#24 unGlue

I’m Josh Muccio and from Gimlet Media, this is The Pitch, where real entrepreneurs pitch to real investors.

[hellos and welcomes]

Alon: Hello. How you guys doing?

Jillian: Good.

Alon: My name's Alon.

Charles: I’m Charles, Alon, nice to meet you.

Jillian: Lovely Alon. Nice to meet you.

Daniel: Daniel. Nice to meet you.

Alon Shwartz is here today to pitch his startup, UnGlue, his answer to cell phone addiction. But first he has to convince our investors… so let’s meet them:

Daniel Gulati is with Comcast Ventures, we have Jillian Manus with Structure Capital, Phil Nadel with Forefront Venture Partners, and Charles Hudson with Precursor Ventures.

Each of them brings a unique perspective to the table but they’re all looking for one thing, a startup founder they can put their money behind to turn a fledgling startup into a massive success.

Now, it’s all up to Alon Shwartz to prove to investors that his startup is one worth betting on.

Alon: Yes. So my name is Alon Shwartz. I'm the CEO and co-founder of unGlue. So if you have kids, if you've ever seen kids in a restaurant, in the street, in the park, you know that kids are pretty much glued to their devices. An insane amount of time. They're spending about six and a half hours per day on their many devices. And it's not getting any better

It's not just Alon who's worried about this. A lot of recent research has shown that those hours spent staring into the glowing light of a smartphone is really bad for kids. Some studies correlate more screen time to depression and loneliness. 

But, parents still have a hard time keeping kids off their phones — a problem Alon knows all too well.

For him, it all came to a head one afternoon. 

Alon: I came back home Go to one of my kids, I won’t tell you which one And walking into his room, he's supposed to do homework, of course he's on his phone, Snapchatting. So, I told him, okay, put the phone down. Sure, sure. Okay. Sure. Okay, I come back 20 minutes later just to make sure, sure it is actually what it is, and of course he's watching YouTube videos on his computer instead of doing homework on the computer. Well, you know, just to be sure, I come back 20 minutes later, and of course he's taking a break, . And at that point, that's it, I see red. That's it. I decide to put an end to this. I just unplug all of the computer, the Xbox, took his phone, took his tablet, threw it on my bed.

If this was a movie, this would be the part where the main character has a totally over-the-top comical meltdown.

Alon: I went to his brother, to his sister, took all of their devices as well. They of course thought dad went crazy. And I had this nice pile of electronics in my bedroom. Our bed. It was beautiful.

It was beautiful... and satisfying. But even in that moment of triumph, Alon realized that this solution probably wasn’t the most sustainable one. At least not if he wanted to sleep on the bed again. So he thought, wouldn’t it be nice if instead of repo’ing all of their electronics, I could just get my kids to use them less? 

Alon: how do we get them to stop or pause using the things that are really hard to stop? Like social media, watching videos and playing games? And when I couldn't find something that actually does that, I decided to start unGlue.

So Alon and his team set out to build that something else. And after years of development, they finally unveiled unGlue. 

Alon: what we’ve done, is we empower kids to manage their own time. Instead of that becoming all stick control, we made it into something fun, a game, that kids actually like. I'm here to raise $3 million to continue to grow the business, find investors and partners to join us in this important mission that we're on.

Jillian: Tell us about the product.

Alon: The product. What is unGlue, first of all? The parents download the unGlue app to their phone, they start the set up.

So once the app is installed on their children’s phones, parents can see just how much time their kids are spending on what apps. They can also limit time spent on apps that have the potential to be addictive. 

Alon: So if they spend it on anything from Snapchat, Instagram, Clash Royale, whatever, YouTube, Netflix, everything, we count that time. When that time ends, they can still do homework, do everything, listen to music on Spotify, no problems. Can't watch any more cat videos. Can't Snapchat until midnight 

But it’s not just the parents who have the control. With UnGlue, kids can actually earn extra time to spend on their favorite apps. All they have to do are some good old fashioned chores.

Alon: Walk the dog, feed the cat, help your brother with his homework. You can earn time. Obviously, it makes parents super happy. Like, oh my god, my kid just emptied the dishwasher, that's insane. The kid's happy because, well, I just have to empty the dishwasher to earn 15 more minutes? Score. No problem, I'll do that.

At the end of the day, kids retain some control over their phones; parents are seeing their kids more — everyone is happy.

