Interrupting the Flow
The idea for FloLogic stemmed from an incident Chuck de Smet’s former boss experienced one day when his toilet tank cracked. As an Executive Vice President at Closure Medical (which was eventually acquired by Johnson & Johnson), Chuck had spent a portion of his career researching Super Glue solutions for uses such as wound closure.
As Chuck watched his boss go through the trials and tribulations of dealing with contractors, plumbers, and insurance companies to deal with the damage caused from his leak, an idea started to stir. “It dawned on me that there should be some way to stop a toilet tank from cracking.” Ten years later, Chuck was still kicking the thought around, but had expanded the opportunity. “It’s not just a toilet tank, it’s the whole house.”
In 1996, as Chuck started to seriously consider the commercial vitality of the idea, he began to speak with the owners of 11 patents that already existed around technology that could detect leaks. Many of the patents were old and outdated and he quickly realized the technology deserved a second chance.
The next chunk of research was around how hot water is used in North America. Chuck was on his way toward a business model for FloLogic to be a circuit breaker for the home plumbing system.
The difference between FloLogic and some of the earlier technologies and newer competitors is that is uses sensors that detect water flowing into the house versus moisture detection (after the water has already ended up on the floor). According to Chuck, moisture-based products can’t detect what’s happening behind the walls or be used in outdoor settings for applications such as irrigation systems.
FloLogic begins detecting water at a minimum of half an ounce of water (the equivalent of a tablespoon). While that may seem minimal, over a long term period of time these micro-leaks can add up. “We’re the only flow based product, so that’s how we differentiate ourselves,” says Chuck.
“A family of three uses water 40 times a day but for relatively short periods of time,” explains Chuck. FloLogic will turn off uninterrupted water flow after 30 continuous minutes (“that’s a teenager taking a shower”) when a home is occupied and after 30 seconds when the system is in an away state. “That’s enough for ice makers to make ice or to service a humidifier, but after that, water really shouldn’t be running.”
In terms of getting traction for his technology, Chuck says insurance companies have really paved the way. “Being first in the market isn’t easy.”
Adoption has ticked up as installation of a leak detection system has become a condition of home insurance in some states and can offer homeowners a policy break in others.
Chuck recounts the first major mold incident in 1999. “A woman in Austin bought a 1,200 square foot home,” he says. “She had one leak that went undetected which stemmed from a crack in an ice maker line.” Eventually the home was filled with mold and the woman sued Farmers Insurance for $6 million dollars. “The jury awarded her $32 million,” says Chuck. “This was the lawsuit that launched the mold hysteria that started in this country around 2000. That’s when our phones started ringing.”
At this time, Chuck explains, insurance companies started to get serious about water damage prevention. Turns out, water-related claims accounted for 25% of claim volume filed every year and 22% of the cost. “That’s only second to acts of nature,” says Chuck. “They pay out between $9.5 and $10 million dollars in lost claims every year. It’s a big category of loss.”
In FloLogic’s early days, the insurance industry was their primary channel through which to generate sales. They relied on a “hub and spoke system” of hitting the big companies and communicating to entire policy bases through them.
Chuck cites an example from the largest insurance agency in the U.S. For State Farm customers, two water losses in a three year period will prompt a letter to the homeowner stating they have 60 days after remediation to install a leak detection device like FloLogic. “If you don’t install before the renewal they will drop you from their policy.”
Going with the Flow
Today, FloLogic also sells direct to consumer. Many referrals come through the trade — plumbers, home builders, smart home automation integrators. “Call backs are the bane of the plumbing trade,” says Chuck. He believes FloLogic can prevent those.
Even with impressive adoption to date, Chuck speaks of the remaining addressable market. “It’s people who just don’t know if they are at risk and if there is something out there that can mitigate their risk.” This includes owners of non-primary homes who spend a lot of time away.
How will Chuck reach these potential new customers? “It’s fair to say, that our engineering has outpaced our marketing.” FloLogic is actively trying to determine a strategic growth strategy and find a capital partner that makes sense for their business.