As the digitization of society in the internet age continues to expand, the relationship between a brand and its customers has evolved. No longer do TV commercials and discount coupons satisfy the requirement for a brand to be connected to their customer. Companies spend billions of dollars every year trying to build and deepen relationships with consumers and that relationship now needs to be continuous if a brand is to achieve preferred status. Success of companies like Salesforce, Hubspot and Zendesk prove the importance businesses put on customer relationships. However, when looking at companies that produce and sell physical goods that continuous digital connection is inconsistent. These brands are spending time and money “re”selling and “re”marketing to people who are already their customers, which is five times more expensive than maintaining a connection. Ken Rapp, CEO of Blustream, York IE’s latest investment, expands on this gap in the relationship between seller and buyer. “After a customer makes a purchase, brands have little value-added connection or relationship. Existing systems fall short because they aim to help brands get the initial sale, not build an ongoing relationship with their customer. Retailers should recognize that the common denominator between their brand and customer is the product.” As the world has become “smart”, these legacy products need to become connected.
Recent research performed by PwC shows that 54% of U.S. consumers say customer experience at most companies needs improvement. One of the ingredients missing in customer experience, especially for physical goods companies, is product usage data. Blustream fills this void by, as the company describes it, “Building meaningful after-sale connections with customers through its SaaS-based Product Experience Platform.” By integrating with real-world data from internet-of-things (IoT) sensors, Blustream’s platform collects aggregate usage, environment and performance analytics for brands to deliver automated education, alerts and purchase recommendations to end-users that will result in a deeper connection between brand and consumer leading to increased revenue growth, reduced churn, and an overall increase in the lifetime value of a customer. York IE is excited to invest and work with Blustream as they become the de facto solution for physical goods providers to connect with their customers post-purchase.
York IE first engaged with the Blustream in August of 2019. Originally evaluated as an investment opportunity, the company’s focus on their hardware sensor and a non-recurring revenue business model resulted in an advisory and marketing/communications services relationship. Over the last nine months, Blustream leadership, on the advice of the York IE team, has shifted their business model to SaaS and developed a web portal, analytics, API and centralized data architecture to become a cloud-based software company. The York IE team believes this vital change brings a ton of value and potential to Blustream, leading York IE to renew interest in the company as a potential investment opportunity. On second review, our investment team gained conviction that Blustream’s technology and team were solving a massive problem thereby creating a large market opportunity. This round of funding will allow for continued evolution of the Product Experience Platform and provide capital to build upon the sales and marketing foundation that Blustream has created to meet growing demand. York IE will continue to serve Blustream as a MarComm services client to help optimize their sales & marketing efforts.
Blustream’s team of 14 employees is led by co-founder & CEO, Ken Rapp. Ken is an experienced founder and executive having previously founded and led VelQuest, a leading provider of automated procedure execution management systems, for 13 years. Ken has also been an executive with Accelrys and Zymark. Additionally, Ken has been named a Life Science top 100 Innovator, Zenie Foundation Trustee and is a member of the Worcester Polytechnic Institute (WPI) Investment Accelerator Committee. Joining Ken in leading Blustream are co-founder & Chief Customer Officer, Bob Bean, co-founder & VP Technology, Michael Gordon, and CFO, Andy Aberdale. Bob is a multiple-time founder, his most recent venture, Acoustic Stream, was a startup that developed IoT sensors for the protection of musical instruments, which became the genesis foundation of Blustream. Bob has also served as COO & EVP at Kubotek, and President & CEO at Cadkey. Michael Gordon is a technology leader with expertise in cloud, mobile, and edge technologies. Andy Aberdale is formally joining the team as part of this fundraise and brings experience and expertise from a range of executive roles. Most recently, Andy was the CFO of Target Hospitality, a $1.4b hospitality services company that he helped take public. The York IE team also feels that it is important to note the quality of Blustream’s board. York IE will be represented by one director, joining Tom Folliard, Chairman of CarMax, and Bhaskar Panagrahi, Chairman of ConnectM Technologies. The combined experience of this founding/leadership team is truly impressive to the York IE team. The willingness, energy and execution capabilities they have shown over the last nine months pivoting their business to a SaaS model has been incredible to watch and bodes well for the probability of success of the business.
