#23 Jiobit

I’m Josh Muccio and from Gimlet Media, this is The Pitch, where real entrepreneurs pitch to real investors.

 

Daniel: Hello

 

Phil: Hi

 

Jillian: Hi John.

 

John: Hi guys. Thanks for joining me and for having me.

 

Jillian: Absolutely.

 

That’s Jillian Manus, from Structure Capital, introducing herself to today’s startup founder. 

 

Alongside Jillian are 3 more investors, Phil Nadel from Forefront Venture Partners, Daniel Gulati with Comcast Ventures, and angel investor, and recent cryptocurrency poster child, James Altucher. 

 

A quick note: if you heard an earlier episode, Sandbox Commerce, and you’re wondering if we’ve heard back from James yet, the answer is no. But this pitch was recorded back in August of 2017.

 

Okay, on with the show.

 

Our investors are all here today to hear from John Renaldi, founder and CEO of today’s startup: Jiobit. 

 

Daniel: Jiobit?

 

John: Jiobit. Like geolocation. And bit like small.

 

Daniel: I know both. I'm familiar with both. That's great.

 

So they’ve got the name down. But behind a lot of truly great companies - and company names - is a personal story. And John’s is a doozy. Parents, brace yourselves. 

 

John: So about two years ago, almost exactly, my wife and I took our family to downtown Chicago. I'm from Chicago we showed up, oceans of people, of course. We go to a park, oceans of kids. Parents' nightmare, kids' dream. My wife and I split up. I took my son, my wife took my daughter. So, I had my son. I looked left or I can't tell you exactly how, but I think you guys, many of you have kids, probably a little bit older, but you remember when you just can't see them for a second. I look left, I look right, poof, Ethan is his name, he's gone. A couple of seconds turn into a couple of minutes. A couple of minutes turn to ten minutes.

 

Jillian: Oh no. 

 

John: So I recruit parents. We’re running around, I’m telling them what he looks like, I have my phone out, I’m showing pictures. And thirty minutes later, I never found him. He found me.

 

Daniel: How did he find you?

 

John: I suspect he actually probably always saw sort of where he was. And I Just never saw him.

 

Jillian: Children are so wily. 

 

So fortunately John’s story had a happy ending — but it left an impression on him. He knew he never wanted to be in that position ever again.

 

John: I came back from this and I bought every single type of tracking device I could possibly get my hands on.They're all just like terrible. Big bulky shoddy engineering, no innovation, no design. They lasted maybe a day if that. Every time I go to grab them they're out of power. And I thought, hey,I've always wanted to start my own business. And just never had the right idea. And so I pitched my wife the idea and she said, let's go do it. 

 

So John set out to create a better way for parents to keep track of their kids. At the time, he was a Vice President at Motorola, so he knew how wireless chips worked — a technology he was able to customize for his own device. What he eventually came up with was Jiobit. 

 

John: It is the world's smallest and longest lasting smart tag. We call it a smart tag.

 

John is here today to ask investors for 750 thousand dollars to help bring his smart tag into the market. So what is this smart tag?

 

John: And I can just show you, too. Always good to show and tell when you have a physical product. So this is Jiobit. 

Daniel: So you're pulling out what looks like a slightly bigger guitar pick like.

John: Yeah, a little bit.

 

Daniel: Head of an arrow is another way to put it. And it's the size of two quarters or something.

 

What our investors are struggling to describe is a small, plastic fob, about the size of a car’s keyless remote. It retails for 150 bucks. John shows investors an array of interchangeable attachments — loops and clips — that a parent can swap out to fasten the Jiobit to their kids’ backpack, shoelace, belt loop, whatever.

 

Jillian: And you feel like you can clip it on to them so they're not going to take off that piece of clothing, so they're at school.

 

John: So there's a childproof lock system, so similar to like you have a medicine bottle, where you have to have a certain amount of dexterity to actually remove it. we have a similar type of child lock mechanism.

 

Once the Jiobit is attached to their kid, a parent can track them through an app on their Smartphone. If their kid gets lost, like what happened to John in Chicago, a parent can immediately open up the app and find their kid. 

