Serial entrepreneur Derek Smith is taking a different tack in growing his second startup, Tesla Controls Inc.
The founder and CEO is the only employee of the wireless lighting control company and he’s eschewing the massive effort required to manufacture and distribute products.
He said he prefers to develop his idea, then hand off the tasks to others.
In January, he licensed out the core technology to Anaren Inc. in Syracuse, N.Y.
“We’re not producing the finished product; we’re producing the tools that other people can use to put into their projects,” he said of his 4-year-old business. “During the gold rush, who made the money? The people who searched for gold, or the people who sold them the picks and shovels?”
Smith’s strategy contrasts sharply with his first venture, downtown San Diego-based Awarepoint Corp., that makes mobile devices to track hospital equipment and which has raised $60 million in venture capital, including participation from two of Silicon Valley’s fabled firms, Kleiner Perkins Caufield & Byers and Venrock, backed by the Rockefeller family.
This Time It’s Different
He remains a stockholder in the firm.
“I raised a lot of money, but ended up owning so little of the company,” he said.
In his latest venture, Smith has two investors, and owns a bigger percentage.
And Smith’s cutting costs where he can so he doesn’t have to raise as much money from outside sources.
His office is located above the Harbor Freight Tools store on Miramar Road next to a tire repair shop.
“Tesla was conceived to solve energy management problems, such as how to deal with lights left on overnight,” said Smith, who said he came up with the idea while pursuing his MBA. “I noticed the lights were left on a lot, almost all the time.”
Other companies in the space include such firms as Coopersburg, Penn.-based Lutron Electronics Inc. and Melville, N.Y.-based Leviton Manufacturing Co.
“So, having done wireless lighting technology for a long time, I realized this was pretty simple, and I knew I could address the problem, so I set out to solve it,” he added.
Intelligence Is Built In
The technology basically allows users to control a light switch remotely using a computer and a browser.
No special software is required, he said. It acts kind of like a Wi-Fi access point in a home network, he explained.
Someone who enters the room can override the decision, Smith explained. The intelligence is built into each light switch.
The system is controlled by a little box about the size of a paperback book that is wired into the network, and which links to a central server that controls lighting in a building.
The market for light controls is fast-growing.
Industry researcher Pike Research says the market will reach $4.3 billion in sales in 2020 from $1.2 billion in 2012.
He considers Tesla a technology business, not a clean-tech concern, an area that is rapidly falling into disfavor with investors.
He launched the company with $50,000 in capital from personal sources, and was looking for up to $450,000 a year ago in seed capital.
He was one of a dozen CEOs looking for seed money as a participant in the 2011 Tech Coast Angels’ Quick Pitch Competition.
‘Rare 2 Percent’
Ricardo dos Santos, one of the judges at the competition and a lecturer who teaches entrepreneurship at San Diego State University, said the Sacramento-native is among “that rare 2 percent crazy enough to be an entrepreneur.”
“And it’s certainly not common that people start businesses more than once,” he said.
Dos Santos has invited Smith to talk to his classes. Smith, dos Santos also said, is steeped in the process of starting businesses.
“He started Awarepoint and it had its natural course for him, he got what he wanted out of it, and he now knows what it takes to do another startup, and more than likely, in another five years, he’ll be doing something else,” said dos Santos.
Smith has a degree in electrical engineering and in theater (with a focus on lighting) from UC San Diego, as well a business degree from San Diego State University, and holds the rights to 10 patents.
“I basically generated the intellectual property that they (investors) really liked, and they said, ‘Hey, why don’t we take that from you, and that way you don’t have to build it, and market it,’ and I thought that sounded really good.”
Smith added that the nice thing about starting a business these days is that the capital component has come way down. “You can do a lot with a lot less capital.”