Bobos in Paradise Want _____?
EC 2.0 (Electrochromic) Startup Lessons from The Shade Store
What do Bourgeois Bohemians (Bobos) desire even more than an inflammation-taming Tumeric-Coconut Bedtime Shake? Hint: It doesn’t matter whether you’re in Mill Valley, Pac Heights, Palo Alto, Santa Barbara, Beverly Hills, La Jolla or Laguna Niguel. C’mon, guess! If you guessed solar shades for their windows, go buy yourself a Lulelemon Love Tank. You deserve it.
If you’ve walked down University Avenue in Palo Alto or M Street NW in Georgetown, you’ve passed The Shade Store. For a competitive commercial real estate developer, being able to attract The Shade Store to your retail project is a new litmus. It signals mate-worthiness.
There are 50+ Shade Stores scattered throughout Yuppyvilles across the U.S., all targeted at the Creative Class. Co-Founder Ian Gibbs and his team haven’t even come close to saturating the market. On any given weekend, highly-educated, professional, 35–55-year-old homeowners pepper “Shade Consultants” with questions about the pros & cons of basic solar shades versus designer solar shades. These consultants aim to make your home into ‘a soft oasis of light’. Like a buttery Chardonnay with 80+ Parker Points, the product is price-forward. They’re selling an experience.
“Get smart about sunlight. Protect against UV rays. Maintain your view. Reduce glare. Prevent your interiors from fading. Choose a transparency that works for you. Improve your quality of light. Improve your quality of life. It’s that simple. Never lose sight of the beauty outside your window.” — Verbiage from “the SOLAR SHADES collection” catalogue at The Shade Store
Which brings us to an essential “product-market fit” truth, a truth relevant for every EC 2.0 (electrochromic window film) startup. The ways that electrochromic technologists (organic and inorganic chemists, energy efficiency modeling geeks, semiconductor execs, etc.) at startups in Silicon Valley think about lighting control products, and the ways that expert home consumer product marketers (like Michael Crotty at The Shade Store) think about lighting control products are very different. As in, different planet different. (It’s reminiscent of the conversation around EV’s (electric vehicles) 8 years ago, when Tesla thought it knew everything because it knew software, and Detroit was equally smug about its cherished ‘knowledge’ franchises.) The Shade Store Revolution proves why it’s dangerous to invite R&D scientists and engineers into PRD meetings too early in the game.
Steel Cage Death Match: Who Will Win?
Electrochromic Chemists versus Home Product Marketers
The chemists and the home consumer product marketers are each suffering from cognitive biases, and these cognitive biases will either make the EC 1.0 players tragically late to the EC 2.0 race, or they’ll make the window treatment industry execs misunderstand what business they’re in (they are in the light attenuation business!). Same way with VC investors. As the adage goes, “customers trump investors” (investors can prognosticate in any old way, but paying customers — actual market data — will give the lie to lazy prognostications).
There is a lot of unchallenged sophistry in EC 2.0, and it typically surfaces after entrepreneurs leave pitch meetings. Sophistry is something that is seemingly true, but upon closer inspection is obviously false. We have to confront the Armchair Analyst. Firm and impersonal, we must be specific.
When Does Your Sophistry Start to Erode Your Humanity?
Even though we live in an Age of Sophists, we don’t have to be impolitic. We can disagree without being disagreeable. We just need to acknowledge the obvious. The Shade Store already knows how to sell solar shades. They know that the “perfect window treatments start with perfect measurements”. They “have a professional measure your windows free-of-charge”. “Free swatches, free measurements, free shipping.”
Uhm, yes please. “White-Glove Measure & Install”, “10-Day Lead Times & Free Shipping”, and “Lifetime Customer Care” all sound more like a Path to Liberation than a fenestration treatment purchase process. Plus, s’il vous plait. There’s a seamless UX/UI, so couples can continue their deep flirtation with this (entirely discretionary and very likely un-budgeted) purchase at home, right after their retail store visit.
The Shade Store is selling an experience — and Bobos pay a lot of money for experiences because we know, scientifically, that experiences make us happier. Experiences are investments in well-being. When we deposit experiences in our psychic bank accounts, we earn interest on the principal.
The Shade Store has fashioned a lingua franca for consumer discourse about their product. It’s easy, harmonious, soft.
The key terms and phrases we hear at The Shade Store: light filtering, gently filter light, balance, simplify, perfect light, changing moods, Swatch It, view-saving, motorization made simple, whisper quiet eco-friendly battery operation, state-of-the-art controls, transform your interiors, revitalize your space, exclusive, morning glory, relaxed, modern, functional, easy-to-operate, gentle, versatile, clean and modern, back to nature, find serenity, green design, earth tones, Mother Nature, cozy atmosphere, Eco-chic, reconnect with nature — and style, design for the way you live, customizable to the 1/8”, have your light and privacy just so, keep your energy bill in check, set the mood, be an innovator.
