I met Jakub Krzych in Palo Alto in one of my favorite bakeries – Paris Baguette. Estimote is a leading company producing beacons – very smart transmitters, which combined with software on other devices like mobile phones, can make our reality much better understood by them. The company got a pretty large recognition in USA.
How did it happen that Estimote is at the stage where it is? How American investors react to the fact, that founders are in Poland? And above all – how it is to lead a triple life?
SG: There is a lot of buzz about your company in the Internet. Famous technology reviewers like Robert Scoble interviewed you for their media channels. Congratulations! I’m glad that we could meet. For those, who have not heard about your business, please tell briefly what does Estimote do?
JK: My pleasure! Thank you for inviting me. What we are trying to do is to change how people interact in the physical world. For example, right now you have a few modern gadgets such as a mobile phone or Apple Watch, and not everyone is aware that these are small computers that are much stronger than PCs 10 years ago. We carry them with us every day. They can connect with servers at the other side of the globe in 3 seconds and get lots of data. The problem is that they have no clue where you are inside of a building and what objects are surrounding you.
“Devices that you carry with you become smarter and smarter, but they still have no clue where you exactly are and what is around you. Our mission is to change that.”
SG: Is it because GPS is not accurate enough?
JK: GPS has its limits in physics. Radio waves sent through a satellite do not go through roofs and constructions. They do not have precision close to 1 meter. If you close your eyes and try to walk, after 10-11 steps your brain will make you stop. You will be paranoid about hitting something. When your eyes are closed, your brain does not receive millions of bytes of information about objects, shadows, signals, that let you navigate in the physical world and match your behavior with the context. So if you enter a store or see a dog that runs towards you, you know how to behave. Devices that you carry with you become smarter and smarter, but they still have no clue where you exactly are and what is around you – whether you are near a car, whether you sit or stand. They are blind. Our mission is to change that.
We want modern devices to know where you are and what you do so that they can help in making decisions. We are first targeting retail stores, because 95% transactions worldwide take place in physical places. Amazon or eBay sum up just to 5% total transactions, so it’s not worth to pay much attention to them. Today, if you go to IKEA, you will find a wooden pencil in order to rewrite Swedish names on a piece of paper, and eventually you get lost in the whole show room. What would happen if you could use your devices to navigate, so that IKEA could tell you: “Hey Sylwia, since you have at home this sofa, there are some great matching pillows, check them out!”. You approach the pillows, and if you are interested, you pick up your phone and with a touch of a button you add them to cart. Other objects could say “Hey, try me!”. Image that you sit on an armchair and it can communicate with your phone. If you want, you can buy it with one press of a button and go have a hot dog.
With these technologies we could change the whole consumer experience in retail stores. Today, even if you want to go to IKEA, it is crazy! Why there is no IKEA show room in downtown Palo Alto or on an airport? Thanks to this technology it could be possible. When you have time between flights, you go into the show room, interact with the objects, pay, and get it delivered. Our idea is that the technology focusing on context and location sensors will change the way people behave in physical world. I gave you example only in retail, but I can also talk about hospitals, airports, schools and stadiums.
SG: So this would be also the way to create accurate navigation inside the buildings?
JK: Yes, by using this technology even today we can get up to 1m precision. It is often used to so called assets tracking, where we can simply monitor where different types of devices or objects in a warehouse are. We can process data, thanks to which we can make better decisions, design big objects, stores, measure how people walk, react, where do they spend their time. Screens could react to your presence. Something like in Minority Report, but here you have full control over the data. In this technology you need to opt-in to be a part of it, so if you want IKEA to give you prompts, you need to download their app. If you don’t want it, you just turn it off or delete.
SG: I saw the promo video on your website, that clearly explains how your products work. Your company was founded in 2012. Where did the idea come from and how did it all start?
JK: It started because I and my co-founder Lucas Kostka had similar vision of the world. He was a big data and smart cities specialist, just started a PhD on AGH University in Cracow. I had just sold my previous startup that was dealing with internet and advertisement. I thought that physical world around us is much bigger and more interesting. We met each other by chance on TEDx in Cracow, started talking to each other and it occurred we get along really well!
