June 20, 2022 – On today’s show we welcome Sky Technologies Executive Chairman Rani Kohen. Sky’s mission is to make homes and buildings become safe-advanced and smart as the standard.
On the show, Rani discusses:
- The disruptive idea behind making light fixtures safe and easy
- How they go about getting market adoption
- Key insights and learnings behind their February 2022 initial public offering
- Main risks for investors and how they are trying to mitigate these
- And more
Welcome investors to The Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies, your hosts, Julian Klymochko, and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate because performance matters. Find out more at accelerateshares.com.
Julian Klymochko: Welcoming Rani from Sky Technologies. All the way from beautiful Miami. Now Rani, I have been considering perhaps some home renovations, specifically light fixtures. So, as I know you are the man to speak to with respect to that. Now, can you give us a quick overview of Sky Technologies?
Rani Kohen: Oh, Sky Technologies. We always say the foundation of the company is first of all based on safety and simplicity, we make life safer and simple. And on the same time, we save, I think, I believe a lot of money as well. So, what we do is, our first invention is you know, there are billions believe of light fixtures installed annually globally, and probably hundreds of millions installed here in the U.S. and to install a light, fixture, ceiling fan, chandelier, et cetera, you really kind of risk your life. You go on a ladder, and you cut such hazardous wires, and it takes you a long, long time while doing it. And it’s really complicated. So, we came with a solution that technically you can go on a ladder and plug and play a ceiling fan or a light fixture within seconds, okay. So, it requires a one-time installation of two to three minutes and then it just plug and play in seconds. And it saves lives. It saves probably 90% of the time and probably 90% of the cost of installation if you would pay someone because it will take minutes, but you probably don’t need to pay someone because it completely simple, and you can do it by yourself.
Julian Klymochko: Now I have terrible memories of installing a ceiling fan a couple years ago with much frustration and swearing. So, to give a sense to our listeners, basically imagine an outlet where you just plug in a plug into the outlet, you’ve created something similar for light fixtures and things of that nature.
Rani Kohen: Yes, we did. You have the outlet in the ceiling and this outlet has wires coming in. So, all you need to do is push the wires into our receptacle like you would do if you installed speakers, you know, how the wires go in and the push thing, something very similar to this. You push the wires in and two screws that are going directly to the box, and then you have your receptacle, and all the rest is plug and play.
Julian Klymochko: So super, super simple and disruptive. What was the inspiration for the founding of the company?
Rani Kohen: So, I was a business or still a businessman all my life. And I did many things, and I had a background in lighting. I own large lighting company that we sold with hundreds of employees. And then I went to real estate and I think we did a trigger to really go, I had this idea already in my mind, but when we bought quite a large apartment buildings and we were renovating, partners of mine and myself, hundreds of units and saw the installation and the cost we spend and the time of each fixture, it took 30 to minutes to an hour and ceiling fans more and every bedroom we had to do, three, four bedrooms apartment. And I saw the time and I saw the risk and I saw the problem, said, you know, I had this idea, but I thought someone already invented it.
And when I searched, and I saw that no one came with this idea. I said, okay, I’m a businessman, but let me give it a shot as an inventor. And that’s kind of like how we came with our first invention and people like the plug and play system. It holds 200 pounds. And it’s really a very unique small device that really, you know, weighs probably a hundred grams and the size of a hand watch, but it really is very powerful, and our invention, people liked it. And then we did a few interesting things with this, based on safety and based on ease and cost saving,
Julian Klymochko: You made a good point. Why no one invented it, certainly anyone who has installed a light fixture or seen it get done, maybe had that idea as well. Because it totally makes sense to simplify things that are unnecessarily complex. So why wasn’t this done before, do you think?
Rani Kohen: So, I should go backwards. I’ll answer this. One thing you asked me, and I forgot to mention. So, then we started with this invention and then we took it to the next level of the tech world. And we added all the smart gadgets around the receptacle and the plug. And we made it, we believe everything is needs to be only safe, simple, and easy and cost saving, and also should be smart as the world is going toward that direction. And there’s hundreds of probably billions of homes around the world that want to be smart. Like they have electricity as a standard. We believe they should be smart in the standard. And I think our technology with the simplicity enables everyone to do that. So that’s really kind of the concept behind the company and why we did what we did now.