So what makes unGlue happy?

Alon: So let's talk about business. 

[laughter]

Daniel: How do you monetize?

Alon: It was silent here for a second. So it's a subscription product. first fourteen days are free. Free trial. Everything is open. You can see exactly how it works. After 14 days you can subscribe for $10 a month or $84 a year. What we see is that on average, 12 - 15% of our users, of our active users, subscribe. 

Phil: Just define that a bit better. 12 - 15%?

Alon: Of active users.

Jillian: How many active users? 

Alon: First of all, active user means at least one kid with at least one device. So the parent...

Phil: Set it up.

Alon: Right. They set up, they sign up, they finish the set up, all the timing, everything, they got their phone from their kid, they put the app there, there's no resistance, whatever. They're using it. Out of that, 12 - 15% subscribe. 

Jillian: How many active users?

Alon: So active users, we have about 13,000 active users right now. So we have about 800 paying subscribers.

Jillian: I’m coming at it from a parent point of view. I have a feeling it’s going to be very difficult to talk your teenager into You’re saying they’re going to buy in. I don’t see a teenager buying into this. I see that they’re going to be perceiving this as punitive. And so instead of incentivizing them, you’re actually limiting them to something that they already feel they have the right to. You give them a phone, they have the right to use it however they want.

Alon: it’s really all about how do you present to the kid. And I’ll tell you why. So I’ve talked to 1500 parents and their kids already. And what I discovered is that unlike what we think, that kids want 8 hours, 12 hours, that’s actually not the case. By now, teens know that too much time in front of the screen is not good for them. They know. 

So Alon has done his homework. And the results of his research are good: parents—and kids—know that their screens aren't good for them. But it's one thing getting people to download an app because they know they should — it's a whole other thing to get people to keep using it.

Phil: I know it’s early, but on the monthly users, what kind of churn do you see?

Alon: So first of all, the monthly to annual, just about 52% of our users go to the monthly, 48% go to the annual. So again, for me it’s a really great show that they like what they see. They like, okay fine, it’s a year, let’s go. It’s also for me to show that we can probably play with the numbers.

Phil: That’s a pretty big discount that you’re giving them for the annual.

Alon: Yeah. The gap there is encouraging them to do it. I definitely think we can play with the numbers. This is... Price testing is part of what we’re going to do soon enough. Again, a list of a lot of A/B tests we’re going to do. Every week there’s a test.

Phil: So what about the churn? 

Alon: So the churn, what we see is if you look at our total subscribers, we see about 7.5% drop month over month.

Phil: So 15% of the monthly subscribers?

Alon: So 15 - 20% in the first two months we’re losing. And then it starts flattening out.

Those are pretty impressive numbers for a consumer product — especially one built on the back of breaking bad habits and doing chores.

Jillian: Can you just give me, who built this, a little bit of your background on this? Are you an engineer?

Alon: So my background is in engineering. My previous startup before unGlue was called Docstoc. It was a very large website for small business professionals. So documents, videos, articles. I co-found that with another guy back in LA. We started in 2006. The company was acquired by Intuit in 2013. After that, I told my wife, that's it, no more startups. She took one look at me and said, sure Alon. I believe you. So that lasted for about a year. And honestly, when I realized what's going on at home, my wife is a high school teacher, and when I realized that, you know, pulled me aside, I mean, how can we not solve this problem. Installing anything, anything out there. Something has to be done. So I took it upon myself to solve the problem for the next generation.

It’s one thing when a founder walks in claiming they’ve created the next big tech company. It’s something else entirely when that founder already has a successful startup under their belt. That’s when investors sit up and really pay attention. Now the thought on all their minds is: can lightning strike twice?

Here’s Daniel.

Daniel: So what protection do you have here against Phil starting a company that undercuts unGlue by $5 a month and basically takes a share that way? 

Alon: So first of all, the technology itself. It took us about two years to build the technology to cover any device, wherever it is. That’s very, very complicated. Kids will try to hack it, kids will try to uninstall it, we need to let the parents know. There’s a tremendous amount of technology behind the scene. It’s super simple for the parents and the kids.

Daniel: Can I just push back a little bit.

Alon: Of course.

Daniel: If I’m taking the vantage point of the broadband provider, I would imagine that 80% of what you’re worried about as a parent is what happens at home after hours. And I imagine that 90% of that is on your Wi-Fi rails anyway. And so, a) is that right?

