How iStaySafe Reached $30K MRR and About 2,500 Subscribers While Exploring a Strategic Exit (Interview with CEO Karen Cantwell)

Introduction to Karen Cantwell and iStaySafe

Nathan Latka

00:00Hey, folks. My guest today is Karen Cantwell. She's somebody that constantly innovates. And in 2012, she started iStaySafe with a mission to design a personal safety watch for children. I was gonna say kids, for for children. This led to the launch of TicTocTrack in 2014, one of the first kids smart watches in the world. Karen, are you ready to take us to the top?

Karen Cantwell

00:18>> Sounds great.

Business Model: SaaS Plus Hardware

Nathan Latka

00:19Alright. So is this pure SaaS or is it SaaS plus hardware plus consumer? What's the mix?

Karen Cantwell

00:23>> So it's pretty much SaaS plus hardware. So we do both.

Nathan Latka

00:26Interesting. Okay. So tell me about the hardware. Can you show it to us? Do you have the hardware today?

Karen Cantwell

00:30>> Yes. Sure. I'll grab one.

The Two Products: Watch and Phone App

Karen Cantwell

00:35>> So we have two devices at the moment. We've got a 3G, which is a small kids watch. We also use it for elderly. We also use it for domestic and family violence lone workers. So we've got quite a few verticals that we operate in. It's basically small, lightweight. It has an SOS duress function on it. It's Hold it

Nathan Latka

00:59>> up close to the camera.

Karen Cantwell

01:00It's like an Apple Watch, basically.

01:03>> Yeah. So it can just look like a sports watch. It has a magnetic charging clip on the back. So we do that. We also have a phone application which has a remote Bluetooth button that is just like a button on your key ring, like a key finder. And so if you don't want to wear a watch, you just want to use your phone as a duress alarm, then the button remotely activates an SOS in the event

01:27>> of an emergency. We have two different solutions there for personal safety.

Nathan Latka

01:33Interesting. Okay. So that device you just showed me, what does that cost?

Hardware Pricing and SaaS Subscription Cost

Karen Cantwell

01:37>> So this one costs around $200 Australian for the hardware. And then you're looking at around $15 to $20 a month for the SaaS and the SIM and the use of the platform.

Nathan Latka

01:52Is it $15 a month per watch?

Karen Cantwell

01:55>> Yes. Yeah.

Nathan Latka

01:56I see. And so when you say the cost is 200, is that what you charge people or is that what it costs you to make?

Karen Cantwell

02:01>> No. That's what we charge people.

Nathan Latka

02:03What does it cost you to make? Do you make margin there?

Karen Cantwell

02:05>> Yeah. So we... It costs us probably around... The new one that's coming out is a little bit cheaper to make than the previous one we had because we just changed manufacturers. But it it costs us probably around between 60 to $80 Australian landed.

Nathan Latka

02:19Okay. Wow. Got it. So 200 retail, 80 cost. So you can make $120 per watch sold, something like that. Yeah. Okay. Interesting. When did you sell your first watch? What year?

Karen Cantwell

02:29>> 2014.

Nathan Latka

02:31'20? Okay. So that was your effective launch date or were you working on coding before that?

Company Origins and 2014 Launch

Karen Cantwell

02:35>> So we started the business in 2012. It took probably about eighteen months to find a manufacturer, design a solution because back then, kids wearables just weren't a thing. Like, there was no one doing it. So it took me a while to find someone to manufacture. And then we coded the software, designed the features, designed the hardware, put it all together and launched in 2014.

Nathan Latka

02:58Wow. Okay. So now you're scaling. How many watches are out there in the public now today?

Subscriber Count and B2B Shift to Resellers

Karen Cantwell

03:03>> So we got thousands out in the public. I mean, we've sold thousands over the years. We currently have probably about two and a half to 3,000 subscribers live at the moment. About 20% of our business is now business to consumer whereas previously when we started, it was all business to consumer whereas now we're more B2B because we've really moved into more of a reseller market in the last probably two years. So probably about 80% of our

03:29>> business is through resellers and the rest is B2C.

