Deal to Watch: The Hub for Your Smart Home

Key Stats:

Summary

Atmos Home has been selected as a “Deal to Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10-20% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology, please reach out to hello@kingscrowd.com.

Problem

The smart home market is growing at a rapid pace. A report by IHS Markit stated the smart home market reached $41B in revenues in 2018 and will grow to more than $191B by 2023. Additionally, the same report stated that smart home devices had penetrated more than 38% of homes in 2018. 

With a myriad of connected smart devices ranging from security and safety devices, utilities management, wellness monitoring, smart appliances, and more, managing your devices can be difficult. With each device generally comes some form of control whether it be through a direct interface or through an app. With each interface and app comes different interactions, protocols, and more that can further complicate things for homeowners. A McKinsey survey found that over 44% of homes have 2 or more smart home devices. You can imagine adding more devices to a home means having to download more apps to manage your devices remotely. Add on having to manage the various devices via apps with different interfaces, usability, and more and the ownership process of having these devices get more complicated. 

With the explosive growth of the smart home market and the growing number of devices and apps, the need for a central hub is clear. In fact, McKinsey’s survey of ~2,000 households found that around 50% of those households are interested in purchasing a hub. In this explosive market with a myriad of devices, a central system for managing them all can help the homeowner interested in adding multiple smart home devices.

Solution

Atmos Home is bringing homeowners AtmosControl – a smart home hub that combines all five of the most popular smart home protocols (Wifi, Bluetooth, Zigbee, Z-Wave, and Infrared) with voice, touch, smartphone, and gesture controls. Atmos Home’s AtmosControl IS the universal remote for all a homeowner’s smart devices, regardless of brand or manufacturer. Homeowners will no longer need to learn about the intricacies of their smart devices, nor open and switch between various apps to control their devices. AtmosControl makes it so it’ll be the only smart home hub you’ll need.

Atmos Home is a hardware OEM that is not currently sold to the public and is in its beta. The Atmos team will sell its products through its website, online distributors like Amazon, and possibly even brick-and-mortar retail stores. The average dollar amount during the team’s pre-order phase was approximately $400. When they begin manufacturing, the team expects gross margins to be around 45% eventually coming to 65% over the next two years. As the company is still rather early in its life, there’s no historical data to back their claims of their gross margin reaching such limits, but we’ll continue to track their financials as they continue raising.

When we spoke with Mark Lyle, co-founder of Atmos Home, he also gave us a product roadmap which includes AtmosSwitch, an intelligent lighting controller, and a home security system to AtmosControl that will compete with Ring and Simplisafe as well as add a recurring revenue stream to Atmos Home. We like the team’s foresight into adding additional products as well as a consistent revenue stream.

The Deal

The Atmos Home team is offering convertible notes that trigger if the company raises at least $3M in their next qualified equity financing. The team is raising at least $10,000 with a maximum of $1.07M with a valuation cap of $12M. The discount rate is 20% with annual interest at 5%.

The company is accepting a minimum investment of $250 and has raised $63,436 at the time of this writing.

The Team

Mark Lyle is the co-founder and CEO of Atmos Home. Mark has over 20 years experience in hardware tech. He previously co-founded and sold a wireless hardware startup called Universal Microwave Corporation that was acquired for $24M. He was also the founder of Innovative Golf Systems of which the exit is unclear. 

Chris Ladwig is the co-founder and Chief Design Officer of Atmos Home. Chris has held multiple creative roles as an Art or Design Director and has won numerous product and branding design awards.

Overall, it seems the Atmos Home team is led by accomplished and successful individuals in marketing, design, software, and hardware engineering. The team has raised over $1.2M with a $900K investment from a strategic industry partner in Luminance Brands. We believe an additional venture investor would legitimize Atmos Home and open an additional network of investors.

Why We Like it

1. Team: As we just mentioned, in the “Team” section of our report, the Atmos Home team is led by an accomplished and serial entrepreneur in Mark Lyle. Mark previously exited a hardware tech startup that was acquired for $24M and started a golf simulation/golf entertainment startup. His co-founder Chris is accomplished and has received product and branding design accolades and his other executives have backgrounds in their respective positions.

