Smartivity labs is making learning fun for kids and making big revenue

With 3000X Revenue Growth In Three Years, This STEM Toys Startup Could Be India’s Answer To Lego

SUMMARY

Smartivity designs educational DIY kits and internet-connected toys

The company’s revenue grew from INR 65,000 in 2015-16 to INR 20 Cr in 2018-19

The innovative startup was part of the Inc42's 42Next list in 2018

Ideas can strike you at any point. Like at a kid’s birthday party for Smartivity Labs’ Tushar Amin and Apoorv Gupta. The two noticed how even the most expensive toys could not manage to grab the attention of children for more than a few minutes. This got them talking about the need for toys that could offer a more wholesome experience and immersive engagement for children.

Gupta went on to discuss this idea with his IIT-Delhi batchmates Ashwini Kumar and Rajat Jain. Kumar, who also happened to be Gupta’s roommate, liked the idea and so did Jain. Coming from a family that’s involved in the importing and wholesale distribution of toys from China, Jain was well aware of the lacunae in this sector.

After a few months of brainstorming, they decided to take the plunge. In 2015, they came up with Smartivity Labs — a startup that designs STEM (Science, Technology, Engineering, and Math) educational DIY toys, augmented reality-enabled activities, as well as internet-connected toys.

The Smart Pivot

Before Smartivity Labs, the team had come up with a digital subscription-based startup — Yoohoobox that designed arts and crafts activity kits for 3 to 6-year-olds.

“We consider Yoohoobox as our training school. It taught us the fundamentals of the startup world, the toy industry, and retail industry, and the expectations kids and parents have from a product,” said Amin.

However, due to budget constraints, Yoohoobox could only focus on design, or marketing and customer acquisition. They chose to go with designing and therefore had to abandon the digital subscription business model, for retail or in-store sales.

This time, the team faced the major challenge of convincing toy stores to stock its products. The few retailers who signed up did so under the condition that the team sold the toys themselves. Yoohoobox employees spent a few months standing outside toy stores as sales executives, explaining and trying to sell the products to their key target audience — parents.

While painstaking and cost-intensive, this effort proved to be a blessing in disguise as interacting with parents offered the company valuable customer insights and expectations. Additionally, the experience of working with shop owners and external sales staff taught key brand management techniques to the team.

This helped Yoohoobox pivot to Smartivity Labs.

Toying With Ideas

Having been through a rigorous learning experience, the Smartivity team wanted to build products that were not simply art and craft projects. The goal was to create innovative products that offered a comprehensive understanding of STEM concepts to kids, teaching them practical applications, while also being fun to play with.

The company offers STEM learning activity boxes for kids between the ages of 4 and 12. These DIY boxes are designed around fundamental scientific principles and their real-world applications. Kids can put together the building parts — made out of compressed wood, as per instructions in the booklet that explains the scientific principles behind each activity or creation.

The company also offers AR-enabled colouring and jigsaw puzzle activities that implement Smartivity Labs’ patented ‘Augmented Reality Colour and Texture Recognition’ technology. The tech allows kids to scan a completed colouring sheet using the Smartivity EDGE app, which shows an interactive AR avatar of the character on the screen. The 3D character is shown in the same colours that the kids have used.

Building A Community of Mini Ninjas

With a myriad of digital tools and learning experiences, even the toys market is moving towards educational and more immersive recreation. While video and mobiles games claim the top spot on the list of options for children these days, STEM toys are making a big impact too. So, the first task was to get children interested in their toys over the more attractive video and mobile games?

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To this, the startup launched STEMNinja programme, where it invited children to collaborate with Smartivity team, right from the conceptual stages of a toy. The feedback and suggestions from STEMNinjas are used to guide product design, features, prototyping, and evaluation.

The first step for Smartivity Labs in developing new toys is aligning a STEM concept or mechanism with gameplay. Once the match is made, a prototype is presented to the STEMNinjas and the company’s advisory board. The advisors evaluate the potential product on age-appropriateness, learning concepts, and engagement, whereas the kids judge the prototype based on their interest level, gameplay, and whether the concepts are clear and then the product hits the market.

At any given time, the company has a bank of products for the next 18 months, ready for launch.

But simply creating engaging toys is not enough; one has to make sure that its products are absolutely safe to be handled by kids. Thus, Smartivity tests its products for usability and designs at the most trusted testing laboratories to ensure any safety flaws or potential hazards.

