Senic is raising capital via a Crowd SAFE at a $28 million valuation. The company has generated impressive revenue (more than $7 million over the lifetime of the company), and 2021’s $3.2 million in revenue implies an 8.75x revenue-to-valuation multiple. That multiple is quite reasonable for a consumer packaged goods company manufacturing hardware. Senic’s valuation is also favorable when compared to other growth stage startups that are raising capital online. The main uncertainty arises from whether Senic has the potential to grow its revenue significantly further than what it has already accomplished. Investors looking for substantial returns would be betting on Senic’s future product development, including its “Muse Blocks” tiles that play music via Sonos speakers. However, those products are far too new and unproven to merit a significant valuation boost. Thus, Senic’s price is reasonable for its current development but may not provide room for investors’ shares to grow.

The smart home technology market has been more sluggish than many technologists originally anticipated, but it is still growing steadily. Demand for smart home technology in the US is projected to reach more than $33 billion in 2022, with an expected compound annual growth rate of 11.1% over the next four years. By 2026, Americans are expected to spend $51 billion on smart home technology. Two thirds of homes are expected to have smart home technology within the next four years. 

Senic doesn’t offer smart home technology directly, so the company isn’t vying for a share of this full market size. Senic fits most neatly into the specific control and connectivity market segment, which is projected to hit roughly $8.6 billion in 2022 at an annual growth rate of 12.1%.

The smart home technology market is decent-sized. Growth is steady but not stellar. It’s not a bad market to play in, but Senic will need to move aggressively to offer more products and cover a wide variety of use cases to effectively capture demand. Currently, Senic’s product suite is likely too unrelated to the hottest device segments (smart appliances and security) to generate significant value.

Senic was founded by a trio of German friends who each grew up getting hands-on experience building either technology or carpentry. At least two of the founders worked with their family businesses, but it’s unclear whether or how this gives Senic a competitive advantage. The three founders each have a C-level position: CEO Tobias Eichenwald, Chief Design Officer Felix Christmann, and CTO Philip Michaelides. 

Eichenwald and Christmann don’t offer many details on their LinkedIn pages, so it’s not clear what their professional backgrounds were before starting Senic. Michaelides has a bit more experience as a scientist and former fellow at Audi but also doesn’t appear to have very many years of expertise. Senic was founded in 2012, so there’s a good chance that the company was the founders’ first venture after leaving school. 

As a result, the Senic team doesn’t seem to have significant experience in product design, manufacturing, sales, marketing, or any of the other functions required to scale a hardware startup. While the trio has clearly developed a method for bringing products to market thus far, there aren’t any concrete reasons to believe that this team has a competitive advantage.

Senic’s main product is a light switch that wirelessly connects to smart home devices. This switch allows users to turn their Philips Hue smart lights on and off (or dim them, turn on certain scenes, etc.) with the press of a button that resembles a traditional light switch. Senic is not the only company that offers smart light switches. Iotty is a similar concept with a more elevated design. However, Senic switches are differentiated from competitors in that they do not require batteries or wiring. Senic switches generate the energy needed to send the wireless signal through the actual switch click, so they are entirely self-sufficient. In addition, Senic offers a switch that is suitable for the outdoors (it is protected against rain and other elements), which is unique on the market. 

Senic’s new Muse Blocks music product is a more unique concept. These tiles are connected with Sonos speakers. Users simply hold their phone next to a tile, and that tile’s designated Sonos Radio station plays from Sonos speakers. This product seems to be the first of its kind in the smart home technology and adjacent devices market. However, the device is new and unproven. It’s not clear that this type of device will actually be popular with consumers. 

In general, Senic does offer unique and well-designed products that fit nicely within a smart home system. But these products aren’t solving clear problems in a way that forges a deep competitive moat for Senic. The company still faces the risk of being upstaged by more relevant products.

Senic has generated impressive revenue over the past few years. In 2020, the company brought in $2.3 million in revenue, and 2021 was a year of significant growth, with revenue up to $3.2 million. Senic has brought in more than $7 million in revenue over the lifetime of the company. Moreover, Senic keeps costs relatively under control. The company posted only $600,000 in net loss last year. However, the company noticeably has long-term debt of more than $1.3 million, so investors may be concerned if the company continues to accrue debt without some form of repayment strategy.

