The Story of Dropcam, a Little Hardware Start-Up With Its Head in the Cloud (Video)

Before hardware start-ups, Kickstarter products and “The Internet of Things” were the new hotness, a little company called Dropcam entered a world unfriendly to all those concepts. It was 2009.

Today, Dropcam is the best-selling surveillance device on Amazon. The company is fairly certain that it processes more video than YouTube per day. It has millions of dollars in revenue per year, up an estimated 400 percent from last year (when they were “well over $1 million”). But it’s still a little start-up — just 23 employees based in San Francisco and Shenzhen.

Dropcam sells a hardware product in a box: A home monitoring video camera. It is much loved by techies and luddites alike. But at its heart, Dropcam is all about the cloud.

Founders Greg Duffy and Aamir Virani are software engineers — they met at the email app start-up Xobni, where the two former Texans say they bonded over long talks about how they’d build a start-up company culture if they got a chance to do it themselves.

As for what the company would actually do, Duffy and Virani decided they wanted to provide a better solution for monitoring large quantities of video.

At least part of the inspiration for Dropcam came from Duffy’s dad, who set up a bunch of IP cameras at home to find out which of his neighbors were letting their dogs poop in his backyard. But his system kept failing because his hard drive would fill up and cause the video to stop recording — or Windows would update and reboot. “It was like a Tim Allen on ‘Home Improvement’ comedy of errors,” Duffy recalled.

Meanwhile, Virani’s dad may not have been obsessed with poop snoopery, but he ran a convenience store, so Virani grew up knowing about expensive proprietary video surveillance systems.

Duffy and Virani wanted to make these video systems simple and modern, but found that the existing camera options were too focused on motion sensors, couldn’t do night vision, or were Web cams that relied on being connected to computers.

“We really think about the software as being the be-all end-all,” said Duffy in a recent interview. “We were forced to get into hardware.”

With painstaking research and trial and error on plastics, industrial design and reliable production (at one point earlier this year they had to replace a batch of faulty devices), Duffy and the Dropcam team developed a camera that has night vision, charges via USB, sends emails and mobile alerts when unusual activity is detected and compresses HD video efficiently. And perhaps the best part — at least, for all my coworkers who use their Dropcams to monitor their dogs during the day — is that you can talk through the camera remotely. It’s fun to be the voice of God.

Unlike many hard-to-install alternatives, all new Dropcam users need to do is connect the device to their Wi-Fi network, give it power and set up an account.

A Dropcam sells for $149.99. After that, it’s free to use, but buyers can upgrade for $9.95 per month for DVR capabilities — something 40 percent of them do.

Perhaps one of the largest problems with Dropcam is explaining why people need a newfangled camera. If you see a highlight reel of guys in squirrel suits flying over mountain tops, you get why you need a GoPro. If you’re a home security nut, you evaluate the options — and there are quite a few. But watching a room in your house 24/7? Why would normal people want to do that?

Duffy and Virani said the most effective way they’ve found to describe Dropcam — so far, at least — is “home monitoring.”

When Dropcam surveyed its users, the most common place they said they put their Dropcam was their living room.

The most popular reason for users to buy a Dropcam is to watch their home, followed by their baby, followed by their pets.

“Most people aren’t expecting a burglar to break in at any time, but they’re insanely curious about what’s going on at home,” Duffy said.

And once people get it, they really get it. Duffy said 25 percent of Dropcam buyers have purchased more than one of the cameras.

Users log in every other day and watch 15 minutes of video, on average. And here’s a pretty weird stat: 90 percent of Dropcam users watch on iPhones. In fact, more people watch on iOS than on the Web (iPad was just recently introduced, too). There’s an Android app available, but Dropcam users seem to be Apple fans.

Still, Dropcam has a way to go to really serve all of the things people are already using it to do — like keep track of their babies. Though the service has relatively low latency — a delay of one to two seconds — that’s longer than some parents would like to wait to hear whether their baby is in trouble. And uploading video all day will tie up just about anyone’s available bandwidth.

Further, many people may resist buying a Dropcam because they don’t want to invite Big Brother into their homes — after all, this video is published on the Internet! But Duffy insisted that his company has the opposite intent — he said it’s a way to give people control over the fact that they’re constantly being surveilled. Private Dropcam video is secure, he said, and once it expires, the company deletes it. (For more of Duffy’s thoughts on this topic, see my video interview with him and Virani.)

This has been a big year for Dropcam. It introduced its new HD camera at CES, for half the price of its previous product. It started online retail through Amazon. It launched iPad and Android apps. It raised $12 million in Series B funding led by Menlo Ventures and including investors such as Accel Partners and Bay Partners.

So what’s next for the company? Part of the challenge, said Duffy, is growing deliberately. After all, he and Virani first bonded over their interest in corporate culture. Dropcam explicitly hires people with an eye for work-life balance. It provides lunch and breakfast at the office, but never dinner.

“This is a product for family,” said Virani, so it only makes sense to acknowledge that the people who work on it have families and lives. “I don’t want a company where people work 80 hours a week with marginal productivity.”

Compared to other Silicon Valley start-ups, “we view ourselves as counter culture,” Virani added. “We’re not a fraternity.”

What’s next on the product front? On the software side, it’s getting smarter at processing all that video.

Dropcam has hired a team of in-house computer vision experts to work on features like identifying people and pets to give better context around event detection. Remember that stat about Dropcam processing more video per day than YouTube? “We’re the only ones with a dataset large enough to do this,” Duffy said.

On the hardware side, the No. 1 Dropcam customer request is an outdoor camera. After all, the delinquent poop scoopers of the world need to be shamed.

But there has emerged a friendly flip side to a tool that was originally intended to patrol the bad behavior of pet owners. Because while Dropcam is still mainly used for private personal use, there’s also an option to publish video streams to the public.

A pet shop in Michigan strapped a Dropcam to a 16-year-old, 40-pound tortoise named Franky that roams around the store. They publish “Franky Cam” live online, and it gets thousands of views per day. That includes frequent tune-ins from Dropcam employees, who have made him their unofficial mascot.