I was bored at that time, he was bored too. We decided to do something together. We rented a co-working space in Cracow and started ordering first processors, programming, soldered first circuit boards and wanted to see what we could do about it. We envisioned producing sensors, that would measure how many people enter particular location. Here is the story that inspired this:
My kids were 3 years old back then. I used to go a lot to parks in Cracow. As a parent I noticed that many other parents tend to look into their phones while watching their kids. I realized that everyday around 2pm the playground attracted certain target group. I thought that it would be great to do a marketing campaign to reach them, since they have common interests, new trolleys, kids have new clothes. That was our first goal. It was also kind of habbit from my previous company.
So we sat and played with our devices. Lukas did the first prototype, hacked an old router, etc. I sold some of my previous startup shares, so I had the starting capital to invest. We hired some people. After working for a couple months we attracted a few clients like Tesco and T-mobile. We did the first pilots with them. They were very promising, but actually Europe was not as flooded with smartphones as USA. Lukas decided that we would apply to Y-Combinator and take action in USA. At that point I thought that I am too old for this. However, he sent the application and they invited us to California. And that’s how it started.
SG: So were you in YC already in 2012?
JK: Not yet. In 2012 we were on the first interview. We got approved only after our third application. We were super stubborn! The first time we flew for the interview it was barely 2-3 months after founding the company. They made it clear: “Great product and amazing mission, but come back to Europe, get funded by some early investors and get a few first clients. You need to have some traction and then please apply again”. By the end of 2012 we applied again, but they did not even invite us, others must have been better. Then in 2013 we applied again as we were in a different situation. We already had clients and employees. We made it, got approved and few weeks later we rented a house in Mountain View, where me and my family moved, and together with Lucas we continued hard work.
SG: You mentioned kids on a playground. Do your children also have a beacon attached to them (laugh)?
JK: No, I’m trying not to involve my kids into interaction with technology that surrounds us. I think that as for now this technology is great when it comes to using it in retail, or in navigation. If you go to Tesco or Target and something does not work, you will not get a coupon or an ad, nothing really bad happens. But if you, as a parent, will trust that your phone will tell you that your child went beyond the range on a beach, this is not yet the time. You should actually watch your kids yourself. That’s why we do not focus on “critical mission” applications, where someone’s life depends on it. It is yet to early.
SG: Your company was started in Cracow, and where were your first investors from – Poland or USA?
JK: We had first investors from Poland. There is a very active angel group in Cracow, where people who had their success in previous companies largely invest in startups. This is how we got the first money, and only later we got international investors.
SG: How much money did you raise so far?
JK: Together we raised over $7mln.
SG: Was it hard to get first investors in Poland?
JK: It is a little different when you raise money in Poland from people, who already know you, who are from your network and who know that you already have some track record. My previous startup is doing great, it was bought by one of the biggest media groups in Central Europe – Agora. This helps for sure. It was not that hard, but also not extremely easy.
SG: How long did it take for you to raise first money?
JK: A few months, up to half year.
SG: Where do you produce your beacons?
JK: We manufacture them locally, in Poland. First of all, we want it to be top quality. Also, we do a lot of changes and innovations so it is much easier to visit the manufacture in Poland than to fly to Asia.
SG: When did the first paying customers come?
JK: I remember, that we had lots of talks with clients in Y Combinator, which let us launch our product. In July 2013 we announced to the world what we were doing.
SG: Did you do a PR campaign?
JK: Y Combinator helped us to be published by TechCrunch. At that moment we started to sell our Dev Kits in pre-orders, $99 each. We immediately sold dozens of thousands to clients form around the world.
SG: Ok, so you got approved to Y Combinator with more advanced product and strategy, but without paying clients yet.
JK: Yes, all we had was a contract with Tesco for a pilot program.
SG: Do you think that this was the reason why you got approved to YC?
JK: Yes, to be approved to YC it is important to have some clients, first contracts, some interest.
SG: Your Silicon Valley adventure started with YC. What are your thoughts about their acceleration program?
JK: YC is the most famous and prestigious startup accelerator in USA, with the biggest success. A lot of companies that graduated from YC are worth billions of dollars, such as Dropbox, Airbnb and many more. It is much more than accelerator, it is something like modern university, or even a family. It’s a group of enthusiasts, partners and other founders, that support each other. Everyone wants to improve technology and business. When you are approved to YC, you endlessly become a part of an exclusive group of few thousands of founders and more than a thousand of startups. Since then they are always willing to help and use their network. Once you get here, YC tells you how the program looks. For 4 months you will work hard on the development, in the meantime they will help you and introduce to their partners.
