How FlumeWater CEO Eric Adler grew FlumeWater to $6.4M revenue and 4 customers in 2024.

you're gonna love this interview just got done editing it i'm glad i got it live for you i'll be in the comments for the next 30 minutes hanging out answering any questions you have in fact leave a comment below about data points or what you think is going to happen to the company and i will respond to every comment additionally if you're just loving the content click the thumbs up and i will go and check out your profile as well and give your videos some love as well in the meantime enjoy the interview hello everyone my guest today is eric adler he is a central oregon native cal poly graduate and startup founder with a passion for entrepreneurship whether it be building a tech company from the ground up investing in real estate or flipping cars on craigslist he's got a desire to construct his own success and inspired and that's this has inspired his actions now building a company called flume water an intelligent water monitoring system eric you're ready to take us to the top yep i am let's do it all right so i mean you know this is great you're a hustler you're a capitalist but i mean what got you into water monitoring well guys under water marching was the drought in california we started this as a cal poly senior project back in 2015 when california realized you know basically how screwed they were because we have limited water resources and 38 million people living in the state so you're trying to figure out a way to basically help people understand how much water they're using and kind of bridge that gap okay so how does it work is it a peer play sas model or just a hardware sale or what we're starting with the initial hardware sale we do have a sas model long term but initially we need to get the hardware out there begin gathering data and then we can turn on the recurring revenue okay so if i want to sign up for this thing what's the hardware going to cost me as a consumer the hardware's going to cost you 1.99 so you can buy it on amazon you can buy on our website but it's 199 right now online okay and um when did you start selling these when was your first sale our first sale was actually pilot programs to insurance companies probably two years ago and then we began selling on e-commerce platforms about december of last year so so pretty recently and when did you launch the business the business launch in 2015 uh took about two years of r d before you really had any product in the field how much cash did you have to have to sink into this thing before your first dollar of revenue it's a good question um i believe it was about two million before we got our first dollar revenue which is pretty low actually for an iot company yeah so software people were going to be listening to this going this guy sounds young like how to get so rich or where to get this money from a rich parent or trust fund or what's the story yeah far far from rich parents or a trust fund that'd be nice uh no we actually raised a lot from angel investors on the central coast of california so i mean we have a lot of investors involved uh the typical check size is like 25k so we've looped in you know a lot of angels initially um great investment base and now we've gotten some recent venture money but from small seed funds as well so how much was the first round total first round total was 250k second that's very small uh one million and third 750. so these were all convertible notes and basically multiple caps that kept growing uh and then recently we did three million on a priced equity rate on a price equity route so you have about five million in the company today total yeah yeah that's great okay so five million in um were you able to clean up the cap table from all those early convertible notes or do you have literally like a hundred people listed on your cap table we were able to clean it up i mean they're all on the cap table um but i was very happy to finally convert those notes over not be dealing with you know all the different interests the different dates so it's all clean now um but yes things get messy when you finally do that price round yeah yeah yeah okay good well so you made it through that now how did you i mean what was the story you told this last round of equity investment the three million and by the way when was that uh this closed about five months ago okay so what was the story you told those equity investors in terms of getting the valuation you wanted why you were having success you know why you're going to be a breakout a winner so i think what they were really excited about is seeing that what we were gathering the data we were gathering on water was useful across a variety of different channels so if you just look at this on amazon or look at it on our website you know it looks like this hardware this gadget but the end of the day there are all these different customers out there that want water data you know you interviewed a soft juan not too long ago with hippo insurance they are looking for data on water usage and leaks you know looking at like irrigation channels they want that information as well water utilities are looking for data too so there's the consumer aspect of it but really kind of flume being in the center of this water universe is what got these investors excited about what we're doing yeah and explain like how this installation works right so i'm looking at the hardware there's like a cylinder that looks like i can hold it pretty easily in my hand and then like a rectangle box thing that's about the you know three times the size of the round kind of fun how do these things actually fit into the water system yeah it looks pretty rudimentary right now it's our v1 product it's going to be more beautiful down the road here but it doesn't need to be pretty right no one sees it right right just has to work and that was our initial goal um so the real innovation here compared to anyone else in the market is that you don't need a plumber come out you do not need to cut pipes in order to install our product so nearly every home out in the market has a water meter on it that's how you get your water bill from the city and those water meters have little