 

According to John, this is the product parents have been waiting for.

 

Jillian: So there are a lot of products out there. Okay, and I know quite a bit of them, in fact.There's everything from the basic which are Tiles, which people, people use Tiles on their children by the way. 

 

John: Yeah, they don't know that they don't work.

 

Jillian: Well they do work, to tell you the truth. Actually a lot of them do work. So I'm just saying there's a lot on the market. So how do you distinguish yourself?

 

Phil: Yeah, I agree with you. How is this product unique and different? What's the technology that makes it special?

 

John: So uhh.. what we, our primary tech what we call is progressive beaconing.And what it does is really tries to solve the battery problem that so many consumer electronics have, particularly location products that just draw an amazing amount of battery. Which is why they only last about a day. Through this technology breakthrough, we can last up to 30 times longer than the best products on the market today.

 

James: So 30 days.

 

John: Up to 60 days.

 

Jillian: But this is not your own battery? This is not your own IP?

 

John: No, so the way the progressive beaconing works, it traverses all the different radio frequencies. It really has all the same tech that’s in your smartphone, but in something the size of about a quarter. So every radio that’s in your smartphone, Bluetooth, Wi-Fi, cellular, GPS, all in our custom systems architecture. 

 

The technology John calls progressive beaconing — patent pending — works by piggybacking on the cellular signal of your family’s phones. According to John, this allows it to use the least amount of battery possible, thus lasting weeks on end — way longer than any other geotracker currently on the market.

 

Daniel: And so why do you need to conserve battery if the use case is a day trip with your children?

 

John: Yeah. So what I found was every time, well, I have lots of things I charge in my house. Like, tablets, computers, phones. And so even though sometimes I would use it for day trips, but actually I was using it most every day, because they go to school, I never knew when this would happen. So I was putting it on them all the time. 

 

Phil: To Daniel's pointwhy not just charge it every night? 

 

John: So one thing that I found when I was using these products was that when I did go to use them every day or when I wanted to use them, they were always out of battery. I just forgot. And for us, having something that could just take out a little bit more anxiety in my day, make things just a little bit easier, and not have to worry about charging this thing all the time, made my life a lot easier for that. 

 

Daniel: okay. 

 

The investors look a bit dubious. Sure, charging things is kind of a pain in the ass — but is it a big enough pain to build a whole company around?

 

Daniel:it's a reasonably crowded landscape for these general beaconing devices. And so what's the differentiation here? Is it the core 30x longer technology? Is it the go-to-market? 

 

John: So software-wise, obviously mom and dad have a smartphone app. Software on the device itself. We use machine learning to employ different types of routes and behaviors and machines. So like a Nest thermostat. You don't really set it up, it just kind of learns what you do with it. Same here. 

 

So Jiobit is more than just another geotracker with a longer-lasting battery. It’s also super smart. 

 

John: It learns where home is, it learns where school is, it learns the bus route. Tells you when you get to school, tells when you don't get to school.

 

Jillian: Why is that important?

 

John: Because I want to know when my child deviates from that routine. If they're taking the same path to school every day, I'm fine. Don't tell me any differently. But if they're not, that's when I want to know.

 

Jillian: So it alerts you when they deviate?

 

John: Correct. It will send me a push message right to my phone.

 

Phil: Do any of the other products out there do that?

 

John: No. Nope. So we....

 

Jillian: So a phone does. 

 

John: Yeah of course.

 

Jillian: So that is the other thing in terms of the age range here. Because people are giving their kids phones earlier to just keep in touch with them. Around ten years old. Some of them as early as eight years old.

 

James: But the phone will track location, it won’t learn the route.

 

Daniel: It just has a find my phone.

 

Jillian: But it doesn’t learn. 

 

Phil: But how does this how does this differentiate if the child has a phone and you’re able to track them using the phone? 

 

Phil: I mean kids who are ten, eight, ten, I mean, I don't know, where I live they have phones. I don't know.

