SaaS Interviews with CEOs, Startups, Founders
FlumeWater Sells 10k Units at $200 With SaaS Upsell
10 Dec 2020
Chapter 1: What challenges is Flume Water currently facing in profitability?
We're burning a few hundred grand per month right now. We're not at profitability yet by any means. That being said, we can actually get there. I'm actually confident that if we wanted to, we can be pretty careful with how we grow the business and get to the point where we're actually at a break even within a year.
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My guest today is Eric Adler. He is a Central Oregon native Cal Poly graduate and startup founder with a passion for entrepreneurship. Whether it be building a tech company from the ground up, investing in real estate or flipping cars on Craigslist, he's got a desire to construct his own success and inspired. And this has inspired his actions.
Now building a company called Flume Water, an intelligent water monitoring system. Eric, you ready to take us to the top? Yep, I am. Let's do it. All right. So, I mean, you know, this is great. You're a hustler. You're a capitalist. But I mean, what got you into water monitoring?
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Chapter 2: What inspired the creation of Flume Water's monitoring system?
You don't need a plumber come out. You don't need to break any pipes. You can install it in about 10 minutes. And you have leak detection and water monitoring across your entire property, both indoor and outdoor. Um, no one's been able to do that. And that's kind of the main innovation with what we've developed patented patent pending right now.
Okay. So haven't had to, it's not issued and haven't had to defend it yet.
Yep. Not yet, but we're getting there.
It's a process I can imagine. Okay. So what are these little devices? I mean, what do they cost you to make? And do you do them kind of domestically or internationally, China, somewhere else?
We started out domestically here in California. Of course, our cost of goods were very high. We weren't making much margin off that. Now we're going overseas. I can't tell you exactly what our cost of goods are, but I can say it's under $100 per unit. What was it in California? We're always battling with trying to drive that unit cost down and also make sure that the quality stays just as high.
We're still doing low volume here. So as we kind of go up to higher volume, that price point goes down, that cost of goods goes down significantly.
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Chapter 3: How does Flume Water's hardware installation work?
Yeah. Eric, just start and stop your video real quick because you froze on me and reset that. But we'll keep chatting in the meantime. So when you were still in California doing the manufacturing, what was your what was your how mean? How expensive was it?
When we initially started out, our cost of goods was hovering around one hundred and thirty dollars in California.
OK, got it. And you've been able to drive it now below one hundred by moving overseas.
Yeah.
Okay, that's great. So let me ask you a question, right? I mean, why not? I mean, if your software platform, which is going to be higher margin, more data, more valuable over time, is dependent on the hardware install, wouldn't you be fighting like heck to subsidize these installs, not trying to make a $70, $80, $90, $100 margin on each of those hardware sales?
That's like pennies compared to what you're trying to build.
Right, right. So there's some pretty cool ways we can do that. We're actually working with water utilities all over the country, and they are actually subsidizing that cost. So for example, in San Antonio, right next to nearby where you are, San Antonio is paying us $150 in rebates per unit that we sell.
So for customers, they only have to pay $50 and are able to still gather that $150 cost or the $150 revenue. And that way for the consumer, you know, it's not too expensive. And we can also begin to drive some SaaS revenue off of the portal side of the business, which is a software platform that basically allows you to see this data from a master portal view.
And what do consumers pay for that?
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Chapter 4: What is the pricing structure for Flume Water's hardware?
And the customers are opting in to share that data by taking advantage of these rebate programs.
So it's kind of like B2G, business to government, kind of?
Yeah.
Yeah, it is a little bit business to government. It's kind of B2B to C, if you will. You know, we're working with utilities. They're a channel to get us to the customer, but they're also a customer for us.
Okay, so these utility management companies that are paying you to access the software component, obviously, it sounds like you're in the early innings of this, but what do they pay on average to access the tech?
Uh, it's small, you know, we're talking like a dollar per user per month.
Okay. Okay. Got it. A dollar a user a month. That's good. And then how does this mature? Like, how do you see this maturing over time? Right? So when does a software business become bigger than the hardware business?
It's a really good question. We see these integrations becoming more and more value as basically as we get more units out into the field. So we're not... What are you at right now, by the way?
How many units in the field?
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Chapter 5: How much investment has Flume Water raised so far?
Right now, we're not getting that recurring fee from Amazon sales because that's just a direct consumer sale. We're not necessarily working with a utility it also kind of opens up these doors to have conversations with those utilities and say, Hey, you know, you have 500 customers in your region that have flim devices. It's time we actually start talking.
So of the 10,000, how many have come from Amazon?
Uh, probably about 60% of them have come from Amazon. So it's a significant portion.
Got it. Okay. That's helpful. So you, you have 4,000 that have kind of been driven from utilities, pushing them forward. Uh, what I'm trying to back into right now is I'm sure it's, it's pretty low cause you're just getting going, but what are you doing per month right now on the SAS side of things like two, 3000 a month?
It's small. Yeah, it's in that ballpark, low thousands.
Yeah, okay, good. And how do you, I mean, for people that are buying this directly through Amazon, what's their incentive? Why do people care about monitoring their water personally unless they're just like a really good person and care about the environment?
Yeah, you can't sell just based on being a really good person. We figured that out. Most reviews we read, it's someone who came home to their vacation house, they opened their door, and water started pouring out. Or they got hit with a $1,000 water bill because they had a toilet leak that was running that they didn't know about. It's one of those things where it's like,
It's not a sexy space at all. Like leak detection is not sexy, right? But it's a real problem that people experience quite often. About 50% of homes throughout the country have had water damage. So once someone has experienced that, they never want it to happen again. And spending $199 to fix that problem is a pretty nominal cost.
Yeah, you should connect with Scott Stratford, who runs a company called AirDNA. They basically sell to Airbnb homeowners and they've sold to, what did he tell me? He was just on the show. They've sold to 6,500 Airbnb owners. And this is like something that pops up all the time with those guys. I bet you he'd sell a crap ton of these units for you.
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Chapter 6: What is Flume Water's strategy for scaling their SaaS model?
Interesting. Okay. What about churn? So every company that I've had on where there was a combination of kind of IOT, like hardware plus SAS, the churn is really low because once someone installs this thing in their house, they're not going to stop. Right. So do you see that as well? What's your turn the past 12 months?
Yeah, we have no churn right now because we're not talking about customers paying a monthly fee for the product. So once it's installed, we own that customer, we're in that house. What we're focused on doing is keeping our engagement incredibly high. On average right now, we have customers that are checking in on the app about once every two days.
And the customer, sorry, is the utility person or the homeowner?
There's two customers. So there's the utility and there's the homeowner. But right now I'm talking about the homeowner themselves because that's really where most of our effort is focused. So we have homeowners that are logging in about once every two days, checking in on their home, making sure they don't have any leaks. So the engagement is really high.
And what that is important for is if you ever want to upsell something, right? If you want to encourage those customers to, hey, maybe switch over to a different insurance carrier because you can get a discount for having Flume installed or you can get a rebate from your utility. You know, you want to keep those customers engaged.
So we're trying to ensure that we have this ongoing relationship with our customers.
That's good. Now, you mentioned now you're doing $2,000, $3,000 a month in terms of SaaS sales. Give me a sense of velocity in terms of new hardware units you're moving per month today.
We're doing in the ballpark about 1,000 units per month. Okay, pretty healthy. Yeah, thank you. We're beginning to turn on different channels, you know, Best Buy, Home Depot, Costco, looking at the retail channels to turn on and also looking at these strategic partnerships in the irrigation space and the insurance space.
And where were you a year ago if you're moving a grand per month today in terms of units? We were doing like a hundred units every other month.
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