Skylight the founder, CEO, and co-founder Michael Segal (left) and Skylight’s new president Aviv Gilboa
In 2018 Michael Segal was working at Bessemer-Ventures and building his side business of creating digital frames for family photos that families could upload pictures. Segal recalls that the company made two million dollars in revenue with only two employees and little effort. That’s why Segal, now 35, put aside doubts and walked away from the venture industry.
The company, Skylight, is a 75 million (2021 revenue) consumer electronics company that has no investors. With a low cost of operations by selling online only and investing profit back into the company, He will continue to operate the same, despite requests from investors who want to invest. It’s rare in today’s market where the majority of fast-growing companies–and particularly rapidly growing consumer hardware startups where the costs of developing the product and then launching it can be high—cash in exchange for losing control over their operations.
“We’ve broken many rules along the way,” Segal states. “Having seen how the sausage is made, for hardware in particular, for anything physical, VCs pretend that is their game, but let’s be honest, they’re after the software business.”
To sustain growth, In an unannounced move, Segal appointed a president, Aviv Gilboa, an early employee of Ring who was its director of product development and growth following an acquisition from AMZN acquisition. AMZN acquisition. Together, they are working on new products and retail distribution strategies to keep the growth growing. “Part of the reason I was brought in was to bring it from a speed boat to a ship,” declares Gilboa, 31, who also had a job as an executive vice president (at Kleiner Perkins).
Growth is more complex than businesses get more extensive. However, Skylight is now facing increased competitors in the photo frame market. Aura was created by former Twitter staff and has raised $26 million through equity and debt to help expand in November. In the meantime, Nixplay, which says it raked in an annual revenue of $58 million this year, is looking for $15 million via crowdfunding for equity. As the category has grown to hundreds of thousands of customers, Segal says cheaper look-alikes are popping up. “There is a lot of noise, a lot of knockoffs,” Segal states.
“We have broken a lot of rules along the way.”
Segal is a native of Moscow and is fortunate to have parents who were in a position to leave along with the wave of Jewish immigrants at one year old. They emigrated to Vienna, followed by Italy, and settled in Philadelphia around 1989. His parents were computer programmers, and no household member talked about business. “It was the classic immigrant mentality: become a doctor or a lawyer if you have to,” the man says.
Segal was valedictorian as well as class president in his high school. He then attended Harvard to pursue a degree in biochemistry. Silicon Valley beckoned, and Segal enrolled in VC shops Bessemer-Venture Partners. “He was specifically a lab chemist thinking he was going to process in chemistry,” says Bessemer partner Jeremy Levine. “He did not understand his ass from his elbow when it came to business.”
Over time, he learned more about business. He then decided to create his company’s market for handmade products. The business failed. He went back to Harvard to study business and to heal his wounds. “I was this golden child,” the man says. “The problem is that you’ve never fallen over. The first time I fell pretty heavily.”
A skylight was born. A skylight was returned from the course assignment to develop an online business. In brainstorming ideas about what would interest their grandparents, Segal and his classmates decided to share photos using technology to make connections. Along with his classmate Ricardo Aguirre, he started the process with 40 hand-crafted prototypes. “It barely worked,” says Segal, who returned to Bessemer after earning his MBA.
In 2015, Skylight raised nearly 55,000 via the crowdfunding site Kickstarter. That gave Skylight enough funds to contract a maker to produce the digital frames to keep up with the demands. When the company reached its million-dollar sales, Segal realized that he had more than a hobby project in his hands.
“Even Apple has to invent an upcoming product every couple of years.”
In the year 2018, he resigned from Bessemer to become the CEO of Skylight. He brought in his high school buddy Jake Kring, previously director of engineering at Scripted, in the role of chief technology officer. The following same year, Skylight introduced its second offering, a clever calendar that lets families manage several people’s schedules, shopping lists, schedules, and similar information on a shared device.
Customers who purchase either model pay the same amount for the gadget ($160 for the regular model and $300 for the deluxe), and those who want to use it for photography (beyond simple functionality) have to pay an additional $39 per year fee. The company’s sales increased rapidly, reaching $30 million in 2019 and more than the previous year’s $75 million. In addition, Skylight’s user base exceeded 5 million.
Segal is currently planning new products (perhaps targeted towards infants), a new distribution system for retail, and the latest marketing strategies in 2023. “Even Apple AAPL has to invent a upcoming product every couple of years,” Kring states. “Everything needed to go from 0 up to 50 million dollars is what you need to dispose of to go between $50 million and $500 million. We’re currently in that turbulent transition, and we can see that.”
The business has grown entirely from direct-to-consumer advertising and selling through its website and on Amazon. For its expansion, it must expand into larger retailers, like Target TGT , Walmart, and Best Buy BBY . With retailers reporting declines in sales and the prospect of a recession looming and the timing of this could prove challenging. Segal states that even though they’ve sold over 55,000 units per day during its most successful days of the sales season, It’s been a wild ride, and he’s predicting the sales to stay flat for the rest of the year.
In contrast to tech firms who have had to cut the value of their businesses or cut employees due to overextension, Segal figures that not having investors provides an advantage to weather any pullbacks in the consumer market. “It’s very seductive,” Segal declares, “to stay independent.”