 

John: So in more affluent neighborhoods you're right. On average though in the United States, definitely not.

 

Jillian: And yet, but this is $150 to buy one of these things. So in an affluent... $150 is a lot for anybody to spend who is, as you said, not in the affluent neighborhoods,I mean, this is a lot.

 

John: And exactly why we…

 

Daniel: You could probably get a phone for $320 bucks a month.

 

Jillian: Oh less. You can actually get less.

 

John: Exactly why we want with scale. Bringing that down to the price points we talked about. We're obviously going to have higher costs right away. And you're totally right, as you scale, those are the price points you want to be at. A two-year-old, a three-year-old isn't going to have a smartphone, right. So you need to have something that's not a phone for those age groups.

 

So, yeah, kindergartners may not have cell phones. But, as investors are quick to point out: kids are getting phones earlier and earlier. In fact, a 2016 study by Research Central, pegged the average age for getting a first smartphone at 10, in 2012 that age was 12. 

 

But this phone question may not even matter. The kid geotracking market is only one vertical — and John’s progressive beaconing technology might have infinite other possible uses. 

 

Daniel: I would argue that your progressive beaconing technology is actually way more powerful than any other vertical besides the one that you've chosen.

 

John: Yeah. I mean we are...

 

Daniel: Like let's take luggage, for example. Which is I can stick that, I can stick that device into my luggage, I never have to, I don't have to think about it on a trip and I can charge it when I get back home versus...

 

John: Totally.

 

Daniel: so why the initial focus on the kid problem when you could be solving a gazillion other problems?

 

John: People that we, we did open up kind of a soft launch without really doing any marketing, and those pre-order people started hitting us up and they started buying it for pets. A pretty natural extension given that people that don't have kids but pets, many times treat them like children, or just as important. They're their most precious asset. And the battery life is obviously super important to those, because you don't want to go take it off your collar every 24 hours, right. So having something that lasts 30 days, 60 days is super important

 

Daniel: why haven’t you, why don’t you guys just test ten form factors in ten verticals? Do pets, do kids. If it’s not that hard to change the form factor, put it all up on the site, spend six months really figuring it out. I Just worry that we’ve hit this local maximum around kids. We’ve anchored around kids because you had this experience, and obviously that’s important. But is there a 10x bigger business right next to us that we’re not seeing.

 

We’ve seen this before, sometimes investors get so captivated with an idea that they can’t help but imagine a whole new world of possibilities. Possibilities that appear to have a much bigger payout at the end of the rainbow.

 

But what happens when that pot of gold isn’t the same pot o’ gold the entrepreneur is going after

 

John: For now, we're focused on two consumer markets. As we expand, these are things we'll definitely be looking at. But for the two consumer markets, I mean brand is just as important as tech. And building that out. So we are starting to invest in that.

 

Daniel: We see so many companies where the founder, the founding team come in with this hypothesis on a vertical, and that hypothesis is just completely wrong. And there's actually this other vertical that's easily reachable and just kind of right next door that results in a much, much bigger business.

 

Phil: You know granted it's born out of your traumatic experience, so you have an identity with that solution.

 

Daniel: But that's not always the biggest business.

 

Phil: That's what I'm saying. I'm saying you have to step back and look at the other use cases more analytically and not emotionally.

 

John: I totally agree. And this is exactly the reason why we're launching pets in two weeks. And exactly why we're taking those conversations with those companies, to talk about and understand what their needs are, and we're coming to realize the same product can be used. We actually don't have to change the software

 

So John is willing to grow Jiobit beyond just the kids’ market. He’s just saying, one thing at a time. First kids, then pets, then who knows? Maybe luggage. But all in due time.

 

Jillian: So have you launched this product yet?

 

John: We have not. So we will ship it in a couple months.

 

James: And what are you looking to raise and at what valuation?

 

John: We raised $4.6 million already to really develop all the technology.

 

James: You raised $4.6 million?

 

John: Yes.

 

Jillian: That’s a lot.

 

James: What valuation?

 

John: Ah, our post money is 13.

