Healthcare startup Beam Technologies made it to market on a shoestring budget, using $500K to put the Internet of Things in your mouth.
Five hundred thousand dollars is a tight budget for even the most practical software startup. Trying to launch a hardware startup for that is somewhere between naive and audacious. Enter Beam Technologies, a healthcare startup that used their $500,000 seed round to design, develop, and ship 7500 of their Beam Brush, a connected toothbrush that collects and analyzes data on your brushing habits.
Alex Frommeyer, Beam's Founder and CEO, said that getting a physical product into the hands of consumers was the idea from the beginning.
"Manufacturing fascinates the shit out of me, much more so than shipping code," he said.
Now that they have sold out of their first run of the Beam Brush, the Louisville, KY-based company is at a crossroads faced by many startups. Their ideas and frugality have gotten them this far, but their funding is running out and they can't sell toothbrushes forever. So, what's next for this "ballin' on a budget" startup? Get funded and diversify.
Connected home initiatives are causing quite a stir, with http://www.techrepublic.com/article/google-stakes-32-billion-on-the-internet-of-things/Google recently shelling out $3.2 billion cash for Nest Labs, a company that makes connected thermostats and smoke detectors. Beam Technologies is unique in that they had a team before they even had an idea. Their team, made up of a structural engineer, a mechanical engineer, and an electrical engineer, never even considered software when trying to come up with an idea. This explains their focus on hardware. It's what they know.
Frommeyer, who refers to himself as "Fro," is insistent that he will not be pitching Beam Brush as a better toothbrush. The mechanics of physical bristles removing plaque from teeth has little room for improvement and don't really interest the guys at Beam Technologies. They are more interested in creating tools that can collect and analyze data, helping customers better understand the way they use their everyday products. Tony Schy, one of the early Angel investors in Beam, said that the data is what matters.
"I think the toothbrush itself could be the minority of the value," he said. "The real value could be in the treasure trove of data that it could provide dental and health insurance companies, ranging from promoting healthy living to early detection of disease. I think in ten years, the toothbrush will be doing things that most people can't even imagine right now."
Beam Technologies began their funding with a small investment from some local Angel investors that got them to a prototype of the Beam Brush and initial data collection. The goal in the beginning was to assist dentists in patient retention by connecting them with their patients via data, but they have since targeted individual consumers. Frommeyer then reached out to the Yearling Fund to secure a seed round of around $500,000. At this point their financial strategy became as important as their product so they could make it to market without going broke. They knew they needed to get to market quickly to fill preorders. They wanted Beam to lead the way in agile hardware production.
"Hardware needs to start looking more like software in how quickly you can prototype and how quickly you can commercialize," Frommeyer said.
The first purchase they made was a MakerBot 3D printer to help them design the product. Consumer grade 3D printers typically do not provide the type of smooth finish needed for a marketable product, but they work well for quickly altering a prototype. Beam used their 3D printers, a http://www.makerbot.com/MakerBot Replicator 1 and a Replicator 2, to develop their prototype, but they also use them to print the internal skeleton of the Beam Brush, which helps them to cut some cost. The exterior pieces are then injection molded by a third-party manufacturer and mailed to Beam's office.
The most expensive piece of the Beam Brush are the internal electronic components. The Beam Brush uses a customized capacitance sensor that recognizes when the brush is in your mouth and it has different triggers it uses to stop recording time when the brush stops moving or is removed from your mouth. The brush uses a Bluetooth sensor to send the information to a native iOS or Android app and it also has the capacity for three weeks of hard storage on the brush itself. Beam developed their native apps in-house, writing their iOS app in Objective-C and using Java and Java Script to write their Android app.
The biggest money-saver was the assembly. Typically a hardware company will outsource assembly to a third-party company like the one who manufactured the parts, but that can be costly. Beam had all of the plastic parts and electronics shipped to their office and assembled all 7500 of them by hand. They did develop robotics to help with part of the process because, let's be real, they are engineers. They also saved some money on packaging by partnering with a local company who produced the boxes for the brush.
At this point Beam is in a position occupied by many startups. They sold out of their first product run during the holiday rush in December 2013 and their company bank account is starting to dry up. Most big companies would now begin to coast, producing to meet demand and maybe starting to cast vision for the what's next. Startups like Beam Technologies do not have that luxury, they have to make a decision quickly if they want to survive. They have to adopt the training philosophy of Frank Grillo in the 2011 movie Warrior: "Move or die!"
In light of their impending mortality, Beam has decided to keep moving forward. They have begun pitching venture capital firms trying to raise a Series A round to keep producing the Beam Brush and look into more connected health products with Beam Technologies. Frommeyer said they are open to different firms but they are targeting Khosla, Mayfield Fund, and O'Reilly AlphaTech Ventures. Even though Louisville-based Chrysalis Ventures is in their backyard, they probably will not be pitching them as Chrysalis is typically not focused on hardware. He did not disclose how much money they are seeking, but Beam has proven they can make a dollar stretch.
The Beam Technologies team have decided to expand outside of healthcare and into the general Internet of Things (IoT) market. They have started a second, independent company called Uproar Labs that will focus on connected home and lifestyle products. The companies will be run by the same group, but will operate independently. Beam Technologies established itself with the Beam Brush and Frommeyer said we can expect public work around connected home initiatives from Uproar Labs in the next few months. I'm just interested in how the Beam Brush will compete with a singing http://www.brushbuddies.com/jb-product-line-category.html#.Ut_89WQo7mEhttp://www.brushbuddies.com/jb-product-line-category.html#.Ut_89WQo7mEJustin Beiber toothbrush.
Fro's two tips to aspiring hardware entrepreneurs
1. Invest in the maker community. Follow things like http://makezine.com/Make, http://hackaday.com/Hack a Day, and http://www.instructables.com/Instructables. Learn as much as you can about how things work.
2. Understand the customer as deeply as you can, ahead of time. You can do less experimenting with hardware than you can with software and it costs more time and money to develop a hardware product.
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