Top Deal: An Adorable Octopus is the Latest in Smart Toys

Key Stats:

Summary

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

Problem

As mobile phones and tablets proliferate across the world, children are spending more and more time with screens. A 2017 study from Common Sense found that children under eight years old spend an average of two hours and 19 minutes on screens per day, with almost half of that time spent on mobile devices. In fact, 42 percent of children under eight had their own tablet in 2017, up dramatically from less than one percent in 2011, and that number has likely increased since the study’s publication three years ago.

Time spent on screens is the new reality for the vast majority of American children, and there is a raging debate as to whether screens are bad for their brains. The mainstream media publishes countless pieces offering different perspectives from experts. 

In general, though, most critics agree that digital media has at least expanded access to educational material at home. Parents agree too. The majority, 67 percent, of parents surveyed by Common Sense felt that screen media helps their child’s learning (a lot or a little), and 57 percent of parents felt that phones and tablets help kids’ creativity. It is therefore unsurprising that the global smart toys market is expected to grow to more than $24 billion by 2025 with a CAGR of 15.5%. 

One clear downside of screens, though, is that they limit real-world social interaction. A recent study published by JAMA Pediatrics noted that as many as one in four children don’t possess the language, communication, and emotional skills they need to succeed when they enter school. The study’s authors pointed to increased screen time as a potential culprit. While educational games on phones and tablets can help kids learn letters and numbers, they’re not great at encouraging healthy social bonds. Parents are in need of a technological solution that provides adaptive educational play alongside a physical presence.

Solution

Thinker-Tinker is an educational technology company developing unique software-plus-hardware solutions for children’s play. Thinker-Tinker’s flagship product is Octobo, the “plush robot learning platform.” Octobo is a cute stuffed octopus made with a pouch for holding a tablet. When a tablet is inserted into Octobo, the octopus lights up with realistic expressions and interactions. Octobo also has an RFID reader between its front tentacles capable of recognizing “tokens” that children offer to the toy, furthering the physically-connected play experience. 

Children play with Octobo in conjunction with included tokens, storybooks, and parent play guides. They are prompted to search and find letters and numbers, play memory games, and follow along with developmental stories. Kids can also elicit responses from Octobo by squeezing the toy’s sides or tentacles, which contain soft touch sensors. 

Octobo is suited for children aged zero to seven, and is meant to be a toy that ages through a child’s various stages of development. For younger children, Octobo teaches letters, numbers, shapes, and colors. Older children learn skills like coding, design, and science. Thinker-Tinker reports that 72% of customers have purchased additional expansion packs on top of the Octobo starter pack. These expansion packs include additional storybooks, mini-games, and tokens in accordance with a child’s development. 

Thinker-Tinker has been funded by Techstars and Comcast-NBCUniversal Lift Labs. The company has also won several awards for Octobo’s design, including the Techcrunch Disrupt Top Picks in IoT, Robotics, and Hardware, Last Gadget Standing Finalist at CES, and Finalist at the SXSW Innovation Awards. 

Thinker-Tinker does not report on financial performance in its fundraise materials.

The Team

Thinker-Tinker is led by Founder and CEO Yuting Su, who holds dual Master’s degrees in Medical Informatics and Game Design from the USC School of Cinematic Arts. Su created multiple award-winning game projects before launching Thinker-Tinker and was awarded a spot on the 2017 Forbes 30 Under 30 list in the Games category. 

Su is supported by other industry veterans in game design and art direction, including team members from Disney Interactive and the hit game Club Penguin.

Growth Plan

Thinker-Tinker has exciting new projects on the roadmap for 2020 and beyond. A portion of Thinker-Tinkers fundraise capital will be used to launch a new Octobo subscription service to maximize customer lifetime value. A subscription to Octobo Club will include an enhanced parent portal to monitor play and bi-monthly physical and digital content updates. 

The company also plans to launch an “Octobo SDK” in Q3 2020 that will allow outside organizations to develop their own interactive characters and pay Thinker-Tinker licensing fees dependent on the use case. The company has also developed a modular hardware packet that reduces time and cost for new hardware product development, reducing development time from a full year to three months and cost from an average $100,000 to $5,000. 

In addition, Thinker-Tinker is developing a new product line for launch in late 2020 called Music Stars. A new line of collectible plush characters, alongside a companion mobile app, will encourage children to create music via rhythm and remixing. Thinker-Tinker has signed a deal with Universal Brand Development to use characters from the DreamWorks Trolls franchise in its first Music Stars launch.

Why We Like it

• Engaging hardware-plus-software product designed to grow with kids: Smart toys are a source of major investment for many families, as children become digitally-native at younger and younger ages. Octobo and future products occupy a unique market niche as a digital toy that also encourages children to interact physically and develop social and emotional skills. Moreover, Thinker-Tinker products are meant to cater to children in a wide age range (zero to seven years old, which could expand in the future), meaning that families are all the more likely to invest and continue to purchase add-ons and subscriptions for many years.

• All-star investors, advisors, and team: Founder Yuting Su is a product and game designer with an ideal background for developing unique and lasting concepts in smart toys. Thinker-Tinker is further credentialled by the endorsement of the prestigious TechStars accelerator and the investment of Comcast-NBCUniversal (who doubled-down on their investment with a DreamWorks licensing agreement). The Thinker-Tinker team is well-connected to the game design and entertainment gatekeepers that can help to propel Octobo and future products to long-term success.

• Licensing agreement with DreamWorks: Few startup companies have the privilege of licensing major franchise characters early in their company history, but Thinker-Tinker has inked a deal with DreamWorks to include characters from the Trolls franchise in its upcoming product launch. This type of deal creates lucrative cross-marketing opportunities and increases the likelihood of a high-revenue launch driven by families who love Trolls. Moreover, the deal creates the potential for additional licensing agreements with other characters and brands, which could drive significant revenue in years to come.

Rating

Thinker-Tinker has developed a distinctive, compelling smart toy product in Octobo and will likely develop additional groundbreaking hardware-plus-software toys as it continues to grow. The company is backed by leading investors and connected to entertainment leaders like NBCUniversal and DreamWorks. It is also led by experienced game and product designers with hit toys and games already under their belts. 

Thinker-Tinker does offer less financial performance information than most fundraising companies. It is unclear, for instance, how much revenue the company has generated from Octobo sales. However, the fact that Thinker-Tinker is backed by leading venture capitalists undoubtedly monitoring performance is a reassuring signal to potential investors. 

Thinker-Tinker enjoys high acquisition potential from larger toy brands who are eager to continue expansion into digital-forward toys and games. Mattel acquired tech toys company Fuhu in 2016 (though Fuhu was on the verge of bankruptcy, so not a prime example), and big toy makers are generally on the lookout for smart toy makers that can bolster their portfolio. If one of Thinker-Tinker’s brand partnerships with a franchise like DreamWorks’ Trolls is particularly successful, it may be feasible for an entertainment company to acquire Thinker-Tinker’s tech as an alternative exit path. 

Thinker-Tinker is responding to a clear need in the toy market: educational toys and games that are evergreen and adaptable through technology but offer the physical connection of an old-school stuffed friend. Leading investors and entertainment giants have already endorsed Thinker-Tinker, which is led by an experienced and creative team. Thinker-Tinker is therefore a Top Deal: the future is bright for hardware-plus-software smart toys like Octobo the octopus.