I spent $50K side-hustling a Tesla cam IoT product while in business school, and Amazon Ring crashed my party.
By: Ivan Todorov
Tags: Mobility As A Service, Mobility, Tesla, Amazon, IoT

The Tipping Point

It was summer 2019, and Tesla had just beamed an OTA upgrade adding the Sentry Mode feature to my Model 3 — imagine coming out of a Best Buy, and as you unlock your car you’re greeted with a notification on a 15” center-console screen letting you know that “events” had occurred while you were gone. That was it, just a “Hey, 3 events happened while you were away.” It could have been a person passing or an 18-wheeler taking off your bumper, same notification.

u/Goencz on Reddit

It did not offer any other useful information or utility to see what triggered the alarm. The whole experience left you in a frustrated “WTH happened?” mental state, nagging you for the rest of the drive home to see if someone rammed their shopping cart into your beloved car. Once home, you had to dig around the center console of the Tesla, endlessly probing for the USB port to access your videos. And this was only after going through the process of installing numerous adapters and a painful USB setup process to enable the recording feature of Tesla’s four external-facing-cameras.

When we started the project, there were no in-vehicle player and no “Format USB” options. Tesla owners were required to custom-format a USB Flash Drive and then manually create specific folders. If you got that far without making a mistake, let’s hope you purchased a USB Flash Drive fast enough to keep up with the video recording speeds. And then, once you enabled recording, you realized there was no app to stream the recordings, and no wireless way to download and share those videos from your phone. After a minor fender bender at a Best Buy parking lot that left my prized possession with a rather large dent, I asked:

“Why isn’t there a “Nest Cam” for my car?”

Back-of-the-Napkin Research

Looking through the forums, blogs, and social media sites, it became clear that Tesla owners around the world were frustrated with the experience, and there were no viable solutions out there. So I did some back of the napkin math to figure out how big this audience was and what they would be willing to pay for instant access to their Tesla’s videos.

This was easier said than done. Tesla releases production numbers with their quarterly earnings releases but digging through the data took a while, especially because only certain models were equipped with Auto-pilot camera hardware and projections for next quarter were just that, projections.

I dug up enough numbers from Tesla’s earnings reports (Tesla Q1 2019 Update and Tesla Q3 2018 Update) and various car websites to get a sense of my serviceable available market (SAM) and built projections targeting a 5% serviceable obtainable market (SOM).

As I was getting in the weeds conducting future growth modeling, I had to stop and remind myself how much uncertainty the company was facing at the time — as a reminder this was 2019, there were talks about Tesla running out of money, production issues, etc. I decided to simplify the model down to two cases: a conservative growth-rate increase in adoption of AP hardware and no growth-rate increase. I estimated that during the second half of 2019 Tesla would deliver between 90,000 and 180,000 new vehicles in the US, bringing the totals to 740K and 780K AP vehicles on the road in the US alone.

I thought to myself: “OK, this could be interesting.”

Looking back, I was close. Tesla put on the road 209,276 new vehicles during the second half of 2019:

Other Tesla enthusiasts knew about the feature but was the greater population willing to pay for a third-party product?

Testing the Market

Having built and run a digital marketing agency for twenty years, I knew that if the product did not appeal to the much broader Tesla owner market, we would not succeed long-term. I set up a short, online survey to learn what Tesla owners knew about the new Sentry Mode features and how much they say they would pay for an IoT product with a monthly subscription. I posted the survey (seen below) on my Facebook and LinkedIn and started collecting data.

The survey had 5 questions:

Do you drive a Tesla with AutoPilot?

Yes

No

I don’t know

Did you know that your Tesla can record DashCam style video using the AutoPilot cameras?

Yes, I’m aware but do not use this feature

Yes, I’m aware and record my DashCam video using USB Flash Drive

I’m not aware/I’m not familiar with the DashCam feature

Did you know that Tesla’s Sentry Mode (security/alarm feature) records video using the AutoPilot cameras when there is activity around your unattended vehicle?

Yes, I’m aware but do not use this feature

Yes, I’m aware and record Sentry Mode video using USB Flash Drive

I’m not aware/I’m not familiar with the Sentry Mode feature

How much would you expect to pay for a hardware gadget/device that uploads your Sentry and DashCam videos wirelessly to the cloud, and makes them available to your mobile, tablet and desktop devices for easy sharing?

$___________USD

How much would you expect to pay for a monthly cloud-video service subscription to store such videos in the cloud?

$___________USD

While my sample size was small, within a few days I had a very rough, directional, sense of what was in the head of the customer, numbers I could use to model top-line revenues. My “gut” was fairly spot on about the hardware pricing, but to my surprise, Tesla owners “said” they were willing to spend quite a bit more for a monthly subscription than I had anticipated.

I also set up Google Alerts to monitor the internet for “sentry mode” and related keywords, so I would not miss a product announcement or new competition. This also allowed me to follow how Tesla was evolving the in-vehicle experience to assess if custom hardware investment would make sense.

Assembling the Team

I’ve been building digital products and experiences since I was 12, starting on IBM desktops with 256-color CRT monitors running Basic and Windows on DOS, but I knew very little about building consumer electronics hardware. So, I tapped my friend and previous Tech Director, Daniel Smith. He and I worked together at the digital marketing agency I co-founded. We launched digital products and marketing for brands like Microsoft, VIZIO, Xbox, and Gears of War. Daniel knew quite a bit about sourcing cheap components from China and was always tinkering with smart devices. I enjoyed working with him because we pushed each other to invent technology solutions to business problems.

If we were going to be “shipping product” I needed someone to own logistics — sourcing, assembly, packing, shipping, and returns. My UCLA Anderson classmate Stephen Brightman was perfect. After graduating from the United States Military Academy at West Point, Stephen spent seven years as an Army Officer planning and executing highly intricate troop and equipment movements by land, air, and sea. He culminated his time in the Army as a Battery Commander, responsible for the defense of America’s #1 asset in the Middle East, the health and welfare of 80 Soldiers, their families, and over $375M+ worth of equipment. He was also an entrepreneur and had brought to the US market a product sourced and manufactured in China. If he was good enough to take responsibility for 80 families and $375M in military equipment for the government, he would be more than enough firepower to take care of our logistics needs. Here he is, standing behind the flag: