SaaS Interviews with CEOs, Startups, Founders
MyCroft Raises $5m to Ship Home Speaker Echo Competitor That Doesnt' Suck In Data
26 Sep 2020
Chapter 1: What is Mycroft and how does it differ from other smart speakers?
We're effectively pre-revenue right now. We have not tried to monetize any of our customers. We have about 50,000 people who are signed up to our system and are using our system, but we are not actively trying to monetize them yet because, quite frankly, the experience isn't where we want it to be.
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We've got to grow faster. Minimum is 100% over the past several years.
Or bootstrap founders like Vivek of QuestionPro. When I started the company, it was not cool to raise. Or Looker CEO Frank Behan before Google acquired his company for $2.6 billion.
We want to see a real pervasive data culture, and then the rest flows behind that.
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My guest today is Michael Lewis. He's the founder of Stellar Semiconductor, which was sold to Broadcom in 2000, then went on to found Cryptic Studios, which was sold to Atari in 2008. For the past decade, Michael has been deeply involved in charitable efforts through the Onspar Foundation, formerly the Lewis Charitable Foundation, and now is running Mycroft.ai.
Michael, you ready to take us to the top?
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Chapter 2: What challenges did Mycroft face in its development journey?
We have over 1,500 investors because we went through a crowdfunding campaign a couple years back.
So how do you manage that? I mean, is your cap table literally 1,600 people on it?
Yep. Basically, we...
are very forthcoming with our investors we put out a monthly newsletter try to keep them informed as to what's going on we've never had any problems uh to date um and um yeah i mean it's it's really about being transparent with what's going on in the company and setting the proper expectations i mean but so for example if you're going how much are you trying to raise right now institutional
Our target's $5 million. Okay. So, I mean, one of the things that obviously any institution is going to come in and look at is the current cap table and is there any risk? And one of the risks they'll look at is, well, if one, just one of these 1,600 investors hold out on some decision, it could tank the whole company, essentially.
How do you convince the VC that you potentially work with on this new round that that's not a risk?
Well, there's a couple of ways. First of all, we have two classes of shares. We have voting shares and non-voting shares. So, the cohort of the crowdfunding investors are all non-voting shares. So that's one issue. Secondly, as I said, we keep our investors happy, but there are ways around this.
We may have to do some creative corporate restructuring in the same way that maybe an angel fund creates a sort of company that serves all of its investors, we may end up creating a sub-entity that encapsulates the crowdfunding investors to simplify the cap table at the top level. That's just one idea.
How do you, I mean, um, this is sort of a direct question, but like, why are your investors happy? I mean, your first seed round was back in February of 2016 with tech stars and star power partners, about $400,000 raised here. We are four years. I need product crowdfunding even earlier than that in 2015.
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Chapter 3: How does Mycroft plan to monetize its platform?
I think it's a lack of imagination. Come on, Michael.
This isn't sending someone to Mars. A home speaker that is not backed by one of the big four and you're not sucking up data. You think that's some original idea that people just haven't imagined?
It's really hard to convince people to not do things the traditional way.
Well, you just said there's only 30% of people that want this.
Yeah, exactly. But finding a business that wants to do this is a different thing, right? Yeah. My background most recently was in video games where we did subscription. And the video game industry has moved a lot of its business to the freemium model where they just give away the product and then they charge for upgrades. And this is certainly a thing that happens in other businesses as well.
But it's really not familiar to that many people. And people aren't comfortable with it because they don't understand it. There are There's a lot of reasons to not understand it as well. In video games, one of the most popular things that people like to buy is clothing. It has no impact on the game. It has no effect. It's just personal. It just allows you to express yourself.
That's counterintuitive. Right. And that is, I think, a thing that people don't really get. By embracing the idea that we don't want to control the user, we want to empower the user... And part of that is respecting their privacy. And we do encourage them to opt in and let us use their data in limited ways to help train our machine learning algorithms. But by default...
We respect their privacy, we do what they want. If they opt in, they can later opt out and we just delete all their data. This is a system where the user is really in control and people are afraid of doing that.
Are they afraid or do they just realize the user is not going to use the thing most effectively? I mean, that's actually the thing I think you're going up against here is I think over time as Amazon is able to deliver more and more value to customers with their voice data, more and more people will say, I know they're collecting my data and I don't actually care because I'm getting so much value.
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Chapter 4: What is the significance of privacy in Mycroft's business model?
Which is great for the consumer, because we probably get it cheaper now. Why is that bad for the consumer?
It's bad for the consumer because they don't really have a choice now. Yes, they do.
There's a cheaper option. Amazon crushes the competitor, brings in a cheaper option, and you rock and roll, like they do with diapers. Well, listen, hey, look, we'll have to see what happens. You proved me wrong. This interview, I will look very, very silly two years from now if you have a million speakers to market. I will post this everywhere on all my socials. I was completely wrong.
They killed it. Look at what they've done. Before we wrap up, so let's just talk again about software real quick. Let's say you've got a million devices out there. What is the software subscription look like? Are you charging developers to use it? And if so, what's the monthly price point?
Um, so it's, it's a completely open source system. It's free to developers. It's free to OEMs to integrate into their system. Um, what we charge is the consumers for basically upgrades. So, uh, you get all the basic services, everything that you need to do your normal everyday activities on a smart speaker or a voice assistant that comes for free. Anybody can make an account and it'll just work.
In fact, on a Linux system, you can go download a snap install with one click right now and go test it out. Um, it's free to make an account. Um, down the road will provide premium features like custom voices, additional languages, different accents. I think that it's really important that the technology that we use today reflects our users.
And as we move to a voice interface, this has the trappings of a personality. And I think people want to see their own values, their own culture reflected in the technology they use. And that's something that we're going to focus on.
um so those will be upgrade paths there'll be premium features like access to sites that actually cost us money to use their api like if we're providing stock quotes or you know real-time analytics and various you know business markets or things like that that'd be part of an upgrade um and uh you know really there's uh there's just so many options in terms of providing value add to the users above the basic level of subscription uh or the basic level of just having an account um the uh you know
It's a really open market. And I think that as video games have moved to this freemium model, I think that the same thing is going to work really well for us.
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Chapter 5: How does Mycroft engage with its community of developers?
And we didn't have 30 developers staying up all night to make sure. I know how to do this. I'm going to get a product out there that works. And then we'll see. We'll see if people really care about privacy. But I don't think we can test that until we offer them the choice.
When is the product going to be out? When can someone get it in their house? It's working. They can use it.
By this time next year, it'll be available for direct sales.
Michael, sounds like the perfect time for a follow-up interview. This time, though, let's wrap up with a famous spot. Number one, favorite business book?
Business book? I think it's called From Many One, the story of the Visa startup, how Visa got started.
Number two, is there a CEO you're following or studying? No. Number three, what's your favorite online tool for building Mycroft? GitHub. Number four, how many hours of sleep are you getting every night? About five. Okay. And situation, married, single kids? Married, twin boys, five years old.
Oh, wow. That's exciting.
Very cool. How old are you? I am 48. 48. Last question. What is something you wish you knew when you were 20, Michael?
That people aren't scary.
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