Dropcam is revolutionizing the way people stay connected to the places they care about. The company makes a line of cameras that allows anyone to better stay connected to their home, business, or anywhere else. We sat down with COO and Co-Founder Aamir Virani to discuss how they view marrying hardware and software, iterating on customer feedback and lessons learned raising $47.8 million in funding.
My co-founder Greg’s dad was trying to figure out whose neighbor’s dog was pooping in his yard. He goes to Best Buy, buys an IP camera, brings it home and tries to set it up. It took him four hours, and he still couldn’t do it.
Greg’s dad is technical – he’s actually a software engineer and still was unable to get this camera online. He gives Greg a call out here in California. Greg tries to help him set it up, and it takes another few hours, and they finally get it online.
That was the first hint for what we were trying to solve. Something that’s a consumer product in Best Buy should not be that hard to set up.
A few days later, Greg’s dad calls back and he’s got a couple of different issues. First, he’s not able to watch the video from his work office and second, he’s having problems trying to get the video to record. It’s very inconsistent and it breaks a lot. If the computer has software updates he needs to do, the camera goes offline, and the recording stops.
That led to the second hint: this camera is not made for watching from a remote location, and it’s definitely not recording reliably. So Greg reaches out to me, and we get started on the idea.
We actually brainstormed about a few different ideas when we first began working together, but this idea resonated most. Greg said, “I think I’m going to work on this. It’s an interesting problem, at least for someone like my dad, and I think there are a lot of people like my dad.”
This was around January of 2009. Greg was working on this idea, and then we had a friend who suggested that we talk to investors about the idea. By that point there was a basic demo.
There’s a question that comes up a lot with people wanting to start hardware businesses, “How much do I need to show?” For some people, they need to show they’ve already got a bunch of people willing to pay for it. For others it’s showing their initial result in the product that they want to sell. In our case, we took a camera made by someone else, hacked it together, and showed that the setup process could go from six hours down to sixty seconds.
That was the demo that we used to show our potential investors what could be done. When you compared by saying, “Here’s our Dropcam, here’s the setup process, and now here’s a camera that you can buy in Best Buy — go set it up,” the difference was dramatic. That became very clear to not only people we were showing—like our friends and family—but also to the investors we reached out to.
Yes, though I would say that it’s not just about the prototype, it’s really about the vision for the company and what you’re trying to build.
Our lead angel investor was Mitch Kapor, and within the first hour of talking he said, “Okay, I get it, I’m in.” He saw the promise of this ability to check in on your home when you’re not there. Being able to say, “I am at work, I am at the grocery store, I am halfway around the world, but I want to see what’s going on with my dog. I want to see what my kids are doing. I want to see if the UPS guy dropped off the package. I want to see if anyone is in my home right now.”
We didn’t have as much information on the market, but we had to show that we had at least a target market that we could address, and then we saw that it could be big. That goes back to the vision and what you’re really trying to build and what the goal is for not only you, but your customer.
We believe that every person can use a Dropcam. You’re carrying around an iPhone, this super-computer that is just sitting in your pocket and has a big screen. Why shouldn’t you be able to check in on your home?
You may not use it all the time, you may not necessarily sign up for our service, but the usefulness is there. The ability to see what’s going on in your house, whether you’re using your iPhone, Android, or Google Glass, these things are all going to need a way to see your home and we are the solution to that.
Kickstarter wasn’t really around when we first started. As a result, we didn’t even think about crowdfunding.
Honestly, at that point, we didn’t even know how to discuss this product with the market. If we went out to the market immediately, we would have been saying, “This is a security camera.” Then people would say, “Fine, I’ll buy a Sony, I’ll buy a Panasonic, I’ll buy these devices.”
We were still trying to figure out the messaging, and how the consumer—someone who’s a home user, who’s not just an installer who’s trying to set up security systems in someone else’s house—was going to approach this market. We had a lot of learning to do.
“It is not just for early adopters. You have to worry about them, because they're the ones who end up telling others, but the market isn't going to stop there.”
We talked to a lot of people. We actually went to the Golden Gate Mothers Group early on, because we wondered whether the market went beyond security cameras.
It’s easy to see that this can be used as a security device, but we were wondering how applicable it could be outside that — if somebody just wanted to keep an eye on their home. We thought that the Golden Gate Mothers Group was a really great group to ask.
We got some people to talk to us. We started doing user studies and going to people’s houses, asking them, “Where would you put this?” We saw that a lot of people ended up putting it in their living room, and that they were putting it in their living room to not just keep an eye on their kid, but also have a general eye on what’s going on.
These things came together and made us realize that Dropcam is more than just a baby monitor and more than just a security camera. It’s a way to just stay in tune with what’s going on at home when you’re not there.
The idea of being able to share your Dropcam with multiple accounts, or with the public at large, came from some of those experiments. This is something that is still not common on baby monitors. Whenever a parent came to us and said, “I want to share this with Grandma and Grandpa and they’re in New York.” That made us say, “We were planning on doing that, let’s do it sooner.” So we quickly prototyped something and put it out the door.
I think this is where the software and hardware coming together make a difference — we could iterate quickly, and learn how customers were using features.
There have actually been three product phases for the company.
First, we came out with the software, and tried to see if people would use it with webcams. The results of that didn’t go well at all. We tried to do a big public launch, but it’s really hard to get media and people talking about your product early. We tried to acquire users using Google AdWords. A few thousand people hit the website, signed up for accounts and tried it out, but no one signed up for the service.
