Even before starting production, this home automation startup from Goa has got pre-orders worth Rs 30 Cr
Ajay Naik, 31 and Lucio Mesquita,33 first met while working at Persistent Systems Limited in Goa, and their combined experience of 20 years spanned the enterprise software domains of travel, healthcare, online gaming, and computer graphics.
It was while working together that Lucio first became aware of Ajay’s entrepreneurial ambitions. The two got talking and on September 29, 2011, L & A Tech Pvt. Ltd was incorporated.
In 2013, the firm changed their focus to mobile apps from enterprise software, claiming on their LinkedIn page to have 12 apps, used by more than 2,00,000 people across six continents, in 200 countries and 5,000 cities. In February 2015, a German firm made an offer to acquire the app wing of the business for a sum of €1 million to be paid over a period of three years. The founder do not wish to reveal the name of the company because of a non-disclosure agreement.
From apps to automation
But their success did not mean that Ajay and Lucio became complacent. They started their second innings and started work on a home automation system, putting a part of the acquisition money into building the product prototype.
Today, their product Homdroid, can be used to control most electrical appliances in a household, requiring zero-rewiring. It can be retrofitted within a home or office in a span of two to three hours.
The hardware is fitted into switchboards and is accompanied by an app on the consumer’s smartphone, allowing them to remotely control their appliances. Some of the basic functionalities include switching on and off electrical appliances remotely, scheduling the working of appliances, setting profiles for rooms by controlling the cooling and lighting in the room as well as active power monitoring for high-load appliances. Through monitoring, the system warns the home owners if the device shows variances in its power consumption from the rated voltages.
Lucio tells us that the system also supports features like controlling the speed of the fan and dimming of lights (with LED configured bulbs that support dimming) without the requirement for a light dimmer. The engineering team is currently working on integrating security features on to the product, such as motion detectors and CCTV camera technologies.
From automation to revenue generation
As of now, he tells us that the firm has received 2,655 pre-orders from five B2B suppliers, who will sell the product further to final consumers or builders. The price quoted for each unit by the firm is 1.15 lakhs, which roughly covers 25 power points or appliances. The duo claims that they’ve received pre-orders amounting to Rs 30 crore, with 50 per cent of money to be paid to L & A Tech Pvt. Ltd after delivery of the product, and the remaining 50 per cent after sale to the final consumer.
The firm also offers smaller units, which cover 5-10 power points worth INR 40,000 for offices.
When asked how they achieved this remarkable number of pre-orders, Lucio tells us that it was a solely a B2B push, where the sales team approached businesses, without contacting the end consumers. But he doesn’t deny that the firm will also work on the B2C variant of the product in the coming one or two years.
On the unit economics front, Lucio tells us that he retrieves the parts from Taiwan, while the components are assembled in Bangalore and Hyderabad. He says for the bigger units, it takes almost Rs 50,000 to put them together, to which taxes, marketing, distribution, logistics, and inventory stocking costs are added at the time of sale. Profit margin are currently at 15 per cent.
Further, the product comes with a one year of warranty (after the product is fitted) with the app upgrades being free for life. Moreover, there isn’t much training required to fit the units in switchboards. As of now, the product is only marketed in Mumbai; pre-orders are pouring in from Bangalore, and there are plans to take it to other metros soon after mass production starts.
Aspirations to automate further
The company is also planning to branch into infrastructure automation for industries and public infrastructure (eg. street lights), but haven’t started mass production yet. Lucio shared that it is his dream to build a global infrastructure company in India.
Bootstrapped, they are looking to raise a funding of Rs 6 crore to kick-start assembly and production at scale, and marketing, which will help them to not just deliver the goods against purchase orders, but also upscale their presence.
Through the funding, the 15 member team also plans to hire assembly workmen, who are currently working with them on a contractual basis.
The duo is excited to deliver and see their next level of growth. Lucio says
“I am excited about seeing my company grow. Day in and day out we ask ourselves how we can achieve better growth. We started with an initial investment of Rs 30,000 and today we have a revenue potential of Rs 30.3 crore. All this within a span of 4.5 years.”
The delivery targets are tough, but these entrepreneurs are still optimistic, forecasting sales worth Rs 100 crore for FY 2016-17, if everything goes to plan. The home automation industry in the country is just starting up, with the Indian government trying to make the Internet of Things (IoT) industry a $15 billion entity by 2020. In the US, home automation is a commercially viable IoT entity, valued at $5.77 billion in 2013 globally by Markets and Markets, estimated to grow at 11.36 CAGR.
There are young companies with products like CloverBoard, which have also received pre-orders of more than 1,000 units showing the sheer opportunity and requirement of the market. However, the biggest challenge for these startups would be to receive the necessary funding to kickstart the mass production.