How to Make $200 Million in 28 Months

August 17, 2014 - table lamp

Last week, a association called SmartThings sole itself to Samsung for $200 million. On a face of it, zero about this is surprising — tech companies sell to bigger tech companies all a time, and $200 million is, trust it or not, a comparatively medium sum as these things go. But a SmartThings sale held my courtesy for dual reasons. First, we know SmartThings — we wrote a story a year ago about contrast their home automation pack in my house. Second, as we watched a association in a months after that story came out, it occurred to me that they were following a start-up playbook to a T. Every pierce they finished seemed expertly distributed to grow, get attention, and eventually income in.

Let SmartThings be a doctrine to you, determined tech entrepreneurs. If we wish to start a tech company, and sell it for $200 million only over dual years later, here’s how to do it:

1. Solve a large problem that looks like a tiny problem.

In 2012, a record executive named Alex Hawkinson had a inundate in his Colorado vacation home that caused $80,000 value of damage. That isn’t accurately alert-UNICEF material, though it is unequivocally irritating — consider of all that busted West Elm! So Hawkinson motionless to make a complement of sensors that would warning him, around a smartphone app, if H2O amassed in his residence from hundreds of miles away. Thus SmartThings was born. The association eventually stretched into an whole line of sensors, all related by an app, that could assistance we keep tabs on your effects and control them from afar. A home automation pack was a ideal change of critical creation and caprice — not too dry and boring, not too whimsical and invalid – and it incited out to be useful for most some-more than only avoiding floods. With a SmartThings kit, homeowners could build their possess home confidence systems for most cheaper than an off-the-shelf system, emanate environmentally-friendly programmed light systems, and more. It was a large understanding masquerading as a gimmick.

2. Get VIPs to feel like they’ve detected you.

SmartThings was a Kickstarter sensation, lifting $1.2 million and assembly a goals many times over. But, given it was formed in Washington, D.C. rather than San Francisco, it didn’t unequivocally locate a eye of Silicon Valley’s financier corps until it won a start-up foe during a Dublin Web Summit. Conferences like these are attended by try capitalists and angel investors — in other words, a kind of people who worry about $80,000 floods in their vacation homes — and many of them presumably returned to their offices vehemence about this exotic, under-the-radar association they’d discovered. A month later, a association had lifted $3 million more.

3. Dwell among buzzwords.

Hawkinson’s timing was impeccable, given that a supposed “Internet of Things” — a jargony tech word that means, basically, a thought that all a appliances in your residence will one day speak to any other — was fast apropos one of a hottest areas in consumer tech. Everyone wanted in on Internet of Things, and SmartThings got itself enclosed in many of those early conversations. Its early employees also gave themselves buzzword-heavy bios, like: “Jeff is a ‘Cloud CTO’ that strongly believes in a significance of Cloud-based services as an enabler of time-to market, scalable architectures, softened and some-more mature use spin agreements, and rival advantage.” Cloud-based services! Scalable architectures! That is a winningest Start-Up Bingo label ever. And by substantiating themselves as leaders in a rising Internet of Things sub-sector, Hawkinson and Co. ensured they’d have a chair during a list when a genuine movement started.

3. Be a platform, not a product

Early on, SmartThings finished a best preference of a life by opening adult a technology, and permitting other manufacturers to build things on tip of a software. Products don’t sell for hundreds of millions of dollars; platforms do. Becoming a height meant that SmartThings didn’t have to spend time and income creation tons of hardware — it could outsource that work to other companies and only be a thing that tied them all together. And carrying dozens of manufacturers sealed in to conceptualizing SmartThings-compatible gadgets gave a association a tray that prevented bigger, richer companies from simply holding over their space.

4. If possible, be a nerdy, pleasant white man.

This one is uncomfortable. But it’s true! If we wish to be a CEO of a mega-successful tech company, sadly, it still helps to demeanour like Alex Hawkinson. we mean, only demeanour during him. Doesn’t he only demeanour like he should be swimming in venture-capital dollars? Don’t we only wish to chuck a tenure piece in his ubiquitous direction?

Photo: Michael Nagle/Bloomberg around Getty Images

(Hawkinson also has a advantage of being a honestly nice, intelligent dude, with a prolonged list of education and a 15-year lane record in a cloud-computing business. But this isn’t a exigency to success. Assholes with no knowledge sell their companies all a time.)

5. Give good demo.

SmartThings’ advantage over, say, a big-data analytics height is that it’s easy to uncover off. Put a sensor on your door, and we can get a presentation on your phone when that doorway is opened. Plug your flare into a SmartThings outlet, and we can spin that flare on or off with a elementary daub of an app. The approach SmartThings works is Jetsonian adequate to feel futuristic, though elementary adequate for a normal chairman to understand.

Put another way, it’s catnip for tech writers who wish to wow their readers with an sparkling nonetheless relatable glance of a future. And dozens of tech writers wrote about Hawkinson’s demo house, that he’d had fraudulent with 300 SmartThings sensors. (Bonus points for Hawkinson’s choice to supply adult his home complement so that it played Marvin Gaye and dimmed his bedroom lights when his kids were in bed — an edgy, sexy-time fact that few publications could conflict mentioning.)

6. Intimidate a giants, afterwards play tough to get.

While SmartThings was desirable a media, it was also being circled by large companies like Apple, Google, and Samsung, all of whom saw a intensity of a Internet of Things and were disturbed about being beaten to a punch by a tiny upstart. SmartThings had wisely set adult partnerships with companies like Philips, Belkin, and Sonos early on, that enabled those companies’ inclination to run on SmartThings’ platform. And when Apple announced that it was building HomeKit, a SmartThings-like platform, it upped a ante for Apple’s competitors to build or acquire something similar.

Meanwhile, Hawkinson was personification it cool. When asked by Business Insider if he wanted to sell SmartThings to a incomparable tech company, Hawkinson pronounced it wasn’t a going concern:

BI: Would we be open to an merger if it came along?

AH: It’s not during all on my mind right now. Never contend never in business generally, though right now we have a lot of seductiveness in a company, I’ll say, and we trust that only generally right now it’s best to stay eccentric since we find that a marketplace place wants a truly open height in this space.

Translation: we can buy us, Samsung, though you’re going to need to bombard out some serious cash.

7. Get really, unequivocally lucky.

None of a things SmartThings did are a pledge of success. It’s not like they designed to build a height for a Internet of Things only as a Internet of Things was apropos a mania of tech mega-companies, or get out forward of Apple and Google only in time to move Samsung to a negotiating table. All of tech MA these days is fundamentally pointless dart-throwing, and Hawkinson only so happened to be in a right place when a darts were thrown.

There are other ways to build and sell a association for hundreds of millions of dollars in a camber of a few years, though it’s hard, and Hawkinson and a rest of SmartThings’ executives and advisers did all a right things, and got dirty abounding as a result. Start-up wannabes: This is how it’s done.

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