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It’s one of those pie-in-the sky dreams we’ve had for decades: an automated home that thinks for you. Lights turn on when you enter the room. Your door unlocks as you approach. You get an alert when an intruder enters.
There are a lot of folks working on making that happen right now, including one startup called SmartThings.
SmartThings isn’t just one gadget. Think of it as a platform that lets hardware makers turn their everyday objects like lights, door locks, and garage door openers into “smart” devices that you can control over the internet. You buy a starter kit, which includes a router-like hub that talks to all your devices and lets you control them using an app on your phone.
It’s one of several companies exploring the budding “internet of things” trend. And it’s a hot area. For example, Google recently bought Nest, the company that makes smart thermostats and smoke detectors, for $3.2 billion. And just this week, Nest (using Google’s cash, presumably) bought Dropcam, a company that makes Wi-Fi cameras that give you a 24/7 live video feed of your home, for $555 million.
Apple is sniffing around the internet of things trend too. A few weeks ago, it introduced HomeKit, a platform that manufacturers can use to let customers control objects through the iPhone.
SmartThings has raised over $15 million so far, including a $12 million round last fall.
Here’s an lightly edited transcript of our recent Q&A with the company’s CEO Alex Hawkinson:
Business Insider: How do you convince normal people to buy into SmartThings? How do you make them realize it’s not just a fun thing for geeks and early adopters?
Alex Hawkinson: Our attitude is that people purchase initially around very specific problems they have. Early adopters are imagining the whole connected world and have a more open-ended view of it. But a typical consumer, we’re finding, buys for a specific problem or necessity in life that they feel they need to solve. And then our philosophy on it is: if you do that well, then they become connected to their home, and in the context of our app, we’re creating the experience for them. They begin to gradually discover and broaden their use cases through the app itself.
BI: So people are buying a kit and then expanding from there?
AH: The average household right now doubles their connected devices in the first 30 days. They go from 0 to 16 push notifications per day now, which is mind-boggling in some ways, but it shows what the house is like, and that has an important voice. Clearly, the top use is an underserved market now, where I’d say more than half of our customers initially buy for security and peace of mind. On some level, there’s a very practical benefit to keeping an eye on your house from anywhere. So we’ve begun to have kits on the site that are focused on individual problems. For example, we launched a security kit that’s selling really well.
BI: A lot of your competitors like Nest are making smart devices themselves. What’s the advantage to building a platform for other manufacturers versus building the hardware on your own?
AH: I think they’re going to be distinct. I believe very much in this sort of device innovation wave. We’re probably the biggest supporter in that we’re not competing with [Nest], but we create this mechanism for onboarding devices and putting them to work together, creating smart connections between them and the apps and so on. So I obviously believe in that wave. And I think there could be a couple of factors. One is use cases and the deepest value for consumers is not on an individual device but in the space between devices. It’s also that consumers, I believe, will want choice in a number of different ways.
By having a platform that makes these magical scenarios happen, apart from the devices themselves, and being friends with the device makers and the wave of forthcoming devices, once consumers have the choice to use the device they like the best for whatever reason, that will still enable this connected service experience that isn’t possible on any individual device itself.
BI: Do you think the trend of smart everything is getting absurd? Do we really need internet-connected cups, spoons, and all the other crazy things people are coming up with? Is that stuff useful or gimmicky?
AH: Some of both. I would say we’re not the judge. The market is the judge. So on the platform, we can see which apps, which use cases are most popular. And those naturally come to the top. The smart setup area, which is like an app store for the smart home to some degree in our consumer experience now, it will surface stuff based on an assessment of what’s right for you and what’s the most popular, and so on. But to me it’s like, we’re not the judge and the market will decide. We embrace this open innovation.
BI: What’s your take on Apple’s HomeKit platform? Are you worried about it?
AH: At a top level, it’s too early to say. They’re really good at being secretive about their broader plans and stuff like that. We do have a lot of indicators that make us generally really positive about it. I believe that largely it’s not overlapping. It’s very complementary.
BI: How is it complementary?
AH: I think a lot of our users are iOS users, and there are a lot of pieces being built into the platform that make richer experiences happen for consumers using an iOS device. So making it a better participant in the smart home, as an example. So things that are not even HomeKit specific but around iOS 8, like interactive notifications as an example, or Siri integration are going to be great and are sort of open-ended for integration. So it’ll help make richer experiences happen on iOS. And as with Google and Nest, we’re so early in the market that it’s not a competitive landscape still, it’s literally [building] consumer awareness, people getting an understanding that they can connect up to things in their world and make them smarter.
BI: What’s the ultimate vision for SmartThings as a business? Will it be a thing that can exist as a standalone entity or do you see yourself being acquired by a bigger company?
