#3 Birdi

June 6, 2017
Mark Belinsky pitches his internet-of-things startup Birdi to investors Carl Fritjofsson of Creandum and Greg Castle of Anorak Ventures.

Show transcript

Episode transcript

You’re listening to The Pitch, a podcast about startups, I’m Josh Muccio.

Mark Belinsky: We see saving lives as a UX problem.

Mark Belinsky, founder of Birdi, an internet of things startup that started because of a close call with Hurricane Sandy.

Mark: Grandma was in the evacuation zone.  Grandma, when told by the government to leave, didn’t.

Don’t worry, Grandma lives.  Also, on today’s show, why you might need to pay more attention to the air you’re breathing.

Greg Castle: Very few people know that air quality indoors is five to ten times worse than it is outdoors.

Greg Castle, early investor in today’s startup, Birdi. Let’s get started.

Mark: So my name is Mark Belinsky, CEO, co-founder of Birdi and Birdi makes elegant products for the home.  And we’re starting with our first, which replaces that ugly, awful device that all of us have in our homes, assuming, which is the smoke alarm.  So instead of sticking Wi-Fi into existing devices like so many companies are we see this as a legally required sensor hub for every ceiling.  And so we’ve made this into a smoking and carbon monoxide alarm that also tracks air quality as well as presence.  So that it can really be your safety and health hub for the home.

Sheel Mohnot: Cool.  

That’s Sheel Mohnot, my co-host and the fintech partner at 500 Startups.

Sheel: Where’d the idea for the product come from?

Mark: The idea is actually really personal, it comes from my grandma.  I’m a New Yorker, born and bred, and my family lives there, down in Brighton Beach.  So Hurricane Sandy was coming to hit New York City, Grandma was in the evacuation zone.  Grandma, when told by the government to leave, didn’t, because she’s Russian and often we don’t listen to the government.  So she stayed put, was very hard hit by the storm, thankfully was ok by I didn’t know that.  And when I finally visited her I saw that she had all her power knocked out but she was heating her home with her gas stove, so potentially poisoning herself.  So I wanted something that would call her on her landline and explain to her in her native Russian why that’s dangerous.  And then would send me a push notification that says, “Holy crap, Grandma’s in trouble!”

To solve this problem, Mark and a friend of his who would become his co-founder, decided to build their first prototype during a hackathon.

Mark: Which bringing hardware to a software hackathon, sort of like bringing a gun to a knife fight, it’s just not fair.  So we won the hackathon, got some press coverage in the Wall Street Journal and Fast Company saw there was a really huge market need.  And have now come out with the first beautiful and functional smoke alarm and so much more.

Carl Fritjofsson: Love the design, looks awesome.

Carl Fritjofsson, principle at Creandum, a European venture firm that invested in a company you may have heard of; Spotify.

Carl: But it’s also a very commoditized product so the price point, I don’t know.  For a few dollars, seven, ten dollars, something like that you probably buy them.  What is your price point?

Mark: We’re a premium product, it’s $99, but for an air quality monitor it’s actually about half the price.  The sensor technologies have been traditionally really expensive, so when we designed this we didn’t want to just create kind of an elegant, Scandinavian design, we knew we had to rebuild it from the ground up.  So we actually rebuilt the sensors, one, to make them more accurate so they don’t annoy you while you’re cooking or taking a shower, plus to drop the cost.  That is part of our strategic advantage and cost advantage.

Sheel: And you have to price it at a hundred bucks because that’s what Nest had said?

Mark: Potentially.  So that’s where we’re in negotiations at, Nest initially priced themselves at 129—

Sheel: Yeah.

Mark: And then dropped to 99, so that was a significant drop for them.  So we’re exploring whether to be price competitive on the smoke side, but also we have all the air quality sides.

Sheel: I think you should try to charge a little more, personally.

Greg: It’s not ‘like for like’ versus Nest, Nest doesn’t have any air quality sensing technology.

Greg Castle, Investor at Anorak Ventures.  It’s important to note that unlike the other two investors on today’s show, Greg has already invested in Birdi.

Greg: You guys designed the air quality sensor from scratch, right?

Mark: Yeah, two of them, actually.  So we designed the particulate sensor as well as the carbon dioxide sensor.  

Sheel: What’s the market for air quality sensors?

Mark: So worldwide, it’s really interesting.  So in China, they don’t really know what a smoke alarm is but they very much care about air quality.  So there we’re sort of a different product, where we’re an air quality monitor that also has the security aspects.  In the US, it’s small but growing.  The cost of air quality monitors has been prohibitive and kind of the design question of, where do I put this?  Here, this kind of goes away in the industrial design, it’s elegant on your ceiling and then it gives you all these additional features.  So we really see ourselves as being the first ones to be introducing air quality as a concept to consumers in the home.

Carl: How close are you to having a functioning, shippable product, because–?

Mark: Done.

