Sensegiz: Funding a Start-up

Sensegiz: Start-up

In early April 2014, Abhishek Latthe, chief executive officer and founder of SenseGiz Technologies Private Limited (SenseGiz), and Anuj Kulkarni, a newly appointed consultant, were discussing new funding sources for SenseGiz. They were at the compan y offices in Belgaum, a small city in the Indian state of Karnataka. The product being discussed was SenseGiz FIND (FIND), a search and find Bluetooth tag. FIND had been designed and developed by SenseGiz, a technology start-up. However mass production of the product was delayed until enough fi nance could be secured. Latthe had hired Kulkarni, a recent MBA graduate, as a consultant to explore possible funding options. “Kulkarni, we need funding for my start-up, and esp ecially for FIND, otherwise how will SenseGiz be able to start mass production of this new product?” Latthe asked Kulkarni. He continued: The product will be ready for production in another week, but now the supplier will not manufacture unless the total amount owing is paid up front. I know this product is unique.

The demand for such Internet of Things (IoT) tec hnology products is increasing. The front page coverage in the The Economic Times 1 has played in the company’s favour and the demand from distributors has been pouring in ever since. But now all the funds have been exhausted in developing this new technology and some of the funds are tied up in the research and development (R&D) of a few other new products. How will we be able to bring FIND to market? How will the company fund mass production?

 The market was witnessing a huge demand for such pr oducts with the rise in the use of smartphones and smart wearable technology devices worldwide. Some competitors of SenseGiz had already launched similar products the world over, but none had entered the Indian market. Latthe felt that moving fast in the technology segment was the key to growth, sin ce better products were be ing launched every day. SenseGiz had to explore options that would enable it to fund the mass production of FIND as soon as possible. The company also needed funds for its day- to-day operations. The option chosen by the start-up to secure funding would be critical for its long-term sustenance.

SenseGiz had begun operations in August 2013 when the company became registered as a small and medium enterprise (SME) in India. It was an elect ronic start-up with a focus on developing wearable technology and IoT-based products (see Exhibit 1). The company was founded by Latthe, an electronics engineer, and his friend Apurva Shetty, an electri cal engineer. Latthe was studying in England for a master’s in engineering when he became fascinate d by the concept of wearable technology. Being extremely tech-savvy and skilled in technology devel opment, he started experimenting with wearable technology products. As soon as he returned to Indi a after obtaining his graduate degree, Latthe began working on the idea with Shetty and Sen seGiz was born. The initial seed funding of ?10 million 2 was secured from his father in exchange for shares in the company.

Revenue Model

SenseGiz had forecasted three revenue sources: 1) sal es through the distributor-retailer network, 2) sales through the company’s own website and other e-comme rce websites, and 3) technology licensing to other development companies. Only some of SenseGiz’s competitors used the distributor-retailer network; most of them chose the e-commerce route. In the future , licensing the technologies of their products to other companies could be another source of revenue. Sen seGiz was in negotiations with four multinational companies for technology licensing. SenseGiz was planning to sell FIND for US$29.99 per pi ece. Because the Indian market was more price sensitive, the retail price of FIND in India was estimated to be ?1,495. For STAR the launching price was estimated at US$119 and ?7000 for the international and Indian markets, respectively.

The wearable technology industry was slated to reach US$30 billion in another four years with Google, Sony, Adidas, and Samsung being among the big names expected to lead the race. 4 Wearable technology was the buzzword at the Consumer Electronics Show he ld in Las Vegas in January 2014. Also, 2014 was christened the “Year of Wearable,” by many publications across the world.5 The development and use of wearable technology de vices started further back than most people would expect, but it was only recently eviden t that the industry was expected to grow at a rapid pace. Initially the technology was known as “wearable computing.” Wearable computing using electronics was believed to have begun back in 1978 when Eudaemonic Enterp rises introduced a wearable computer in shoes to predict the speed of roulette wheels. 6 Then, in 1979, Sony introduced th e Walkman, a wearable cassette player. Steve Mann, one of the pioneers in this indust ry, came up with many wearable tech products (i.e., Hydraulophone: a musical instrument which produced sound from water and headgears in various forms)  in the early 1980s, but most of them did not reach commercial usage.