The Sound of Innovation: EDGE Sound Research🎶
Happy Thursday! 👋
I’m excited to announce that Omnidollar is backing the EDGE Sound Research (ESR) Team in their $500K pre-seed round, led by Sunstone Investment with participation from Kern Venture Group! Fresh out of Techstars Minneapolis Twins program, they had multiple competitive term sheets from reputable VCs. For a “hard tech” company in this type of macroeconomic environment, this feat is particularly impressive to accomplish.
Dollars and macroeconomics aside, co-founders Ethan and Val have impressed me in so many different ways. Put frankly, they’re scrappy entrepreneurs who have continuously showed me that they can leverage low-cost/high impact creativity to manufacture something from nothing. When it comes to entrepreneurship, isn’t that what it’s all about? You have to bring an idea to life, and you have to do it as economically efficient as possible. It’s such a unique skillset that is very hard to measure. The entrepreneurs that have “it”, simply have a far better chance of success. These guys have it.
Oh yes, and then there’s the technology that they’ve built which is 🤯. So many times these days, we see new software created to make our lives more efficient, giving us back time to reallocate to more fruitful areas. When a team approaches me with a technology that is creating a unique amalgamation of 2 of the 5 human senses, I’m all ears (pun!).
They are doing to sound, what Virtual Reality (VR) has done to sight. The ultimate goal of VR is pretty simple: Create an experience that most closely reconstructs a real life event. Embodied Sound, their signature patent-pending technology, gets our society closer to reconstructing the sound of a real life event: Sonic Realism.
As a former product-forward founder, I put a heavy emphasis on product during my due diligence. I’ve never stepped into an investment without exiting due diligence passionate about the product and the problem(s) that it solves. However, with Embodied Sound, this marks the first time that I feel an innate responsibility to ensure that our society sees this technology come to life and continue to evolve.
Before we kick off, a few housekeeping items to cover:
This is the first time that I am releasing the deep dive prior to my allocation being closed out. With that, if you’re an accredited investor and are interested in backing EDGE Sound, please feel free to reply to this email.
I’d ask that if you enjoy reading these deep dives, please share this by forwarding to someone that you think may be interested or posting on your preferred social sphere. I’d love to continue to increase the reach of the amazing founders that I back. Thank you in advance🙌!
This one is going to be fun…let’s get to it.
Enjoy!
Myles
Secular Growth Thesis
Here’s the tl';dr version of the secular growth thesis
Virtual Reality has been under construction for at least 2 decades and is close to a major inflection point. If you haven’t read my deep dive on Blockchain, Web3, NFTs and the Metaverse, it may be a good use of 20 minutes to familiarize yourself with the massive secular shifts occurring with theses technologies and how they are interconnected. In the piece, I wrote the following:
From a secular growth thesis, the Metaverse very well might end up being one of the largest tidal waves that Millennials and GenZers will ever experience in terms of sheer value creation. According to Verified Market Research, the Metaverse Market size was valued at $27.21B in 2020 and is projected to reach $824.53B by 2030, growing at a CAGR of 39.1% from 2022 to 2030. Put simply, if you were to invest $100K in to a hypothetical Metaverse ETF in 2020, at those growth rates, it would be worth over $3M by 2030. The reality is that these estimates could prove to be ultra aggressive or ultra conservative. That’s what I like to call a “black box” opportunity. If you have conviction in the right direction on a black box opportunity, the potential return can be astronomical.
When discussing the Metaverse and the implications of sound innovation within this realm, there are so many directions that this can go. However, for the sake of brevity, I really want to hone in on the implications that this technology can have around fan experience. The reason is two fold:
ESR is already being piloted at Sports Stadiums, so there is a natural land & expand strategy that equates to immediate, real dollars for the company.
There are long term implications in sports beyond the stadium experience within the Metaverse that ESR could become a key element of.
Put simply, sports stadiums have a big problem:
They are struggling to get butts, especially young butts, into seats at live events.
As the cost of televisions have gone down, the quality of the experience has gone up. Additionally, the expectations from Millennials & GenZers as it relates to technology is at an all-time high, and their patience is at an all-time low. The, “I want it yesterday, I want it to be awesome, and I don’t want to have to work for it” mentality is real, and it’s fierce. Oh yeah, and they don’t want to pay anything for it. Don’t get me wrong, this is nothing against millennials (I am one of them) or GenZers! I believe it’s the reality of Web 2.0’s disruption to traditional paid business models and the façade that everything is free, when in reality it’s not (their data is being sold).