Carl: Oh, it is done?  Prototyping and like tying together the firmware with the actual software experience and making it seamless and beautiful.  I think the reason why hardware is hard is because a lot of people struggle going from that prototype idea stage to an actual, functional product.  Are you already there and you’re ready to ship?

Mark: So hardware has undergone a complete revolution, and when we went to that hackathon, the reason why it was so exciting is that it was never before possible.  What we did in six hours or eight hours, that would have taken months and hundreds of thousands of dollars, if not millions, just for that prototype.  And so that part of the process has completely shortened and the cost have dropped.  The rest of the process is still as long and as hard as it’s ever been, and so the slog has been two and a half years because we knew we wanted to get it right from the start.

Sheel: There’s an elephant in the room, obviously, you alluded to it earlier, but Nest has a product that, in my mind, is very similar.  Tell me about that and how do you plan to beat Google at this game?

Mark: We are standing on the shoulders of giants.  Having Apple in our corner is really exciting because we’re the only reliable, elegant smoke alarm on HomeKit.  And we think that’s a massive differentiator and something that we see customers are just begging for.

Sheel: But don’t you think Nest will be on HomeKit as well?

Mark: I don’t think so. For one, for HomeKit access – I’m not sure what I can say because of NDAs.  You have to have some core integrations that—

Sheel: Sure.

Mark: They haven’t built-in.

Sheel: Is there any other revenue stream, other than the hundred bucks for the smoke alarm?

Mark: We have totally optional, security concierge service, which I jokingly call the ‘Uber’ for firetrucks.  So if there is a fire emergency, of course you can call 911, but if you’re at work or your phone’s off, you might not be able to.  So we’ll deploy the firetrucks right to your house, faster than any other product on the market, and more reliably.

Carl: And you charge a subscription fee for this?

Mark: Exactly.  So we’re still playing with the pricing, currently it’s five dollars a month.

Sheel: And how much does it cost to manufacture this thing?

Mark: It’s not cheap [laughing].

Sheel: Is it going to be sold in Apple stores?

Mark: I cannot confirm or deny… whether that is true.

Sheel: Did you do a kick starter or did you do pre-orders for this?

Mark: We did for a slightly different version of the product, so we were called the Smart Air Monitor. Because legally we’re not allowed to call it a smoke alarm or carbon monoxide alarm.

Sheel: I’m looking at the packaging that says Smart Detector, smoke plus carbon monoxide plus environment.  So you can call it that but you can’t call it—

Mark: So we can now, but—

Sheel: Oh, you can now.  Well why not do it now, why not do a kick start or pre-orders now?

Mark: We’re going forward on a very exciting, exclusive launch opportunity.

Sheel: Oh, interesting.

Carl: Great.

Mark: So stay tuned, it’s going to be big.

Carl: Great.

Sheel: Tell me about the funding situation.

Mark: So we are fundraising right now, so closing on a seed round. We’re about a million into a 1.9M raise on a convertible note.  We have great investors already, like Greg.  For us it’s all about what is the future of home living, to me it’s insane that we don’t know that the air that we’re breathing.  Personally I’m seeing with my nephews and nieces, asthma rates are going up, allergy rates are going up.  People with kids are becoming more conscientious about what are we breathing, and to me it’s almost the state of where organic foods was 10 years ago.  Air quality is going to become more and more of an issue, so we can give little tips of advice on how you can improve what you’re actually breathing.  And honestly, the hardware is hard but the behavior change is the hardest part.

Coming up, Mark gets the boot and the investors get real. Here’s Greg Castle, he’s already invested, but he’s not as biased as you might think.

Greg: What hooked me about Birdi was Mark said one thing that really struck me is, he said to me when we were originally meeting, he said to me, “Where is your smoke alarm right now?”  And I sat back and I thought about it and I said [expletive].  I think three out of the four smoke alarms I have in my place are in my kitchen drawer because the alarm went off, I didn’t have a nine-volt battery handy, I knocked it down and it’s been sitting in my kitchen drawer ever since.  And it was like, shit, now that I think about it, they’re not up, they’re not being used right now.  And so I think that there’s a bunch of people who have smoke detectors that aren’t functioning that can look at this and be like, “Oh, if I’m going to go through the trouble and replacing it, why not just get something that is going to fit with my more modern home?”

Sheel: One thing I forgot to ask, does this need to be plugged into electricity?

Greg: It’s got both options, it can either be plugged into the main line or it can be—

Sheel: Battery?

Greg: Battery operated.

Sheel: But the battery probably won’t last that long if it’s using Wi-Fi, as well. I should have asked Mark.

Greg: Yeah, I don’t know—from what I recall, the battery life is enough, it’s like a year or something like that.  And then that nice thing about an IRT device is that it’s fully connected.

Sheel: It tells you—yeah.

Greg: Yeah.  I think he’s also got a service, actually, that mails you a new battery like every time the alert goes off.

Carl: And I think the huge case that he brought up with the firetruck automatically being dispatched to your home, that’s not the biggest selling point to me.  So I think there’s got to be something more, daily or weekly activities that engage me with the product that makes me feel I want to pay more.

