Editor’s Note: Vote for your top pick among Inc.'s 35 Under 35 Coolest Entrepreneurs of 2014. Inc.com announces the Readers' Choice winner Thursday, June 26.

Your smartphone is not that smart, but Jakub Krzych and Łukasz Kostka want to turn it into a location-aware genius.

Krzych, 32, and Kostka, 26, are the co-founders of the New York City-based beacon maker Estimote. The company's beacons--palm-size waterproof wireless sensors--transmit data to your smartphone by using Bluetooth low-energy radio signals. Since the two Polish computer scientists founded Estimote in 2012, they have sold more than 20,000 beacons ($99 for a set of three) to developers and companies that have been building their own apps to engage customers through their smartphones.

Virgin Atlantic, one of the only companies that publicly revealed their plans with Estimote, is installing beacons throughout its section in London's Heathrow airport. The goal is for passengers to receive helpful prompts and pertinent details such as their boarding pass and gate information. 

But Virgin is only the tip of the beacon iceberg.

"If you think about it, the phone you have in your pocket is called a smartphone, but it's not that smart--it has no idea where you are," Krzych tells Inc. "When you're at home, why does your phone lock itself? There's no reason for that, but it doesn't know the context."

Krzych, who co-founded online ad publishing platform AdTaily before Estimote, has high hopes for his company's products. "Beacons will provide all future generations of smartphone [users] with context," he says. "In the future, all the objects you see around you--from your car, washing machine, and even a table--will advertise and broadcast their presence within a context that your phone and future devices can react to."

Estimote, which is a Y Combinator alum and has offices in Krakow, New York City, and San Francisco, is focusing on the retail space with fervor. Kostka, who co-launched Estimote after dropping out of a Ph.D. program on technologically connected cities at Krakow's AGH University of Science and Technology, says the company is working to build out its platform so developers can program the beacons with unique apps easily.

Krzych says they realized the size of the opportunity in retail through data and taking a look at how customers buy products in-store and online: "We understand our physical world is at least 10 times bigger than the Internet," Krzych says. "If you think about it, 95 percent of all transactions in business are still happening in the physical world. So everything that happens on eBay, Amazon, and Facebook are only five percent of all transactions across the world."

To put a finer point on it, just look at the smartphone penetration rate in the U.S., suggests Krzych. About 70 percent of Americans have a smartphone, and in two years, it could be 80 to 90 percent of the U.S. population, he adds. That's going to have real consequences. 

With a list of 20,000 different customers--from huge U.S. and European retailers to museums, hospitals, schools, and public transportation systems--some tasks will become obsolete, Krzych says. When you walk into a restaurant, the menu will pop up as you take a seat. A stroll through New York City's Museum of Modern Art might prompt your phone to deliver information about each painting you see. Eventually, your home will react to your presence; the door will unlock as you turn the knob and lock behind you as the lights, air conditioner, and TV turn on.

"With beacons, we will see the Uberization of the world being transferred to other aspects of our lives," says Krzych, in reference to the app-enabled car-sharing company Uber and its dominance in the market. "Think about public transportation, airports, hospitals, and schools. You will experience a future world that will help you leverage your skills as a human being, and technology will do the rest for you."

Brendan Ciecko, founder and owner of the Web design company Ten Minute Media, is an investor in Estimote and has only great things to say about Krzych and Kostka--including how he believes Estimote will disrupt the retail space. But he does admit there are some inherent challenges by way of user adoption for beacons.

"One of the challenges facing the complete beacon-enabled mobile experience is making a compelling enough experience to make the user download the app, turn on Bluetooth, and authorize the app," says Ciecko. "The experience you're offering needs to be revolutionary and has to have something juicy for the consumer."

Airports, sports arenas, and other venues in which people spend a lot of time will more easily adopt users than, say, a single retail shop that caters mainly to tourists. Nevertheless, the space is packed with competitors, and new companies and organizations seem to be announcing beacon partnerships and projects every week--from Macy's to Major League Baseball.

"There are a few layers for beacon-enabled apps to run smoothly, but once people start to see the value of their experience enriched, the beacon-enabled apps will become second nature," Ciecko says.

Published on: Jun 24, 2014