When I look into my crystal ball, I see an immediate need for enhancing the fan experience, but longer term, I see an incredible opportunity for sports teams to drastically increase revenue. By leveraging VR and Embodied Sound, sports teams will break down barriers to consuming the in-stadium fan experience, recreating the experience within the Metaverse. Over the past 12 months, I’ve seen more Metaverse opportunities come across my desk than I can count on two hands, and I’ve passed on all of them. Until now.
The Opportunity
Imagine being able to sell 10M…100M…1B…you name it…“virtual” FRONT ROW tickets all over the World to experience the game. Better yet, you are sitting at the game with your friend half way across the World. The revenue possibilities are boundless. As I alluded to in the introduction, in order to achieve the truest sense of VR, you must reconstruct a real life event. This requires one to reconstruct all 5 senses of the event, including sound (sonic realism). In order achieve sonic realism, you must reconstruct sound using both vibroacoustics and vibrotactiles, which creates Tactile Perception. If you’re like me, your urge is to jump to Google, so I’ll save you the trouble:
Vibroacoustics: The study of vibration and sound combined to influence physiology.
Vibrotactiles: Relating to or involving the perception of vibration through touch.
Tactile Perception: The ability to perceive objects or judge sensations through the sense of touch.
Sound serves as a guiding light to properly ignite our innate obsession of survival. If you’re walking through the woods and hear a stick crack in the distance, your amygdala immediately notifies your nervous system, triggering adrenaline and cortisol which puts your body into fight or flight mode. Listen to the sound of food sizzling on the grill, and the hypothalamus triggers nerve cells that kick off the feeling of hunger.
Thus far, our society has gotten really good at reconstructing the visual portion of virtual reality, but there has been little innovation around truly reconstructing sound.
The Next Evolution of Sound: The Immersive Era
It’s pretty incredible to go down some rabbit holes on the innovation surrounding the 5 human senses. It’s nothing I’ve ever thought to do, but for this piece I considered it necessary in order to orient myself on where Embodied Sound stacks up. In my research, I found the documentation/research on the evolution of sound technology to be rather scarce. However, one of the common themes was that most researchers broke down the evolution of sound technology into the following:
The Acoustic Era: 1877 - 1925
The Electrical Era: 1925 - 1945
The Magnetic Era: 1945-1975
The Digital Era: 1975-Present
The other big trend has been the miniaturization of audio. Most recently with the digital era, my own observation of sound innovation has been that there have been two key innovations:
Wireless speaker technology (leveraging software - more on this later)
Sound cancelling headphones
I was able to find an amazing infographic that breaks down the different eras here.
Whether you are consuming sound via headphones, a 5.1 dolby digital surround sound or at a live concert, the sound is being delivered to our body the same way. Vibrations compress and stretch the air around you, which in turn vibrates your body. Because humans are wired to hear for survival, the first part of our body to consume sound is your ears. However, depending on several factors such as…
Frequencies: This is what creates the different pitches of sound and is measured in Hz (treble vs bass).
Amplitude: The power behind the sound, which is what we know as volume.
Environment: The surroundings around you that consume the vibrations creating the sound.
…to what degree you feel sound beyond your ears varies greatly. Generally, speakers work like the image below, pushing sound one-dimensionally in an outward direction:
If you’re at a live concert up close to the stage, the chances are high that you will feel significant sound throughout your body, primarily in low frequencies (bass). However, the further you get away from the stage, the less your body will feel. Which brings us to an interesting conundrum with sound: Space. The bigger the space, the less effective current sound actuation methods become. The reason for this lies in physics, and the way we work around it now is by leveraging amplitude and speaker placement to better suit the environment. This highlights a few big gaps in the way that we consume sound today:
Control: We lack control of sound beyond amplitude. Current systems use “brute force” to emanate sound via space, creating a chaotic dissemination of sound.
Actuation: Current means of delivering sound rely too heavily on pre-existing notions of the primary vibration consumption mechanism: The ears. As a result, we’ve created unnecessary constraints around sound innovation.
The gaps above have limited our society’s ability to reliably reconstruct sound in an environment-agnostic way. ESR has cracked the code on how to fix this which I’ve included in an excerpt from Ethan’s yet published/defended PhD Dissertation:
In such spirit, I propose a multimodal embodied sound solution for Aurora: a vibrotactile + vibroacoustic system emitting high fidelity physical vibrations, that will also radiate high fidelity vibrations in the air to achieve a true embodied sound experience. The combination introduces the body as a relevant acoustic sensory pathway so we can begin investigations into the relationship between the body’s physical perception of vibrations and how it is translated to perceived acoustic information. The ears, if available and accessible, will be able to pick up a normative, substrate-corrected frequency response, with the body compensating for the limited acoustic range of substrate which is being sonically excited. The combination of the two sensations should trick the brain into a smooth crossover of the threshold between feeling high frequencies through the body vs perceiving high frequencies through the ears.