Blustream is a SaaS-based product experience platform that helps physical goods companies build after-sale connections between their products and end-users. By integrating with IoT sensors (Blustream’s sensor or any sensor the customer prefers) on tangible products, Blustream’s platform collects aggregate usage, environment and performance data enabling analytics to help brands deliver automated education, alerts and purchase recommendations to end-users. Today, CEOs, CMOs, and executives in charge of customer experience and digital transformation use Blustream’s Platform to create a direct channel with their customers that increases revenue, profit, and delivers better customer satisfaction. Product Journey Templates power the product-to-customer engagement experience and allow companies to continuously provide recommendations to customers. Real-world-data is monitored to trigger customer engagement actions in the customer-product relationship, including product alerts, education, and purchase recommendations at exactly the right time. The end-user receives these alerts and recommendations via an app that is white labeled to the brand. These data points then become actionable insights to power digital transformation and excellent customer experience. Blustream’s web portal and analytics are built on cloud-native architecture with microservices, resulting in a scalable and highly performant platform. Blustream’s platform and product recommendations has allowed business leaders to see reduced churn, increase lifetime value by 3x, and more than 25% revenue growth.
York IE’s analysis of Blustream resulted in a total addressable market (TAM) of $11.25 billion. Our bottoms-up methodology was multiplying the 45K product companies with over $10 million in revenue in the U.S. by a $250k average contract value (ACV). Part of York IE’s advisory work with Blustream has been helping develop pricing and packaging strategy, and believe a $250k ACV is appropriate when considering the universe of potential customers. However, when looking at companies over $100 million revenue, a segment Blustream will initially target, it was determined that a $500k ACV would provide a more accurate analysis. When multiplying a $500k ACV by the 6.25k product companies with over $100M in revenue it results in a $3.1 billion serviceable addressable market (SAM).
The competitive analysis performed by York IE confirmed Blustream’s key insight; no 3rd party vendor utilizes product usage data to help optimize product experiences for physical goods. Plenty of larger brands have developed IoT connected devices (think refrigerators), but are not sharing that technology externally. There are also plenty of customer success and product experience software vendors, especially for software companies, but the physical goods industry has been left out due to the difficulty of connecting to physical goods. A good comparator for Blustream’s potential is to look at what Pendo has been able to achieve providing product experience insights for software vendors. Pendo raised $100 million last October at a $1 billion valuation.
The solutions that are geared towards retail are predominantly focused on increasing engagement for the stores/retailers, not the product. There were numerous software vendors that helped retailers track customers, improve store infrastructure/maintenance, alert in-store customers, manage supply chain and inventory, and perform general marketing to customers, but the individual products and their producers are ignored. One competitor we would like to highlight is Registria. Registria provides a platform where consumers onboard/register their product and receive updates, insights and marketing offers on a predetermined cadence. The big difference here is that none of these insights/recommendations are driven by data from the usage, performance, or environment of the product itself. Blustream’s focus on the product, and direct connection to it via IoT, enables deeper understanding of each end user’s individual product resulting in better, and more timely, insights, recommendations, and marketing offers.
Blustream’s go-to-market (GTM) strategy is targeted on two industries they were already seeing success in before York IE’s involvement- music and pets industries. Eventually, the company will expand into other industries including, insurance, homes, food and beverage, medicine, nutritionals, vehicles, sporting, plants, and consumables. Blustream will attack these target verticals through a GTM strategy based on demand generation and direct sales. York IE is helping Blustream develop a demand generation engine through content production, public/analyst relations, and social media strategy. Ken Rapp and Bob Bean will lead the GTM efforts on Blustream’s side and will serve as the initial salespeople with plans to bring other reps onboard in short order.
In conclusion, York IE decided to invest in Blustream after a months-long engagement, which gave us an incredible opportunity to evaluate the product, market opportunity, and team. We are confident that the leadership of the company and recent pivot to a recurring revenue business model has positioned Blustream to capitalize on the large market opportunity in front of it. The world is increasingly becoming more connected and it is time physical products join the trend.
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