Alon: That’s not right. No. So kids, we mentioned they are smart. If you block their Wi-Fi, what will they do? They’ll just take their phone and switch off, go to their cellular network, continue to do whatever they want.

Daniel: But you can just, that’s an easy... You can turn off cellular data when they’re at home, or something?

Alon: Sure. You can do every day, go take your kid’s phone, turn it... The reality is, if you need to do anything manually on a daily basis, it won’t work. It has to cover cellular. Most of the kids’ use is actually on their smartphone. Whether it’s good or not, of course not. But that’s the reality. 

Jillian: I know a lot of adults like that, too.

Alon: Exactly. That’s another thing we talk about. Because we’re all addicted, right? We’re all guilty of the exact same thing For me it’s proof that this is a problem that must be solved right now.

Daniel: It feels like that this is a neat kind of hook product into a bigger ocean of...

Phil: That’s what I’ve been trying to think...

Jillian: What’s the next… 

Daniel: As you think about adjacencies, you’ve got the parent, you’ve got the kid, they’re using the parent every day. What’s the big ocean?

“The big ocean.” In other words, tell me just how big of an opportunity this is for me?

Alon: Perfect question. So the bigger vision really is... unGlue is the solution, the tool they use, kids, to manage their time. Overall, from now until they’re going to college, and beyond. So if you’re looking at unGlue not as a parental control but more as a time management solution that kids use, so if you start figuring out how much time I need to do for homework, how much I need to budget for - and we’re helping with that And that’s a tool that helps them say, okay, well I do need to spend an hour today on practicing for that test. [00:50:00] Or I have an hour of soccer practice, or music, or drama, or whatever, which all the things my kids are doing. And that becomes the tool they use all the time to manage their time.

Daniel: Isn’t that Google calendar? Isn’t that just a calendar app?

Alon: It’s a lot more than a calendar. Because the bigger problem here is... Putting something on calendar is just there. How do you enforce it? How do you enforce it?

Charles: So I have met a couple of companies that are working on this problem, and you all seem to have... It seems to me that Apple letting third party developers use the MDM profile is a big part of what made this possible, to be able to get down to that level of control. How does this all play out in the end? Does it end up like anti-virus, where you have three of four different brands that are similar but market themselves differently? Does it end up with one company that's the solution for everyone? Can you just give me your sense for how the market plays out?

Alon: I think it will be probably one or two players. That's how I see it. And the one or two players will be the ones that the kids will like. Or hate the least. Depending on how you want to look at it. That's how it will play out.

There is no doubt that Alon sees unGlue as the answer to smartphone addiction.

But has he convinced investors that this opportunity is as huge as he thinks it is?

First up, Jillian — who cuts right to the chase.

Jillian: I don't see the long tail. And I perhaps I disagree that this is for kids to manage and budget their time over a long period of time. II see this as very intriguing. And interestingly enough, I probably will use it. I don't know if we'll use it for a year though, and that's about it. Or even two years, and that's not much. So I'm not seeing the bigger roadmap, I think. So I'm going to have to pass. Yeah.

Phil: Yeah. I’m sort of having the same feelings. {sighs} I'm just having problems with it. I just see it too much as a feature and not a product. I think ultimately… I’m going to pass this one.

In less than a minute, Phil and Jillian are both out. Here’s Charles.

Charles: I just think like, in the 80s it was the telephone. I used to stay on the phone all night talking to my friends. And I think there’s a maturity point where you have self-governance, but there’s also times when my mom would come in the room and unplug the landline phone from the wall and put it away. And I think the one thing that I’ve become aware of, it took me a long time to realize this, these online experiences that people are having, they’re engineered for addiction.

Jillian: But the whole point. That is. Exactly.

Charles: That's the whole point. In a way that the telephone and television weren't. You could unplug a TV, you could unplug a phone. And ultimately, if there's no one on the other end of the telephone, it's not a very fun experience. These are addictive single player experiences. And so I applaud you for working on this. It's a pass from me because I have, my biggest issue is the competitive environment. I feel like I don't have a clear enough picture in my head about the endgame of what happens. Because it seems like everyone is seizing on the same set of core technologies, it feels to me, I think you're right, one or two companies will rise to the top. I'm just not sure which one or two it is. But this is one of the most well-thought out attacks on this that I've seen. 

Charles is out. Last up, Daniel.

