Following last week’s purchase of Vancouver-based web-enabled sports eyewear maker Recon Instruments by chip-maker Intel Corp. for a reported $175 million, I spoke to Recon co-founder and CEO Dan Eisenhardt about the deal, what it means for both companies, and the opportunity in the wearables market.
CB: How did this deal come about?
Dan Eisenhardt: We’ve had Intel Capital as an equity partner since 2013. We got to know them pretty well. We don’t use their chips in our platform but we were evaluating them, so we had our eyes on them. We weren’t really looking to sell, but [when they approached us about an acquisition] the synergies were so obvious. Intel is looking to be a player in the wearables market. We’re already here. We’re leaders in the heads-up display market and we’re looking at consumer and enterprise and that’s the next frontier. Smart watches are already out there. The next thing you’re going to see over the next two to five years is a lot of these smart glasses.
I wouldn’t have thought of that as part of Intel’s core business. What made them so interested in Recon?
They kind of missed the boat on the mobile phone revolution. They basically had a monopoly on the desktop business. Now they don’t want to make the same mistake in wearables. It’s a huge market. Any person could have any number of wearables on them whereas most people only have one phone. It’s like an unbounded opportunity.
Will there be any changes to your operations?
We’re staying in Vancouver. I’m staying on. In fact everybody’s staying on. We don’t have one person who isn’t. We may have different titles but we’re still responsible for the same areas. In many ways we have increased responsibilities, as we’re part of a new devices group at Intel. Now we’re part of an ecosystem that’s bigger than it was before, made up of 700 or 800 people. Our brand continues, our product line continues. But we’re not a subsidiary; we’re part of Intel.
Did you need to raise money one way or the other with your launch this year of your own line of glasses, Recon Jet?
With Recon Jet, it’s a consumer product. Before, we were going through eyewear companies—Oakley and Smith and those guys—shipping them our heads-up display. They would put our display in their goggles and sell them through their channels. Now we have that still going strong, but we also have our own eyewear. We’re in the fashion market now. Suddenly we have our own inventory, our own distribution and sales channels, so suddenly our costs are also increasing. We’d have to raise quite a lot of money to get to the next level. Here we could ally ourselves with a strong partner where we could continue what we’re doing and we get access to technology and resources that will really propel us to the next level. It was really a no-brainer for us.
Did you consider an initial public offering? A lot of Canadian tech companies are at least talking about that right now.
If we’d gone the IPO route it would have been later on. There’s risks when you go too early. We evaluated the Intel offer carefully at the board level and thought this is just a great match.
The purchase price was reported to be $175 million. Can you confirm that?
I can’t confirm or disconfirm that. Every term of the deal is under covenant.
Anything else you’d like to add?
I’d like to thank all our supporters. We’ve had a lot of help along the way. Having such a big company and a great company invest in us, and then we stay here, is a great testament to the ecosystem of technology that is blossoming in Vancouver. There are many stakeholders we owe a debt to: UBC, where we took the entrepreneurship course and where the founders met. BCIT and SFU as well; we’ve got post-grads and post-docs that we’ve used for our research and we continue to hire out of their programs. And BCTIA, the British Columbia Technology Industry Association. Stuff’s really happening here. I think you’ll see multiple exits here over the next three to five years.