Reseller Economics: Wholesale Pricing and SaaS Cut

Nathan Latka

03:32Okay. A lot to unpack there. So let's... Let me let me do resellers first. 80% is through resellers. So if a reseller sells one of your $200 watches and sells a $15 month subscription, what do you pay them in an affiliate cut?

Karen Cantwell

03:44>> Right. So with the resellers, we operate a slightly different model. With the resellers, we will sell the watch to them at about $150 wholesale. We make less. We make probably about $70 a watch on the reseller price. Then they put their own markup on. Sometimes we will sell at 200 retail because for consumers we try and keep the price down low. They might sell at different markets, have different pricing structures because they pay slightly different prices.

04:13>> But that's obviously up to the retailer what they charge for that.

Nathan Latka

04:16What about the software?

Karen Cantwell

04:17>> The software with the SaaS, for the resellers, they pay around $11 a month. So we still make probably about three, four dollars, per month on the SaaS and then they put their mark up on top of that.

Nathan Latka

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06:55the interview. Got it. You sell them $11. They pay you $11 a month for the SaaS. You're making $11 per watch they sell monthly recurring.

Karen Cantwell

07:04>> Yes.

Nathan Latka

07:04Oh, okay. Interesting. So 2,500 out there today across your value added resellers plus your direct to consumer at $15 a pop. Right? What... So you're doing $37,000 a month right now in revenue?

Karen Cantwell

07:15>> Yeah. So we're probably around 30 in revenue at the month because we've... With the phone app, it's slightly cheaper because there's no SIM card with the phone app so that brings the average monthly revenue per month down slightly.

Nathan Latka

07:27Okay.

Karen Cantwell

07:28>> Because the phone app, you're only paying $6 or $7 a month for a retail customer because there's no SIM Okay.

Current MRR and Impact of Phone App

Nathan Latka

07:34And if you're at $30,000 today, where were you a year ago? Do you remember?

Karen Cantwell

07:38>> A year ago? I don't remember a year ago. I know probably 2019 because we did an acquisition about a year ago and that increased MRR. But prior to that, we were probably at around 15, 16. We probably doubled since we did that acquisition.

Growth History and 2019 Acquisition

Nathan Latka

07:55Okay. We first interviewed, I don't know if you remember this, back in 2018. Wow. And you said revenue back then was around $20,000 a month. So that's four years later, you've added $10,000 in MRR. I would say that feels like really slow growth. Why aren't you growing faster?

Karen Cantwell

08:13>> There's been a couple of reasons for us. I mean, resources we've always been really small. We're pretty much

Nathan Latka

08:20Are you bootstrapped?

Karen Cantwell

08:22>> Yeah, pretty much. We have had investment. We've definitely had some good investment but it costs a lot obviously to develop the hardware. Unfortunately in Australia, the networks have been shutting down. They'll shut down a network like the 2G network, just after we launched and then we had to invest in redoing hardware. Now they're shutting down the 3G network so we're having to reinvest in hardware. A lot of our cash has gone into hardware development, which

08:48>> has really limited our ability to scale. Australia is quite a small market too. We haven't been able to go overseas just yet so that's something obviously we're looking at doing. And then obviously COVID hit in 2020 so we invested in an acquisition which we did at the end of twenty nineteen and then COVID hit. That slowed sales in our B2C market. So really last year we spent a lot of our time pivoting and moving more into

Fundraising History and Investor Equity

Karen Cantwell

09:14>> the B2B market because our B2C customers really dropped off. I think there's been a number of factors that have impacted the growth.

Nathan Latka

09:22How much total though, Karen, have you raised?

Karen Cantwell

09:24>> About 1.6.

Nathan Latka

09:26When was the last fundraise?

Karen Cantwell

09:30>> 2018.

Nathan Latka

09:31Okay. So so between 2012 and 2018, you raised 1,600,000 total? Yeah. Got it. And and investors own what? Like 20% of business or more?

Karen Cantwell

09:42>> So the investors probably own at the moment.

09:48>> We've got investors that own probably about 60% of

Nathan Latka

09:52>> Would you do anything differently looking back?

09:55That's a lot for investors to own.