 

Jillian: Wow. Okay, so this is pre, I mean you've no radar, you're pre-beta.

 

John: We've been doing betas already on our first product. So this product here, we changed the design. So this has been in beta for some time. 

 

Jillian:What do your orders look like right now? 

 

John: So we haven't spent any marketing. We sold about $75,000 worth of inventory with monthly recurrings of $8,000.

Jillian: Over what period of time?

 

John: Like a week. 

 

Daniel: You've done $75,000 of sales in a week?

 

John: Yeah.

 

Jillian: So how much runway do you have off the 4.6?

 

John: We’ll be... February.

 

Jillian: Okay so you have until February until you run out of runway, Okay.

 

John: And this would give us another 12 months.

 

Daniel: Another 12 months.

 

So this funding John is asking for would buy him another year to get Jiobit off the ground. And even though Jillian seemed a bit shocked by the company’s 13 million dollar valuation, the investors were all impressed by the 75K in preorders John brought in in just one week. 

 

Has he managed to convince them that Jiobit’s revolutionary technology is worth the hefty price?

 

Here’s Daniel

 

Daniel: Almost all of our successful portfolio companies have started with a really deep founder pain point. A really personal founder pain point. And that doesn't guarantee success, but I think it's kind of a necessary condition right.And I definitely, I mean, the way, you didn't walk in and pitch this as a hardware startup. You pitched it as a solution to a problem that you had. And I think that is really compelling, and I think you are really compelling. I think this is a market and a space with just lots of competing substitutes. Whether aaa it's subderm chips, whether it's aaa smartphones You have this sea of substitution that could happen here. And so that's a big worry for me, frankly. And then the last piece I think about it is just ownership for the fund. So if you're raising 700k on a $15 million valuation, it's just not going to get us the VC ownership that we need to move the needle. And so despite what I said about you being an absolutely compelling founder, just for those reasons I'm going to have to pass

 

With Daniel out, it’s on to Phil

Phil: I just want to jump in and say, for me, I think the tech is really cool. There are a whole bunch of opportunities here. You really seem to have your stuff together and know what you're talking about, and it looks like you've assembled a great team. For me, it's a little too early. I'd want to see it further developed into certain use cases where you're showing some traction, getting some actual orders, which sounds like it's very soon.So for me, I'm a pass. I think you're off to a great start and I wish you all the best.

 

Phil’s out, here’s James. 

 

James: So I’m sort of in line with everybody here. But I think, to Daniel’s point, I think it’s okay if you go out with any use case and you’ll sort of figure it out as you go along. Like that will kind of evolve with just your incoming phone calls and you’ll be surprised and we’ll all be surprised, six months you’ll be, you know, the luggage company, or the construction company, or the API company. Something will happen. Many companies pivot and find their right spot with their technology.for me, I’m, they’re venture capitalists, I’m an angel investor, so the valuation puts me out right away. I think for you, a great return on this is if you close this round, you show some use cases, Motorola or Google or whoever comes along and buys you for $80 million and you become a very wealthy man and we make 5x our money is not as interesting to me. So I have to pass for that — but I do think you’re going to end up doing well with this.

 

Three of four investors are out, now it’s up to Jillian

 

Jillian: Um, I have to be honest with you. I have been actually completely schizophrenic on this one. Because half of me is saying, for all the reasons Daniel has ticked off, this just doesn't make sense. One of the biggest problems for me is the, yes, the competitive landscape, I know a bit about but I'm going to have to know more of, because I don't know your technology well enough, and so I can't really assess it right in this immediate moment and juxtapose it to everything out there, including Revolar and the other ones. This would take more a dive for me. I love this. I love the why on this. Okay. We, our most precious, precious cargo, our most precious possession are our children. Anything to make them more safe. That said, I am going to pass

 

[thank yous]

 

Jillian: It was really great to meet you. I love your energy, by the way. I love your smile. I love your determination. And I’m glad you found Ethan. Absolutely. Absolutely.

 

John: Thank you so much for your time, guys.

 

Phil: Thank you, great job.

