OkyWatch Business Case: From Copycat to Seeking Traction
OkyWatch is a startup supported by Lanzadera which sells smart watches with GPS to locate kids. In 2018, OkyWatch has validated its value proposition lowering risk through pre-orders and have achieved product market fit selling almost one thousand watches. In 2019 OkyWatch will face challenges to scale the business to the next level, differentiating from new competitors and consolidating the team.
1. Founder Introduction
After 10 years working at Mercadona, Alejandro Albiach decided to apply to an university to have more opportunities in his professional life. Then Alejandro met EDEM, a entrepreneurial university promoted by Mr. Juan Roig, chairman of Mercadona and his current boss.
He realized that this university was his path to follow. He tried but at first EDEM didn’t accept him. After this tough moment, to take advantage of his time, he decided to start his studies at University of Valencia and he prepared the required English level. After this busy year still working at Mercadona, studying first year of BBA at UV and improving English he decided to try again… and he finally achieved to be accepted at EDEM.
In these four years at EDEM, Alejandro learned the basics of starting a business, met lots of entrepreneurs and he realized he wanted to become one of them.
Even more, he had some entrepreneurial adventures. Firstly, he opened a pub in Alicante during summer. The business was not successful but he learned how to manage and motivate people and not mix family and friends with business matters. After another failed trial with a hairdresser marketplace, he founded a Youtube subnetwork with his brother in law, who was a youtuber. This platform offered content, copyright, networking and tutorials to youtubers in exchange of percentage stake of their earnings. They were able to get 120 youtube channels and 7 million visits per day. However Youtube changed this business model and elimited all subnetworks. After this, he tried to improve the efficiency of a logistic supply chain but there were many big players like Telit, IBM, Microsoft, etc. to compete with. Because of this reason he decided to not continue in this business model.
In this project Alejandro learned how to geolocate devices to establish some communication channels between these assets. These learnings will help Alejandro to run his next entrepreneurial project.
Despite this, he wasn’t discouraged and from the point of view of Lanzadera, we knew that he was a good entrepreneur but he didn’t achieve product-market-fit in his projects.
2. Methodology
With the aim to support Alejandro to undertake his entrepreneurial path, Lanzadera taught him a methodology that was becoming very popular in startup ecosystem.
Copycat methodology consists on analyzing different projects which are performing well in other geographical areas with the objective of introducing them to another market. These projects should be easily copied and brought to our market, without taking into account personal preferences to avoid bias in the analytical decision.
The key to success is to be very methodological analyzing different trends. Patience is required because it is a long process, and the entrepreneurs should develop their own criteria to choose a project. After this, entrepreneurs have to be able to improve the chosen project by creating more customer value and adapting it to the chosen market.
Standard Criteria:
- Easily clonable
- Customers are willing to pay
- Some players in the sector
Also, it is recommended not to choose a technological project, because it will delay the go-to-market. Alejandro says that it was the toughest part on the launching of OkyWatch.
A good example could be the growing market of scooters, where many companies have developed in a short period of time.
It’s the opposite to the traditional mindset of starting a business in a field where you have a proven expertise. This methodology is designed for people who are pure entrepreneurs, they know how to attract the right people, launch and improve a MVP as fast as possible to validate the chosen idea and they know how to scale the business in a profitable and methodological way.
This model is usually carried out by serial tech-entrepreneurs like Iñigo Juantegui founder of La Nevera Roja, which was sold in 2015 for 80 M €. Iñigo has recently created On Truck to solve all the inefficiencies in conventional pallets transports. They didn’t have experience in this sector, but they knew very well how to launch startups, raise funds, use and create technological tools to become more efficient. They detected an inefficient sector, and they are using their technological and entrepreneurial expertise to eliminate wasteful expenses and improve processes.
I have no evidence that On Tuck was originated by copycat but for sure they have used lean methodologies because they know how to scale and improve in an infinite methodological way. La Nevera Rojas was a copycat from Just Eat (UK) and Grub Hub (USA) among others.
Rocket Internet is a startup clone factory based in Germany. They use copycat methodology from the analysis of best worldwide startups, mostly from Silicon Valley. From 2007, Rocket Internet has supported more than 75 companies, which generate more than 3 billions dollars per year.
To identify ideas, trends, business models and useful tools for copycat I have prepared this dynamic list of resources:
3. Copycat Analysis
In February 2016, dokiWatch, one of the first players, overcame its kickstarter objective of 20.000 $ achieving 312.000 $ in pre-orders sales.