SG: And this is how it really is? What is your general impression on the program?
JK: Yes, Sam Altman, YC President gave us a very important introduction to Apple, where in Cupertino we met a team working on ibeacons. YC introduced us to many investors and potential employees. The whole experience of being in YC is like a camp. You live in a rented house in Mountain View, and just like in the Social Network movie you work day and night on your startup.
Once a week you do check-ins in YC during a dinner and talk about the progress you made. Also, there is always somebody super successful like Mark Zuckerberg or founders of Jawbone, Groupon, Yahoo and others, who can answer your questions and with whom you exchange contact info. This is organized every week or two. And in the end of the program there is a demo day, which takes place after 3 months in the Computer History Museum in Mountain View. Founders pitch in front of 600 best funds in Silicon Valley like Sequoia Capital, Andreessen and well-known business angels like Ashton Kutcher. They make 2 min pitch during which investors can learn about their business and very often they invest right away. Like in our case – a few of them simply wired the money the next day.
SG: Just like that? Without any written agreements?
JK: There are some documents, however in YC there is something like a handshake deal, which means that if you agree on specific terms during a meeting, it already becomes official because of the YC prestige.
SG: Coming back to the clients’ topic, which of them are you mostly proud of?
JK: We have a lot of clients at the moment. 65% of companies from Fortune 100 in USA are our clients. One of those that we are most proud of is the second biggest retail store in USA. I’m not sure if you really go there, for example in Sunnyvale or San Francisco?
SG: You mean Target? I was there even yesterday!
JK: I can’t really tell because of confidential purposes, but if you download their app, thanks to beacons it will be suggesting products matching your behavior in a store. So if you spend a lot of time in electronics department, it will suggest products that you probably like, because you spend a lot of time there.
SG: Yesterday, as you may see, I actually was in the hair styling department (laugh)!
JK: Ok, so next time you may get more offers of that category. Apart from big retail stores we also have many other clients, like airports, museums, hospitals.
SG: How big is the beacons’ network in that retail store?
JK: As for this app, they are spread in different departments, so that in a big store they could tell in which department you are.
SG: Let’s talk now about the logistics of your startup. Actually, are you a Polish startup?
JK: That’s a good question. Very often, if a startup was founded by Polish people, it is introduced in Poland as a Polish startup that has achieved this or that. I call it startup nationalization, which tends to be very helpful.
SG: All in all, Poland likes it and these headlines sell well.
JK: Yes, but this is also not 100% true. In our case, out of three founders only two are Polish. Many of our 50 employees are not Polish either. 80% of our clients are from USA or Great Britain. Our company is registered in Delaware. We are a neither Polish, nor American company, we are a global startup that operates on the markets where it makes most sense. Of course we are proud of many things, like of the fact that we manufacture in Central Europe. There is a symbol of Cracow on our packages. We think that coming from Poland is our strength. However, this is not something we emphasize all the time. Our clients do not really care where we are from and what languages we speak. They are mostly interested whether we are delivering the highest quality.
SG: You mentioned that you have 50 employees. This is a pretty large number. Where are they based?
JK: There are three locations where we are mostly active. Of course our main office is in Cracow, in Stare Podgorze. This is our headquarters, where engineering takes place. This is where our programmers are, people who design our products and a team that takes care of our community. This is also where we manufacture. However, our second location is Manhattan in New York, from where we manage our clients, do PR and marketing. Our co-founder Steve lives there. And finally here in San Francisco at Market St. you may find us in Digital Garage – one of our investors’ co-working space. This is where we manage relations with other technological companies, build our community, meet investors and clients.
SG: Where do you spend most of your time overall, Poland or USA?
JK: That’s a good question. I fly very often, spend a lot of time on the plane. Everything depends on a phase. When we build a product and implement something new, we spend time with our engineers in Poland. If we need to meet lots of clients and work on implementing the system, we are in New York, Minneapolis or South Carolina. If we do fundraising or work on a partnership with a big technology company, we are here in Silicon Valley.