Why the other people did not invent it, you know, we try to think out of the box, but if you go to the medallion people that own all the taxis in New York or still own some of them and ask them, why didn’t they invent Uber? You know, probably on one side, you know, I think probably they fell asleep in lunch and sometimes people think out of the box, and you know, that’s what we trying to do to simplify life. And I really think that the biggest thing we have here is also it’s based on safety. And I think that every product that you save lives is really a necessity in regulators and insurance companies are going to work with you because when you save lives, you prevent hazardous incidents to happen. So, it’s not only death and injury. The numbers and hundreds of millions of installations only here in the U.S. are huge with the hazardous incidents, the fires, many people who die from those fires that come from electrical wires and others. And you have the regulators behind you, the insurance companies, and then you can make, if you can save time and you can save the dollars at the end of the day creates a win-win. And you know, I think we are also lucky to be in that place that no one else came with this. And you know, that, you know, we’re lucky. And we had the conviction and we stayed on it because to invent something that has electricity and holds so many pounds of fixtures and it needs to be very small size and the size of a hand watch again. You know, it’s a long journey sometimes, but we didn’t give up and we’re lucky we did it.
Julian Klymochko: And speaking of this journey you mentioned, or you invented the product, which you mentioned has a number of advantages, ease of use, time saved, safety. So makes sense from a conceptual perspective. Now, in terms of executing on the business plan, you are now trying to get product market fit, get market adoption. What is your strategy with respect to building your customer base and your go to market strategy?
Rani Kohen: So, we have a couple of strategies that were working parallel. So, when the first thing is, as I said, we came with the first plug and play invention, and then we came and understood the market as going towards smart. We added all those sensors and gadgets and chips around it to really enable someone to make his home and his fixtures become smart as a standard. So, fixtures are smart. And then we also had the technology that really, you put it within minutes and the ceiling, and your entire room or home is smart. So, the go to market on the first standard product, we sold a million units of it in the market. And we decided after a selling million units, how big the market is. And we figured once we go to the tens of millions, we’ll start having competitors.
And we don’t have even 10% of the market. And we figured that margins are going to go lower and maybe quality’s going to go lower and we didn’t want to mess with this. So, we came with this, I think, brilliant idea. It wasn’t our idea, but we really copied based on the safety aspects we have, so to speak, took the airbag model we call. So, the person that invented the airbag, what did he do? Did he chase the car manufacturers and air [Inaudible 00:8:46] to put airbag? No, he didn’t. What he did is, he went to the regulators. He proved them how many lives he can save. That device can save per year. And what did the regulators do? They inspect it on every car in the U.S. and then globally. And this is really the path we took, based on safety, with our generation, one product, the plug and play safety. And we went to the regulators, and we proved them we’re saving lives. And we were voted into the NEC to the National Electrical Code in 10 segments already. And we’re now on the final, final stage. And as we kind of believe and not only us, some senior people, including the former National Electrical Code. Head of National Electrical Code that works for us and many others that believe that this is going to become a good chance to become a global standard one day. So that’s one approach we had. And with the other approaches with other product, we have, we’re going to launch a presale campaign. That’s going to be based on mentioning all the safety aspects that are really almost a fiduciary obligation, quote and quote, for media outlets to cover. Because when you have a lifesaving aspect on a product, the media, usually create global headlines.
Plus, we have all the time saving and the smart gadgets and the cost savings. So, we’re going to really launch a PR campaign to educate of our product. And then we’re going to start presales. And then from there, we’re going to go to sales and sales are going to include direct to consumers, OEMs, big box manufacturers and builders are a big play for us because builders, it saves them a lot of time and cost. It also enables them a fast co, one of our products. And I think all the builders today in the world want to be, you know, becomes smart. Buildings want to become smart as a standard, like they supply electricity standard, and we have a product that really can enable that to happen within minutes, imagine a high rise of a few hundred units. If you want to make this high rise become smart, let’s say it’s an apartment building. It’s going to take you probably a year and going to cost you a fortune, many millions of dollars with our product. You can make an entire building with a few hundred units or hotel smart within days and the normal house would take you smart within weeks. Our product can make it smart within really minutes. So that’s our to go to market general strategy,
Michael Kesslering: Just digging into that. Can you put into context for our listeners, the amount of lives and the amount of costs that can be saved through your product?
