There are quite a few Israeli startups that launch different products, but an Israeli startup rarely produces a product that even the standard Israeli consumer can purchase and use. Sensibo is undoubtedly one of those exceptional cases. In an exclusive interview with Geektime, the company's CEO and co-founder, Ran Roth, talks about the challenges faced in Israeli product creation, why they charge more than similar AliExpress products, and, for the first time, reveals how many homes Sensibo products are installed in.
Not a single hardware engineer
"A third of the world’s energy is spent on cooling and heating buildings. If you look at all the cars together for comparison, we're talking about 18%. Twice that goes to cooling and heating", claims Roth, who explains that the original purpose of Sensibo was "to give control over the home climate with the understanding that this is one of the leading causes of carbon emissions.” And so, at the beginning of its journey, Sensibo really wasn't supposed to be the Sensibo you know today, and you weren't supposed to purchase its products in every gadget and computer store as you can today. Roth says that the company was designed to work through electricity companies, but after a while, they decided to change direction and reach consumers directly. "Our goal is to build an operating system for Home Climate.
Although we equate Sensibo with "hardware", Roth claims that he and his partner, Omer Enbar, didn't really come from that field. "I didn't know about hardware before I started... We wanted a product that was easy to install, and worked well. Along with the hardware should come smart software. It's not enough to make cheap and reliable hardware... Today I'm less into hardware, but when we started, I knew what each resistor in the circuit did. I went down to every detail". However, today he claims that 95% of Sensibo's capabilities do not lie in the same IR transmitter, but in the software that sits in the cloud. Today, Sensibo doesn't have even a single hardware engineer "in-house" out of its 25 employees, and Roth claims that's because the company has found "great people to work with and the resources you need are constantly changing".
Already three strong generations
The first set of products Sensibo introduced is the one that made it famous: in 2014, it launched a crowdfunding project on Indiegogo, in which it proposed an innovative device that would turn any air conditioner into a smart air conditioner. 1,260 users pre-purchased the first generation of Sensibo for a total of 614,864 ILS. Since then, it has managed to present several more generations of the same device: the second generation known as Sensibo Sky was launched in 2017 (which this time was not battery-based), and in 2020 the company launched the third generation, Sensibo Air, which came with an additional external sensor that can measure the room’s temperature, humidity, and movement (to turn the air conditioner off and on as needed).
"The suppliers we worked with are only in Israel. We even started with production in Israel, but at a certain scale, it became unreasonable", says Roth. Sensibo continues to develop its products in Israel when according to him, 90% of the engineering and product design are done in Israel. As time has passed, Sensibo is no longer alone in the IoT field, and while it continues to price its products in the hundreds of ILS per unit, today anyone can order from a diverse number of Chinese alternatives for a few dollars, but Roth is not excited by my question on the subject: "Sensibo is a much more complicated product because there is an issue of reliability here. You can see on the social web someone who says he installed a similar product for 5 USD that works great. But you won't hear from those whose products didn’t work great. The reliability and the ability to connect to 30 thousand different models of air conditioners and reliably support them - it's not obvious. It's one thing to do it at 50% or 70%, and it's another thing to get to 100% the way we are today. It was a difficult task, and we have a super sophisticated engine that knows how to do it".
Roth claims that the company's products are currently in more than 200,000 homes, with 300,000 active users, while the number of users and devices is pretty much the same according to him. Surprisingly, or not, Israel is really not Sensibo's strongest market, and according to him, it accounts for 5-8% of the company's sales, while its products are very popular in Northern Europe (for heating purposes) and Australia (for cooling purposes). The average Sensibo user uses the app approximately 5 times a day in the appropriate season, leading Sensibo to process millions of interactions daily from 1.5 billion data points. But Roth claims that despite the impressive numbers (certainly relative to an Israeli company that manufactures gadgets), Sensibo still has quite a few potential customers: "Let's put an order of magnitude. There are about 2 billion air conditioners in the world. We are at 300 thousand, and that means there's still a long way to go. Sensibo today is global and bigger than any competitor and even more than several competitors combined. We are market leaders technologically, as well".
According to him, the average Sensibo user saves about 20% of the energy consumption of his air conditioner, thanks to its remote control capabilities, along with its less prominent features, such as filter cleaning alerts (to which he claims a clogged filter wastes 5% more energy). "We also have a component called Optimus, which Musk stole the name from us six months ago, and it knows how to tell what the right temperature is, finds anomalies in the air conditioner that knows whether you need to call a technician. Together, all of this makes a significant difference. In Israel, within a year - this product returns its cost.” Today, the company also offers a monthly paid premium subscription with additional features, and according to Roth, the company's conversion rates are "very high", with tens of percent remaining even for the second year of the subscription.
Many Sensibo fans were outraged by the move to a monthly payment model, but Roth clarifies that no free feature has become a paid feature and that the premium model is necessary for the continued development of the company: "We need the subscription to support the development of the product. One of the problems is that a company sells you something, and the best way for it to make a profit is to sell it to you again. Many companies design products that will fatigue after a certain time so that you will buy another one. Rather, the greenest thing is to create products that will last for many years and enable a reasonable economic model for this thing that will pay off for both the consumer and the business. In fact, the subscription is very ecological in my eyes. Sometimes we wonder about certain features and choose to release them to the free tier even though they are complicated and require a lot of development".
