Hardware is hard; you make it happen or you don’t with Keith Nothacker of BACtrack

Transcript

Ledge: Keith, great to have you. Thanks for joining us.

Keith: Ledge, thanks for having me.

Ledge: You have a really cool story that I want to get to tell, but first I was wondering if you’d just give a two or three minute background introduction of yourself and your work before we dive into details.

Keith: Absolutely. I’ll take you way back. I was actually an economics major at the University of Pennsylvania, but early on I knew that I wanted to be an entrepreneur. I needed to be, almost. I wanted to start a business.

So, I had internships doing online marketing sort of before the Googles and the Facebooks of the world. Actually selling products online in school. When I was selling products I thought, what are some interesting opportunities?

People occasionally tend to drink alcohol in college. Some people know that. I just thought it was crazy the police could test people for a DUI, and if you were above a certain number you’d go to jail, and if you were below a certain number they’d send you on your way.

I saw a market opportunity there. Started with e-commerce early – and this is 17/18 years ago. We have worked our way to the point where now we design all of our products and our software. We’ve created this space that didn’t exist before, and that’s really exciting.

BACtrack pioneered the market for consumer breathalyzers and it allows people to test themselves and know their alcohol level.

It’s been, and currently still is a really fun, exciting journey that’s involved a lot of exciting technologies.

Ledge: Start us off with one guy in a garage. What was that version of your story? Right at the beginning there, making a product. Where does the product even come from – especially at that stage. It’s quite a long time ago.

Keith: Yeah, like you said, it’s one guy in an apartment and you’re just trying to figure out where to even start. Everything seems so big and such a massive undertaking, when really, now looking back, it’s just a bunch of steps. Anybody can do it. If you don’t have a lot of dollars and budget, you have to be thrifty.

Early on I connected with some designers in the San Francisco Bay Area. I moved out here after school. Worked downtown San Francisco.

The first stage was talking with people who had created hardware products before and understanding, what are we trying to make? What are the goals? What are the benefits to the end user? Let’s see how that would impact an industrial design.

We started there and took it from there.

Ledge: How does the product or prototyping and hardware idea get to where then you’re starting to think about, I’ve got to make a lot of these, and I have to distribute these things and get them on retail shelves? Consumer is such a different space then that a lot of maybe the B2B types of solutions, particularly in software that we deal with.

This is foreign to me. How do you get a physical thing and make lots of copies of it and get it on shelves?

Keith: I know this now, but hardware is hard. People say that and it’s true. The design process, not having studied engineering in school, that was all fascinating to me. It’s exciting. You’re creating this thing. You’re creating industrial designs and you’re doing prototypes, and that’s fantastic.

Then you get to a point, wow, we actually have to make these at scale to a very exacting spec, we have to pay for that and then we have to sell them. There’s this whole sort of design process that is entirely different than the manufacturing and sales.

We were fortunate. We connected with good partners who could help connect us with contract manufacturers. So I took some early trips out to Asia and learned a lot. During one of our first big manufacturing runs for one of the first products we designed ourselves, this model called the B70, I remember I booked a one-way ticket to China and I was there at the factory, working with everyone and eating until it was done. Until we got it done, and then booked the trip home.

So either you’re committed and you make it happen, or you don’t. Everybody makes mistakes along the way, but every day, every week you learn more about what it takes to produce that hardware, make it right and get it sold.

Ledge: You talked about growing your own engineering department or engineering organization now sort of in-house.

What was that like? The process of deciding that we ought to now internalize those things and start to take over our own design destiny? Now you have hardware and software. How does that all fit together from a personnel standpoint?

Keith: Yeah. Especially since 2019, it’s more and more a mix for a lot of companies. We certainly make use of long-term engineering experts and partners that we worked with for a long period of time that are external to us, and we have people internal that are making important contributions.

So, to me it’s about, what are you trying to accomplish, what resources do you have, and how can you get to that goal? We’re privately held. We’ve actually never raised outside capital, which seems to be a very rare thing in the Bay Area here.

Our journey is very different than a company that raises 20 million in VC funds and can hire out entire departments right away. We had to be smart about, okay, here’s the mechanical engineering that we need done for this one product. What’s the best way to accomplish this?

It was really more of a targeted approach, finding just fantastic people and groups that can help us, and help us grow during times when we were smaller and weren’t as sure about the distribution.

Now, because BACtrack had distribution in tens of thousands of locations, when we launch a product we feel good that we’re going to sell it, so we can invest more up front. But a smaller company has to hedge their bets early on.