 

Jillian: Thank you, thank you so much

 

After John leaves the room, the investors delve into a few of the sticking points in his pitch. 

 

Jillian: I'm trying to figure out how much he...

 

Phil: Well, he only has until February right now runway.

 

Daniel: That's not a ton of runway.

 

Phil: No. That's why I think he does need the money.

 

Jillian: But if he's raised 4.6, there has to be someone, you do an internal round of just a small seed extension to bump to the, to get that 750. So that's, there was a definite disconnect there.

 

Daniel: Well, how do you guys feel about coming in on these seed extensions? It always worries me as an outside investor to come in on a seed extension where the first question I'm asking is why aren't insiders doing this?

 

Jillian: Right. Right. Unless they're trying to get a seed extension, unless they're going for strategic seed. Unless they're trying to bring someone in, which we do often, that we don't have that area of expertise on the team or on the board now.

 

Phil: But a lot of times, these extensions, the insiders are participating. They're just trying to bring in some additional investors.

 

Daniel: Sometimes. but a lot of times they're not.

 

Phil: If they're not, then it raises a red flag. I wouldn't do it.

 

When we come back, we find out if these so called ‘red flags’ were big enough to keep other potential investors at bay — and whether customers have been coming up with their own uses for Jiobit these days. Coming up after the break.

 

[break]

 

Welcome back. So it’s been five months since his pitch. I wanted to get John on the phone to find out how how Jiobit was doing and hear what he thought of his pitch experience — especially the feedback he got from the investors...

 

Josh: they seemed concerned that you weren't focusing on other verticals other than children and pets and that there might be money left on the table. But Jiobit started out as a personal project of yours, scratching your own itch for a need you felt. What did it feel like to have the investors challenging you about whether your approach -- to focus on kids first -- was the right one?

 

John: It's one that I have heard before and I agree with in the sense that I think there's a bigger market. I've always thought that way and I've always pitched my company that way.

 

Josh: Really?

 

John: But… but ... but I also understand that you can be incredibly distracted by boiling the ocean.so it's just having that true north, like, what is the first problem that we're going to go out and solve and like, at least going out and solving one, like, really really fricking well. And then thinking, "Okay, now that we've done this, where else can we go with it? When you think of, like any ... I mean we're probably no different than many others, but like smart hardware. You have a little bit of service, you have a little bit of software, you have a little bit of hardware. You know ... Like, you're doing so much that, to then layer on top of that, like, five or four or three or two different verticals, it seems like you could probably get distracted pretty easily. 

 

John: Yeah, so it was always ... yes, you're totally right, it was scratching my own itch, had a problem, wanted to solve it, very passionate about that. But we also realized pretty quickly, as we started building the tech and the product, that there would be other markets that had similar problems and that eventually we'd go solve those too.

 

Josh: Soyou agree that there's a bigger market out there.

 

John: Yeah, totally.

 

Josh: But that, like, kids was your beachhead anyway 'cause you knew you had to focus on something. Why not focus on the bigger market first if you know it's a bigger ... potentially bigger market?

 

John: Wellthe thought was, if we go solve this market, parents are really particular. They're very concerned about security. You're building something incredibly small for small children so it's going to be small, lightweight. It's got to last forever because no one wants to recharge this stuff every day. So, if you start solving those things, you inherently start solving lots of other things of other markets. That was our hypothesis.

 

Josh: So you created Jiobit out of this personal pain point, to know where your kids are at all times and feels confident that, like, they're where they should be and that they're safe. Do you still feel like the company has this core value that's personal to you?

 

John: Yes. I think it's important to have a mission for the company and for your employees. Like, you need to have a very passionate, real, motivating true north that rallies everyone around, they can really feel it, they can see the impact you're having, they can hear from customers in the way you're helping them, and that's massively inspiring and focused. And yes, everyone in my company knows there are other opportunities. But the inspiration comes from this one. And it's an inspiring mission that people can rally behind and feel good about, like, wanting to go to work every day and, like, do really cool shit.

