A new make and model set the new standard in smart locks: Our investment in Latch
My father visited last week. As with previous parental visits, I anticipated the frantic (and not infrequent) phone calls confirming which key to use in the front door, and the inevitable exasperated follow-up call, as said guest negotiates the right amount of push/pull/jiggle required to release the sticky lock from its stubborn hold.
But this visit was different. My building has recently installed Latch: The latest in a wave of smart locks that allows users to control visitor access from a sleek smartphone app. Not only did Latch smooth over any of the usual lock-related hitches that arise with out-of-town guests, but I received notifications of my father’s arrival, as well as clear visuals as he opened the front door, giving me total peace of mind that all was well in my absence. I should mention, at this point, that Latch is also a Primary portfolio company, and with the company’s official New York unveiling this week, we’re thrilled to publicly sing its praises.
On-demand services bring convenience and hassle
My building, like any big residential complex in Manhattan, houses busy, overworked residents who increasingly outsource household tasks to a growing legion of on-demand services promising to deliver, clean, repair and more. While on-demand services provide a measure of convenience and luxury that residents increasingly can’t/won’t live without, property owners see the flipside of that coin: More foot traffic creates hassle, risk and expense from a security and management standpoint. Prohibiting these services is not an option, as property managers must be responsive to resident demands. What ensues is an acute need for a solution that provides seamless and secure entry and reduces management expense.
It was this need that inspired Latch’s founders as they sought to differentiate their smart lock from other entrants. Latch is now the first enterprise access control platform that eliminates keys for tenants and building managers; offers management a powerful SaaS suite of management and control tools; and activates automated deliveries and guest management via smartphones. Pair a simple user experience with a fresh, out-of-the-box approach to enterprise-level access management, and you’ve got a truly differentiated product with a huge and captive audience.
The rise of smart homes
The connected home market is growing at a rapid pace. Revenue from smart home devices - including home automation, security, entertainment and energy management - came to $10.4 billion in 2016, with projections of 75% growth over the next four years, and 75 million households owning at least one smart home device by 2020. The smart lock market, specifically, is projected to hit $3.9 billion by 2019, and the past few years have seen increased activity in that space. Since 2013, we’ve seen the emergence of a number of Bluetooth-enabled smart lock products - most notably August, Lockitron and Kevo - which have validated the demand for these next-generation lock solutions. But existing products have been plagued by issues ranging from smart phone connectivity to inconsistency around the products’ locking mechanism to hacking vulnerability.
While many of those products are effective in certain use cases, we were left wanting for a product that offers true enterprise-level access control and management. In that context, we knew we had found something unique and differentiated when Luke Schoenfelder, Thomas Meyerhoffer and Brian Jones first presented us with the Latch concept early last year.
Seeking differentiation in enterprise
Luke, Thomas and Brian thought the earliest players in the market were limiting themselves by selling a do-it-yourself product to consumers. Sure, there would be a wave of tech-geek early adopters interested in the novelty of a keyless existence. But it was enterprise customers - owners of buildings with hundreds of doors to manage - who had a real pain point. The Latch team observed that if you built a product tailored to enterprise users, you could unlock some huge accounts by building not just a hardware business, but also a recurring revenue model around access control and security. To crack this market, they knew they had to build more than a hobbyist’s add-on accessory, which most of the early players have done, but rather a highly secure, enterprise-grade mortise lock (think: heavy-duty, multi-bolt locks that are built into a door, not just screwed on).
From superior product people comes superior product
The resulting Latch product is just that, and it’s exactly what you would expect from the drafting table of two talented ex-Apple employees who partnered with a decades-old lock manufacturer. It was Latch’s visionary leadership team, which brings unparalleled engineering and design talent, that originally drew us in. Both Luke and Thomas (whose early career includes tenure at Apple, IDEO and Porsche) have an insatiable drive to create high-quality hardware, and they’re committed to succeed where a number of their predecessors have come up short. As such, the team has been hard at work for the past three years perfecting the entirety of the Latch experience to ensure that it meets the standards of its enterprise audience.
We think the results speak for themselves, and we’re not alone in that. When I first met the Latch guys, I immediately brought them to Keith Hamlin, a friend and partner at leading property management company Pan Am Equities, which coincidentally owns my apartment building and dozens others like it around the country. Seeing its value-add, Keith both invested in Latch and became its first strategic partner, agreeing to deploy the locks throughout his residential buildings. “We spend a significant amount of money each year replacing keys and cylinders as apartments turn over,” Keith told us. “In addition, package delivery management in non-doorman buildings can be complicated. Latch allows us to think about access in an entirely new way, and it presents an innovative solution that cuts costs, improves security and offers enhanced convenience to our residents.”
We and Pan Am took a big risk by investing long before the product was ready for prime time. But when Lux Capital led the company’s Series A earlier this year, they were joined by a number of large strategic investors in New York, representing significant holdings both in the city and across the country. With these eager parties in tow, Latch could build a healthy business for itself without ever leaving its own cap table. But, of course, our collective ambitions are much, much larger than that.
As investors in both NextGen Commerce and SaaS, our investment in Latch equally excites both sides of our (now very well-secured) house. It’s a true ecommerce enabler, allowing for the free flow of goods and services in a highly secure manner. But what really sets the platform apart is its enterprise-first, revenue-first approach, which elegantly solves some acute property management pain points and drives a recurring SaaS revenue stream. As I sit here at the end of a long day, enjoying a beer that was delivered earlier today while I was in the office (at 3:27pm, to be exact, according to the record in my Latch app), I’m thankful to live in a building that has rolled out the Latch solution, and I’m even more grateful to have had the opportunity to invest early on in a company that’s poised to be one of the victors of the smart home movement.