Ledge: You spent all these years in your own company. What percent of the days have you ever woken up and said, “You know, maybe I should go do something else.” Has it been love every day, or what’s that entrepreneurial journey been like for you? Some good days, some bad days? Just go through the flow there.

I ask that question specifically because there’s this trough of sorrow stage and cycle that a lot of people go through, and they don’t get the immediate hit. I wonder what that was like for you, because it’s easy to look at it now and go, “Wow. He went from zero to all these units and a big footprint.” But maybe it always didn’t feel that way.

Keith: Yeah. It’s a great question, and honestly it’s something I thought about myself just more recently when I say, oh, I’ve been doing this for this many years. The answer is, we’ve really created many different businesses along the way. I’ve been able to scratch my entrepreneurial zeal many different times with these different businesses.

Here are the specific examples. You know, early on we were trying to create a market just through e-commerce. We have the product and just try to sell it online and I could make use of a little bit of e-commerce background I had. Then, when we get in to make your own product, that’s a whole new world. That’s exciting to me. I’m learning. That’s new. I get to work with very smart engineers, hardware, manufacturing.

Then to open up sales channels. There was no category for breathalyzers that existed in Best Buy and these other accounts, so that was something that was brand new, that was fresh. That was a different type of thing we were doing.

Then, we launched BACtrack mobile. That was the first smartphone connected breathalyzer, and so then we get into designing apps, and that opens up a whole new world. With the technologies and the power within a smartphone, which in 2013/2012 when we were designing that was just opening the doors to a brand new world of capabilities.

We could have this rich display that people already had. We invented new features. We showed people how long it takes for their BAC to return to zero, and we credit that to having the ability to work with smartphones.

So, having all of these business units. Even now we’re working on a wearable alcohol detector, that also again it’s like I’m starting over fresh again. Starting this new product that has different needs and new customers.

If it weren’t exciting I wouldn’t be able to do it, but it’s all exciting with all these different stages.

Ledge: You were in a space that would be easy, you’d think – at least from an engineering and product perspective – to clone and to disrupt. Yet you really went through multiple iterations and continued to kind of lead the pack there.

What was that thinking like? How do you know when you get to the spot that you can do another thing and stay ahead of the curve?

Keith: I honestly thought it would be easier to make accurate breath alcohol tester devices, and it is not an easy thing.

Somebody makes an electronic device. You make it in the factory, throw it together, and boom, it’s done. But with a breath alcohol tester, one of the steps during manufacturing is you have to calibrate it. What does this device do? It’s measuring exhaled alcohol that’s coming from your lungs, and it’s converting that signal into an estimate of your blood alcohol content.

So there’s actually calibration equipment where we’re simulating human breath, heating a mixture of alcohol to a certain temperature, having a certain flow rate, and setting that as example BAC points in the calibration.

That’s not at all an easy process. That’s just making sure that we have had to focus on that and learn from that. That’s also a massive data exercise to make sure that we’re understanding the sensor data. That’s something that we wanted to prioritize and that’s important to do because anybody can take a certain type of sensor and throw it on a circuit board and say, “Hey, this is my device.” But to have it accurate and reliable over a longer period of time, that’s an entirely different challenge.

Ledge: Talk about the big data in your business. You were doing business probably before it was called big data, and you’ve got a long run there so you must have been collecting all kinds of statistics, and learning from… I imagine data visualizations are important.

What does that software backbone look like for a business like yours?

Keith: There’s obviously the manufacturing data that we continue to dive into in greater detail every week and every month now. That gives us just more precision, and better understanding of sensor performance in different environments. That’s important. That’s really important, not just for us but I imagine for any sensitive device.

On the other side of this, consumer-facing, when we have smartphone connected devices, if people are saving data, they’re taking results we are very strict in clear confidentiality. Users own their data. They can delete it. They can remove it. People say, oh, are you sharing it with the police? Of course not. That’s not what we do. It’s your data.

When people have opted in to anonymize their data and share it with us, that allows us to see locations or time of day. We put out public data studies showing when people drink the most by time of day. When people drink the most by holiday. We’ve even done studies during sporting events like the Super Bowl and watch BACs rise and fall over the different quarters of the game.

