The Scotts Miracle-Gro Company, the branded consumer products company for lawn and garden care, this week agreed to acquire Oso Technologies, the manufacturer of the Plant Link soil moisture sensor.
The acquisition provides an exit for Oso Tech’s venture capital investors including majority investor Serra Ventures and other local Illinois-based VCs, angel investors, and economic development groups.
Details of the transaction were not disclosed, but it’s understood the terms take into account the future sales performance of the sensor.
The rollercoaster begins
It’s been a rough ride for Oso Tech and its investors from its founding in 2011 in Urbana, Illinois until now.
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A team of engineers at the University of Illinois, led by Eduardo Torrealba, met Tim Hoerr, partner at Serra Ventures and lead on the investment, while he was serving as an Entrepreneur in Residence at the University.
The team’s initial research was for a remote, internet-enabled soil moisture sensor for indoor or outdoor plants that would be combined with a database of plants and soil types and uploaded into the cloud to help growers know whether their soil is too moist or too dry. When Hoerr met them they had a crude prototype of the sensor.
He then took the team through the University’s I-Start Entrepreneur Assistance Program, a 3-month program where they were incorporated, created a business plan, drafted a budget and received support for other business set-up activities.
The startup had some early success with a Kickstarter campaign in the fall of 2012 after it raised $100k from around 800 individuals and helped to validate market demand for the sensor. This campaign was followed by a small seed funding round involving Illinois Ventures and some local angel investors.
“From there, the focus of the team was to build a commercial version of the sensor to send out to the Kickstarter supporters and build from there,” says Hoerr. “But the time it took to engineer the sensor to a place where we were comfortable manufacturing the first set of 1k units was much longer than anticipated and took about a year instead of the three to six months we planned.”
Capital was then running out as the company hadn’t managed to get a product into the market as planned, so the startup had to go back to the funding market. This proved challenging, and it raised about half of the $1 million target, from local investors and Serra Ventures.
The business started to crumble from here as some founders moved onto new jobs or to continue their PhDs. The remaining founders were recommended by external VCs to try and sell the sensor to other businesses instead of focusing on consumers, and they decided to pursue this B2B strategy at an accelerator in Boston.
“I still felt there was a strong play in the consumer space, but after getting feedback on exploring a B2B strategy, they decided to join an accelerator out of Boston, which was less than successful,” said Hoerr.
Eventually, all the founders had left, and the existing investors were about to terminate the company and take the write-off when the team of another portfolio company of Serra’s came to the rescue.
The Product Manufactory is an R&D and design agency that had in fact worked with Plant Link in the early days on its design.
“We were catching up with The Product Manufactory team, including Mercedes Mane and her husband Brian Wilcox, and mentioned we were dissolving Oso Tech. They proposed they step in and take over the management and attempt to turn it around,” said Hoerr. “It was an intriguing proposition, but I was doubtful it made sense initially. However, after working with them on how it might work, we brought Mercedes on as a part-time CEO, and rounded up $300k from existing investors and re-launched the company in early 2015.”
Most of 2015 was focused on developing relationships with potential distributors and resulted in the company getting orders from Home Depot and Lowes. By the end of the year, Oso Tech had also reached a sales agreement with Scotts Miracle Gro. Scotts wanted to bring Plant Link into its connected yard concept alongside Blossum, and had been researching other soil moisture sensors but decided Plant Link was the best, according to Hoerr.
Scotts Miracle-Gro acquisition
Fast forward to today and that sales agreement never really came to fruition as Mane and her team decided to stop manufacturing the first version of the sensor and focus on designing a V2 product, which is not due to hit the shelves until next year. This V2 will be more robust, lower cost and incorporate a valve product that can turn on and off depending on the soil moisture sensor.
“Scott’s loved the V2 product and imagined using the value system to dispense fertilizer, one of its core products, making Plant Link a money shot for them and soon we were in acquisition talks with them,” said Hoerr.
It wasn’t an easy decision to sell as the team felt they were on the right track again and had yet to really ‘give it a go alone’ under the sales and distribution agreements they’d made, said Hoerr.
“We had been raising money for a while and so the decision was should we continue to raise and sell more of the company to investors, or take the opportunity with Scotts and work with them to grow it even bigger?” said Mane. “Consumer product sales and marketing is a huge piece, and you have to grow very fast which requires a lot of investment. We felt our team was excellent at engineering but not the strongest fit for consumer sales and marketing, and after working with Scotts for a year, it became clear they could help us.”
“It was good timing for us to keep being relevant and so was a pretty good exit for us at this point,” she added.
Mane and her team will all become Scotts employees, with no timetable set for them to move on. Mane will take more of a backseat, strategic role at The Product Manufactory.
Key investor takeaway
For Hoerr, there was one key takeaway from the whole process:
“Now when I look at the companies I want to invest in, I look at the potential resilience of that team; how resilient will they be when the tough times come? Often founders haven’t been through the hardships of life, and when the going gets tough, they have other options such as a high paying job elsewhere or a PhD to return to. So I now focus on evaluating which teams will be more resilient in times of crisis.”
This is the latest in a series of Scotts Miracle-Gro acquisitions, particularly in the cannabis space. In October it acquired plant nutrients and growing systems for hydroponic gardening manufacturer Botanicare in October, and in August it announced the $136 million acquisition of Dutch hydroponics company Gavita Holland. In 2015 it bought California’s General Hydroponics for $130 million and this year it’s also invested in Boulder’s AeroGrow indoor gardening company.
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