magnets inside of them that spin so that black box that you see is actually a sensor that goes on the side of the existing meter and monitors that movement through the meter you don't need a plumber come out you don't need to break any pipes you can install it in about 10 minutes and you have leak detection and water monitoring across your entire property both indoor and outdoor no one's been able to do that and that's kind of the main innovation with what we've developed patented patent pending right now okay so haven't had it if it's not issued and haven't had to defend it yet yep not yet but we're getting there it's a process yeah i can imagine okay so what are these little devices i mean what do they cost you to make and do you do them kind of domestically or internationally china somewhere else we start up domestically here in california of course their cost of goods were very high you know we weren't making much margin off that uh now we're going overseas i can't tell you exactly what our cost of goods are but i can say you know it's under a hundred dollars per unit what was it in california margin on the product um you're always battling with trying to drive that unit cost down and also make sure that the quality stays just as high we're still doing low volume here so as we kind of go up to a higher volume that price point goes down that cost of goods goes down significantly yeah eric just start and stop your video real quick because you froze on me and reset that but we'll keep chatting in the meantime so when you are still in california doing the manufacturing what was your what was your how i mean how expensive was it when we initially started out our cost of goods was hovering around 130 in california okay got it and you've been able to drive it now below 100 by moving overseas yep okay that's great so let me ask you a question right i mean why why not i mean if your software platform which is going to be higher margin more data more valuable over time is dependent on the hardware install wouldn't you be fighting like heck to subsidize these installs not trying to make a 70 80 90 100 margin on each of those hardware sales that's like pennies compared to what you're trying to build right right so there are some pretty cool ways we can do that um we're actually working with water utilities all over the country and they are actually subsidizing that cost so for example in san antonio right next to nearby where you are san antonio is paying us 150 in rebates per unit that we sell so for customers they only have to pay 50 bucks and we're able to still gather that 150 cost for the 150 revenue uh and that way for the consumer you know it's not too expensive and we can also begin to drive some sas revenue off of the portal side of the business which is a software platform that basically allows you to see this data um from a master or portal view and what do consumers pay for that this is actually not a consumer play so this is the utility play this is where the utilities are able to log in and see this information across a city and access that data from those customers homes and the customers are opting in to share that data by taking advantage of these rebate programs so it's kind of like like b2g business to government kind of or yeah it is a little bit business to government it's kind of b2b2c if you will you know we're working with utilities they're a channel to get us to the customer but they're also a customer for us okay so these these utility management companies that are paying you to access the the software component obviously it sounds like you're in the early endings of this but what do they pay on average to access the tech it's small you know we're talking like a dollar per user per month okay okay got it a dollar a user a month that's good and then how does this mature like how do you see this maturing over time right so when does a software business become bigger than the hardware business it's a really good question um we see these integrations becoming more and more value as basically as we get you know more units out into the field so we're not what are we right now by the way how many units in the field we're approaching like 10 000 units so it's still small but getting to you know a reasonable number of customers out there um so we're not anticipating charging these utilities more on a monthly basis for that data but we're anticipating turning on different channels so companies also want to know how much water is being used outdoor and they want to integrate that with their irrigation controllers insurance companies like hippo want these units to be in customers home and potentially would be willing to share some of that cost savings with us in order to get these units and customers homes so we'd like to not you know burden the consumer market with another subscription fee that you have to pay for and find ways to get that revenue from kind of third parties that we're working with so how many of those utility management companies right now are paying for at least you know one user per month it's small we're kind of the beta stage so we have a couple right now like three four right yeah like three four okay got it and now do do all of your 10 000 shipped units fall under one of these management companies so you're doing i mean if it was full capacity ten thousand dollars a month a dollar per user per month across four customers so we have a couple lines of business we have the utility channel where we're actually selling through those utilities and they are basically advertising our product to customers and customers are buying it then we also have direct consumer sales on amazon and amazon is becoming a large channel for us as well um right now we're not getting that recurring fee from amazon sales because that's just a direct consumer sale and we're not necessarily working with a utility in that region yet but what it does is it also kind of opens up these doors to have conversations with those utilities and say hey you know you have 500 customers in your region that have flume devices it's time we actually start talking so of the 10 000 how many have come from amazon uh probably about 60 of them have come from amazon so significant