Put simply, ESR has created a personalized way for one to more effectively consume sound via touch (vibrotactiles), creating an immersive sound experience second to none. And just like that, the Immersive Sound Era is born.
The Product
It’s a warm Wednesday evening in September on the eve of the NFL Season. Val’s shipment containing the ResonX product arrived that day, so I decided to take it to my fantasy football draft. Once the draft had concluded, I set up the product to demo to a notoriously tough crowd. The anxiety was building given that I had never experienced the product myself, let alone demo’ed it to a room full of people that had zero knowledge of this infant technology. One by one, people sat down with the ResonX at their backs, and one by one, the reactions rang priceless. Some of the reactions were as follows:
“I feel like I’m at the concert, but can have a conversation without yelling.”
“I’ve never felt music like this before. This is insane.”
“This is the virtual reality of music.”
It was at this moment that my perception of sound was forever changed. As I drove home that night, there was an emptiness in the music that I had never felt before. The band that I had grown up listening to my entire life just did not invoke the same chemicals in my brain. I have seen Phish over 50 times live and listened to well over 1M minutes of their music in varying environments & sound systems, and for the first time, it just fell flat.
It’s crazy to think that a product so mind altering, started like this:
Eventually evolved to this…
And now looks like this…
At its core, the ResonX product uses nothing new from a hardware perspective. The guts of the devices consist of two key components that create the unique feeling of sound:
Transducers: A device that converts variations in a physical quantity, such as pressure or brightness, into an electrical signal, or vice versa.
Exciters: A thing that produces excitation, in particular a device that provides a magnetizing current for the electromagnets in a motor or generator.
It was intentionally built to be transducer-agnostic to avoid supply chain woes and to give the team flexibility to bake different sizes based on varying market needs. Given how early this concept is in terms of potential customer adoption, it’s a sound move to give themselves assembly flexibility.
Where the product becomes very interesting is when you understand how the inner guts of the ResonX are producing the immersive sound qualities: Software. As a bit of an audiophile, I’ve watched the evolution of sound through a consumer lens, specifically around how I make my own purchasing decisions. I’ve spent most of my life a brand loyalist, only purchasing Bose equipment. I’ve been able to sample all flavors of audio equipment, from B&W Speakers powered by McIntosh amps to Klipsch and everything in between. However, I always found myself going back to Bose. That was until wireless technological disruption via Sonos and Apple shook the industry. The main way that they did this was by leveraging software to create new user experiences with mainly existing, and some new, acoustic technologies. Now, my headphones are Apple and my home system will soon be converting to Sonos (or whatever incumbent decides to partner with ESR).
This is where the true magic is happening with ResonX. Leveraging their own proprietary software, they’ve created a patent pending, immersive sound experience that provides the most information in audio by combining audibles, tactiles and haptics in one system. This is a first of its kind system to understand information from both the audible and tactile senses to reproduce how the real world interacts with sound.
They’ve created the ability to reproduce real world sound experiences (i.e. in-stadium) within virtual landscapes: Sonic Realism.
The Unfair Advantage
Aside from ESR quietly placing themselves in the pole position of the VR sound race, they’ve amassed a few other unfair advantages:
TAM Optionality: Don’t get me wrong, this can be a blessing and a curse. However, at the pre-seed stage as you strive to find product market fit, I’d much rather have product optionality over being a one trick pony. There are several directions that this product can go, but having multiple multi-billion dollar industries to flex within is categorically unfair. I’ll dive deeper into this later on in the economics section.
Techstars: Sometimes companies are accepted into these programs that are at a stage where the program is simply less effective. ESR was at a perfect stage and was able to leverage the program to obtain a great paid pilot with the Minnesota Twins, and capital connections.
Patent Protection: Patents are only as good as the money that you have to defend them. Thus, I don’t put a ton of weight in it as a competitive moat. However, it is worth acknowledgment and could serve as a strong validation of the technology in the event a patent is issued.
If you read my post on Happied, you’ll see that I’ve learned a lot about the importance of Unfair Advantages, mainly around their staying power and the importance of the founder’s ability to create new advantages downfield. If I had to bet on which of the three had the longest staying power, my money would be on TAM Optionality. As early stage businesses meander the crazy hard path of finding product market fit, optionality can be the difference between life and death.
