’ve gone out to find out how it works, we’ve spoken to the company that has invented it and we’re developing a partnership so we can give the consumer affordable innovation.”

The IoT Group is planning to open up its IPO in December, or in the first quarter of next year, depending on its revenue and run rate in the coming months. This will help the company raise the capital it needs to make some key acquisitions, hire talent, and accelerate international growth.

“We need capital to accommodate our growth plans overseas and to allow us to set up a strong manufacturing production line. There are also a couple of acquisitions that we’ll be looking at to bulk out the rest of the company’s divisions, primarily in home automation and energy. We want to be the leader in the Internet-of-Things space, particularly in the Asia Pacific region.”

As to why the company would rather list on the ASX than raise capital from venture capitalists, Kantor said the funding pool is “limited” in Australia and the deal terms are “quite fierce.”

“In Silicon Valley, there is a much bigger appetite for technology companies and there are endless rounds of investment. Whereas here, it’s quite different. In order for us to keep the company in our own hands, and to propel our vision forward, an IPO is the way to go,” said Kantor.

“Unfortunately, this (going public) is the only option for tech startups if they really want to stay in Australia.”

If all goes to plan in terms of listing on the ASX, the IoT Group would be the second wearables company to list on the ASX, following Perth-founded startup Nuheara, which created augmented ‘Hearables’ (ear buds) that allow people to control their hearing experience with the help of a smartphone app.

Kantor also believes Asia is going to be one of Blrt’s strongest markets, especially countries like like India that’s experiencing increased levels of digital penetration and where there’s a need for affordable consumer products. When it comes to rapidly growing and emerging economies like India, smaller players like the IoT Group may experience greater success than the likes of Apple and Samsung.

IoT Group has certainly doubled down on its retail strategy. In addition to Coles, their smartwatches will soon be sold at mobile kiosks in Woolworths stores, with expansion into 10 other retail chains planned by the end of the year. The company has the capability to produce up to 10,000 watches a week; and a non-exclusive logistics deal with Brightstar will see global distribution taken care of.

IoT Group’s products will also be sold online on one website once it consolidates its digital presence. It is also open to the prospect of running a Kickstarter crowdfunding campaign later this year to boost market awareness and generate pre-orders.