The language is aspirational. It makes you want to study cinematography in Stockholm or paint desertscapes in Abiquiu. These people are really good marketers. They know that consumers remember how you make them feel. The heart is the art and stuff.
Back to Reality/Oh There’s Goes Gravity
These insights are commercially relevant. Tours of The Shade Store can help EC 2.0 technical founders separate truth from supposition. So let’s spear some sacred cows together:
Myth # 1: It’s all about energy.
Reality # 1: Solving for energy and climate is the existential challenge of our time, yes. There is no higher calling. But it has little to do with selling solar shades and light control products. Consumers only need the vaguest of pat assurances before they drop the topic: “Keep your energy bill in check”, “Energy costs down, comfort up”, “easier maintenance of interior temperatures”. Consumers are blithely unaware of the electro-magnetic spectrum.
Consumers don’t know the nanometer ranges between UV (Ultraviolet) and Visible and Near-Infrared Light. They do know that UV causes skin cancer, so they don’t want that. They know this because of suntan lotion. They have rugs and artwork. Fade prevention is definitely something they want. NIR and UV blocking are achievable without EC 2.0 tech: an integrated UV-blocking layer does the trick, blocking 99% of UV — and existing film in the market can block ~97% of NIR. Heat-carrying Near-Infrared Light is good in the winter and bad in the summer, but consumers don’t actually know how much they pay in energy bills. If they did, they’d have already installed NIR-blocking film from 3M, with its 3-year simple payback.
What do Bobo consumers know? They know what they perceive through their senses. And what they perceive is visual brightness and coolness. Consumers want glare reduction, fo sho.
Myth # 2: There has to be a lifetime warranty.
Reality # 2: Au contraire, mi amigo. While most homeowners have 15 or 30 year mortgages, the average holding period for a single family home is a measly 6 years. Solar Shades have “lifetime guarantees”, but that’s Glib Marketing Language 101. It doesn’t apply to normal wear-and-tear. Window energy performance itself is only warrantied according to the edge seal. Which is 10 years. And window film from 3M is warrantied from 6 years to 15 years, depending. It’s important for EC 2.0 products to have reasonable durability and be able to perform (not lose power, not suffer noticeable emissivity, not de-laminate) according to manufacturer’s representations. But electrochromic scientists’ cognitive bias makes them believe that 50 years is the benchmark for performance. This is based upon the ASTM-2141 standard, self-interestedly written by EC 1.0 manufacturers — for 50,000 cycles in a torture chamber at 85% humidity and 85 C temperatures. Better durability is great (and the construction products industry is notably litigious), but we run the risk of making perfect the enemy of the good. Transparency and disclosure solve 90% of all potential problems.
Myth # 3: It must be very inexpensive.
Reality # 3: No, it doesn’t. Price is brand, and value-based pricing makes the most sense in this instance. Let’s listen to our friends at The Shade Store. It costs $2,700 for 3 windows worth of motorized solar shades at The Shade Store. That’s almost $1,000 per window (8’ x 4’). This includes the $150 wifi bridge and the $350 per shade (per roller) for motorization. That’s the whole shebang for the Smart Home. But that’s for one wall of one house. That’s $31/square foot. That’s the right price territory for the large, high-end market in the U.S., the market driving a 50+ national retail store strategy in the most coveted commercial retail space, from Scottsdale to West Palm Beach. These are Early Adopters.
This means that a mass, mass market will likely see a long-term equilibrium price of $15–20/square foot installed. This target market segment would be the Early Majority, a.k.a. the Pragmatists. The “smart home” Sellable Addressable Market (or SAM) subset of the 125 million single family homes Total Available Market (or TAM) is approximately 5 million homes in the U.S. These homes represent a 300 square feet average account size ($4500 per home spend at the low-end of the range). That’s a $22.5 Billion Sellable Addressable Market. OK, but what about the Serviceable Addressable Market? Surely it’s much smaller.
Well, just to indulge extremism, let’s say that there’s an order-of-magnitude difference between the Sellable Addressable Market and the Serviceable Addressable Market. Let’s say that only 500,000 U.S. homes (by 2020) constitute the Serviceable Addressable Market. That’s a $2.25 Billion Serviceable Addressable Market! EC 2.0 startups are not market-constrained. Why?
Because they have native cost advantages (roll-to-roll manufacturing, no wiring and cabling required) that make $15 — $30/square foot installed cost practical and achievable, advantages that EC 1.0 will find very difficult to achieve (currently at $120 — $150/square foot, and relegated to only the highest end of high-end Commercial LEED Platinum construction).
Did Elon Musk first design a car to compete with a Bugatti? No. But did he first design a car to compete with a Toyota Camry? No. He designed a car for the “first adopter” and “early market” set of customers. The technology enthusiasts. Rich customers, but not just billionaires. It wasn’t the shortest path to nobility. It was the shortest path to commercial sustainability.