Karen Cantwell

09:58>> I think looking back, obviously I didn't come from a tech background and when I started this business in 2012, I had never raised capital before. In doing things differently, I certainly would structure things slightly differently. I would scale much quicker in the early days when the product was really new but I think because I didn't have a lot of resources, it was just basically me. I think I was reluctant to take some of those risks because

10:23>> I hadn't done it before. I think what I've learned in the last five or six years would be I would probably take more risk early on and scale quicker early on to really capitalize on some of those sales I could have done earlier.

Nathan Latka

10:35How much equity do you still own today?

Karen Cantwell

10:37>> 20%.

Nathan Latka

10:38Okay. So who owns the other 20%?

Karen Cantwell

10:41>> My sister, my parents, so family, friends, and then an angel investor that has been with me since the beginning who's amazing. So...

Nathan Latka

10:50Do you get along with your sister and parents?

Karen Cantwell

10:52>> Yes. Yeah. My sister works in the with me. Yeah. Yeah. My sister works in the business with me and my my parents, like, we're really close. There's only there's only four... Me and my sister in the family. So

Nathan Latka

11:02Okay. I'm gonna be I'm gonna be brutally honest with you. You guys have learned so much between twenty twelve and today. Like, a crazy amount. This thing is, like, not growing. So, like, when do you get the courage to shut it down, move on, take all these learnings and launch in your next thing, which is gonna grow much faster and you're going to own more equity because you've learned so much.

Karen Cantwell

11:21>> Yeah. Mean, that's a really good point. And I mean, for the last six months, that's what we've been looking at. So at the moment, we're looking at it like a strategic exit because we have like 30 — we have $30,000, obviously, in recurring revenue, so it's not nothing. And we have... I sort of feel like I have an obligation to the subscribers to make sure that they're looked after because we're in personal safety. It's not just a

Exploring a Strategic Exit

Karen Cantwell

11:41>> widget you can kinda switch So we're talking about people's lives here.

Nathan Latka

11:45Is it your asset though the... I mean, getting a physical piece of hardware in penetration in Australian market, 2,500, to me that's a major accomplishment. Can you push software updates to a piece of hardware? Can those be updated?

Karen Cantwell

11:57>> Yes. We can do firmware updates to change the features. A lot of what we've done with the software though is a lot of the features are on the software platform which makes it really easy for us to update. The software platform is device agnostic and we own that. It monitors not only watches but phones and other devices. So that's I guess the unique piece about us is that our software is device agnostic whereas most of the

12:21>> software out there for these type of wearables is linked just to that one wearable. So that allows it to transfer a little better to another business. That's what we're looking for at the moment. We're just looking for strategic acquirers so that we can move our subscribers onto maybe a bigger business that just wants to increase their subscribers by a few brands, move into a different market potentially. They're trying to get into the Australian market. We've got

12:45>> integrations with leading security companies so they monitor the devices 24/7 and can dispatch the police or emergency services where required. For another security company, this would be a good strategic acquisition where they want to move into the Australian market and that's already done for them. So that's kind of what we're looking at doing at the moment.

Nathan Latka

13:03Isn't the challenge priced though? You've already raised $1,600,000 to build a company that's doing $360,000 a year in revenue. It's gonna be hard to find a company willing to pay a 5x multiple just to return money back to the investors. How do you get out from under that?

Karen Cantwell

13:16>> Yeah, sure. So I mean, the focus at the moment is releasing 4G. We already have probably about 300 pre orders that we're looking at for the 3G so we've got people waiting on the new device coming out and that will significantly increase our subscriber base. We expect that by this time next year we'll probably be doing just over around 54,000 MRR with the subscribers that will increase from the release of the new hardware. There's

Acquisition Offer and Annual Turnover

Karen Cantwell

13:44>> a really good runway for someone coming in. We had an acquisition offer last year that was 2.8 times total revenue. Turnover last year was just over 700,000 with the hardware as well as the MRR and the SaaS.

13:59>> So I think we can probably realize a 2 to $3,000,000 exit potentially. I forgot about that.

Nathan Latka

14:06You have a lot of margin on hardware sales. So, 500 watches times $200 a pop is $100,000 and you're making what, $60,000 in hardware... Margin on hardware Yeah.

Karen Cantwell

14:16>> So, we turned over a little over 700,000 last financial year.

