Silvan Innovation Labs is an electronic product design and systems integration company focused on home automation solutions, keeping the Indian consumer/infrastructure in mind. We aim to become the number one solutions provider in the information technology-based video surveillance space.

Market opportunity

The market size for IT-based home security and automation was U.S.$ 40 million as of October, 2009. By 2013, the market is expected to reach about U.S.$ 500 million in size.  We, the founders, are fairly confident the market size is large enough and there will be strong demand for their products.

Silvan’s differentiation

Silvan’s home security product is designed keeping the country’s infrastructure and environment issues in mind. Network bandwidth and power is an issue in the country. The unique selling proposition of our solution is that its security camera comes with a battery backup and it also comes with local storage to capture images when power or network connection fail. Its low-power design and algorithms to manage power consumption is a critical part of the product.

The overall product is also optimised for power, to ensure the camera runs for as long as possible in the absence of power. There are several other features included keeping the Indian consumer in mind.

Operation model

For now, Silvan plans to focus on product design and manufacturing through partnerships with contract manufacturers.  Currently, we are working with three or four local manufactures, but, plans to manufacture in China once scale is achieved.

From a sales perspective, we plan to focus on product development, while branding and sales will happen through partners. For now, the market is fairly sensitive to brands and we are working with partners like Godrej.  Silvan is currently designing a camera for Godrej’s ‘Smart Safe’ that will have a camera attached to its door.

A few years from now, we will consider establishing our own brand.

The Promise and the Ask

Till date, we have bootstrapped operations through services provided to third party clients. We have designed an e-book reader for a U.S.-based client, a mobile tool to distribute music and video surveillance systems deployment for some foreign customers. Our current annual revenue is at Rs. 2 crore, almost all of it from services.

In 2011, Silvan is working on launching 3 camera models and we hope to touch revenues of Rs. 10 crore from these 3 product lines. We are also focused on growing 25 per cent year-on-year.

At a broad level, we want to focus on the products business (the services business is only for bootstrapping purposes).

Currently, Silvan is looking at raising U.S.$ 1 million from venture capital investors. We are also in talks with the Department of Science and Technology for an additional loan of U.S.$ 1 million. (The U.S. $ 1 million loan can be used only if the other U.S. $ 1 million from equity funding comes through. We believe the loan grant is almost finalized).

Our immediate milestone is to launch 3 camera products by October, 2011. Long-term, Silvan also wants to get into the video analytics space, and will plan out our product road map in that space by end of 2011.

VC perspective

After Silvan made its elevator pitch, The Smart CEO reached out to Rama Bethmangalkar, investment manager, Ventureast to get his perspective on the business plan and some suggestions for the founders.

First reaction

I am impressed with the technical and operational credentials of the Silvan team, coming from a leading firm such as TI. However, the core value proposition of the company is not clear. Why should their customers or original equipment manufacturers choose them over the others? Also, design for Indian conditions is a product requirement rather than a differentiator.

Suggestions for Silvan

Firstly, I would suggest, Silvan should identify the core competency of the team and how it can be leveraged to solve customer pain points. It is nice to have a “services” stream of revenues to keep cash inflow and minimise cash burn. A suggestion would be to continue to grow this stream until after the “products” ramp up.

Secondly, I would request them to bring more clarity on who exactly is the target customer; what is the value proposition of the product and its competitive advantages.

Inherent risks in its business

I am not sure there is such a strong demand in India for automated systems, yet. We are a country of human capital. Individual homes/businesses employ security agencies at reasonable prices. Intrusion detection and surveillance for small and medium enterprises and enterprises with large campus perimeters could be an easier market to begin with.

Based on the numbers presented, the home automation market is expected to grow from U.S. $40 million to U.S.$ 500 million in less than four years. One should be skeptical of such estimates. One needs to really understand if there is a large unmet need for home surveillance presently or is it a potential need in the future? The second risk is a tendency to focus on making the product better and not thinking about offering a solution to the customer, including financing options if required. Lastly, scaling the business is a challenge unless the right organisation structure is in place. The business would require strong sales/marketing and customer support teams.