How A Former VC Built A Consumer Tech Company To $75 Million Revenue With No Investors

Back in 2018, Michael Segal was working at Bessemer Ventures and constructing his aspect enterprise making digital image frames the place households might share images. With simply two individuals and minimal effort, he recollects, the enterprise reached $2 million in gross sales. So Segal, now 35, brushed apart any qualms and stop the enterprise world.

Right this moment, that enterprise, Skylight, is a $75 million (2021 income) client electronics operation—with no buyers. By conserving prices down, promoting solely on-line and plowing income again into the enterprise, he plans to maintain it that means, regardless of inquiries from wanna-be buyers. That’s uncommon in right now’s world the place most fast-growing companies—and particularly fast-growing client {hardware} startups, the place the prices to develop and launch a product are excessive—take money in trade for some lack of management over operations.

“We’ve damaged a variety of guidelines alongside the way in which,” Segal says. “Having seen how the sausage is made, for {hardware} specifically, for something bodily, VCs fake that’s their sport, however let’s be sincere, they’re after the software program enterprise.”

To maintain development going, in a beforehand unannounced transfer, Segal employed a president, Aviv Gilboa, an early worker at Ring who was its head of product discovery and development after the Amazon
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acquisition. Collectively, the 2 are planning new merchandise and new retail distribution plans to maintain development going. “A part of the explanation I used to be introduced in was to convey it from a speedboat to a ship,” says Gilboa, 31, who had additionally labored as a VC (at Kleiner Perkins).

Not solely does development get more durable as firms get bigger, however Skylight faces rising competitors within the digital image body market. Aura, a startup based by early Twitter workers, raised $26 million in debt and fairness for its enlargement in November. In the meantime, Nixplay, which says it reached $58 million in income final 12 months, now could be making an attempt to boost $15 million by means of fairness crowdfunding. Because the class has expanded to tens of millions of customers, Segal says cheaper look-alikes have popped up. “There’s a variety of noise, a variety of knockoffs,” he says.

“We’ve damaged a variety of guidelines alongside the way in which.”

Segal was born in Moscow, and counts himself fortunate that his mother and father had been capable of depart with the wave of Jewish emigrants when he was only one 12 months previous. They fled to Vienna, then Italy, and settled in Philadelphia in 1989. His mother and father labored as laptop programmers; nobody in the home talked about enterprise. “It was the basic immigrant mentality: grow to be a physician, or a lawyer if you need to,” he says.

Segal was each valedictorian and sophistication president at his highschool, then went to Harvard to check biochemistry. Silicon Valley beckoned, and he joined VC store Bessemer Enterprise Companions. “He was basically a lab chemist pondering he was going to work in chemistry,” says Bessemer companion Jeremy Levine. “He didn’t know his ass from his elbow when it got here to enterprise.”

Over time he realized about enterprise, then left to launch his personal startup, a market for handmade items. It flopped. He returned to Harvard for enterprise faculty and to lick his wounds. “I used to be this golden baby,” he says. “The issue with that’s you’ve by no means fallen in your face. With that first failure, I fell fairly arduous.”

The concept for Skylight got here throughout a category project to create a enterprise. Brainstorming about what would possibly attraction to their grandparents, Segal and his classmates settled on the thought of utilizing expertise to share images as a way of connection. With classmate Ricardo Aguirre, he began the operation with 40 hand-made prototypes. “It barely labored,” says Segal, who returned to Bessemer after getting his MBA.

Then, in 2015, Skylight raised almost $55,000 on the crowdfunding platform Kickstarter. That gave the corporate sufficient cash to pay a contract producer to make the digital frames to satisfy demand. It was solely after the enterprise reached that multimillion-dollar gross sales quantity that Segal realized he had greater than a ardour venture on his fingers.

“Even Apple has to invent a brand new product each couple of years.”

In 2018, he left Bessemer to grow to be CEO of the startup, bringing in his high-school buddy Jake Kring, beforehand director of engineering at Scripted, as chief expertise officer. That 12 months, Skylight launched its second product, a wise calendar that permits households to arrange a number of individuals’s schedules, procuring lists and the like on one shared gadget.

Prospects for both product pay the identical worth for the gadget ($160 for the usual measurement, $300 for deluxe), and those that use it for images (past very primary performance) pay a further $39 a 12 months subscription. Gross sales grew quickly, reaching $30 million in 2019, earlier than greater than doubling to final 12 months’s $75 million. In the meantime, Skylight’s person base hit 5 million.

Segal is now planning for brand spanking new merchandise (maybe focusing on infants), new retail distribution and new advertising and marketing efforts in 2023. “Even Apple
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has to invent a brand new product each couple of years,” Kring says. “Every thing required to get from zero to $50 million is every little thing you need to throw out to get from $50 million to $500 million. We’re in a little bit little bit of that rocky transition the place we understand it.”

Whereas the corporate has grown fully from direct-to-consumer advertising and marketing and promoting by means of its personal website and on Amazon, to maintain increasing it might want to get into main retailers, similar to Goal
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, Walmart and Greatest Purchase
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. As retailers put up gross sales declines and the potential of a recession looms, the timing may very well be troublesome. Segal says that even whereas the corporate has bought greater than 5,000 gadgets a day on its greatest days of the vacation promoting season, it’s been a rollercoaster and he is planning for gross sales to stay flat this 12 months.

However in contrast to tech firms which were compelled to slash valuations or lay off workers as a result of they’ve overextended, Segal figures that not having buyers provides him a cushion to climate any client pullback. “It’s very seductive,” he says, “to remain unbiased.”