Nathan Latka

14:21I see. That's a little more real. That's a little... Hardware sales won't get the same multiple software, but it's a little more realistic to find someone that would offer you $2, $3, $4, $5,000,000.

Karen Cantwell

14:30>> Yeah. Yeah. So that's kind of what we're looking at. We're not we're not looking to to make like ridiculous amounts of money. We're really realistic about it. I just think for us, it it... It's it's a really good solid business for someone that already has an existing company in this kind of space that's looking to increase their subscribers or potentially move into new markets.

Nathan Latka

14:50Plus isn't churn like zero? Once you buy a watch, you're not going to stop paying for the software. Right?

Karen Cantwell

14:55>> No. I mean, we probably have a life cycle of about eighteen months on the hardware. So the watches, some will go about eighteen months before they either turn it over, get a new one or change. But that's why we bought the mobile device out because when people grow out of the watch, they can then go onto the mobile device. So it gives us that continuity of customer contact and the SaaS.

Nathan Latka

15:16I see. Very cool. What's your team size today? How many people?

Karen Cantwell

15:20>> So we just went through a restructure last year from seven. We're down to two at the moment while we restructure and scale and we're trying to build things back up again. So there's only two of us in the business at the moment, but we look to increase that over the next twelve months.

Nathan Latka

15:32Sounds like you're ready to be acquired.

Karen Cantwell

15:35>> Let's hope so.

Nathan Latka

15:36Alright. Let's wrap up Karen with the famous five. Number one, favorite book.

Team Restructure from 7 to 2

Karen Cantwell

15:40>> Woah. That's a tough one. I've been reading some books at the moment about... I can't... Like, there's a... I can't even think what I'm reading at the moment.

Nathan Latka

15:52We can skip that one. Number two, there a CEO you're following or studying?

Famous Five Rapid-Fire Questions

Karen Cantwell

15:57>> I've been actually studying, mean I know it's really obvious like Richard Branson looking at some of the things he's done with regards to growing his business because he's started some really from small interesting things and then growing things. I've kind of been following him a bit lately.

Nathan Latka

16:12Number three, what's your favorite online tool for scaling your business?

Karen Cantwell

16:16>> Founderpath.

Nathan Latka

16:17Are you loving it? You're having fun?

Karen Cantwell

16:21>> And I'm not just saying that because I'm on a podcast with you. Honestly, if it was something else, would be honest and say no. But the tool is really, really good, especially for a small startup. It really kind of consolidates all the information in one and I find it incredibly helpful to be able to pull metrics together that are really valuable for the business. So...

Nathan Latka

16:39As your score increases, you're about to unlock some some cool new products. That's... We've sort of gamified But no. We love having you on it, I'm glad you're enjoying it. Number four, how many hours of sleep do get every night?

Karen Cantwell

16:49>> I used... I still get about six to eight hours of sleep.

Nathan Latka

16:52Okay. And what's your situation? Married, single, kiddos?

Karen Cantwell

16:55>> Married, two kids, 15 and 10, boys.

Nathan Latka

16:58Wow. And Karen, can I ask how old are you?

Karen Cantwell

17:00>> 49.

Nathan Latka

17:0149. Last

Karen Cantwell

17:02>> Yeah. Just turned 49.

Nathan Latka

17:04Congrats.

17:05>> Last question, something you wish you knew when you were 20.

Karen Cantwell

17:10>> How to scale a business?

Nathan Latka

17:13Guys, there you have it. IStaySafe launched in 2012. They raised $1,600,000 to build a watch that helps first responders or folks that are collecting loans that might be in danger to quickly call the police or first responders. Amazing technology. Over 2,500 devices in the world today. They sell the devices for $200. They make about $120 per device sold. Here's the catch, they then sell a $15 a month software component on the backside of that. Really smart

Closing Reflections and Lessons Learned

Nathan Latka

17:36combination of SaaS plus hardware to drive net retention rates through the roof, doing about $700,000 a year right now in combined hardware plus SaaS revenue as they look to scale or be acquired. We'll see. Karen, thanks for taking us to the top.

Karen Cantwell

17:48>> Thank you. Lovely talking to you, Nathan. Take care.

Nathan Latka

17:52One more thing before you go. We have a brand new show every Thursday at 1PM central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

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