Daniel: I’m in the same boat as the three of my colleagues here. I think, it’s a hard one. Because I think the utility for the parent is actually there. I think there is product market fit here, and I think you continue to build on that. And some of the features that you were talking about, I think some of them will pop and be really great for parents and for children. I think you’ll get a lot of usage and retention So it’s one of those ones where I really believe in the product, and I really believe in the roadmap, I just don’t see the business that comes out of it. So I’m going to pass as well.

Phil: For me, it’s tough. Because you’re exactly the type of founder I’d like to invest in. I mean, you’re very well spoken, you have the experience, you have previous exits, your vision is crystal clear, you know exactly what you’re going to do with this. So you’re exactly the type of founder that I love to invest in. So this is... You know, I would love to see you tackling a bigger...

Jillian: Yes. Me too.

Jillian: It’s almost like, if in a perfect world, where I would take a perfect founder, and a perfect team, and a great concept that I felt had scalability, and put them together and said, here’s a box of a fantastic... Everything I need. Now let me just... I don’t think unGlue is big enough for you.

Phil: That’s how I feel.

Jillian: That’s the thing. 

Daniel: Go start a flying car company or something.

Phil: You’re a great founder, I’m sure you have a great team. 

Phil: I think you’re going to have a successful business, and maybe a successful exit. But I think the scale of that will be relatively small from our perspectives. But maybe a great result for you.

Jillian: Maybe you want to do a 10 million dollar or a 20 million dollar, and that’s good for you.

Alon: We’ve done that. That’s not the goal. The goal for me, if we were sitting here and all agreeing that we have tens of millions of kids, families, and tens of millions of kids today, in the US alone, that are having this problem, and we are still saying, this cannot be a big business! Then yeah, we’re not looking at the same page.

Jillian: Yes. We’re not.

Alon: Then that’s okay. 

Jillian: Go prove us wrong. Because, clearly...

Phil: Do it.

Alon: Thank you guys so much.

Jillian: Thank you so much.

[byes and thank yous]

Alon is off to prove them wrong. Meanwhile investors are sorry to see him go, but they’re pretty sure they made the right call on unGlue.

Jillian: I loved the way he pushed back.

Charles: So the other team I saw that's working on this... It's interesting. It's an equally experienced entrepreneur who sold his last company for $300 million, who built basically VPN technology that sort of effectively... And that's his aha. The way you keep kids from cheating is you basically tunnel all the traffic so that you can see everything. He's at 3.99. So the price based competition that you talked about is... And there's two or three others. And I just worry that the market quoting price ends for this ends up being 99 cents until it's free. Until it's free.

Phil: It won't be zero. Because they've got to pay him a few pennies to...

Daniel: For all intents and purposes.

Phil: Close to zero.

Jillian: It took him two years to build this. But the fact is, is that he has a small team. And I think this can be replicated pretty fast.

Phil: Next time one of my portfolio companies needs a CEO, I’m going to try and persuade him to drop this, and go join us. Because he...

Jillian: I need a him. I have two companies right now, I need him. Absolutely. 

When we come back, I find out from Elon, if things with UnGlue are still going as planned. And what happens when breaking news from Apple has major ramifications on your business. Coming up, after the break.

[ads]

Welcome back. Three months have passed since Alon’s pitch to investors. So I called him up with a few questions...

Josh: It was interesting for me to watch your pitch because all signs from the investors perspective showed a lot of interest in your technology and what you were building. But then of course they didn’t invest. What was the disconnect you think?

Alon: I think I talked more about, too much about the product and not enough about the business. And that's, that's sometimes a trap I'm falling into. Admittedly so. And I think part of the problem is that there have been so many broken promises in this space. There are a lot of historically parental control solutions that have promised to fix this problem, and there is a certain level of fatigue, um, both for parents as well as investors that have not seen success in this space yet. What maybe I have, you know, kind of failed to convince them is that our way of doing things is vastly different, and that's why, so far, we are very successful 

Josh: Yeah...I know what you’re saying. But I don’t think the investors were hung up on the fact that there have been a lot of failures in this space. It didn’t feel like they were like, we’ve been burned by this kind of product before. It felt more like they just didn’t think you were solving that big of a problem.