Apart from international players like Xplora (which is investing in TV ads), some spanish companies have emerged such as Watchimp and many asian smartwatches brands in Amazon and Aliexpress.
According to INE there is around 5 million kids in the range of 5 to 14 years. This is the most accurate information about OkyWatch buyer persona, although the real target is between 6 and 12 years. This is because according to the Net Children Go Mobile research, children from 0–6 years are exposed to technology but they don’t own any gadgets and the majority of them obtain their first smartphone at twelve.
This data highlights the targeted niche market. OkyWatch allows children to have their own gadgets with some games, phone calls, interaction between friends but without the problems of having uncontrolled internet access of a current smartphone. At the same time, parents keep their children content and they feel comfortable controlling their locations and having the possibility to contact them.
In addition, INE states that 80% of 10 year old spanish children have access to internet, then we can assume that more or less children between 6 and 12 years would have 70% internet access. This means that the total addressable market is 3,4 millions children. This data is needed to recognise that your chosen market is large enough to start operations.
After calculating TAM, next step is analysing spanish customer trends. As we can see in the next graph, there is a significant increase of searches on Google in 2018 when Okywatch started their activity.
4. Go to Market
To launch the company Alejandro faced with the creation of the software and hardware issues like long processes of importation and collecting money to satisfy minimum quantity orders. Then, with the aim of lowering the risk, he decided to launch a pre-order campaign to be funded by its future customers.
He was able to sell 350 units which represents a turnover of 28.000 € before investing any money in production. This is a very good example of validating a solution following lean startup method. After some collections OkyWatch improved its software and hardware and at the same time OkyWatch gained enough paying customers to sustain the investments in this incremental improvements.
I have dedicated a GIF about pre-orders because it was an important milestone. This sales figures gave OkyWatch enough credibility to attract talent, raise bank loans and to be accepted at Lanzadera.
The initial business model was a transactional ecommerce just selling devices for 79 €, but Oky Watch recently have iterated providing SIM cards and obtaining 3,5 € to 10€ monthly recurring revenues from their customers.
5. Team
All the achievements are thanks to the OkyWatch team, which consists of a CMO, CTO and part-time customer assistant, apart from Alejandro which is the CEO.
At this moment, the key roles are asking Alejandro for shares of the company, because they have participated in the growth of the company and they have been underpaid.
6. 2018 Oky Watch Performance
Alejandro is the only shareholder of the company and these are some of the major problems he faced at the beginning:
- There was a delay with the pre-order campaign and he had to refund 55 unhappy customers with the loss of 4.440 € revenues.
- He started operations under the brand OkyDoki, but with the objective of avoiding confusion with some competitors he had to rebrand the company as Okywatch in which it caused a loss in time and cost.
And these are some of his accomplishments and figures of 2018:
Some relevant metrics:
Number of watches: 860
Number of tickets: 670
Number of Sim Cards: 280
Costs Breakdown
Watch cost: 31 €
Custom duties and taxes: 26%
International transport costs: 650 per each 500 units.
Blended CAC: 19,5€
Delivery and picking: 7€
Return rate: 1,1 %
Estimated Customer Lifetime Months of SIM card services: 12 months.
Currently Alejandro is facing some challenges for 2019 and he needs your help. Are you willing to support him?
- What are the potential threats of OkyWatch? and how would you solve it?
- What would be the marketing strategy based on Unit Economics ? Read this article if you are not familiar with this term. Take into account transactional and recurring revenues.
- Should Oky Watch start selling on Amazon?
- How can Alejandro retain talent in Oky Watch?
On this podcast you can hear Alejandro Albiach explaining about OkyWatch.
Disclaimer: All the case is based on real and fictional data provided by OkyWatch and adapted to didactic purposes. If you have any input we will be happy to receive an email to jdetoro@marinadeempresas.es with de subject line “Oky Watch Business Case”.
Lanzadera is a startup accelerator and incubator based in Valencia supporting more than 100 entrepreneurs per year. Lanzadera have different programs to cover the spectrum from MVP to mature entrepreneurship.
- If you want to know more about Lanzadera you can contact me by email jdetoro@marinadeempresas.es
- Would you like to know more about our programs and criteria? 👉 here
- Some tips for our interviews ? 👉 here
- Unit economics 👉 here
Read our blog: https://lanzadera.es/blog/
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