Amazon just revealed a new, upcoming Echo device that brings its Alexa assistant to a touch screen near you, the Echo Show. It will let users make video calls to another Echo Show gadget, to the Alexa app on a smartphone or voice calls to an Echo or Echo Dot.
"Certainly, it hurts when your closest partner becomes your biggest competitor," says Frankel, only eight months after Amazon led his $5.6 million Series A round last September.
A spokesperson for Amazon denied that any of the Echo Show features had any connection to Nucleus. "We didn't get the idea for Echo Show from that product," she says. "And I would even go as far as to say that Alexa has been on screens for a long time, when you look at Fire TV and Fire tablet, so for us this was a natural extension and another way to add value to our customers."
To be sure, Alexa was available on Fire TV much before the Nucleus ever hit the shelves, but the touch screen Fire tablet integration came last October, two months after Nucleus was released.
Behind the Device
If you're unfamiliar with Nucleus, it is a Wi-Fi enabled intercom that launched last August as the first Alexa-integrated touch screen device. Frankel, a father of three, devised it when he couldn't find an affordable, easy to set up system for him and his wife to keep an eye on their children. According to the company, it made $4.5 million in its first six months, and has maintained a 42 percent month-over-month growth.
The entrepreneur says he understands Amazon's point of view. "Strategically, it is incredibly valuable," he says. "[Amazon] has the chance to put a shopping cart in every room in your home."
The way Nucleus works is by allowing users to connect with each other instantly. If you want to check if your kids are doing homework, you can call from your smartphone or your nearest Nucleus device to the one on their room and see what they're doing, without them having to pick up. A similar function dubbed "Drop In" will be available on the Echo Show, according to the Alexa Calling website.
According to Richard Gora, a lawyer who specializes in securities, corporate governance and IP litigation, this is not an uncommon occurrence, especially in seed and angel investors.
"Sometimes the strategy of these investors is to get a small stake in a company for the sole purpose of gaining access to the IP," he says. "The reason why they do that is that it's much less expensive to engage in a small equity or debt round process instead of buying the company once it matures."
A way startup founders can protect themselves is by insisting on non-compete and non-circumvent clauses before signing any investment deal. These clauses basically mean that your investors can't use the information they learn from your company in their own endeavors and that they can't compete against you in the same business.
Frankel declined to comment if he had any of these clauses in place, but he does have a patent granted for his technology. The Harvard Law graduate wouldn't say whether he planned to defend his patent in court. Though he did note that he is evaluating his options and that "everything is on the table."
He adds that even though it is scary for his business, big retailers like Target and Walmart should have more reason to fear this new development. Frankel argues Amazon's image recognition technology could take a photo of your fridge, figure out you're running low on milk and order that for you, so you never have to set foot in a grocery store again.
As for Frankel, he is focused on his mission of connecting families with one another. He says that because they're passionate about that and not selling you a product, they have an advantage over Amazon. "[It's the] tiny details that make a huge difference," he says.