Why everything is a subscription

The founders of Sphero just wanted to make robots. In 2010, Adam Wilson and Ian Bernstein asked investors for money to start a business around their smart robotic controlled phone ball. But in some cases, investors wanted to know what the company could offer more: after selling a robot to a customer, what happened next?

Many hardware companies have turned to this solution: a recurring revenue model that allows them to rely on customers who pay monthly or annually. To find this model, Sphero tried to turn the robot into a gaming device, but later decided to use its development tools and transform robots into coding toys that would appeal to schools. At that time, the team focused on education and allowed its clients to pay year after year.

"We have created a new product that is very suitable for this group. [of educators]Wilson said. "But the business model changes a bit because once you make a pack of 30 [of robots], schools have a recurring budget, right?

The team had to find a way to make sure their robots were the best way for a school to spend money year after year. He designed software for iOS, Android and Chrome OS that guided teachers and students throughout the process of using a Sphero product. Teachers can use the product to teach concepts such as perimeter, form and variables. Its product complies with state educational standards and, at present, Sphero is present in 40,000 schools worldwide.

"We could now make recurring income in a way that makes sense rather than selling a bullet to someone who knows they will buy something else," says Wilson.

Hardware is a notoriously difficult business. Start-ups often close even after collecting hundreds of millions of dollars. However, some of the surviving businesses are finding a way with recurring revenues in various forms. This is even true for large companies. Apple is focusing on monthly services as iPhone sales are not growing, and many companies, such as Keurig and Nespresso, are creating gadgets based on pods that need to be continually redeemed. Meanwhile, startups like Peloton need a content subscription to get the most out of their hardware.

Education is a unique market and Sphero has created specific products and offers to attract schools. The team has developed a personalized product for educators, delivered in a multi-unit protective case and with a longer battery. He has also developed a new method of selling products, including a plan for teachers to call Sphero to replace a unit at any time. The company also launched this year an individual tutoring program with Sphero. Wilson ends up saying that the team will start charging more premium content, such as lesson plans, and share the revenue with the teacher who created it.

Image: Sphero

"You can actually be a superstar teacher [who] could create a whole secondary building content for us in the future, "says Wilson.

In total, these 40,000 schools have changed Sphero's conversations with investors and made them an attractive sell.

"It's a bit like saying we have 40,000 customers who will buy [a product] next year and every two years, so that's a lot, "he says. "When we started, we made fun of a lot of plays. It was nothing else, or education, but we want to create a robot ball and you connect it to an iPhone, and that's the product. Many people [were like], & # 39; What is it? I do not understand.

Recurring revenue models can empower IT manufacturers and make them more lucrative for investors. In the case of Sphero, this really supports the activity.