Rani Kohen: Yeah, sure. So, there’s some research that we just really recently saw that says that you know that there’s several things that we’re preventing. So, the number one severe injury in homes I believe is ladder falling, okay. And if you save 90% time of the ladder, okay. So, you probably will save the majority of ladder falling, okay. And then when you save 90% of touching wires because you really, only on the first time, one-time touching wires, but then it’s plug in place. So, if you save 90% of touching wires, you probably reduce 90% of executions and also the biggest item here and there’s hundreds of thousands, if not millions of ladder fallings annually. And when you’re talking about electrocutions and they’re bad too, but there’s another really devastating things that happens with fires. Fires are created, from electrical wires, when they’re not tight, the contact is not tight. And when you twist wires on the ceiling to install like you have 20 fixtures at home, or 30 or 40 depends on the size of the house, it’s enough that one of those contact is not tight enough to create sparks and those sparks can create fires. And with those fires related to lighting, only on this part, we know that there’s hundreds of deaths a year only in the U.S. alone, okay. And just imagine the number globally, and that’s only with fires that are related to lighting, okay. And wiring contacts with this. So, the numbers, you know, even one life a year, if we can save is beyond huge, I think. But unfortunately, we’re talking about a much larger number and fortunately that we have a solution to this, and we believe that’s what the regulators, you know, probably the most historical event in America’s National and the U.S. National Ethnical Code. The last major change additional to the code with the GFCI, where you have in every bathroom. I’m sure you notice the receptacle that has a switch on it, safety switch, that’s the last major code change or addition to the NEC and our addition in 40 years is probably the most significant one. So, all based on safety aspects. That’s the only way you can get voted to the code and in 10 segments in the code already, based on the voting’s
Julian Klymochko: One aspect of having a new invention, a new innovation that you’re bringing to market is protection of intellectual property. Now I understand Sky has several patents, correct. Would you mind discussing, you know, some of the patent protection that you have?
Rani Kohen: Yeah, we have a total of 60 or plus patents and patent pending, U.S. and global. 15 were already issued. We have patents on our new universal plug, that enables really covers all the type of light fixtures and ceiling fans, if I say 99%, there’s one fixture maybe the big, big, big fixture that we’re not really going, but most of the common fixture, if not all and the same with ceiling fans, and then we have all the smart sensing devices that are attached to this. So that’s another of a few patents that we got on the smart product. So really that enables us to provide a safe and smart plug and play solution that enables you to save 90% of time on installation, 90% on the cost, but also enables you to make a home become smart within minutes. And those are, I think, quite significant patents that we have.
Michael Kesslering: Now, you are early in your go to market strategy, but can you talk a little bit about the expected unit economics for your products and business moving forward into the future?
Rani Kohen: Yeah, I can’t go with too much numbers, but I can say that what I’m allowed to say, our legal is that our Tam is a 500 billion TAM in the U.S. alone. And we believe that based on the ease of use and cost saving and most important lifesaving aspects, we can definitely take a nice piece of it, but even in a fraction of 500 billion TAM, total addressable market, I believe is not too bad.
Julian Klymochko: Now at the stage of the growth of the business, you recently raised capital to enact your growth plan and you raised capital via initial public offering. You went public in February 2022. So just recently, newly minted public company. Why did you choose to IPO and how has that experience been thus far? I know that we’ve been in a choppy market, for sure.
Rani Kohen: Yeah, so we decided to go IPO because I think the IPO market’s, really very choppy market now we are so, some of the things that I’m saying today, who knows how they’re going to sound tomorrow.
Julian Klymochko: [Laugh].