Senic is generating all of this revenue because consumers are interested in its devices. The company has shipped more than 100,000 units over the last several years. Most customers have purchased three or more products. In addition, 95% of customers use Senic products daily as part of their core home control workflows. Consumers can purchase Senic switches in more than 250 physical retail stores and also online via Senic’s website or Amazon (where customers give strong reviews). 

In addition, Senic has clearly succeeded in forging partnerships with key stakeholders in the smart home market. Senic’s core product – its Friends of Hue light switches – directly integrate with the Philips Hue smart lighting system. Senic has also developed a deep partnership with Sonos via its Muse Blocks system. This product works directly with Sonos speakers to play Sonos Radio playlists in seconds. This partnership seems so strong and direct that Sonos could be a potential acquirer of Senic in the future.

Senic is a reasonably low-risk investment opportunity, given that the company has been in existence for several years and has generated more than $7 million in revenue. It’s clear that Senic has found at least some degree of product-market fit with its light switch product. The most significant source of risk for investors to consider is Senic’s balance sheet. As of December 31, 2021, Senic was carrying a great deal of debt: more than $1.3 million in accounts payable. With only $710,000 in cash on hand at that time, the company is in a risky position. It’s also worth noting that Senic’s team is inexperienced, which poses more operational risk if the company encounters financial difficulties.

A bearish outlook on Senic boils down to a simple question: do consumers actually need these products? Consider Senic light switches. They are basically making smart home lighting controlled by light switches – reinventing the traditional light bulb and light switch mechanism. Many reasonable consumers might assess their options and decide that investing in expensive light bulbs and switches, setting up the system with a smartphone app, and other frequent maintenance and troubleshooting isn’t worth it when a traditional lighting system works just fine. 

Then, there’s Senic’s new Muse Blocks product for playing Sonos Radio on Sonos. This product is new and unproven, which would be fine if it were more clear that it solves an actual issue. Controlling music on Sonos speakers can certainly be annoying. Sonos speakers require use of the Sonos app rather than native music apps like Spotify or Apple Music, unlike other Bluetooth speakers. Still, it’s not clear that Muse Blocks make that process any easier. In fact, they seem just as cumbersome to use and more restrictive. Users still have to interact with an app to control Muse Blocks, and they’re limited to the specific radio station that their Muse Block is connected to. This doesn’t seem like a compelling value proposition. Senic’s additional plans for the Muse Blocks (to allow artists to create non-fungible tokens, also called NFTs) might be more interesting, but these currently feel like a stretch to incorporate buzzwords like NFTs and Web3 rather than a substantive product concept. All in all, it’s simply not clear whether Senic’s products are valuable enough for a large and increasing number of consumers to spend money on them.

Senic offers unusual, compelling physical products. While these products may or may not be solving an actual consumer problem, that might not matter. There very well might be enough early adopters and technophiles seeking the latest gadgets to sustain Senic. 

In addition, the company has taken steps to develop products in close coordination with smart home technology leaders like Philips and Sonos. These products have been carefully designed to work seamlessly with those devices, which seems intentional. Senic might be setting itself up for acquisition scenarios. With companies like Spotify venturing into the physical product realm, Sonos could be looking to add additional physical products to complement its suite of smart home technology. If one of Senic’s partners did pursue an acquisition, the company and its investors could reap the rewards. 

Senic is a smart home technology accessories company building physical products that make the smart home experience a bit simpler and more tactile. Senic’s current products include a light switch meant to control Philips Hue smart lights and Muse Blocks tiles that play Sonos Radio stations on Sonos speakers when tapped with a phone. These products are unique and compelling for new gadget adopters, as evidenced by more than $7 million in lifetime sales. The market opportunity is also decent, and it seems to be growing at a healthy pace.

On the other hand, Senic’s products don’t really solve pressing consumer problems. The smart home technology experience can be complicated and confusing, but adding another product to the mix might not help. In addition, the Senic leaders are inexperienced, without the expertise they might need to scale the company. Senic’s valuation also seems too high for a company whose products are still relatively speculative. Therefore, Senic has been rated a Neutral Deal. 

For questions regarding the KingsCrowd analyst report or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written on March 17, 2022.