Myth # 4: The window film must go from “totally light to totally dark” (i.e., 100% visible light transmission down to 1% visible light transmission). An enormous dynamic range is required for a marketable product.
Truth # 4: Nope. Smaller dynamic ranges (50% down to 2%) may do just fine. Our minds can’t tell the difference. We like to talk confident “lab shop”, throwing around terms like “TViz” like we know what we’re talking about. But this is beer muscle talk. This is sports radio idiocy.
We use these absolute numbers to support our first-hand, perceptual, relative experience of the thing. The Shade Store has proven that there is a massive market for sun shades that don’t offer privacy. Their sun shades range from 1% — 10% visible light transmission. In absolute terms, 1% visible light transmission sounds small enough to safely prance around naked. But you would be wrong, and your pics would likely make it onto the Interwebs.
For the full geek answer on why smaller dynamic ranges could be OK, we need to put away our photometers. We need to stop thinking in absolutes and start think in relative terms.
It’s important to first understand how the human eye perceives light intensity. For our purposes, we will consider the effect of the pupil and photoreceptor cells (rods and cones). The pupil can change size in an effort to moderate the amount of light incident on the retina. As the pupil is circular in humans, the amount of light let through is proportional to the square of the diameter of the pupil. On average, the pupil has a minimum diameter of 3–4 mm and a maximum diameter of 5–9 mm.
From the pupil alone, someone with excellent vision would perceive the same intensity outside on a sunny day as they would in a room with a light source on 11% as bright as daylight. Someone with only a minimally active pupil would need a light source 65% as bright as daylight. As such, the pupil provides levels of adaptation for light intensities. Rods and cones interact with the light allowed through the pupil (about 30% of which reaches the retina) based on intensity and wavelength. These photoreceptors allow for distinction of a thousand-fold range of light intensities for a given adaptation. Together, the eye has a sliding scale of response providing equivalent perceived intensities. As such, the human eye is best at distinguishing intensities relative to something else in the same field of view. This is quite different from a photometer, which determines absolute intensities.
Therefore, a window with a maximum transmission of 50% (or even 38%) would not appear to be overly tinted unless it was next to a window with a significantly higher transmission. Furthermore, commercial buildings typically have windows that transmit around 45% visible light, with some of the darkest getting down to about 6–8%. — Mike Stacey (Source)
Myth # 5: The optical quality has to be perfect. Architects want ultra-clear.
Reality # 5: I hear ya’ chirpin’, Big Bird. But no, it doesn’t have to be perfect. It needs to be ‘pretty good’. Of course, everybody loves Guardian Ultra Clear Low Iron Glass. It’s beautiful. It does deliver maximum clarity and color neutrality, clear to the edge. It does elevate light transmission and present views that are true to life. Its perfection is inspiring.
But EC 2.0 entrepreneurs are commercial people, not Shaolin Monks. They are doing something different, not refining a 65+ year-old technology. We need to release products that are pretty good. And the ‘pretty good’ standard is in the Eye of the Bobo.
Every Great Startup Relies on At Least One Miracle.
Antonio Garcia Martinez talks about Startup Miracles, referencing the behavior change miracle that enabled AirBnB’s success (renting your place to strangers). If every great startup is based upon one miracle (and not two miracles), the miracle for EC 2.0 is simple: consumers will buy a smart home product that is mostly invisible. It’s not entirely obvious that they will. It’s not a ‘given’ because the solar shade business still has the solidity of the shade. It’s a thing. You can see it. You invested a lot of money in it — and you can see it.
But EC 2.0 doesn’t draw attention to itself. It’s conspicuously inconspicuous. It’s more of a gentle and benevolent presence, getting rid of excessive heat and glare, safe-guarding your skin and your artwork. In some ways, it’s a system of absences: absence of heat, glare, discomfort. It harkens back to some primordial impulse in our evolutionary history, when light attenuation gave us an advantage for natural selection. For more on this, Bobos will want to watch Neil deGrasse Tyson’s “The Inexplicable Universe” on Netflix. Even before color, we sensed shade.
I’m willing to accept that consumers spend money on portals — and that they’ll happily get rid of or augment the ‘binary-ness’ of curtains and blinds. The iPhone isn’t about the iPhone. It’s a portal to infinitely varied places.
The EC 2.0 solar shade is a portal to nature’s infinite healing and wisdom. When our eyes go “out there” (gaze out into nature), it’s easier for us to dive into the deepest interior spaces within ourselves. This is why we crave a comfortable, but otherwise visually-unmediated relationship with nature. When we’re surrounded by her wisdom, we sit easier. We love more easily. We see the cortisol-driven stressors of our manufactured existences in clearer terms — and we let go of these stressors. Meditation isn’t a trend. And EC 2.0 isn’t a trend. It’s a discovery of an experience that we’ve always needed access to.
Let’s stop the false comparisons and learn from the geniuses at The Shade Store. Their stuff is pretty good.