Freedrive Meets The Crowd
In ‘X Meets The Crowd’ I talk with entrepreneurs in the middle of their crowdfunding campaign. What’s the story behind their project? What are they looking for in an investor? Why do they think they stand out and what do they offer investors? Find out everything you want to know here, on our HelpTheCrowd Blog.
Texting while driving causes 23% of all car accidents. In Europe, annually this represents 1.6 million collisions, 500 000 injuries and 6000 deaths. Freeedrive is an app that blocks all except the necessary apps and notifications while remaining handsfree compatible. I spoke with Augustin van Rijckevorsel and Hugo Mahieu to hear why Freeedrive is ‘probably the most innovative car app of the year’.
HTC. Freeedrive. Why are there three e’s?
Augustin van Rijckevorsel. That’s a good question, people often ask us about this. There are two answers, the first one is very pragmatic, historical actually. Initially I’d launched an app called Free meant to address the issue of smartphone addiction. It had nothing to do with texting, it’s an app that prevents people from using their smartphone for too long a period. So the reason we called our app Freee is first of all because people would have never seen us on the internet with only two e’s as the name already existed. At the same time there is the nice version of the story which is that Free with two e’s means ‘for free’ and Freee with three e’s on the other hand has an emotion within. But to be fairly honest, we might go back to two e’s as the three e’s sometimes cause problems in terms of finding the product.
Hugo Mahieu. Search engines often ask ‘did you mean Free with two e’s?’ which means that people who aren’t sure might not be able find us.
HTC. What inspired you to start Freeedrive?
AvR. Let me give you a little wrap up about Freeedrive and the context it’s in. Above Freeedrive there is a company called Barefoot which is what we call a startup studio; Barefoot has been capitalised with funds of professional investors and has just launched several startups. All of these startups are B2B and we’re not into ideas, we’re into problems. As soon as there is a problem, there is a solution. Once there is a solution we look if it’s possible to monetize, if this is the case we start taking things further from there.
So what exactly is Freeedrive? It’s a problem the market has; texting while driving nowadays causes 23% of all car accidents, it kills several thousands every year and evidently this has to cost a lot of money to someone. So who is paying for this, well, leasing companies, insurance companies and fleet managers – companies that are having big fleets and that pay the insurances every year. Those insurances are becoming more and more expensive as there are more and more accidents. There we go, we have a problem, a problem that costs money, now what is the solution? We tried to find a solution that automatically blocks all of the ‘dangerous apps’ as soon as the smartphone enters the car. The people who are going to manage this are the leasing companies, the fleet managers or the insurers, the ones who are paying basically. They will be able to decide which applications are allowed and which ones are not.
HM. By ‘dangerous apps’ we mean those applications that will distract the driver while he’s driving. Think of games for example, but texting and messaging apps too, as well as all the applications that can compromise the drivers vision on the road through the windscreen – everything will be frozen.
AvR. At the same time, we’re all for staying connected. Today being connected is extremely important and being able to reach someone that’s driving is obvious. So how does Freeedrive work? Everything that is ‘connected car’ – meaning everything that is linked to the phone in your car – incoming calls, your contacts, some cars even read out text messages and emails, all of this continues to function. We don’t block the application, we’re preventing the access to it on the smartphone. This means that we assume the smartphone is either on your windscreen, because you look at the sat nav, or it’s in your pocket, but it definitely is -not- being manipulated manually. That’s how we came up with Freeedrive, it’s a real issue the market is having and it’s costing money so we want to tackle the problem.
HTC. Three years from now, what’s the biggest challenge for Freeedrive?
AvR. In three years, our biggest challenge will be to keep all of our clients satisfied and to have realised an international integration in the right manner. Even though we’re offering a software product that is perfectly manageable in any country in the world so to speak, there is the client management and sales as well, so we’ll have the same challenge that every startup is having which is talent. It’s about finding the right people to take the product there where we want it to be. Once the product is good, the problem is solved, and it’s possible to monetize, all the ingredients on the product level are there. The challenge will be to put everything in place, going international is not something that’s done easily.
HM. I would add another one. As we are a startup involved with software, people can copy us. One of the big challenges will be to keep the competition at a distance, to rapidly conquer a big part of the market in a way that we become -the- go to reference for everyone. Meaning that everybody, in all the countries in which we’ll be active, whenever someone talks about how to stop texting while driving, will think about Freeedrive. If someone wants to develop a similar solution, there will be the time needed for this development, but most importantly there will be the time needed to conquer the market and while the competition will be running after us, we’ll continue to make progress. So the human challenge pairs up with this one, we have to execute quickly and rapidly conquer an important part of the market.
HTC. You have a pre-money valuation at 900k, how did you determine this?
HM. This was relatively simple because the company is fairly new. We thought, in order to run a successful crowdfunding campaign, people shouldn’t ‘worry’ about things like is this company expensive or not expensive. We don’t want to be obliged to send information about sophisticated calculations that we put in place to calculate the valuation of the company to attract investors, so we said 10% for 100k euros. This is the valuation we wanted to have to keep things simple, because when we start calculating estimated cash flows and that kind of methodology we’d get a valuation somewhere between 1.8M and 2.3M, all of this based on cash flows while we haven’t commercialised anything yet.
We’re a young company, Barefoot started in July last year and is getting bigger already. We’ll probably return to crowdfunding again in the future. We want to demonstrate that investing in a Barefoot company is quickly profitable and that we care about potential investors. As we can’t talk directly to our investors we want the message that we sent out to the market to be ‘You’re investing in a Barefoot company, we’ll make sure you’ll have a high yield on your investment fast.’
AvR. Going back to the valuation of Freeedrive, you should know that when you take the different market elements of a company, the most difficult one is the team. Freeedrive is integrated in a startup studio, Barefoot, which has some very experienced people behind it – the ex marketing director of B-Post, the ex CFO of Mangrove and a few others. The valuation of Freeedrive has thus been done in terms of human capital as well; not only do we address a real issue that is costing money, we also have some true human capital that is stable. It’s a startup up that doesn’t pay for it’s office, the heating, the internet etc. All of that is being paid by the startup studio. This implies that the Freeedrive team can use all its time to manage its product and bring it into the market. In startups, 50% of the time is being spent on things that don’t involve selling the product. Here we have a team that is only doing the sales, they sell their product, they talk about their product, they introduce their product. Everything else is done by Barefoot.
HTC. Why did you decide to go for crowdfunding?
AvR. That’s a good question because Barefoot is a capitalised company and Barefoot gives the cash to Freeedrive. Why did we go for crowdfunding well, this year we had the car fair in Brussels and there are not that many car fairs left. Besides, it’s quite an important car fair and a very important event in Belgium which allows for a big buzz in terms of publicity. We were able to see the industries, meet the professionals of each sector and we could offer them the possibility to invest in the product. Basically we allowed our potential customers to invest in a product that we were going to sell to them. The crowdfunding campaign offered us the opportunity to be at the right place and to create a lot of buzz around it.
HTC. Anything you recommend future entrepreneurs to read?
AvR. Yes, there is The Lean Startup from Erik Ries. In his book he often applies the methodology we apply around here as well; spend every single euro only when you know exactly where it’s going and why you are spending it and only start developing once you have a letter of intent, meaning once you know you have a client.
HM. There is a second book and it’s the one I have on my bedside table at the moment. It’s from Ash Maurya and it’s called Running Lean. He applies the principle of the lean startup but in a corporate environment showing that innovation and the principles we apply in a startup can also be used in other companies.