Built on the back of a humdrum home security enterprise, Vivint has grown into one of the world’s biggest and most successful ‘smart home’ businesses, the most visible component to the average consumer of the burgeoning Internet of Things. Still private, Vivint was valued at over $2 billion in late 2012, and it hit $650 million in revenue last year, 16 percent more than the prior year. It recently attracted a $100 million investment co-led by billionaire tech investor Peter Thiel. In contrast to Silicon Valley’s gadget-obsessed innovators, who tend to agonise over product design and tech specs, Vivint has succeeded on the sheer power of its sales network. Its door-to-door salespeople spend long days proselytising the benefits of the smart home to anyone who will listen.
It’s not just the legion of peddlers that makes Vivint unique. The company owes its success, in part, to a business model that breaks with industry norm. Rather than sell individual devices, which can be pricey, Vivint relies on a subscription model. The company installs an average of $1,500 worth of hardware into a home—a mixture of gadgets made by Vivint and the likes of Nest and Amazon—and in return it charges a monthly fee that can total $480 to $960 per year. Customers sign a contract, which lasts between three-and-a-half and five years. Vivint doesn’t actually start making a profit until about three-and-a-half years into the relationship. It’s akin to carriers subsidising the price of a smartphone. It helps customers avoid the sticker shock of an expensive purchase, and it gives the company a recurring revenue stream. “We know that for the smart home to succeed, it has to be a service that’s delivered to the customer,” says Todd Pedersen, Vivint’s ultra-competitive co-founder and CEO. “We have to win business every day, every month, every year. We’ve done this for so long, and we know it’s complicated. To get lots of hardware to communicate and do it effectively in a way that delights the consumer is not easy.”
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