portion got it okay that's helpful so you you have 4 000 that have kind of been driven from utilities pushing them forward uh what i'm trying to back into right now is i'm sure it's it's pretty low because you're just getting going but what are you doing per month right now on the sas side of things like two three thousand a month it's small yeah if you're you're not it's in that ballpark low low thousands yep okay good and um how do you i mean for people that are buying this directly through amazon what's their incentive why are people why do people care about monitoring their water personally unless they're just like a really good person and care about the environment yeah you can't sell just based on being a really good person we figured that out you know most reviews we read it's someone who you know came home to their vacation house they opened their door and water started pouring out or they got hit with a thousand dollar water bill because they had a toilet leak that was running they didn't know about um you know it's one of those things where it's like it's not a sexy space at all like leak detection's not sexy right but it's a real problem that people experience quite often about 50 of homes throughout the country have had water damage so once someone has experienced that they never want it to happen again and spending 199 bucks to fix that problem is a pretty nominal cost yeah you should connect with uh scott stratford who runs a company called air dna they they basically sell to airbnb homeowners and they've sold to what did he tell me he was just on the show they sold a 6500 airbnb owners and this is like something that pops up all the time with those guys i bet you would he he'd sell a crap ton of these units for you yeah i'd love to connect up with that you know a couple other channels we're opening up here hoas and property managers uh as well as you know specifically vacation property managers is a market that makes a lot of sense for us now that does make a lot of sense yeah okay good so you've sold 10 000 units average price point 200 bucks so there's essentially two million there in kind of top-line sales depending on what your margin is you move from california overseas you may be made five six seven hundred grand uh in terms of the margin there the rest the revenue or the rest the way that you're supporting yourself is through the funding that you've raised correct correct yeah so how aggressive are you being when you look at your total burn right now per month i mean how negative is it you know we're burning we're burning a few hundred grand per month right now um you know we're not at profitability yet by any means uh that being said we can actually get there i'm actually confident that if we wanted to you know we could be pretty careful with how we grow the business and get to the point where we're actually to break even you know within a year um there's there's quite a few factors we're looking at right now you know i'm not too confident in what the economy is going to be like a year from now so we're trying to be careful with our burn um also looking potentially raising some more money here soon um so weighing in a few different factors to how we grow yeah if you just raised five months months ago three million dollars but you're burning 200 dollars per month i mean that's the only raise for like a 10 or 12 month runway why didn't you raise more capital back on the last raise you know we we're burning but that's not including revenue so that's just i'm just saying oh that's total that's sorry what's net burn our net burn i'm not gonna you know exact numbers on it but it's you know about half that so we have the ability to last for quite a while we're doing fine yeah god you got we have more like 30 months around your net burns maybe like 100 a month you have much more runway we have more runway yeah yeah okay interesting okay what about churn so every company that i've had on where there's a combination of kind of iot like hardware plus sas the churn is really low because once someone installs this thing in their house they're not gonna stop right so do you see that as well what's your turn the past 12 months yeah we have no churn right now because we're not we're not talking about you know customers paying a monthly fee for the product so once it's installed we own that customer we're in that house what we're focused on doing is keeping our engagement incredibly high on average right now we have customers that are checking in on the app about once every two days and the customer sorry is the utility person or the homeowner there's two customers so there's the utility there's the and there's the homeowner but right now i'm talking about the homeowner themselves because that's really where most of our effort is focused so we have homeowners that are logging in about once every two days checking in on their home making sure they don't have any leaks so the engagement is really high and what that is important for is if you ever want to upsell something right if you want to encourage those customers to hey maybe switch over to a different insurance carrier because you can get a discount for having flume installed or you can get a rebate from your utility you know you want to keep those customers engaged so we're trying to ensure that we have this ongoing relationship with our customers that's good now you mentioned now you're doing two three thousand dollars a month in terms of sas sales give me a sense of velocity in terms of new hardware units you're moving per month today we're doing in the ballpark about a thousand units per month okay i'm pretty healthy yeah thank you thank you we're beginning to turn on different channels um you know best buy home depot costco looking at the retail channels to turn on and also looking at these strategic partnerships in the irrigation space and the insurance space and where were you a year ago if you're moving a grand per month today in terms of units we were doing like 100 units every other month okay so we're doing basically nothing i mean it's in the ballpark um 7x growth from last year so that's the story you sell to increase your valuation to raise more capital without getting diluted right