Rani Kohen: But you know we saw for example, I’d like to give Snowflake, who knew snowflake is before they went public. So, the public arena is also kind of a marketing tool that puts you on a certain stage. And if you have something destructive, I believe we have more than one destructive product. And not only I believe thank God, many others that, you know, once you launch, it gives you the right publicity, but the most important thing is you have enough funding to keep on running your company. So, everyone knows financially, you have much more advantages of being public.
And then also marketing wise, we thought once we launch product, we have so much safety news to address and to publicize. So, we thought it’s doing it as a public company can definitely service to get the message even stronger plus having the dollars. So that’s kind of a win-win. We also recognize that retail buyers of stock are much more involved today’s markets in the past. And a lot of those retail buyers also buy product under guts and that served like a lot of EV companies and others. And think, I compare ourselves something, were not. EV, they make cars safe and smart, they make four wheels safe and smart. We make four walls safe and smart kind in a way. So, and the same thing. And I saw how the market treated EV companies with vision. And I think once we launch product, people are going to really like what we have and see the company has a true vision.
Julian Klymochko: And in terms of your thought process, with respect to going public and raising capital, we have seen a number of businesses at a similar stage of growth as yours, pursue blank check companies, SPAC Merger, to go public. What are the reasons why you chose to go through a traditional IPO?
Rani Kohen: So, we went through traditional IPO because you know, and I respect SPACs and all type of other businesses, but I thought for us that the safest and most clean-cut way to go is a traditional IPO, rather than trying a SPAC and everything. And really there are great SPACs out there. I’m not saying something [Inaudible 00:20:14], but, you know, based on everything we saw based on the company we have, based on the team we have, we have a very unique team of people that I didn’t mention here, but, you know our lead Directors is Governor Tom Ridge, first Head of Homeland Security, former Governor of Pennsylvania, two times former CEO of AC Nielsen and President of Office Depot, Steve Schmidt is with us and John Campi, our CEO, and Mark Early from the NDC. We have really a tremendous team of people. We all thought, you know what? We have such a real product, real people, real team, all the Israeli tech, young people that are also part of our company. And we all together thought a clean IPO makes more sense.
Julian Klymochko: So, if a public market investor were looking at Sky Technologies stock, they’re not buying it for, you know, current revenue or current profits, they’re buying it, such that they’re looking at the business 5 to 10 years. Oh, now what do you envision for Sky over the next 5 to 10 years?
Rani Kohen: We really believe strongly that this product based on the safety aspects. So, we can really become like what the airbag was for cars. As, I said, mentioned before, when you’re based on safety, it’s a different mindset, okay. On safety, the regulators, insurance companies, we talked about hundreds of millions of installations in the U.S., billions, around the world. And if you think about the hazardous incidents, we can prevent it. We talked many, many billions of dollars annually to insurance companies. And so, when you lead with safety and based on regulators, I really think that we can become something global. And then the ease of installation, the cost saving and the ability to make homes become smart as a standard and instantly within minutes per room. I think really, we can be a world leading company. Not only I think it, the team that joined us, I mentioned a few of the people here that joined us. We have really tremendous, tremendous team, high, high IQ people around us, six former G executives, and many good other people. Now, we also have supportive investors, a former deal of Home Depot and Chrysler, Bob Norelli, and many other people that really believe that this company can be, or the destructive product we have can be a more leading company in the next 5 or 10 years.
Julian Klymochko: So, speaking of leading with safety, one of the key benefits of the product is risk management. Now, with respect to the stock and your business plan over the next 5 to 10 years, obviously as a new company, still trying to find that product market fit and build sales, build customers and revenue, you’re executing your go to market strategy. As you pursue these goals over the next 5 to 10 years, what are some of the risks for investors and how do you plan on mitigating these?
Julian Klymochko: So, there’s always risks to investors and especially with this world and everything we see around us you know, since COVID, you don’t take anything for granted anymore, and a lot of things can happen for every company. I think it’s based on, you know, the people we have and how responsible we act. And I think, again, going to safety, it brings us, you know, you’re having a company that’s based on safety. It’s always a safer, so to speak bet really, safety and safer, right. When you save lives. I think you have most of the risks like other companies will have, but I think you have a better chance to succeed and mitigate risk because you really, if there’s a lifesaving product and this type of magnitude, and their billions of installations, and I mentioned, billions, it’s only lighting.
