The Smart Home Startup MClimate is Back On Track With New Security Product Line and Market Approach

In 2014, he founded a company with the promise to turn any air conditioner into a smart one and help users save energy and costs. The next year the first funding round of €600K by local funds Eleven Ventures and Rosslyn Capital was closed and in 2016, the first product came out. Seeing a market potential, the 20-year-old entrepreneur Lyubomir Yanchev and his team decided to launch more products and expand the smart home portfolio.

In 2017, other products were launched, the team grew to over 35 people in four countries… and almost failed a bit later. Around this time, another investment of €500K by Rosslyn and business angel Vassil Terziev came in. In 2018, the founder had to scale down the team by two thirds, find new sales channels and market opportunities, and get the company back on track.

New gadgets for old appliances

MClimate is all about turning home with all its conventional appliances into a smart ecosystem. The company has developed devices, that installed on the appliances make them controllable by a mobile app. MClimate’s software monitors usage, temperature preferences, even the geolocation of the user, and makes anything at home act accordingly.

After Melissa, the startup released Bobbie (for water heaters), Vicky (for radiators), SmartPlug, and recently started selling Maya, a vacuum cleaner. Unlike Melissa, Bobbie and Vicky, the plug and the vacuum cleaner are not completely developed by MClimate, but run on the company’s software and have the same single point of control.  

MClimate has already sold tens of thousands of customer electronics devices internationally, mostly Mellisas, but Yanchev sees the greatest potential with Bobby, which could also be sold to enterprises.  “It doesn’t only make the water heater smart, but it converts it to a battery and allows you to see the exact amount of energy you could input. This is a very interesting application for utilities. They want to have control over the water heaters because whenever there is an overproduction of renewable energy they insert the energy into these water heaters”, he explained. According to the founder, the company already has pilot projects in three countries.

New security horizons within a giant market

The smart home market seems huge – it was estimated to be $39.7B in 2017. Of course, the competition is also huge. The market could be divided into 11 sectors, which alongside with smart energy, include health, AI assistants like Alexa, connected health, and mostly (21% of the companies) – security solutions. It is expected that Europe will witness a major shift and growth within the smart home market in the next years due to energy regulations but also changing customer preferences. MClimate’s strongest markets are also here – in Scandinavia, even though the company has also started corporate projects in the US.

“The smart home market will enter its maturity very soon, but what we observe – even if we take the smart home Reddit community, is that customers are frustrated and don’t know what to choose. So they tend to stick with the products of the company they have already purchased from”, Yanchev explains. Led by this understanding, the company that already has products within the smart energy, lightning and app sectors, is now releasing a new line of security products – sensors for detection of smoke, motion open doors, and leakage.

According to the founder, the competitive advantage of the Bulgarian startup lies in its infrastructure. The cost-effective and scalable production of the devices through subcontractors in Bulgaria is only one part of the equation. More important, MClimate has developed its system as a platform that allows the company to plug in different devices and applications very quickly. The pricing and the price to quality ratio, of course, is also a factor – the most expensive device – the vacuum cleaner costs €325, the others are between €30 and €129, the mobile app is free.

Bumpy road and hard decisions

For MClimate, 2019 started with several important contracts that equal 95% of the revenues in 2018 and plans to release new devices. The future seems bright. However, between 2017 and 2018 the company went through some borderline times. After releasing Melissa, Yanchev decided to focus on product development, and hire a large sales team. At some point the startup grew to 35 people, 15 of them were sales representatives in Italy, Spain, and India. Despite all that, the revenues declined drastically while the costs were growing. Yanchev, who used to do the sales, was too focused on the development of new product lines etc., that he didn’t notice that there was something wrong with the sales department. The company almost bankrupted in 2017 generating €260K losses with revenues under €200K, the financial reports show.

Yanchev had to release 60% of his employees (now MClimate is operating with a team of 10 and a network of distributors) and changed the strategy – among others The company is now selling through its own website and trying to stay in touch with its end customer. The startup is now selling both to ends consumers (directly or through distributors), but also to utility clients. The revenues are back on track and have grown 100% in 2018, according to the founder. One of MClimate’s investors recently shared with us the company was even profitable, we cannot confirm that, as the financial reports are not public yet. The founder expects another doubling this year.

“We learned the hard way you need to focus on customers’ journey and experience, and the revenues. If I have to advise fellow entrepreneurs who are also in the business with consumer electronics, it would be to focus on the end consumer and find the right marketing persona online, not focus so much on distribution”, Yanchev smiles.

+++ recommended read: The 25 Books that helped the youngest entrepreneur in Bulgaria build a viable business +++