what's the team size today team's about 25 people about 16 of those are full-time employees the rest are contractors so pretty lean but have a really really good team we've only lost one person over the past four years of business pretty good how many engineers it's heavy on engineering yeah we have about 15 on the kind of technical slash engineering side under rd okay so i mean you only have 16 full-time 15 our engineers who's the lone wolf no i'm saying it part that's including contractors and full-time 15. so we have 25 people total about 15 of those are on the r d umbrella how many protocaring reps uh in terms of like sales side we have about four of us working on sales and marketing do you carry quotas though do you have that like modeled out well enough or no it's we we aren't really carrying quotas right now um one of the big challenges especially in the utility space is you can't push too hard right i mean if you're trying to sell to utilities like you're selling a used car it's just never going to work you know people run away so you have to work them it's about building a relationship in the utility market in order to actually get a sale yep that makes sense um when you tell the story and you go out and raise this past three million do you bill yourself as a sas company to get sas-like valuations or do you build yourself like a hardware company and get much less favorable hardware sale you know valuations yeah you know it's not like we went out and raised at 100 million valuation i would you know love if we could do that um but we are of course presenting the long-term vision of becoming a sas company you know having this data play um we do have which i didn't mention before actually we have about five percent of our customers right now that actually are paying a recurring annual fee um there is this kind of pro level of service we're offering in a very specific region in california we're working with one utility in that region to try out this model how much do they pay per month 50 it's not per month per year we're charging 49 per year okay well 500 times 49 that's like 25 grand a year say that again 500 paying 49 bucks a year is 25 grand a year in extra revenue right right so there's a big opportunity there right and so we've proven that there are customers that are willing to pay 50 bucks per year as basically this service model um and so we are considering kind of moving to that larger scale but we're testing it out in that market and it's a really good proof point for us yeah um what does it cost you fully weighted to get a new hardware sale it's not too bad um our i can't give you our exact hack uh but you know we're sitting in the i'll just say 25 to 35 of our overall price uh okay so you spend like 50 60 bucks to get a 200 sale yeah yeah yeah well and the reason i'm asking is i'm trying to get a sense of like like how aggressive can i mean can you pour marketing on this thing and explode it right and it sounds like maybe you can maybe you can so what's cool about this space is that it's completely on top market right there's 70 million single-family homes out there only about including our competition only about 25 000 of them have some sort of smart water monitoring system um our competition's gotten investment from companies like moen uh belkins put money into this space and what they're doing is they're actually going out running tv ads they're putting money into amazon they're advertising online but what's beautiful about that is that customers then becoming aware of this market you know we have to create market awareness sure and when they go search for this they go on amazon type in smart water monitoring let's say and flume is the number one a search that pops up we're leaving the market on there so we can dump more money in it to it but our competition also dumping money into this is helping to drive awareness good eric we're out of time let's wrap up quickly with the famous five number one favorite business book um i'd actually say the the first book i read right we started out was the mom test uh so i think that was very helpful when we were going out and talking to customers um so easy to you know convince yourself that everyone wants this so just reading that you know and understanding you know what's a real response number two is there a ceo you're following or studying i follow kind of some friend ceos that are also going to just name one uh a soft wand though is one that i would follow you know hippo and of course bezos as well number three what's your favorite online tool for building your company intercom number four how many hours of sleep we get every night six and seven yeah that's good and what's your situation married single kids single no kids running around how old are you okay 27. 27. and last question what do you wish your 20 year old self knew that building an iot company is quite hard guys there there you have it flume water smart home monitoring system over 10 000 units shipped today they each charge they charge about 200 bucks for that so there's two million there in sales margins obviously they're less than you know more than uh well it's less than a hundred dollars to build a 200 piece of hardware so you can back back yourself in a margin there but there is a heart a software component as well on the back side of that utility companies pay a subscription fee a dollar per user per month to monitor people in their area or their region that have installed these monitors they've raised five million dollars to do this burning total call it a couple hundred thousand dollars per month and and then obviously net burn more in the hundred thousand dollar range so plenty of runway to figure out what they want to do as eric looks to scale eric thanks for taking us to the top yeah thank you you guys know i fight like heck to get these data points for you from the ceos that rarely do these kinds of shows if you want more shows like this make sure you subscribe right now we're trying to get 10 000 youtube subscribers by the end of september here 2019 and it would mean the world to me if you clicked now to subscribe additionally i've got two more great interviews for you if 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