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27 March 2020

Yonomi pins its hopes on an open smart home

 

Having hosted him on a panel at last year’s Connected World, Riot caught up with Yonomi’s co-founder and CEO, Kent Dickson this week. Founded in 2013, the company is co-headquartered in Austin, TX and Boulder, CO. We spoke to Dickson about his unabashed optimism about the diverse potential of the smart home market, as well getting down into the detail of how Yonomi operates.

Yonomi is a smart home integration platform with the mantra of “agnostic interoperability. Our goal is to make it easy for innovators to build great apps that connect with the smart home,” Dickson explained.

This view towards open, interoperable smart homes seemed at odds with much of what we have been writing at Riot recently. We regularly warn of Google and Amazon forging a duopoly, where newcomers are unlikely to survive unless they integrate with one of their eco-systems.

Ever the optimist, Dickson didn’t seem to think this was so. “I don’t think you have to choose your side early on. If you’re a device maker or service provider, you’ll want it to work with everyone else, but you don’t have to choose one ecosystem.”

Of course, this collaborative spirit is what Yonomi has built its business on, so we wouldn’t expect Dickson to say anything else. Yonomi offers a platform which “plays a broker role between hundreds of devices,” translating the commands they send to each other in a smart home ecosystem.

The business manifests in two end products. The Yonomi cloud platform, which currently hosts around 300 consumer smart home devices, as well as an app for end-users. The app is more a product of principle than profit – its free to use and Yonomi does not sell on any data collected from it, with Dickson ensuring Riot that the few hundred thousand people using the app “are users, not customers!” Dickson sees it as a platform for smart home enthusiasts to practice the company’s guiding principle – that “basic interoperability in the smart home should be free.”

So, if the company staunchly believes that consumers should not have to pay for a smooth smart home experience, where is Yonomi getting its money? Essentially, by selling its cloud platform to businesses that want their products synced up with everyone else’s.

The cost of this service is varies depending on the customer, with Yonomi often charging on a ‘per household’ basis. Device makers can integrate to the Yonomi platform with their own cloud headend by making their API’s available to the company, or they can use Yonomi’s in-house Thin Cloud headend, which around 10% of its clients opt to use.

The Thin Cloud came into being after Yonomi began operating. Dickson explained that “we weren’t thinking that device makers needed us to build a cloud headend. But along the way we found many of them were really struggling to connect to the cloud at scale, with good APIs and with necessary speed.” Device makers which opt to use Thin Cloud automatically get integration with both Google Assistant and Alexa.

While many ‘connector partners’ in its smart home ecosystem are huge consumer electronics companies – Dickson gave the example of Phillips Hue – many of Yonomi’s clients are specialists that want to get their products to market as effortlessly as possible.

“We have customers who are specialists, who have PhDs. They don’t want to be in the hardware or middleware business, they just want a way to rapidly assess what else is in the home and to be able to connect to those devices,” Dickson explained.

These less commercialized, ‘expert’ customers come from a wide variety of verticals. One sector from which Yonomi is receiving regular attention is domestic energy management solutions, with three or four clients in this sector currently in the works. Other popular sectors are home insurance platforms, ‘aging in place’ health services, and home security.

Dickson noted how less extensive smart home security services were getting increasingly popular. “Not everyone wants to pay $50 a month for a professional security system. Most people just want a push notification when important things happen, like a person being at your door.” This would certainly make sense, considering the ever-plummeting price of smart home devices, as we noted last week.

Putting devices onto Yonomi’s platform seems straightforward enough. Essentially, “it’s a software development task and Yonomi has an accessible, easy to use, API”, Dickson explained, acknowledging that it’s a much smoother integration for the larger companies that already have the software in place.

Riot couldn’t help but draw comparisons with SmartThings, a platform we have been lamenting a lot, as of late. Dickson did acknowledge some structural similarities, with both services acting as an aggregation platform for disparate smart home devices.

However, Dickson was keen to suggest that the contrasts in the parent companies mean Yonomi is far more committed to interoperability. “SmartThings is primarily enabled by a hub”, Dickson noted, and this tie to certain hardware is demonstrated by its installment on all Samsung devices. Dickson was keen to point out that Yonomi “decided very early on and held to it steadfastly that we are not in the hardware business.”

“A key piece of being agnostic is having no horse in the race,” Dickson explained, “and Samsung cannot be agnostic if it makes appliances. I think the SmartThings team probably want to be agnostic, but at the end of the day, they aren’t going to treat a Whirlpool appliance the same as they’d treat a Samsung one.”

 

Clearly Yonomi is approaching the smart home sector differently, trying to stick to its founding principles as much as it can. All of this seems to be rooted in the company’s conviction that Big Tech will be toppled from its stranglehold, with Dickson encouraging Riot that we “absolutely should be optimistic about smart homes being agnostic.”

“There’s enough of a balance of power that there is a détente among Big Tech,” Dickson continued, “no one has a dominant market position and none of them believe they can run away with the smart home market. They know its going to have to be open.”

It seems that Dickson’s optimism is also fueled by the ever-plummeting price of smart home devices. He noted how device makers are trying to squeeze manufacturing costs as much as possible. Dickson noted that device makers “won’t get recurring revenue from your devices once sold, and they need to keep that thing connected for 10-15 years, so they have to capture the cost of that in the initial sales price.” Lower manufacturing costs make the chances of that more likely.

He also noted how players such as AWS have helped in disaggregating cloud applications from hardware, and relentlessly driving down the cost of cloud computing. Dickson sees this as a stimulus to diversifying the smart home sector, arguing that “if you can keep pushing down the cost of doing business, the variety of business that exist will flourish,” referring back to the aforementioned cheaper home security products.

Yonomi has received large investments from both Allegion and Gentex. Riot first covered Yonomi when Allegion invested in the company in 2017, while Gentex was the lead investor on Yonomi’s Series A round in 2018. Dickson pointed out how both companies were customers before they became investors. “They saw the problem we were solving and saw that it wasn’t just specific to them, that the market would benefit from it being scaled up,” Dickson recalled.

Yonomi is planning its Series B round sometime this year, looking to raise between $8-10mn. “We’re pretty lean as we’re just a software company.” explained Dickson. Currently Yonomi is at 24 staff, although there are plans to expand following the next funding round.

Still very much a startup, Yonomi is not turning a profit. But Dickson seemed optimistic that the company would be able to get there without changing anything, assuring Riot that “revenue is growing year over year.” Yonomi’s sales channels are still primarily in house – “we do direct sales, which is hard for a small company”, said Dickson. Increasingly, however, Yonomi is working with channel partners, who take the platform to customers in their domain, such as telecoms.

For the moment, most of Yonomi’s business is in North America and Western Europe, as one would expect. Yet Dickson noted that the company is seeing increasing business inbound from Asia, the Middle East and Africa. These are generally the same verticals, although some such as insurance are much less hot outside of the Western hemisphere. Property on the other hand, Dickson commented, is a “borderless vertical”.