Unlimited - Key to success

Nick Willis of ECKey was already discussing second-round funding with angel investors when he entered last year’s Investment Challenge, run by Unlimited and UK Trade and Investment (UKTI). He wasn’t just seeking money; he wanted UK contacts that would open doors there to manufacturing his Bluetooth key technology. The UK is one market – along with Australia, the US, Germany, France and Spain – that research has shown has a high penetration of Bluetooth-enabled cellphones. Originally the plan was to use the UK as a base for selling into Europe, but the thinking now is to attack it on a country-by-country basis.

ECKey attracted many of the Investment Challenge investors; Willis has the attitude they like of being focused on developing the business rather than just the technology. In fact, he began his business before knowing what it was going to be. In early 2005 he had been working as a project manager in telecommunications and after nine years wanted out. He set up a company and then searched for an idea. It came via a news story about cellphones replacing everything you carry in your handbag. “I thought, ‘What else do you carry around in your handbag? You carry your keys and your security card.’”

While working full-time, he slaved away at night trying to turn cellphones into remote control keys. Eventually he made a prototype and then managed the rare feat of signing a contract via emails rather than face-to-face with a US security company (as yet unnamed). He finally quit his day job, not easy when you have a young family to support. In late 2006 he gained $250,000 of funding from ICT angel investor Sparkbox, matched by the Seed Co-Investment Fund, and the company’s been awarded several government grants totalling around $450,000.

Sparkbox CEO and ECKey board member Greg Sitters says Sparkbox was attracted because the company was in ICT, a space it knew well and because Willis was a credible founder who “knew his stuff and was technically competent.” Willis also knew what he didn’t know, Sitters says. “He knew when to call for help and what he needed to build the company and we’re a very active investor in that regard.” The fact that the product links into the Bluetooth technology, which has international standards, and that it had global scale from the get go were also key.

ECKey originally only intended licensing the patented technology, but after further market research has switched to a new business model: some licensing to OEM manufacturers and also making the little black boxes themselves so they can establish market credibility and get better margins. Launched in May last year, the $320 product is selling through the Master Locksmiths Association in New Zealand and Australia.
So how does it work? Once the black box is installed in your door or car locks, you register a password. The box searches for your authenticated cellphone via Bluetooth and measures the distance between lock and phone. Once the phone comes within a certain distance, the door unlocks. When the phone moves away a certain distance, it locks again.

Recent second-round funding of $1 million from a range of investors (Sparkbox, SCIF, K1W1, Jasmine Investments, and others) will enable ECKey to export further afield – possibly to some of Willis’s new UK contacts. A US distributor has already been signed up. Sitters says bringing in people such as Stephen Tindall and Sam Morgan, who have a wide network of contacts offshore, is also part of the strategy of finding investors who bring in more than just money.

Willis is relatively sanguine about retaining only 40% shareholding following outside investment. Too many Kiwi entrepreneurs concentrate on the IP instead of realising “no one makes money from a patent alone”, he says. “The difficult part is not the idea, the concept or the technology. The difficult part is turning it into a business.”

Obviously ECKey wants to be more than a one-trick pony; it hopes to have several more spin-off products. The first about to be launched is technology allowing you to use your authenticated cellphone rather than a swipecard on access doors. Willis says they’re also working now with OEM manufacturers on developing black boxes with batteries that can be more easily installed by householders using just a screwdriver. Further down the track is the potential to try adapting the technology for electronic payments, so your cellphone could double as an Eftpos card. Now that could make handbags redundant.

Key to success

Nick Willis is using fresh investment to get his Bluetooth key technology for cellphones before a wider market.