... told by Danalock Founder and Managing Partner, Hans Overgaard.
I’m sitting in the airport on my way home to Denmark. I’ve just had a meeting with one of the largest companies in the world and it got me thinking ...
It has already been eight years since my father and I founded Danalock based on the initial idea: wireless smart monitoring and control for rental homes and holiday resorts. Back then, my father made an agreement with his former company to buy products from them to be able to make money from day one. We took off – and in the beginning we sold quite a few systems. But when we were about to deliver the products, the former company didn’t keep their part of the deal and refused to deliver.
This situation forced us into develop a new solution quickly (in retrospect, it pushed us in the right direction). My father created the first wireless retrofit smart lock. Put together with sensors and a gateway, it solved our problem… Well not quite! We spent the next three years restarting systems and providing tech support 24/7 all around the country. As my father-in-law said, "The good thing about being self-employed is that all the hours you work are free." (He’s a farmer.) He was right; if we had hired people for support at that time, we would have crashed and burned.
Well, nothing is for free in life and luckily, I have a very understanding wife!
Fast forward to 2013. We showed our products at CES in a small and very expensive booth, a huge risk to us. For the first time, we sensed that we were on to something good with our smart lock. But we also realized that when an entrepreneur thinks his product is complete, you can be sure the product is only 20% done, I know that today. We got a great lead on a partner who wanted to buy our smart lock to fit into his idea of a cloud-based access control system, and we were over the moon. I remember my father and I talked about this new partner on the flight back home; we believed this was the break we had been looking for.
… But as in all fairy tales, things are not always what they seem.
Unfortunately, this was the case with the new partner. A long story short, they took our idea and design and made it their own. Legally, it was in a grey area, but my father and I had no money to pursue, and we were shocked by this experience, as we always believe in the best in people. As a famous Danish entrepreneur, Lars Larsen (Net worth 4.3B USD), said "You will always stay one step behind if you follow in someone else’s footsteps". So, we chose to move forward by focusing on product development.
After this experience, we realized that our money was spent, our houses were mortgaged to the max, and the money my dad had saved up for his pension through 35 years as sales director was gone … we literally had nothing left. At that time, we had five employees, and if we didn’t raise money quickly, we were out of business. By coincidence, we met a Danish venture fund based in Silicon Valley at CES and after a couple of meetings, we had raised our first VC capital, 1,25M USD. WOW! This was a lot of money. The VC capital arrived literally three days before we would have emptied our account to pay our five employees. That was too close!
We marched on and launched our next smart lock generation into the market. I would say this generation had reached the point of being 50% done (my father and I believed at that time it was 100% done). We got more serious contacts, and the ones we already had were closing deals. I truly believe that because we’ve always been frank and upfront when we experienced issues with our products, we’ve gained a lot of trust in the market, thus keeping the interest alive for our product, even though it wasn’t ready for prime time.
In 2014, we once again thought we had struck gold, we landed a three-year exclusive deal with the biggest distributor of home goods in Scandinavia. It was a deal worth +20M USD. Remember we just raised 1.25M USD, and we thought that was a lot of money; imagine our excitement when we landed a deal worth 15 times that amount. And this was only in Scandinavia. Think about what we could do in the U.S., China, India … you name it! Unfortunately, when we started collaborating with the distributor, we realized that things weren’t perfect. So we mutually decided to terminate the deal, which meant that we lost all the money that we’ve raised as well as a bank loan for 2M USD received on the news about the Scandinavian distribution.
I think it is safe to say that we were at the bottom of our journey!
We were so close to turning the key and just getting a regular job. We were working 24/7/365, for no pay, and had a really hard time seeing the light at the end of the tunnel. Believe me, there were some serious discussions in that period between my father and I … just ask the employees. But as entrepreneurs, we didn’t go with the rational choice of turning the key and move on with our lives. Instead, we took a good look at ourselves...
What had we done wrong, and how could we turn things around?
At the end of the day it was pretty obvious that we had made the same mistake that most entrepreneurs do. We had overcomplicated the product. We had launched a product with 30 half-done features, instead of launching a product with five perfectly working features. Not that you should wait for your product to be 100% done. You should launch the minimum product and go from there, which by the way has been our mantra ever since. We also decided that instead of chasing the one big deal – the gold at the end of the rainbow – we chose to look at our journey and focus on the smaller deals, as a lot of them also add up to a pot of gold.
We went back to the drawing board and decided to create the Danalock V3!
This generation was be handled carefully by our distributors, the ones who had believed in us all the way and understood our mission. And from that, we would slowly build the market. The Danalock V3 would have the hardware features we knew were missing in the last generation, and finally it would hold the minimum number of viable features, all of them working 100%. Not our 100%, but our external partners' 100%. We went back to our investor with our plan and raised 2M USD to execute it.
In the spring 2017, one and a half year laters, we finally launched the Danalock V3. This is a product that we are very proud of. We hit the bull's eye. Already in June 2017, we were partially acquired by the most renowned electronic lock manufacturer in the world, Salto Systems.
Today, we are aggressively expanding the partner network, and I’m sitting in the airport on my way back from a meeting with one of the biggest companies in the world. We did it, we turned the ship around. And most importantly... my wife hasn’t left me in the process.
This has taught me that you will always meet obstacles on your way, but keep on marching and don’t forget to reflect from time to time.