As Convert Technologies enters the final stretch of its current investment round with Shadow Foundr, we asked its CEO, Martin Boddy, a few probing questions about the work the company is currently embarked upon and the potential returns this might deliver?
SF: What is it that interests the big players, such as Bowers and Wilkins, Sennheiser and Cyrus to licence your technology and how will Convert help their products to stand out and sell in good numbers?
MB: Technology is constantly evolving, and many consumer companies are unable to keep up with the pace of change. Traditional incumbents, like Bowers and Sennheiser, are well established in their own niche (speakers/headphones) with a great depth of understanding in manufacture and product design. However, they are unable to expand into new areas due to a lack of skills (particularly in software) required to develop their products into new wireless/high tech markets. Convert can fill in these gaps, providing complementary skills to enable them to reach new markets. This is much more cost effective and carries much less risk than an incumbent building its own skills up from scratch, thereby providing a faster (and more valuable) entry into the market.
SF: Convert’s energy efficient amplifiers for battery powered audio devices, such as headphones, allows for improved battery life but what sort of improvements are we talking about? How much better would the battery life be compared to similar products in percentage terms?
MB: Convert’s amplifier technology saves 30-70% power compared to traditional high-quality designs. Audio quality is becoming more and more important as headphones’ primary focus is on playing music, as is a marketing angle to make products stand out in a highly competitive space. With significant power savings, we can offer better quality audio performance, and extended battery life – both highly marketable assets.
Our streaming solution provides a one-stop solution for all HW and SW components required to build a streaming product, including app support.
We are continuing to work with B&W refining the audio performance, benefiting from their considerable audio expertise. Their process requires us to pass ‘Golden Ears’ audio tests before moving on to the next stage. This process is now nearing completion, and we consider it to be an excellent benchmark of our quality as we aim for integration into their next design cycle.
SF: What is the scope of the opportunity here for Convert?
MB: The project proposals from Sennheiser are large and complex with 18-month design in cycles, however as a global brand they have access to a large market which will provide strong returns and it will provide engineering revenue through the development period.
SF: Tell us about your development work with Cyrus?
MB: Conversations with Cyrus are ongoing to develop a mid-range headphone amplifier. Although they do have the skills to develop a similar product, they do not have access to our patented amplifier solution, and they are resource limited. We already have a completed design and can provide a true white-box solution allowing them to expand their product range quickly with minimal impact on their in-house teams. In this case, the project is a small-scale project with a six to nine-month development cycle; also, the design remains our intellectual property and we will approach other brands with same proposition where a simple repackaging exercise can achieve the same results for other partners.
SF: How many Project HD620 headphones would Sennheiser expect to sell per year in the targeted €800 price range?
MB: Convert will be integrating its Class A variable bias technology as part of Sennheiser’s HD600 range of headphones, enabling Sennheiser the opportunity to target end users in the €800 price category. Sennheiser is targeting sales of between 15-30,000 units p.a. and Convert will earn 2.5% of the targeted sales cost i.e. €20 bringing in potentially €300k to €600k in revenue annually. These sales numbers have been shared by Sennheiser based upon their knowledge of the market and projections.
SF: And for Project Gauss, do you know how many they sold last year in the €4,000 range?
MB: Project Gauss, incorporating Convert’s technology, will feature a planar headphone design and an accompanying streaming and a powered amplifier. These products both have an end user price of €4k and target sales are 3,000 units of the headphones and 2,500 units of the amplifier per annum. This will potentially earn Convert 2.5% licencing fee, equating to €550k of revenue p.a. In addition, there is an opportunity to roll down Convert’s IP and technology across all Sennheiser’s products, including its lower end products. Contract and development discussions on this are to be continued in September.
SF: Is there anything else of significance that you that can share with us?
MB: Let’s start with ION EZ Vinyl2 converter app, which incorporates Convert’s technology. The product launch commences on Tuesday 21st August and will feature major investment in PR, social media marketing and user ad marketing activity. ION will also be direct mailing the millions of people on their database who have already purchased a USB turntable.
In addition, there has been a great response from Amazon where ION is the number one vendor in their category – they want to bundle the App developed by Convert with a USB turntable sale, tablet, cable etc. This means not just for ION USB turntables, but all USB turntables bought on Amazon would be offered the App. Amazon soft bundling service is a getting great traction.
Convert Technologies stands to get the chance to maximise Amazon affiliate income. The QR card goes out with all USB turntables shipped. Furthermore, Convert is planning to use the Amazon model to then push on to Apple, Samsung and Google utilizing the ION relationship.
ION have confirmed they would like to follow the same strategy to look at the CD ripping solution in mid-September. This should appeal to a much broader market and offer Amazon the opportunity to soft bundle a package with a Kindle CD drive, cable and app.
Convert Technologies’ ground-breaking licensing model, working with large established brands who have market reach to drive excellent sales numbers, is starting to reap dividends. The big brands have the distribution, sales and marketing muscle, what they don’t have is an ability to innovate and that’s where Convert comes in.
With protected IP, grant money vindication, retail traction, a huge market to tap into and the potential to move into other sectors by licensing their tech, Convert is well placed to deliver a period of rapid growth.
If you would like to invest into Convert or learn more about this innovative company, please click here.