It’s not, if you accumulate all the smart sensors that go the ceiling. Smoke detector, ceiling fans, and you take all of those, it’s probably tens of billions of installations globally, and people don’t know how many people and how many hazardous incidents and how many fires and how many injuries, electrocutions, ladder fallings are happening. And it’s funny, we’ve been to the moon 1969 and no one figured out how to install the light fixture without risking your life. I think it doesn’t make sense. And therefore, we strongly believe that this company has a very strong future based on those aspects.
Julian Klymochko: Ignoring all the scary stuff, like risk of fire and electrocution, falling off a ladder and things like that. If a person like myself, doesn’t like a light fixture wants to replace it. Well, that’s time and effort either trying to do it on your own or going out and hiring someone. So certainly, I like the concept of the product, just plug, and play in which it’s nearly as easy as changing a light bulb to change a light fixture. So, I really like that aspect, Rani. Thanks for coming on the show today. One last question prior to letting you go. Advice for entrepreneurs as a founder, what would you tell a younger self?
Rani Kohen: So that’s a great question. I really want to respect that question because I really admire people with conviction that you know, don’t give up. So, I I’ll go with this, one second. I want to mention something on what you said the second ago before I answer that important question is that you said. To change a light fixture makes it life similar, like screwing in a light bulb if I heard you correct. And so, two things. Very interesting things, but about this, the first one is, if you really have our device, it’s quicker to plug and play our fixture than screwing or unscrewing a light bulb takes more time. It actually, it’s similar to plugging in maybe a table lamp. Just plug and play, it’s faster. And another thing I want to mention that you’re just reminded me on this, that you find easy.
So, people don’t know that the first light bulb that Edison invented was also hardwired to the ceiling, okay. And you had to take wires and go on the ladder and wire it to the ceiling and really Edison got all the publicity and he started General Electric GE, okay. And they got all the publicity from that light bulb with the wires. But whether the revenues kick in. The revenues kicked in when they invented the light bulb socket to screw and unscrew. So based on safety and ease of installation, the light bulb socket became a global standard. And that’s one of the reasons when I mentioned before, a lot of our team believe that this based on safety and ease of installation, saving money, is really win, win, win that can become a global standard. So now that I cover this, I think the most important question you ask me, because the future, you know, I how much struggle entrepreneurs need to go through.
And you know, people see movies and stories and think it’s you know, oh, you made it this way. And then people try, and they fail, and they immediately go out. So first of all, excuse me about my French. But sometimes we say success is a bitch, you know, you need to work hard, but what makes it easy about you. I would never, you know, chasing dollars is not the way to succeed. It’s like chasing dollars is like chasing your shadow. So, I would recommend people chase their dreams, okay. Do something you like, you’re passionate about. And if you do something you like and you’re passionate about. (A), when you work hard, because you need to work hard. There’s no success. Read Ellon Musk and read other people, what they say and how they sleep and those tracks and the manufacturing facilities.
This is real. There’s no success, but you need to like what you do. And if you like what you do, you believe what you do, okay. You won’t feel like you’re working, you’re making things happen. And when you make things happen, success comes and when success comes, the dollars are coming, okay. When you chase the dollars, like chasing your shadow, chase success, okay. Work hard, choose something you like, and you believe, okay, believing that something needs to be changed. That’s you’re going to make it happen. And when you make it happen, you’re going to see the compensation and dollars come too. But try to make things happen and be successful. That’s my message. And work hard. Because there’s no shortcuts,
Julian Klymochko: No doubt. Hard work is completely necessary. So, Rani, thank you so much, wishing you the best of luck at Sky Technologies. Since you roll out this innovative new product, I’d like to see it succeed in the marketplace. So, we’ll be following it.
Rani Kohen: Thank you guys for your time. Pleasure being with you and good luck with your podcast. You sound sounds like you’re doing something really special, so all the best for you.
Julian Klymochko: Thank you. Take care. Bye.
Rani Kohen: Thank you so much.
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