Optionality is a beautiful thing. When one path doesn’t work, you pivot to the next. You continue this delicate dance until that one day where the universe aligns. That beautifully stubborn “aha” moment that every founder can spend a lifetime searching for. With this founding team and the technology they have built, my money is that they’ll be able to find it and when they do, it’s going to be well…unfair.
The Team
I was told by a mentor that all great founding teams have a:
Hacker
Hustler
Hipster
I’m not fully convinced of the need for the hipster, but I’m fully convinced on the formers. ESR certainly has the 2 most important in Val (The Hustler) and Ethan (The Hacker). As a part of my due diligence, I was allowed to read Ethan’s ~240 page PhD dissertation (unpublished/undefended) on Embodied Sound which has yet to be published. It was an invigorating start-up story of passion-fueled grit. The trials & tribulations reminded me so much of the decade journey that I was on while starting Upper Hand. This paralleled experience allowed me to appreciate the road that they’ve traveled up to this point, and how many times they looked perceived failure in the face, only to keep pushing on.
Their story aside, the big thing that attracted me to the team was Ethan’s connection to the technology. Given his experience in life being hard of hearing, it was evident to me that there was bigger meaning for him in this business. The PhD dissertation (unpublished/undefended) certainly was evidence given how hard he (and Val) had to push through some very challenging times to keep the business alive.
In the end, they are still on the field, recently graduating from one of the top accelerators in the World, pitching some of the top audio companies in the World. I’ll take a swing on a scrappy team with a deep passion to succeed beyond the money any day of the week.
The Business
There are a lot of reasons to get excited about this business, but as I alluded to above, the primary reason for me is the optionality within big TAMs. Aside from their technology being applicable to multiple large industries, the optionality for GTM is pretty extraordinary. As I told Val when we first met, this optionality can be a blessing and a curse. However, in working with Val on GTM strategies, I feel very confident in their B2B approach and how they’ve already been executing within that paradigm, focusing on enhancing the fan experience at sports stadiums. I’ve mentioned this in previous pieces, but I really love SaaS plus models, and this certainly has the potential to evolve into a very nice economical model with sticky recurring revenue streams.
Economics
When considering the economics of the business, I think in two frames of mind: Current and Future.
Current: With their B2B strategy, the pricing is pretty straightforward. They charge anywhere from $15K (4 ResonX) to $40K (16 ResonX), which includes hardware, implementation and warranty. The typical installs are at sports stadiums, recording studios, audio engineering studios and bars/clubs. This market alone consists of ~115.7K potential customers, or about a $2.89B SAM, assuming an avg. $25K per install. If they were to continue on the current course and disregard some pretty massive markets below, they would need to capture about 20% of the market to be a billion dollar company. A very compelling story and in line for what I look for in order to step into a deal.
Future: This is where it gets interesting. In the numbers above, I’ve left out gaming (150M consumers), movie theaters (11.8K theaters), home theaters ($27.24B in 2022), live events (32M attendees), automobiles ($8.56B in 2020), furniture & bedding ($115B), medical ($10.1B) and of course…the Metaverse ($27.21B).
Will they capture all of these markets? It’s highly unlikely, but the fact that they have a technology that is applicable to so many markets this size is incredible.
Realistically, I think the most optimal model to scale moving forward will come from licensing agreements with home audio, auto, stadiums, live events and Metaverse products. Through licensing agreements, the scale can be staggering over time.
Traction:
It’s early in the life of the company, but ESR has some serious momentum. With very little capital raised, they have:
Launched Pro Venue ResonX system following their paid pilot with the Minnesota Twins.
Completed MVP Product.
Completed Alpha Program with Emmy-Award winning producers, celebrity DJs, Esports gamers and accessibility community leaders.
Deployed first bar experience that integrates with Sonos.
Their B2B deployments are still very young, but the pipeline has quickly filled and early buy signals are strong, especially in sports stadiums.
Summary
This has the potential to be one of the biggest outcomes in the history of the Omnidollar Portfolio. That’s a bold statement, but I have a lot of conviction behind that statement. In the end, there are very few truths within early stage venture investing. As a result, you have to develop conviction and step into it with money. Through the experience of completing several early stage deals, building a company in a green pasture industry, and mentoring north of 50 pre-seed companies, I’ve amassed several key learnings that have helped me better understand what I need to see in companies that I back. This has trickled down to what I want people to feel when they see Omnidollar:
High Quality Big Swings
ESR is exactly that. A high quality shot at an absolute grand slam. The difference with ESR is that not only can I hear the crack of the bat as they wind up for this grand slam…I can feel it. That’s the sound of innovation.