Greg: Yeah, on the critical side there was a fair amount of vagary in some of the answers.  Some of it was maybe NDA issues or different things like that but I generally don’t like vagary—

Sheel: Me too.

Greg: When I’m getting a pitch.

Sheel: I mean, no investor does.

Greg: Yeah, yeah, and so that was one thing that—

Carl: And I’ll be surprised if Nest wasn’t able to build into the HomeKit with Apple as well.

Greg: Yeah, I mean, I don’t know.  Would you?  Do Google and Apple always play nice together?

Sheel: Enough.  Apple wants HomeKit to be successful—

Carl: Exactly, yeah.  Nest is the global leader for smart homes.

Greg: I think that’s fair.

Sheel: So yeah.  I don’t think that HomeKit is a—

Carl: Competitive advantage—

Sheel: Sustainable one – exactly, yeah.  

Greg: You guys invest in hardware sometimes, what are the main questions that you look to get answered from hardware when you’re meeting with hardware companies, and did Mark answer them?

Sheel: So the main thing on that front is like, he has—his co-founder’s in Shenzhen.  That’s really important to me because so much of the failure points happen on the China side.

Carl: You know, we see a lot of people that have reasonably successful kick starter campaigns for various hardware products, considering the fact that it’s what he mentioned.  The time of prototyping has shortened so much and come so cheap and affordable, so a lot of people can get stuff out there and get some pre-orders in.  But there’s a pretty big leap to take to actually scale that up and become a global provider of whatever product it is that you’re trying to do.

Sheel: The number of smart home devices that I own that just suck to use – like I got excited about the Argos smart lock, and now half the time it doesn’t work, which is really, you know annoying.  I paid $500 for the smart router, Aero, it’s ok, I heard Luma’s like worse, actually.  So there’s like, you know—

Carl: But that’s where it all comes down to, right, the software experience of these smart, intelligent—

Sheel: Yeah.

Carl: Devices, that’s the critical, key, killer point.

Greg: Yeah, got to be easy as hell.

Sheel: So at the seed stage it’s so hard to invest because basically you’re thinking that this guy is going to build something that’s better than all the other things you’ve seen with that hardware/software integration.

Carl: Yeah, definitely.  I would want to see much more of the software experience here.

Sheel: Yeah.

Carl: But—

Sheel: But that makes it hard to invest at the seed stage.

Carl: But at the same time, to his credit, I’ve met a bunch of entrepreneurs that are at similar stage where he’s at and they’re saying, we’re raising 50 million dollars.

Sheel: Yeah, totally.  I was shocked when he said he’s raising, was it two million, total?

Carl: Yeah, one point nine?

Sheel: Yeah.  I was surprised, the fact that he has a product that’s ready to go, that’s impressive.

Carl: Agree, yeah.

Greg: They hustle. I would say, in terms of investing in hardware, one rule that I’ve been a lot more strict with myself on is that it has to be super, super compelling for me to invest in a hardware team if they haven’t already shipped hardware.

Sheel: Yeah.

Greg: And oftentimes when I meet with companies, if they’re hardware companies, I’ll say that in the outset.  Once I know their background, I’ll tell them, “Look guys, just want you to know, I love the idea but I really don’t invest in hardware companies that haven’t shipped product beforehand.”

Sheel: Yeah, that’s a good move.

Carl: Yeah.

Greg: And so Mark and team had not, but the product was super compelling, for me.

Sheel: But you invested in the seed round which is still open.

Greg: Correct.

Carl: And you did the deal two years ago, you said?

Greg: I think it was about a year and a half ago.

Carl: And are you happy with—had they achieved what they planned to do in that time?

Greg: I think things are a little bit delayed from where I would have liked.

Sheel: I mean, that’s hardware, it’s—that’s fine.

Carl: Always, always the case.

Greg: Yeah.  It’s par for the course.

Carl: But you have to account for that when you’re investing, you’ve got to make sure that the runway is long enough.

Greg: Yeah, yeah, absolutely.

Sheel: The interesting problem with hardware is if he tells you a realistic timeline, you’ll be like, Oh, yeah [laughing]—

Carl: Yeah, right.

Greg: Yeah, you’re absolutely right.

Carl: Ice cold.

Greg: That’s so right [laughing].  So right.  I was talking to this other company last week, they said they were going to have it out in like six months.  Come on guys.

Sheel: Do you guys remember the coin—the credit card that—

Carl: Yeah.

Greg: Yes, yes, yes.

Sheel: So I’m a bit of a payments nerd so, like, I knew this thing was going to freaking fail, there’s no way he’s going to launch on time.  And they were like, “No, no, no.  He’s launching next month, he told me he’s launching next month.”  I know the people who can tell him whether he can launch, he’s not launching for another year.  Anyway, interesting, some people just build hype that way.

Greg: Yeah, tough.  Hardware is hard.

Carl: That went viral as well though, I don’t know if they took pre-orders but—

Sheel: The company’s dead, to zero.

Carl: Yeah.

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