AS US INVESTORS’ once-insatiable appetite for startups wanes, one Irish outfit is turning to the East in a search for the land of opportunity.
Dublin-based Drop, which makes smart kitchen scales, has been on a fundraising drive in China as part of a trip that has also lumped in talks with retailers and potential partners ahead of a full-scale assault on the world’s most-populous country.
On the phone to Fora from his Beijing hotel earlier this month, CEO Ben Harris was bullish on his company’s prospects in the giant Asian nation – even as a notable chill falls over Silicon Valley, where the company runs its sales operations.
“There is this ‘winter-is-coming mentality’ (there), specifically, where investors are in a wait-and-see phase while companies are resetting,” he said.
“The major trend at the minute is layoffs in a lot of the startups in San Francisco and really getting more efficiencies in place – and I think it’s needed. It’s very, very easy to blow tens or hundreds of thousands on all sorts of consultants and things, and a lot of it is superfluous.”
Midway through last year, unicorns, venture-capital backed companies valued at over $1 billion, were being born every fourth day, but the US funding stream has since slowed to a relative trickle amid some big write-downs and cut-backs.
Despite the Chinese roadshow being a partial bi-product of that new investment reality, Harris said he wasn’t simply looking for “dumb money” for the four-year-old company.
“There’s a huge market here that they have huge insights into. From a fundraising point-of-view, you have to kiss a lot of frogs before you get the right partner.
“The growth here and the opportunity here is massive, so it would be silly to overlook it. We’re not selling here, but already it’s the place where we have the fifth-highest amount of users … it’s a great leading indicator for our potential.”
A smarter kitchen
Drop’s maiden product went on sale in late 2014 after taking the gong as best consumer device at San Francisco’s Launch Festival. Its sales network has since spread to Apple stores across North America, Europe and Australia, as well as to retail heavy-hitters like Target and Lakeland.
The $100 kitchen scale hooks up with an iPad or iPhone recipes app to idiot-proof food preparation for home chefs by automatically adjusting dishes based on the available ingredients.
Since its launch, Drop has generated about $1.5 million in revenue, pointing to unit sales in the tens of thousands from the company’s early trade. Around 18 months ago it announced $2 million in seed funding in a round led by local firm Frontline Ventures and US-based innovation Works.
While Harris won’t officially reveal how much the company is looking to raise in funding this time around, he said he was getting “great responses” so far.
“People are very impressed with what we’ve done with a relatively small amount (of funding) and that we’ve delivered on everything we’ve said we’ll deliver on.”
A concerted pitch for millions of Chinese would-be bakers isn’t likely to come this year, however, as Harris added that he and his three co-founders “don’t want to just turn up on a shelf somewhere”.
“I think that’s how other companies who have come from Western countries and have launched in Asia have failed – they’ve just translated their app, whereas you really need to understand the cultural differences and nuances before really going the full hog.”
In the long term, Drop’s plan is to wean itself off making hardware or producing recipes, instead setting itself up to be the software that helps appliance makers deliver on the unrealised promise of the much-hyped smart kitchen.
Growth in the sector, which includes everything from internet-enabled fridges to digital sensor-equipped ovens, has been forecast at more than 60% a year to 2020. For now, however, shoppers appear reluctant to pay a premium for smart appliances that offer few benefits over the perfectly functional dumb kinds.
That divide between consumers and manufacturers remains because the corporations are still focused on their own needs – like “ticking the box of a connected product for their marketing team” – rather than those of buyers, Harris said.
For now the startup is working to add cooking capabilities into its app and interactive recipes as smart ovens come on the market from many of the major suppliers.
Ultimately, Harris is aiming for a kitchen stocked with third-party ‘powered by Drop’ products that seamlessly communicate with one another via the company’s software.
“There will be a fragmented set of products that have different protocols and we want to pull them altogether in this beautiful, interactive cookbook experience. So your food processor knows exactly how much of an ingredient you’re adding to make your perfect guacamole, your oven turns off when your roast beef is perfectly medium-rare, your app tells you when to start cooking your apple pie for dessert and your tomato soup for starters.”
Written by Peter Bodkin and originally published on Fora, a new business publication for Irish startups and SMEs.
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