We talked to them and saw two main groups of users. One was a set of folks who said, “I’m using this as a baby monitor, and I am not going to put a computer in the nursery.” The second group said, “I want to use this to watch my front door, but I’m not going to put a computer there. That’s ridiculous.”
This led to the second phase — we found a camera we could hack into and write software for so that it could work with our cloud service and still be really easy to set up. That ended up being about a year and a half of our sales — people paid for the camera and service.
The great thing we saw was that people were buying it in Silicon Valley and in New York, but also in the rest of the country. We were definitely showing that this is a more mainstream product. It’s not just for developers; it’s not just for VCs.
We’re now in the third phase — making our own camera to go with the service.
For the company and for our investors, the bet is that this is a mainstream product — it’s not just for tech dorks like us. It is not just for early adopters. You have to worry about them, because they’re the ones who end up telling others, but the market isn’t going to stop there.
“We didn't have as much information on the market, but we had to show that we had at least a target market that we could address, and then we saw that it could be big.”
The seed round of funding got us to the initial cloud service and starting to sell the camera with our software hacked onto it. We realized that the hardware that we’re selling is not perfect for the consumer at home.
It didn’t look good; it still had difficulties in setup — we asked users to plug it into their router. Many people don’t even know where their router is, or they have never had to deal with it because their ISP set it up.
One of our main support issues during that era was that people would call in and say, “I’m plugging this in, and what you’re telling me is supposed to happen next isn’t happening.” That was because they were plugging the Ethernet cable from the camera into their computer, not their router.
We took that to heart. People expect to plug this in to either nothing or their computer, not their router. We were able to take lessons like this and understand that, if we raise another round of funding, it will lead to a new product based on what we learned.
It was a combination of both. During that period where we were hacking together someone else’s camera, we became their number one seller in the U.S. We told investors these numbers were based off of a market that was pre-existing and small. Think how much bigger it would be if we came out with a true consumer brand to go with a true consumer product.
There’s no pre-existing market that’s already there, especially if you’re going after regular consumers. We are saying that there’s a new set of consumer behaviors that are currently emerging.
That was the great thing about Sameer Gandhi at Accel, our Series A investor. He bought the idea that this is a consumer play and that there’s a huge market waiting for something like this.
We were still very much a software company. A lot of companies use that model to first get going.
It’s helpful if you’ve got a hardware competency within the company, and you’re probably going to want it very quickly. If you’re lucky enough to find someone you think is a great lead for hardware, or a great lead for manufacturing and operations, you should hire them. That will benefit you as you think about costs, components, and how everything fits together.
“It's not just about the prototype, it’s really about the vision for the company and what you're trying to build.”
We worked with consultants at the beginning. However, as soon as we could, we brought in our VP of Operations Doug Chan, who used to be at Flip Video.
You could see a dramatic difference as he joined the team. The quality in our initial Dropcam HD went up and the component costs went down. Everything that you would hope for out of our manufacturing and operations started happening because there was someone focused on it 24 hours a day.
As companies think about scaling to be a bigger company, they’re going to want someone like this on board. A consultant really isn’t going to cut it.
Release cycles matter a lot and with software you can move so quickly. You can say, “My MVP is this thing that I built in a month, and that now I’m iterating on this on a weekly basis.”
In hardware, it’s not possible. You can’t update a chip after two weeks because you decide the video quality is not great. In fact, that’s something that we faced. We had to make a change to the hardware after our initial release based on user feedback and the manufacturing issues we faced.
It took three months to deal with that. Three months is a long time in software. Especially if you are going the fund-raised, invested route – people are expecting you to use that money and capital in an intelligent way, in a time-frame that is traditionally 12 to 24 months.
On the software side, it’s really easy, and so software folks are in tune and used to that idea. On the hardware side it’s much harder.
When it comes to customers and your user base, word of mouth is really important. You need to make sure that your first release is quality. If it’s not, then the word of mouth is bad, and you’re dead in the water.
You need it to be not just good, but great, so that people say, “This is better than I expected,” even for that first version. It may be that you need to narrow your focus even more, to that singular core experience, so that they at least talk really well about that.
I think that helped us a lot, because people saw the promise of the web-based viewing and cloud recording right away.
Initially, it was just on our website. Which is great, because you get to keep the margin for yourself, but we knew we needed to be in other places.
What’s the number one place to buy online? It’s Amazon, but Amazon isn’t going to talk to you at the early stages, so we kind of hacked our way in by using third-party seller stuff on Amazon. We also did third-party advertising on Amazon first.
That was a really great channel to make an advertising mechanism for us. Just put an ad on Amazon, people look at the category our products, and they would see a link to us. We saw sales there. It was ROI-positive right away.
We did those types of things to try to remain agile, while we were trying to get attention from these types of retailers. Once you reach a certain size on Amazon, other retailers—both online and offline—start paying attention to you more, and they’ll start coming at you.
It’s really dangerous to approach certain channels to early and do it in a disparate way, saying, “We’ll talk to anybody, and we hope we end up in a new store.” There has to be some really big thoughts around what your strategy and goals are there.
The biggest piece of advice I remember us getting is, if someone tells you no, ask them, “Oh, is this not up your alley? Who do you suggest we talk to next?” More often than not, you’re going to get another name, and that will expand the network of people to talk to.
I hear a lot of people say, “I don’t know who to talk to, I don’t know any VCs.” Well, when you talk to one, then you get a second name. Now you’re talking to a few more, and you’re getting more names. That was definitely the approach that helped us a lot. It led to a really great seed round for us.
It’s good enough if it does one thing really well, and a complete stranger recognizes this benefit. You’ll have to make sure that one thing is marketable and something people will pay for, though.
