Q&A: Owlet CEO Kurt Workman On Going Public, Future Of Babytech Space

Demand for baby technology apps, gadgets and services is stronger than ever as more tech-savvy people start families.

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Owlet Baby Care, headquartered in Utah, came on the scene in 2013 with its Smart Sock baby monitor, which uses proprietary pulse-oximetry technology to track a baby’s heart rate, oxygen levels and sleep patterns so parents can view their child’s vital signs in real time.

About a year ago, we took an indepth look at the babytech “boom” and found that in 2019 Forbes estimated that the U.S. babytech market size was about $46 billion. The global baby monitor part of the sector was estimated to reach $1.9 billion by 2027, according to Allied Market Research.

Meanwhile, we reported that investors had pumped more than $500 million in funding into companies within the sector since 2013.

In February, Owlet announced it would merge with special purpose acquisition company Sandbridge Acquisition Corp. in a deal valued at over $1 billion. Not only could that merger lead to one of the biggest valuations for a parent tech, or babytech, company, but it could also put a spotlight on this sector of technology and innovation.

Owlet co-founder and CEO Kurt Workman spoke to Crunchbase News about the upcoming public debut, and where he thinks the babytech space is going.

The following was edited for length and clarity.

How did you determine that it was time to go public, and why did you choose a SPAC?

Workman: We have a strong core and growth business, growing 50 percent year over year for the fourth year. There was also profitability in the back half of last year. We have only raised $48 million, but $20 million is still on the balance sheet, and we have a $110 million run rate.

Our plan, when we started working with Bank of America, was to do pre-IPO this year, and as we were doing that we met the Sandbridge team, they saw a couple things working at Owlet: 20 percent of babies born in Nebraska, Louisiana and Utah use Owlet. It is also the authentic influencer brand, and Sandbridge is an expert in brands. In addition, our other growth factor is taking our company international. We started in Europe this year, and (Sandbridge) has experience taking brands to Asia and Europe.

There is long-term alignment with traditional IPOs resulting in the 18-month lock-up, which is unlike the traditional 180-day SPAC lock-up with our sponsor. We felt like it was the perfect way to go public, as well as having value-add partners who have a long-term outlook join our board. It was the perfect storm for Owlet. The deal will close this quarter.

What do you expect your new valuation to be?

Workman: The combined business valuation is $1.07 billion, which is the pre-money, while the post money will be more than $325 million. From the last valuation, we hadn’t fundraised in three-and-a-half years, and so it is significantly higher than the $200 million valuation at that round. We also got to profitability, which is the sign of product market fit. A lot of companies buy customers and have to spend money on advertising. Owlet customers know Owlet customers. We have an extremely high product market fit. I think we should have gotten more aggressive with spending, but we are the No. 1 brand in the top three markets. We recently posted something on Instagram and got 1 million views, so there is a strong following.

Looking at the babytech space, what do you see for its future?

Workman: When you look at the market in general, having a baby is becoming a parent’s biggest change in life. However, you go from constant care in the hospital, where they have all the right tools and equipment, to your home where you might just have a thermometer. When I became a parent, I realized this was all up to me. Parents have zero training, but become the doctor, nurse and the dietician. We go through more training to get our driver’s license.

When we were developing our product, we found that parents are dealing with real things, including an average of 44 lost nights of sleep. We set out to build a digital-care platform that guides you with tools and the support you need. We just submitted it for FDA clearance.

This market is overlooked in investment as American parents spend $12,000 per year, and the U.S. market is $30 billion and growing quickly. The amount of spend has tripled in the past few decades. It is also an inelastic market — when parents see something that can improve their child and happiness, they go for it. This gives a lot of room for growth through innovation.

Owlet going public is a big deal. This financing round will mean more money was invested into this market than venture capital dollars. We are trading at a lower multiple right now, but as soon as we get FDA clearance and telehealth integration, that multiple will go up, We will have this big, strong company in the space and venture capitalists will hopefully understand that this market is attractive, and the dollars will flow in.

Who else in the space is doing it right?

Workman: Telehealth has so much health care interaction right now. Kinsa is building a sickness “weather map” — their database is being mentioned in New York Times articles as a way to predict the spread of the flu and COVID-19. It is interesting that a connected network of sensors can help people get ahead of when sickness is coming through their area. TytoCare is taking diagnostic tools and making them available at home to make a telehealth visit better. Likewise, Owlet is collecting data for 10 to 12 hours per night, so it gives us the ability to get upstream and be in the perfect position to show when a baby is getting sick. Insurance is reimbursing for preventative care, and Owlet needs to quarterback that.

Photo of Kurt Workman and product photo courtesy of Owlet Baby Care.
Illustration: Dom Guzman