Alon: A hundred percent of kids are addicted to their devices in this country, not to mention other places in the world. So by any measure of the imagination, this is a bigger problem. And the question, of course, is is this a bigger business? It's just not for everyone. And... Which is fine. Perfectly fine. You know, we're finding the investors that are passionate about the problem we are solving, see the opportunity, certainly there are risks, but hey, all of these investors are in the business of risk. But yeah...

Josh: I think the craziest part to me, Alon, was that the investors, like, we know they didn’t see the big opportunity that you’re seeing… but they liked you. Like, they actually said they would invest in you, just not UnGlue.

Alon: Yeah, that’s not how life works. I’m being driven by things I’m passionate about solving, not by appeasing investors but, fortunately for me, this is the problem that I chose to solve. And actually, I think it's fortunate for the world because we will solve this problem for the next generation, and this will be that everyone will look back on, and, "Yeah, that was one of the things we should have invested in." And that's fine. Right, again, this is not for everyone. 

Josh: Wow, you're so confident in that. Which is impressive. I admire that.

Alon: I mean, this is not ego or vanity, it's really not. It is simply a confidence that this is a real problem, and our solution is a working solution. and not because I think so, but because that’s what families, parents, kids, educators are saying so everyone is addicted to their devices in one form or another. So it's just easier for us to pinpoint to our kids and say, "Ha, they're addicted." But the interesting part is when they asked them "Do you think your kids are addicted to their devices?" And 65 percent of them said, "Yes." Their kids are addicted to the devices. When we asked them about themselves, 67 percent said they are addicted, the parents are addicted, right. So this is their own admission, right. So we're addicted to that content that is just getting us hooked on watching more, clicking more, scrolling more, liking more, and that's just the reality. So Unglue really is the solution for that for everyone. Because if you think about Unglue as the Weight Watchers for your digital calories, right? 

Josh: Weight Watchers for your digital calories. That’s great.

Josh: Alright, so tell me about the big thing in the news that happened, that I'm sure listeners will recognize it... From your perspective what happened? 

Alon: So what really happened is two of Apple's biggest shareholders wrote an open letter that pretty much said, "hey Apple, you built an incredible product, but from all facts, is showing that this is a very addictive product. And you can and should do better to help parents solve this problem for their kids." That's pretty much the essence of it. Of course immediately I opened a bottle of champagne, and drank a glass. Great. Fact of the matter is now that something has to happen, and do I believe that Apple will do something about this? Absolutely, and I think that Apple is, you know, not an expert in this space, and they will have to do something in collaboration with other companies that are experts in this space like Unglue. So I'm very hopeful that something collaborative will happen, and that'll take us to a whole other level 

Josh: So you're driving towards the hope that you'll get acquired? 

Alon: I think that's a possibility, um. Again for me, the mission is solving this problem and building a big business around it. And if Apple, obviously it's a huge partner that would allow us to reach many, many millions of people. So it definitely fits that vision and the mission, so it won't be a bad outcome to be acquired by Apple. 

Josh: So if someone from Apple was listening, which I'm sure they are, do you have anything you want to say? 

Alon: Alon@unglue.com. 

Josh: (laughs)

Alon: Shoot me an email, we can talk about terms. 

Alon is close to closing his $3 million round and hopes to pour that money into marketing unGlue… but of course there’s always Apple ;)

I personally think this is a huge problem that needs a solution, not for my kids necessarily. But for me! Of course, you should stay on your phone... — and go over to Apple Podcasts and leave us a five-star review.

We also have a question for you: it feels like founders like Alon, who are trying to solve a real world problem, are often the most driven and passionate. But it can be hard to get others to realize the scope of the thing you’re trying to solve. So we want to know: have you ever started something because the problem felt big, and you had a passion for it. But you just couldn’t get investors or customers to feel the same way? And what did you do about it? 

Head on over to thepitch.show/discuss and tell me what you think!

Our show is produced by me, Josh Muccio, Kareem Maddox and Molly Donahue. We are edited by Devon Taylor.

We are mixed by Enoch Kim. Original music composed by The Muse Maker and Bobby Lord. Our Theme Music is by Breakmaster Cylinder.

Lisa Muccio plans our recording events and thanks to Samira Sohail for her reporting on this episode.

And for introducing us to Unglue I’d like to thank Connor Sundberg and the team at Amplify.la

As a reminder, no offer to invest is being made to or solicited from the listening audience on today’s show.

All right -- you’ve been listening to The Pitch from Gimlet Media. See you next week.