Level raises $100M and acquires a smart apartment company

Level Home, the maker of a slick smart lock, has raised an additional $100 million in a Series C round of funding, as well as completing an all-stock deal to buy multi-family residential software company Dwelo. The two moves are part of a master plan by Level Home CEO John Martin to grow into a new market while also adding a subscription line of revenue for Level. Both moves make a lot of sense.

Level Home was founded in 2016, and has produced a very nice door lock that was designed from the ground up with connectivity in mind. Unlike many smart locks, the Level lock fits into the existing deadbolt cavity in a door and doesn’t require a large motor or giant battery pack. Thus, the Level lock looks like any old deadbolt from the outside. That makes it an attractive proposition for design-conscious consumers, but its price tag between $199 and $329 has kept it from becoming a runaway hit in the mainstream.

If we’re reading the smart home tea leaves, it’s getting more and more difficult for smaller hardware makers to compete with the giants. And I only expect that to become more difficult as the Matter smart home interoperability standard gains ground next year. Last week we saw Ecobee sell to Generac, for example. Earlier this year, June sold to Weber. Any companies that aren’t selling out are trying to bring in new revenue streams in the form of subscriptions. In July, Dave Crosby, CMO and co-founder at Wyze, spoke about the need to create a subscription product so the company could satisfy venture capitalists and raise the necessary funding.

But instead of looking for a buyer, Level Home has raised money to become the buyer. And to gain a channel for recurring revenue. Martin says that we can “expect the company to make a pivot to a growth mindset,” with these two deals. That could mean more acquisitions but the funding will also go toward expanding the sales and services that Level will offer to both single-family homeowners and landlords.

Dwelo is a relatively small player in the group of companies trying to provide smart home services to apartment complexes. Other companies in the sector, such as SmartRent, which went public through a Special Purpose Acquisition company, and Latch, which also went public via a SPAC, have larger war chests and impressive backers. There are also companies such as RealPage, which purchased Stratis, that offer smart home services along with other software for apartment owners. Alarm.com also owns PointCentral, another player who has served the market for years.

Dwelo provides services to 100,000 apartment units. Latch has 451,000 apartment units paying for its services, while SmartRent has reported about 145,000 apartment units paying for its services. RealPage has 19 million units buying some of its services (not all of those units are paying for smart home features). In many cases, these companies pick out third-party hardware from companies such as Google’s Nest, Resideo, Schlage, etc., and install them while building a software management platform on top of that outside hardware.

Martin believes that by fully integrating the hardware and the software together, Level Home can build a better experience for apartment owners and the residents who live there. This is exactly what I would expect from Martin, who used to work for Apple. Level Home’s CTO Ken Goto is a former Apple executive as well. I do think a well-integrated hardware and software platform would work for the current smart home environment, which is a mish-mash of services and integrations that need constant upkeep. But in the future, when we have the Matter smart home interoperability standard, I was hoping that would become less true.

Martin isn’t betting on that, despite participating in the Matter working group. Martin says that the company will announce specifics of its product plans related to Matter after the standard is finalized and available. The Level Locks are Bluetooth-based, so I expect to see a new Thread-based lock and possibly a Matter-compliant bridge to bring older locks into the Matter fold. Martin says that Level will expand its connectivity platform in the next five months or so.

For the current customers with Level locks, the funding and acquisition are an opportunity for Level to build a more robust business in a quickly-evolving smart home landscape. It gains a larger potential customer base from the apartment owners, while also building a recurring revenue stream from that market. This will help support the existing single-family customers while also letting Level Home try to make it as an independent company.

For more on Level Lock, check out our podcast interview with Level CTO Ken Goto.