"Extremely disappointed by the air conditioner industry"
The market that Sensibo entered in 2014 is really not similar to the market in 2022. Besides competitors from a few countries (and even from Israel, for example, Switcher), it also suddenly competes with the air conditioner manufacturers themselves, who today sell quite a few of their models with control options via the wireless network. But Roth doesn't have too many kind words to say about the air conditioner manufacturers, both in Israel and around the world: "I am extremely disappointed in the air conditioner industry. Today it looks at Smart Wi-Fi as a feature to be ignored. You can see it in the products and their quality. The air conditioner installer will do everything to not tell you that the air conditioner comes with Wi-Fi. Because it's complicated", and he's not wrong. Just recently we saw how a giant Israeli manufacturer like Tadiran faced a security breach and information leak, just because it decided to work with a Chinese supplier that did not protect its database in a basic way.
Roth claims, on the other hand, that relying only on the connectivity of the air conditioner is not really smart, since the air conditioner has one temperature measurement point that is inside the unit. According to him, as soon as you turn on the air conditioner and it cools down, it has no idea what is going on in the room - this is in contrast to Sensibo's sensors that measure humidity & temperature, and are accompanied by software that learns the user's usage habits. Since Sensibo’s sensors are in the room, rather than in the air conditioner, they are better able to measure and track the room’s air quality, which is directly affected by the air the AC unit generates. Therefore, Sensibo makes the AC much more reliable. During our long conversation, Roth insists several times not to call Sensibo a “gadget company”, but rather a "climate control operating system", and indeed, in recent years, you can see the trend of Sensibo relying on its software and its development, rather than annual hardware releases.
A few years ago, Yaniv - the editor of the site, wrote that, according to his estimates, you will become a software-exclusive company. Since then, you have released several more products, but in the same category. Is there anything in his assessment?
Roth: "In the technological world, there is a concept known as non-linear development. If you look ahead, and the metaverse vision is realized, we will only need data farms and Sensibo. Really, the only remaining question is when. We have an advantage since there are two billion air conditioners that are not going anywhere. They will not be replaced in a day and even if they are, they don’t take advantage of IoT. We use these devices to enable the development of the best technology and whoever joins us, we are happy, just as we’re happy to integrate with dozens of different platforms. We are connected to electricity companies to avoid power outages and save on carbon emissions. We have tens of thousands of customers who participate in these programs, and it already makes a real impact. We control more than 700 megawatts of consumption. This is the size of a pretty serious power plant. It's good for all of us, as well as the earth".
Not looking to be acquired now because "we saw what happened to many companies"
If so, it does seem that Sensibo has changed direction in the software space and seems to be looking to lean less on its own hardware, much like the company's original vision for the B2B worlds. But at the same time as this intriguing direction, Roth reveals to Geektime that the company reached a financial balance back in 2017 and claims that the company is growing by about 40% every year. All this when the company has raised very little money during its lifetime, and still operates as a startup for all intents and purposes, while, at the same time, launching companies like BreezoMeter are being acquired by tech giants. So of course, we asked the million-dollar question: "Do you not want to be acquired ?" Roth didn’t blink twice before telling me that he didn’t think the timing was right. "We have received purchase offers, but this is not the time. We are in a state of very positive momentum and there are big tasks for us to accomplish. We care a lot about what a potential acquisition would mean for technology. There are many gadgets on the market, sure, but ours doesn’t just have great meaning (to us and our customers), but great utility as well. We have seen what happened to the many companies that were acquired in recent years, and I don't think it's the right time for us. That said, Sensibo’s time will come and an acquisition will eventually take place.”
In the meantime, Sensibo has entered a completely new field, and placed quite a few chips on it, as have many technology giants, such as Xiaomi and Dyson: air quality. What started with Sensibo Pure, its first air purifier, developed into stickers that you can stick on your existing air conditioner to purify the air emitted from it, and now comes another new product in the form of Sensibo Elements - a monitor that will tell you how clean or polluted the air in your room is. "I think we look at climate control as something very broad. You feel temperature and humidity and you say if you're hot, but you don't feel like you're breathing toxins that will catch up with you in 20 years. We work with schools. And one of the things people don't know is that the percentage of CO2 affects the quality of concentration in children. It is not always the teacher who makes students fall asleep, but rather the amount of oxygen in the air. Temperatures you can feel, but the other gasses and parameters you don't feel and you don't know that you breathe toxic air. Therefore, the first step is awareness. As a data company, this is the main thing we are tuned to. You take 20,000 breaths a day and this is the product you consume the most - air. If there is something that should logically be important to you, it’s air quality".
And what does the future hold for Sensibo? According to Roth, only in the field of air conditioners, there are billions of potential customers, but he states that the company does not plan to become an extensive gadget manufacturer: "You will not see us making alarms and televisions and all kinds of other gadgets". Whether it becomes purely a software company, or whether it continues to launch gadgets - at least in the coming years, Sensibo will continue to be one of the only Israeli technology companies that manage to reach so many homes in Israel, now the question is in what form it will do so in the future.