Over the last few weeks, I’ve uttered the phrase “Amazon needs to buy Ring” or “Amazon will compete with Ring” a number of times. Well, today, they bought Ring, allegedly for a rumored amount of $1.2B or more. Wow! Below, I will quickly unpack why the acquisition is notable…
The Amazon Angle
The front door to the house or apartment meets the bar for “frequent consumer interaction” point, and Ring has clearly nailed their product offering. When I suggested Amazon would buy Ring, others quickly pointed out that Amazon had recently purchased Blink for a very Amazon-y price of around $100M, and the implication was that their hardware labs would most certainly compete with Ring. So, I was surprised to the see the news, which likely tells us a few things – one, that Ring had a fantastic team which Amazon wanted to pay for and a valuable portfolio of patents; two, that Ring nailed the consumer branding and that people nationwide wanted it; three, that Blink’s value was giving Amazon the technology to produce power-efficient stand-alone devices like Ring at scale, and four, that simply slapping Blink into the Echo family was going to be an uphill battle — especially if Google made a run for Ring to add to their Nest portfolio — which is an entry point for Google’s competing AI assistant to gain market share. Ultimately for Amazon, adding Ring to the growing Echo ecosystem had a nice ring to it.
There a fifth reason, too — front-door data and access control. Amazon was rumored to be in the market for a smart lock purchase, too. Today, Ring tells you who is at your door in a way that Nest(cam) does not. Even though Nest has entered this market, too, it likely was a little too late. Now with Ring in the Echo ecosystem (and if we assume a smart lock in the future), Amazon can not just deliver items to your front door — they can potentially enter the customer’s dwelling to make sure deliveries are secured, refrigerated, and stored properly.
The VC Angle
Another billion-dollar exit for Los Angeles, after Snap, Dollar Shave Club, and others! If success has many fathers and mothers, then from a VC standpoint, Ring has many parents. Ring raised a bit over $200M and likely generated a return over 6x paid-in capital (gross), which is quite good and a testament to the operational prowess of the team. The company was started in 2012, but only took bigger VC checks starting in 2014-15, providing a deliciously quick liquidity event for even early investors. The Alexa Fund, an arm of Amazon, was also an investor in the company, which will likely encourage more startups to take their money — in the past, I’ve heard some founders and investors grow wary of having Amazon on the cap table out of fear they could low-ball M&A offers or launch competing products.
The Startup Angle
The world didn’t know who Jamie Siminoff was before today, but now they know. Having tweeted less than 100 times, by way of his online persona he is a serial entrepreneur since college and has a pretty low-key blog — no Medium archive to see here. In fact, I love the greyed-out text that’s on Jamie’s Medium profile page: “Jamie Siminoff hasn’t been active on Medium yet. Check back later to see their stories, claps, and highlights.”
People did seem to recall hearing about Ring — recently, they sold out tons of units on QVC, and years ago, then operating as “Doorbot” — isn’t that the perfect unassuming startup name? — Siminoff pitched the sharks, and none of them bit on the offer to buy 10% of the company for $700k. That stake today at exit, factoring in modest dilution, would’ve turned $700k into well over $50M today. This sale to Amazon is a wonderful outcome for Ring. They really maximized the value they could extract from this market. Assuming Google/Nest would be competing, and assuming that Amazon would throw money and bodies at it post-Blink, going home with $1.2B+ in less than 6 years, and then joining the Amazon team is a huge win.
I do wonder, looking ahead, if Ring is one of the last of a dying breed — as Amazon, Apple, Google all race to win the consumer home, to distribute their voice interface and AI technologies, can any other independent company really compete? Sure, FitBit went public, GoPro did as well, and Jawbone was once on a great trajectory, but will those companies sustain? I tend to think it’s impossible to compete in this hardware+software world, so Ring may be the very last of a dying breed of consumer electronics around the home. Sure, others will break out over the years with new products, but considering these dynamics, finding a home at Amazon is simply a fantastic outcome. Well-played!