AH: The long-term vision is we want to touch many millions of consumers. And it’s whatever makes that happen. But the plan right now is we think there’s a chance we can build a recognized independent global company, so we’re all in on that.
BI: Would you be open to an acquisition if it came along?
AH: It’s not at all on my mind right now. Never say never in business generally, but right now we have a lot of interest in the company, I’ll say, and we believe that just generally right now it’s best to stay independent because we find that the market place wants a truly open platform in this space. And if we were hypothetically approached about being acquired by one of the candidates you would think of, my concern would be, would that close off the avenues of the truly innovation that’s happening on the platform? Would that side of the community sort of shut down? And I think that that’s what’s most important to me is creating the leading open platform as a business in this space, and we think that’s what’s in the best interest for consumers ultimately as well. So what’s on my mind right now is, ostensibly, we have the chance to be a massive, independent company and we can be that on our own and partner through our open platform and model an approach.
SEE ALSO: A review of SmartThings
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We’re not at the market top yet according to David Rosenberg at Gluskin Sheff. Citing legendary Merrill Lynch strategist Bob Farrell, Rosenberg argues that this is because “public participation has yet to reach levels that typifies the final blow-off an equity bull market. …We have yet to see Bob Farrell’s Rule #5 (the public buys most at the peak and least at the bottom).” But how do you really know when you have arrived at the “aha moment” that signals that it is time to exit the stock market?
“Go back to each cycle and you will see that each fundamental peak in the S&P 500 actually represented a ‘failed’ peak,” he writes. “In other words, the market doest a ‘double top’ at the highs. It hits a first peak, corrects mildly from it as the proverbial ‘smart money’ takes profits, and then makes its way to a new high as the last gasp moves up takes hold (generally driven by those who missed out on the bull run and end up capitulating right at the wrong time).”
“Now at that first peak, the momentum is so strong that typically the S&P 500 is up 11% on average over a 30-day period. So the actual classic ‘melt up’ everyone talks about is the first peak. This tends to stir up a frenzy that pulls the momentum crowd and many neophytes into the market hook, line, and sinker. A mini-correction then follows and the brokers typically tell their clients not to miss the boat again — but you know the gig is up if the market makes a new high and does so on weak breadth (lower participation as measured by the NYSE 52-week high list) and Bob Farrell’s rule #7 coincides with fulfillment of that rule #5 (rule #7 goes like this: markets are strongest when they are broad, and weakest when they narrow to a handful of blue-chip names).”
FINRA To Review Its Guidelines After Criticism From The SEC (The Wall Street Journal)
The Financial Industry Regulatory Authority (FINRA) is considering tougher penalties for violations by Wall Street executives, reports Jean Eaglesham at the Wall Street Journal. This comes after a Securities and Exchange Commission (SEC) commissioner, Kara Stein, said FINRA’s disciplinary actions were “too often financially insignificant for the wrongdoers.” He suggested that FINRA update their sanctions. Susan Axelrod, Finra’s executive vice president told the WSJ that they shouldn’t just be judged by the size of the fines. She also said that they would take another look at their guidelines and ensure that their penalties would be “meaningful and will have an impact.”
Investors Looking To Capitalize On Emerging Market Consumer Spending Should Start With Refrigerators (AllianceBernstein Blog)
The refrigerators of emerging market consumers act as a good investing guide for those looking to capitalize on emerging market consumer spending, according to Tassos Stassopoulous at AllianceBernstein Blog. Kitchens he thinks offer a more useful guide than income and assets. Certain measures look at certain items in a home to understand socio-economic status. “So a person with a laptop, TV, mobile phone and stereo could be classified as rich. Yet in our field research, we’ve met people in countries like Ghana whose ramshackle homes are full of electronic devices but who are quite obviously poor,” he writes.
“In working-class homes, the fridge is used mainly for efficiency items (Display). It includes basic foods such as eggs, fruits and vegetables and some pre-cooked food. Middle-class fridges stock more indulgences, from alcoholic beverages to chocolate and cheese. And for affluent households, health is a primary concern. So expect to find foods like low-fat yogurt or 100% fruit juices.”
“Our research suggests that China is in the indulgence phase. So companies that make products like beer, butter and chocolates should benefit from rising incomes. Indian families are still buying fridges, then filling them with efficiency items like milk, yogurt and ready-made sauces. Brazil has already shifted toward health mode, which should see higher-end food producers draw more spending.”
The Demand For Digital Interaction Between Wealth Managers And Clients Is Rising Everywhere (Capegemini/RBC Wealth Management)
While firms continue to focus on in person meeting with their high net worth (HNWI) clients, they’re increasingly open to interacting online as well. 57% of HNWIs conduct all or most of their relationship with wealth managers online. Moreover, 64.2% say the expect to have a digital wealth management relationship in five years.
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