It’s really interesting. It opens up a whole new world in our area of knowledge about drinking. It’s really new data for the government, for researchers, for understanding alcohol consumption habits. People know they drink, and the Department of Transportation has highway fatality data that they look at, but one of the things that was pretty exciting for us was we were able to match our data with the peak consumption times. So people are peaking out around 3:00 a.m., and that’s actually matching up with the DoT highway crash data.

So, just adding to the public discourse on important events. Ten thousand people still die every year from accidents that involve alcohol. It’s a serious thing. The data is just out there and it’s what we do with it that matters.

Ledge: Do you look at that as a public contribution also, or is there a business line that you’ve developed around data as well? I think a lot of entrepreneurs think, hey, I can monetize my data. Is that an easy thing to do or does it really only happen downstream when you’re critical mass?

Keith: You know, we don’t do anything like that at all. We don’t monetize the data. We’re not interested in monetizing the data. Like I said, the data that users create, that’s their own. They can choose to anonymize it and share it, and many people don’t. Or you can buy a device that isn’t even smartphone connected and you can just have it yourself.

But for us, when I speak of these consumption reports or data about when people drink during the Super Bowl, this is trying to elevate discourse and raise awareness. Awareness was one of the key things, one of our key challenges throughout the years.

I remember, I don’t know, 10, 12, 15 years ago being at the Consumer Electronics Show in Vegas and people would walk by and say, “Breathalyzer? Why would I ever want that? That’s stupid.” So, one of our challenges, in addition to engineering, was, hey, just telling people, “This is valuable for you. You should have this. Keep it in your car. Use it in your family. This is a serious issue,” and we tried to make it something that looks good, and is sexy, and you want to use, and you wouldn’t be embarrassed to pull out and test friends and family.

That’s in our DNA, to try to make a consumer product that’s accurate, that’s professional, but that people want to use.

Ledge: Yeah. Hearing you say that and get excited about it, it’s easy to forget about all the really nasty failures of consumer technology – your Google Glass or what have you – that would have tried to pass the same bar there and failed miserably, and became a nasty meme.

You’ve obviously avoided that, which speaks to design discipline. I imagine you must have a pretty robust feedback mechanism from users. How fast do you iterate the product for your next versions? What feedback collection mechanisms do you have to know what people want?

Keith: I mean, does it ever stop? Is there ever a discrete stop and start to when you launch a product and when you’re iterating on the next one? I don’t think so. It’s continuous.

Every customer complaint, problem, report, we want to see that. We want to know that. We want to understand it. We have to.

There are just more ways to see customer feedback now versus ever before. You talk about reviews, and you talk about feedback. People expect to be able to post negative feedback if they’re not happy with a consumer product. They actually expect the brand to comment or get back to them.

I think that the expectations for a consumer device are obviously higher than they’ve ever been ever before, and I think that’s great. I think it’s going to ultimately lead to better products. When you have a world where we’re going towards that one global market, it’s important to have that type of honest feedback because there are a lot of bad actors in the world. There are a lot of bad actors now trying to sell into the US, more so than ever before.

I think people need to see that, and good design teams and good manufacturers will take that into consideration immediately.

We’re doing all the stuff that I think leading companies should do. We’re creating prototypes ahead of time. We’re testing well in advance of launches. We have our core list of supporters who are not friends and family, but like outside customers that want to get early access and we share with them.

Just being ahead of the curve and having customer success teams work with that, and make sure that that feedback there gets directly sent to a member of the hardware team and the software team. I don’t think you can afford to have these different layers of bureaucracy and have it filter through a lot of people. I like when it gets right to the people who are working on products.

Ledge: So, last question. You maybe are a fan of The Office, as I am. There’s a great episode where Jim is messing with Dwight and he starts sending faxes to Dwight from future Dwight, and he warns him that their coffee is poisoned. So he’s messing with him.

I wonder, if you could be future Keith and send a fax back to yourself, I give you a piece of paper and a Sharpie for 10 years ago, what’s your, “The coffee is poisoned?” What warning do you give yourself if you get one chance?

Keith: I’d say, don’t be afraid of any technology. Your company and you can do it all.

I think, for me specifically not being an engineer, not studying engineering in college, things felt exotic to me at the beginning. I thought that we couldn’t do stuff, or it was only in the realm of certain other groups of people. But really, if you find the right people and have them on your team, you can do anything.

I think that’s important for us and for any company that really wants to be aggressive about inventing and creating great products.

Ledge: Great insights, Keith. Thank you so much for joining us. It’s been really cool talking about your business.

Keith: I appreciate it. Thanks for having me on.