   We also like that the Atmos Home team has a strategic investor in Luminance Brands that provides a potential exit opportunity or increased scales of efficiency. We would love to see the team add advisors or investors in the hardware tech space that provide an additional network of investors or strategic manufacturers in the hardware tech and smart home devices space.

2. Exit Opportunities: The smart home devices space is a competitive space with players like Google, Amazon, and Samsung all competing to become a dominant player in the space. Although it remains to be seen how differentiated AtmosControl is, building a great product in this space could provide the Atmos Home team an exit opportunity in the way of any of the major players in this space. As Google and Amazon continue competing for dominance in this space, they will almost assuredly look to others in the smart home devices space to acquire. Amazon, for example, acquired Ring and Blink in order to bolster Alexa. Google acquired Nest and Dropcam to bolster its foothold in the smart home market. Both companies, and Google in particular, have been known to make several acquisitions. Whether it be Google, Amazon, or some other player, acquiring Atmos Home and their ability to potentially harness all smart home devices may be smart play for companies in the space.
3. Market Conditions: I outlined the smart home devices market, but we want to reiterate the market conditions are favorable for startups in the space currently. The majority of reports forecast the smart home devices market reaching well over $100B by 2023. With North America holding 60% of the global smart home market, there is ample room for international growth. The explosive growth in this market and the myriad of devices available provide opportunity to a startup like Atmos Home to be universal remote for the DIY homeowner. The major drivers of growth in this market are attributed to the increasing awareness towards safety and security, increasing consumer need for simplicity and personalized experiences, the growing adoption of cloud-based technologies, and increased disposable income with inclinations towards luxurious lifestyles.
   
   Interestingly, although consumers are becoming more aware of their safety and security needs, homeowners with smart home devices are also concerned with their personal privacy and data. The increased number of installed internet of things combined with the high cost of smart homes will likely impede the growth of this market in the near future. In a market downturn, investors should track their investment in an industry focused on disposable income. It’s likely that families will forego spending on luxury items like smart home devices in an environment where money and family budgets are tighter.

The Rating: Deal to Watch

Atmos Home operates in a fast-growing and rapidly evolving market. Atmos Home is poised for success because of its strong team in tandem with the fast-growing market. If Atmos Home is able to build a strong product with great software backing it, the Atmos Home is poised for a great early exit opportunity from a major player in the smart home devices space. 

With that said, it remains to be seen how differentiated Atmos Home’s product truly is. While they claim to be the first smart home hub that combines all five protocols along with multiple controls, there are other already established hubs. Insteon Hub, for example, is a device that controls all Insteon devices and supports integrations with First Alert, Logitech, Nest, and Sonos products, and it supports Amazon Alexa and Microsoft Cortana voice commands. Additionally, the Wink Hub 2 is a device that supports multiple protocols like Zigbee, Z-Wave, and dual-band Wifi, supports Alexa voice commands and IFTTT (If This Then That) applets, and will control smart devices from manufacturers including Chamberlain, Ecobee, GE, Honeywell, Nest, Philips, Hue, Ring, and Yale and does more! The Samsung SmartThings Hub does much of the same as the Wink Hub 2. The question, then, is whether or not there’s a need for a device that supports all five major protocols and multiple different commands. I’m sure it’s helpful, but is it necessary? Additionally, if an individual decides to go with one of the more popular smart home devices in Google or Amazon, a customer wanting to simplify the entire process could just opt for staying within a particular ecosystem with the Google Nest Hub Max and Amazon Alexa products acting as a hub for their own ecosystem. While it’s great to have more diverse options in one like the AtmosControl, is it necessary?

Nevertheless, the exit opportunities in this space are great. Perhaps a player in the space wants to become the hub that supports every device and sees AtmosControl’s ability to do so and is acquired for that goal? In that case, an investment in Atmos Home can provide a good and early return for investors in a venture environment where investment horizons are being stretched out and capital is tied until liquidation events.