SG: Where do you stay when you are in USA?
JK: Usually in South Bay, Palo Alto. Sometimes in San Francisco.
SG: In hotels, apartments…?
JK: It depends on the length of stay. Usually in hotels or Airbnb. I’m organizing my stay every time. We used to rent a house in Mountain View when we stayed for 4 months, but right now there is no such need.
SG: In general you live in Cracow and this is where your family lives?
JK: Yes, I have my family in Cracow. My kids go to school. Cracow is an amazing place to live and run a business, it is very well connected with other capitals. It’s fun to be in California, fun to be in NYC, but Cracow is also a great place.
“Departures are surely tiring to me and my family, however you can’t run a global startup sitting by the desk. To me it is an amazing challenge.”
SG: How it is to lead a triple life?
JK: It is very exciting to be able to change the environments and a comfort zone. It is fun to get on the plane and fly to the other end of the world, meet people that think differently and see how consumers think. However, at the end of the day, you come back to your team and implement innovation. These departures are surely tiring to me and my family, however you can’t run a global startup sitting by the desk. To me it is an amazing challenge, and traveling, meeting clients, implementing these innovative solutions and having an impact gives me a lot of energy.
“Ben Horowitz used to say, that as a startup CEO he was sleeping like a baby. He was waking up every 2 hours and crying. And I think it is true.”
If second largest retail brand in USA that has 60mln Americans as clients is implementing our system, this is a WOW, big thing and honor. It’s not easy, but no one ever said that startups are easy. It is a hard work all day and night. One of the famous investors, I think it was Ben Horowitz who used to say, that as a startup CEO he was sleeping like a baby. He was waking up every 2 hours and crying. And I think it is true. Startups have their ups and downs, but at least something is going on. In a startup world you have lots of control and influence on everything. Each startup has their own story and this is fascinating.
SG: What are you working on right now? What else needs to be done?
JK: In this technology, until you can’t go to IKEA in Palo Alto and interact with products, our mission is not over. There is a lot of work ahead of us. We are working all the time on new products, we implement new strategies, meet investors, recruit employees. Once you start, there is no end. Of course, there is a lot of improvement of what we already have thanks to new knowledge, clients, science. However, we are also planning to launch completely new products that no one has seen before. They are in a new category and obviously towards innovation.
SG: Did you ever hear while talking to investors that the fact that you live in Poland matters in any way to them?
JK: It depends who we talk to. Of course, investors’ role is to minimize investing risks. They may do it in multiple ways. First of all, they help founders by doing introductions or helping recruiting employees, meeting clients. Obviously it is easier to do that when founders are on site. For sure there is a group of investors that say that if you lived here they could help you more. Secondly, whether you are from Cracow or Atlanta, it means the same to them. As long as you are not in Silicon Valley there really is no difference. However, our role is to tell investors how we are minimizing our risks. If we are able to quickly and effectively build a solid team of engineers or quickly start an efficient production line in Cracow, or easily get clients in New York, this makes sense to them. If we can confront their risks with our strategy and our strengths, some investors will not mind and invest.
However, to everyone reading this interview and planning to pitch their business to investors here in Silicon Valley, they should not be discouraged by first refusals. This is normal and founders’ role is to look for more arguments that will convince them. Well, if it is helpful for the business, it is good to move here for a few months and see how it all works here. Maybe it is not a bad idea to learn something new in SV and build the team remotely.
SG: Do you imagine moving to USA for good?
JK: In startup world you can’t foresee anything. I have no clue what we will be doing in 2 weeks, all the more in a few months or years. But I know that my role as a CEO is to be where my company mission needs. I do not say no, I like California a lot and my kids and wife have been here many times. Maybe in the future I will spend here much more time or even move. But it all depends what my company will need and at what phase it will be.
SG: What can you tell to all readers that are outside of Silicon Valley?
JK: I highly encourage future entrepreneurs to visit SV even if they do not plan global expansion. This is an amazing place, where you can build great network, get inspired and see how people use different products. Those, that are looking for their chance, I encourage applying to YC, 500 Startups and other funds, as it always widens horizons. I hope that talks like ours will help them make their decision and get started faster.
SG: Thank you Jakub!
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