 

Josh: what's been the initial response from customers who've received the product so far?

 

John: So, the interesting thing that we didn't think about is the different ways that the product ends up getting used. And I think probably most entrepreneurs will say the same thing, is like you think your product will be used this way, and it ends up being used, yes, that way, but then in these other ways, too.

 

Josh: So what's been a use case that's surprised you?

 

John: I didn't anticipate, although it probably seems very logical, but I did not anticipate the number of special needs children that would use the product.

 

Josh: Oh! 

 

John: And we're still learning this, you know just like reacting to it because it was not our intent, and I certainly don't know enough about this to be a source of truth or authority on the topic, but what I'm relaying is what I'm hearing and it's just simply that there's an enhanced fear, or I should say worry, about them not ... you know, maybe not being fully aware of their surroundings, or many times autistic children will be distracted and they'll focus in on something.

 

Josh: Yeah.

 

John: And they'll, you know, see something maybe across the room or across the street or whatever that is, and they're just fixated on it. And we'll just ... it won't matter if they know they should stay in this location or whatever, they'll just go to it. And they can be very distracted. And it's a worry that many parents have with special needs children of their children just basically just getting up and walking, or whether it's maybe they're taking a bus and they're worried about getting to school or a variety of reasons. But it is one area that was the surprising aspect of the number of parents that had special needs children that were very, very concerned about this and also incredibly frustrated with the products that were on the market. A very visceral reaction of just, like, not just frustration of, like, me losing my kid at the park, but like, this is like a really, really sharp pain.

 

Josh: Yeah.

 

John: That they're trying to solve.

 

Josh: Yeah, that would be really scary. And I can see why that would be really encouraging to you. 

 

John: those are the ones, like, you hear about, and you're like ... and you have a customer come back and send you an email saying, you know, "My kid was, you know, he got on the wrong bus today. And he didn't know it, and I was able to, you know, communicate with the school." Things like this that you just like, well I never would have thought that that's how it would be used, and that's great to see that being used that way. And those are some great, inspirational stories that make us want to continue to do cool shit.

 

Jiobit, doing cool shit, and maybe saving a few lives along the way. In addition to innovating on their product, John also said Jiobit has successfully raised the $750K he was looking for — in fact, he’s raised double that. 

 

So this pitch got me thinking: it seems like there is this implicit tug-of-war between a founder’s original vision and an investor’s instinct of how to grow the company. On one hand, no one can ever know more about a company than its founder—but, then again, investors are experienced in quickly sizing up the biggest opportunities available—and sometimes they can see blind spots the founder doesn’t see. So what do you think: how does a founder know when they should stick to their guns or when they should let someone else dictate the direction of their company? Have you ever been in this position?

 

Join the conversation over at thepitch.show/discuss

 

We’ll be back with a brand new episode next week. 

 

And one last thing, if you’re a startup founder or you know someone who is, you can apply at thepitch.show/apply. Our next recording event is in February in San Francisco. We’re looking for companies in the seed stage, with early traction. We aren’t looking for companies in any specific vertical, our focus is on finding startup founders who have a story to tell.

 

Our show is produced by me, Josh Muccio, Molly Donahue and Kareem Maddox. We are edited by Devon Taylor.

We are mixed by Enoch Kim with help from Matt Boll. Original music composed by The Muse Maker and Bobby Lord. Our Theme Music is by Breakmaster Cylinder.

Lisa Muccio plans our recording events and thanks to Asthaa Chaturvedi for her reporting on this episode.

And for introducing us to Jiobit I have Nick Moran of New Stack Ventures and The Full Ratchet podcast to thank.

And as a reminder, no offer to invest is being made to or solicited from the listening audience on today’s show.

All right -- you’ve been listening to The Pitch from Gimlet Media. See you next week.

Jillian: So by the way, you should have a little, you should have a photo of your child so Ethan is actually the photo that pops up, not a little...

 

Daniel: Dragonball character.

 

John: It's a Pokémon.

 

Phil: It's funny, that is a photo of my child. How did you get that? I don't understand.