This post is one in my series about a VC’s perspective on investing. It’s part of Graphene Ventures’ commitment to providing transparency about the VC industry for entrepreneurs. These thoughts are my own opinions and not those of Graphene’s.
Jiobit is a location monitoring service focused initially on the children’s market. The team is a stellar group of ex-Motorola and Google engineers with deep expertise in building consumer -facing technology at scale.
Here’s my high-level and detailed rationale for investing in Jiobit:
EXEC SUMMARY (TLDR)
The three main reasons I invested in Jiobit are:
- Signs of a new market
A new generation of parents is emerging. Technology for pregnancy monitoring, baby monitoring, and child rearing have had impressive adoption.
I’m convinced that this new generation of parents accustomed to real-time information will not settle for not knowing where their children are. They’ll expect a notification once their child arrives at school or an alert if their child has wandered from a grandparent’s home. Jiobit’s team demonstrated new ways to solve a major problem in a growing market.
Plus, the children’s market could be the first of many. Several very interesting opportunities exist in other sizeable industries. The needs for an intelligent location monitoring service are similar across several industries.
- Sophisticated management team
John Renaldi and his founding team not only excel in innovation (with 150 registered patents) they’ve also worked together for years. Their maturity in understanding a market and delivering the right product reduced the execution risk.
- Product superiority
Jiobit’s services-led product had both superior software and hardware attributes. The hardware uses a variety of radio signaling for the most accurate location information. The battery life lasts 30x longer than similar GPS-based location trackers and is 50% smaller. Also, Jiobit’s machine learning software will provide parents peace of mind that was previously impossible.
Net net, the product’s wow factor sealed the deal.
Nearly all my investment analysis starts by understanding the importance of the problem being solved. The growth rate in that market and the size of the future market are the next pillars of my analysis.
What drew me to Jiobit is that the initial target market – tech-savvy parents with young children – is a fast growing market with passionate users. The segmented addressable market (SAM) of 6.5M parents in the US spending $1 billion per year on comparable services seems sizeable. Though, it still may not be large enough to reach the returns required for our venture fund.
However, this market is the perfect litmus test. Digital natives using baby tech for tracking diaper changes or monitoring a child’s heart rate had astonishing adoption. These users have also come to expect that technology like Jiobit should make parenting easier.
Secondly, this target market is passionate. For a nascent technology to radically change people’s behavior, first I look for a highly-engaged community that will stop at nothing to solve their problem. Segments with high product usage, strong feedback loops, and passionate advocacy are fundamental to long-lasting businesses. Parents protecting their most precious asset embody the right elements of such a customer group.
Finally, because of Jiobit’s technical architecture, Jiobit can become a platform to launch other products for other markets. A few similar markets with large multi-billion dollar SAMs could be great follow-on markets. The possibilities are very intriguing.
Being a services-led company was very appealing. There are several use cases that indicate Jiobit will have a recurring need in a busy parents’ life. Working parents using professional or family caretakers will use Jiobit daily. Parents traveling with children to a mall, amusement park, or ski resort will enjoy peace of mind for those occasions. These recurring use cases are comforting for building a long-lasting company.
Second, the hardware is outstanding. With all venture investments, I’m seeking a product that is 10x better than the leading solution, not incrementally better. What’s underneath the hood in Jiobit’s hardware is revolutionary.
Accurate – Unlike basic Bluetooth devices, Jiobit uses many radio signal spectrums (BT, WiFi, GPS, and Cellular) to provide the most accurate location on both a horizontal and vertical plane.
Miniature – Other solutions targeting the kids market had large, bulky watch/phone hybrids that were bothersome to wear. Jiobit’s form factor is tiny (the size of a AA battery) and well suited for its smaller consumers. It also discreetly fits in a pocket or on shoelaces.
Long-lasting – Here, the Motorola heritage among the Jiobit team shined through. Even compared to other GPS-based location trackers, Jiobit’s v1 achieved 30x the battery life at 1/2 the size. Not having to charge the device for up to 2 months not only expands the use cases, it also bodes well for smaller form factors.
Third, Jiobit is a platform. Jiobit’s software architecture is intelligently built to accommodate many service layers and deliver separate products. This open approach has massive implications for hyper growth.
PRODUCT MARKET FIT
During my diligence, Jiobit’s approach to market research impressed me. They resourcefully commissioned a study to identify the ideal customer profile, their key problem areas, channels to reach them, and potential price points.
When the product comes to market, it has natural network effects. Parents that add nannies, family members, and other parents to the app will expand Jiobit’s recognition and utility.
While in TechStars Chicago, Jiobit demonstrated they were refining marketing and not redefining their company. They quickly built their audience and maximized organic growth. As a result, the cost of customer acquisition (CAC) was in very low dollar amounts. A healthy indicator for capital efficiency.
Finally, there was a natural value-add within Graphene’s portfolio. Zum – a ride-sharing service focused on children – and B8ta – a retail marketplace showcasing innovative new tech hardware – could bolster Jiobit’s market expansion.
The Jiobit team feels like the storied band that got back together. While working together across multiple disciplines at Motorola, there’s a comfort that this team has the management maturity to execute at scale.
I was also drawn to the team’s motivation. Their hunger to build a notable start-up was tangible. And the founder’s inception story of losing his son for 30 minutes in a public park demonstrated a true commitment to solve this problem for other parents
Unlike other investments, Jiobit’s valuation is very private so I can’t give the same valuation analysis I had done in my post about investing in Lyft. What first mattered to me though, was that the valuation was priced in-line with Graphene’s expectations. For pre-Series A investments we seek at least 20x return. Jiobit definitely has that potential.
Secondly, I wanted to see that this and future financing rounds had enough room to be employee and founder friendly. Maximizing valuation in the short-term is stifling for the founding team if things go awry.
All great venture investments are very risky. My considerations were around the reward premium and my comfort level with the largest risks.
Like most early stage companies, Jiobit’s biggest risk will be achieving product market fit. Their technology is superb and the problem is worth solving for. Whether they will be able to change behavior and have enough people pay for the product is the first commercial challenge.
The second risk is around tertiary markets. For Jiobit to be a very large business, it has to serve several markets. How and when to expand horizontally is difficult.
Finally, hardware products are capital intensive and will require several rounds of financing.
Jiobit demonstrated it could be a stand-alone business and a valuable acquisition target.
My first consideration was whether Jiobit can be a $20M ARR business in the near term. At ~$100/ year that would mean reaching 200,000 annual subscribers. That seemed very feasible. It’s only 3% of the segmented addressable parent market, just in the US. If you add the value of international parents and the follow-on markets, there is plenty of upside.
The enterprise value of such firm had a few comparables. In the pets market, for example, Mars Petcare acquired Whistle for more than $100M. Plus, the value of a high-growth company serving the parental market was sizeable. Several suitors from the smart home, insurance, or home security industries would benefit from such innovation and install base.
But, the greatest upside lies in the founder’s vision of wearables becoming invisible. As the Internet of Things (IoT) industry grows, more uses cases will arise that need intelligent smaller form factors. Jiobit is well-positioned to be a leader in this new wave of technology.
Jiobit’s got a very bright future. Their launch of pre-orders this month is just the first chapter.