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Industry Watch

We've got it covered: A meeting in the office of Canopy, which is nowhere near Sand Hill Road

A case for innovation

Minneapolis startup Canopy has won global attention for its game-changing iPhone case

It isn't often that a Midwest startup makes serious waves at one of the year's biggest tech events. But that's what happened in January at the Consumer Electronics Show in Las Vegas when Canopy, a pre-revenue venture out of Minneapolis, garnered global tech media attention with its innovative touch-sensitive iPhone case, called Sensus.

The cool factor? With the Sensus, users can control action on their iPhone's screen by tapping or sliding a finger or thumb on the back or side of the case. With app developers increasingly desperate for ways to differentiate themselves, it's a well-timed idea.

As the media (including Wired, Cnet, and CNN) covered the game-changing Sensus, the company faced a surreal situation: It had only eight fully functional prototypes. "Sensus has gone through four revisions and will see two more before the launch," says Matt Pacyga, Canopy's chief strategy officer. That launch is scheduled for sometime this summer.

Canopy's PR coup wasn't entirely an accident. Behind the scenes was a dedicated, hard-working team that has carefully navigated its path, using a blend of outsourcing, local Minnesota talent, and bold strategy.

Canopy's founder and CEO, Andrew Kamin-Lyndgaard, admits that he feels "the fear of the unknown" at times while charting the startup's course. But that feeling vanishes, he says, when he reminds himself about his team and their commitment. Many of them have given up well-paying jobs to work with Canopy, squeezing months of work into weeks to perfect a product they believe in  never mind being located far from the sources of venture funding that similar startups in Silicon Valley or New York enjoy.

"We embraced the challenge as an advantage," Kamin-Lyndgaard says.

Backstory

Canopy grew out of Kamin-Lyndgaard's passion for photography and technology. He got a license from Apple in 2009 to make a protective case for the iPhone that could be mounted on a tripod and offer more features. This led to an early case called the Kapok, which featured shutter controls for the iPhone's camera.

Kamin-Lyndgaard's desire for an even better product led him to think of a case with a touch-sensitive interface. An early version, with a sensor wired up to an iPhone, was presented last July at the MinneDemo event. The excitement it generated there prompted Canopy to work furiously with local companies to create a prototype for the Sensus.

North Pole Engineering in Minneapolis helped Canopy design the electric circuit. "They came to us with a short deadline," says Joe Tretter, NPE's vice president of engineering. "Their lead software guy worked directly with ours, and that made it move quickly."

Worrell, a design strategy, branding, and product development company with offices in Minneapolis and Shanghai, helped create the packaging and industrial design of the Sensus. "Hundreds of ideas" were generated in brainstorming sessions with the Canopy team, says Kristin Shardlow, creative lead at Worrell.

Bob Worrell, the founder of Worrell, says he loves to work with local startups and notes how the younger generation is more design-sophisticated. "Earlier we had to push design," he says. "Now it's a pull strategy." (Worrell designed the Bobcat logo, which has remained unchanged since 1974.)

An existing pool of talented local programmers enabled Canopy to put together a software development kit (SDK) for app developers, Pacyga says.

Canopy sees the Sensus as an opportunity for app developers to set themselves apart, using the SDK to incorporate touch sensitivity into their apps. Martin Grider, a local iPhone app developer who created the puzzle game app Oppo-Citrus, sees the Sensus as a positive opportunity to grow and sell more apps. "We have a lot of high-quality developers here," he notes. "It would only take a few hours for them to integrate the Sensus SDK into their apps." He has played with the Sensus prototype and describes it as being "cool and very responsive, especially for gaming."

The Sensus is basically a protection sleeve that can be used as an extension of an iPhone's touchscreen. Drawing a minimal amount of power from the phone's battery when a Sensus-compatible app is running, it adds enhanced maneuverability to gaming, utility, and accessibility apps.

"Application developers, particularly game developers, may find touch sensitivity an opportunity to make it their calling card," says Ben Arnold, a consumer technology analyst with the NPD Group, a global consumer and retail market research consultancy.

Financial considerations

Pacyga often flies to San Francisco to meet with other companies and investors. John Devlin, Canopy's CFO, says that being based in Minnesota helps Canopy keep costs down, but he admits the "Land of 10,000 Lakes" is a tough place to raise funds.

Meanwhile childhood friends of Kamin-Lyndgaard helped Canopy raise close to $4 million to prepare for showcasing its new invention.

For now, the Sensus is being manufactured in China because of the low cost of labor. But with concerns over the protection of intellectual property rights in China, the company would like to one day have the product assembled in Mexico from parts made in the United States.

Either way, the Sensus is a unique product that probably won't see more competition immediately, Arnold says. And the case, which will hit the market this summer for the iPhone models 4, 4S, and 5, "has an inbuilt refresh cycle," he notes. When people buy a new smartphone, they tend to buy a new case as well. He notes the cell phone device protection market grew 61 percent in 2012 to about $1.1 billion in the U.S.

The Sensus will probably sell for between $59 and $99. Kamin-Lyndgaard says the price, set in consultation with Apple, reflects what consumers will pay for a value-enhancing iPhone accessory. Some top-of-the-line cases, such as LifeProof, sell for $50 to $80.

"I think the price point for the Sensus is probably where it should be," says Arnold.

For now, Kamin-Lyndgaard is not worried that Apple might try to integrate touch-sensitivity into its devices. First someone has to prove the technology, and Canopy is doing just that. It's possible someone may offer to acquire the company, but that's not a priority for Kamin-Lyndgaard and his team. "Our job is to keep our heads down," he says, "and build value for the company."

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