Since Smartivity exports its toys to over 24 countries, such as the USA, Canada, European countries, Australia, Russia, and China, among others, it has to follow extremely stringent safety certification standards. It claims all its products (including materials and designs) adhere to global safety protocols.

Smartivity Labs Shows Revenue Growth

Smartivity has chalked out three revenue channels including — retail toy stores (both modern retail chains such as Hamleys and Crossword, as well as traditional mom-and-pop toy stores), institutional sales, and exports.

Since its inception, the company claims to have shipped over 1.5 Mn products and has grown from revenue of over INR 65,000 in 2015-16 to registering INR 20 crores in 2018-19. “We are on track for a revenue of over INR 50 crores in FY 2019-20,” Amin claimed.

Although Smartivity’s products are available online, the sales from offline stores form almost 90% of its total retail revenue. Amin believes that retail makes the buying experience for toys more hands-on and experiential.

“The visibility and exposure offered by retail outlets also build credibility and brand equity. A toy purchase decision is hugely influenced by recommendations — either from peers or from the toy-store owners. Therefore, it made perfect sense for us to put in the hard work to develop a strong retail presence,” he added.

Taking Indian Toys Global

Till date, Smartivity has raised a total of $3 Mn through three rounds of funding with the Delhi-based publishing company S Chand Group holding 23.29% shares in it on a fully diluted basis. It had raised $2 Mn in May last year and had raised close to $ 1 Mn in May 2016.

The company has a 65-member team comprising of product designers, technologists, graphic designers, 3D artists, and other professionals working in its studio. Besides, its manufacturing operations are managed by a team of over 105 employees at its 20K sq. ft. factory.

The company claims that all of its products are designed in-house and it owns the design patents on all its creations. However, certain aspects of its operations such as printing and intellectual property protection process are outsourced.

The startup has already established its presence in Russia, Spain, Portugal, China, and more recently Western Europe. It will also be shipping its first orders to retail giants Target and Walmart in the USA and Canada. Among new geographies, it is opening its first market in South America in Chile and is also starting sales in Turkey and Greece this year.

In India, the company plans to launch 18 new STEM educational construction toys along with a subscription-based service this financial year. Smartivity Labs was one of the 42 most innovative Indian startups of 2018, as per Inc42’s 42Next list. This list was compiled by Inc42 as part of the flagship annual report, ‘The State Of Indian Startup Ecosystem 2018.

Why Root For STEM?

A major flaw in the exam-centric education system in India is the lack of inculcating creativity, critical thinking, and real-world application for classroom learnings. This is where a STEM-based curriculum can come into play. The National Science Foundation predicts that 80% of jobs created in the next decade will require some form of math and science skills.

The rising demand for STEM-based toys seems to be a good indicator of this movement gaining steam. According to a report, the STEM toys’ market size will grow by over $914.37 Mn during 2019-2023 and at a CAGR of nearly 5%. The year-over-year growth rate for 2019 is estimated at nearly 4.53%. It also suggests that 35% of the growth will come from the Asia-Pacific region.

The rise of collaborative working and learning environments in educational institutions is one of the critical factors in driving up the market growth of STEM toys. Further, AI-powered STEM toys are gaining prominence among working parents.

“We believe that our future will be shaped by those who have a thorough grounding in STE(A)M fields [A stands for Art]. Our STEM toys are designed to introduce children to core concepts in these fields through making and playing,” says Amin.

STEMRobo, Avishkaar Box, and STEMpedia are some of the other STEM-centric activity companies in India. Last year, Avishkaar Box, raised $767K in Pre Series A funding from Auxano Deals. In the construction toys space, Smartivity Labs considers LEGO as its competition.

“We regard Lego as both a competitor and a benchmark in terms of consistency of quality and legacy building goal,” Tushar Amin, Smartivity Labs

However, he explains what sets Smartvity apart is the fact that its educational construction toys offer more dynamic gameplay and are activities which teach you important skills. On the other hand, Lego construction toys turn out to be static projects, according to Amin.

Therein lies the major differentiating factor between old school toys and the recreational toys of the future, which are also incredible learning tools. Parents and teachers, all around the world, also believe it’s a good idea to get children interested in STEM from an early age and inculcate these skills as part of their kids’ daily fun time. Buying STEM-based toys for their kids is one of the easiest ways for parents to introduce their kids to the way of the future.