1Mby1M Deal Radar 2010: Clickfree, Toronto

Clickfree makes and sells automatic digital storage products for consumers that are designed to be user friendly and “less work than a toaster.” The company has benefited greatly from increased consumer awareness of the need for a digital backup strategy, played out in blog postings, how-to articles, and chat rooms across the Internet.

The Toronto-based company was founded in 2005 by CEO Bryan MacLeod. He founded two previous technology start-ups, one in consumer electronics (Intrigue) and the other in medical electronics. In 2004, he sold Intrigue, the inventors of the Harmony universal remote control, to Logitech Inc. and joined the Logitech team to manage the Harmony remote control business. Other key managers are president Ian Collins and CTO Jeff Brunet.

MacLeod founded Clickfree because he believed there was nothing on the market that offered consumers a simple backup solution, and he saw consumer backup was one of the biggest if not the biggest unaddressed problem in consumer electronics. Timing played a factor in the company’s initial growth and success. Digital photography was taking off. Consumers now realised that it wasn’t just spreadsheets they were afraid of losing: photos, videos and music were now all electronically stored on personal laptops. These items make home computers personal and valuable; the thought of losing those memories and files becomes similar to losing irreplaceable items in a fire. Devices such as the iPad only emphasize the need for storage backup.

Products include a multicomputer home backup systems that works with a wireless router; desktop and portable backup systems; a travel, credit-card sized backup system; and iPod, network, and DVD transformers. Customers can buy products from Clickfree’s own online store or from a number of online and physical stores.

The market is fragmented and has many players including Imation, Lexar, Sabio, and Digital Foci. Major competitors are Western Digital, Seagate, HP, Toshiba, and Hitachi. Since Clickfree is smaller than these companies, it competes by focusing solely on providing best products to the consumer segment and and on the power of recommendations. It relies heavily on the net promoter score (NPS), a measurement based on the fundamental perspective that every company’s customers can be divided into three categories: promoters, passives, and detractors. By asking one question — How likely is it that you would recommend [Company X] to a friend or colleague? — companies can track these groups and get a clear measure of their customers’ eyes.

The total addressable market comprises anyone who owns a computer. According to an IDC-Forrester survey, at present there are about 500 million individual consumers globally who own a computer, a number that industry observers expect to increase to one billion in the next few years. More specifically, Clickfree targets nontechnical users, business travelers, and nontraditional demographics such as women, the elderly, and the enormous number of baby boomers who are keeping more of their personal files and personal media online.

Clickfree introduced its products on TV shopping channels such as QVC and TSC of which there was broad consumer awareness. It then focused on retail and began selling its products at Office Depot, OfficeMax, and Best Buy.

Initial funding came from MacLeod in 2005, who shortly after turned to friends and high net worth individuals. There was a $10 million Series B from Jefferson Partners in 2009, with $2 million from MacLeod. It was during this investment that the company changed strategy of going from a licensing agreement to building a brand. Finally, there was a $15 million Series C from Canada-based Tandem Ventures just announced this month. There are no plans to raise additional funds. The most recent investment supports growth initiatives that, Clickfree hopes, will propel it to $200 million revenue by 2012 and an eventual $1 billion business.

Since late 2008, the company has been operating at break even. Revenues range from $40 million to $50 million, almost triple the $15 million in revenue earned in 2008, the first year of shipping.

MacLeod’s two-pronged growth strategy is geographic expansion – Clickfree has established itself in North America and is looking into Asia Pacific and Europe, the Middle East, and Africa. In all markets, it plans to continue to focus on establishing relationships with key “grassroots” Web publishers that cater to its target demographic. Targeted partners include Web sites on mothering, parenting, photo enthusiast, self-help, and tech review, on which Clickfree aims to place advertising, contests, reviews, and cobranded offerings. Second, the company will continue to expand its product line and aim to stay ahead of the completion through innovation. There is no plan for an exit.

Recommended Readings
Booming demand for digital storage space (from Network World)
An Amazon review of one of Clickfree’s more popular products
nnovating Web 2.0 Storage: Fabrik CEO Mike Cordano

This segment is a part in the series : 1Mby1M Deal Radar 2010