Key Stats: Dan Clark Audio on StartEngine
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Sound is a core component of our everyday sensory experience. Audio equipment is virtually a requirement for modern life, especially headphones and earphones. The global market for headphones and earphones is expected to hit $15.4 billion by 2024 with a CAGR of 6.5%. The premium headphones market is expected to grow at pace over the next several years, with interest in premium audio equipment only increasing. The coronavirus pandemic has dramatically increased the number of professionals working from home. That increase has in turn expanded the demand for audio equipment for both music and professional use. This trend is expected to persist beyond current pandemic conditions.
Audiophiles everywhere have long sought the perfect set of headphones, one that can mimic the experience of listening to your favorite band live or bring your colleagues on conference calls into the room with you. Common, mass-market headphones like Airpods and Beats just won’t do for these obsessed listeners. They seek innovative audio technology pushing the frontiers of the listening experience. While Sennheiser and Beyerdynamic have long been leaders in producing these premium devices, there is always room for a new designer to introduce the next best set of headphones.
Dan Clark Audio (DCA) specializes in high-end headphones that create a comfortable, lifelike experience for the audio-obsessed. Begun in 2012 as the small business of founder Dan Clark, DCA is now a heavy-hitter in the premium headphone industry. The company generated almost $2 million in revenue for the past two years.
Dan Clark Audio holds five patents and has won numerous industry awards in recognition of their unique headphone designs. DCA headphones are made of carbon fiber, titanium, and aluminum. They weigh up to 60% less than standard over-the-ear headphones. DCA’s patented V-planarTM driver processor and TrueFlowTM air flow manager eliminate distortion to create a true-to-life audio experience.
Dan Clark offers four proprietary headphone lines that range in price from $500 to $3,300. DCA’s headphones are not meant to compete with mass-market leaders like Beats or Airpods. They are designed for the passionate listener who demands best-in-class sound quality and comfort from a pair of headphones. Dan Clark’s AEON2 headphones were recently featured in The New York Times’ Wirecutter’s review of the best headphones for audiophiles: “if you want the absolute best-sounding sealed over-ear headphones under $2,000, get this pair.”
Dan Clark generated $1.99 million in revenue in 2019 and $1.97 in revenue in 2018. The company was profitable in 2018 and operated at a loss of just $20,000 in 2019. DCA headphones are sold primarily direct-to-consumer via the Dan Clark website. The company also has partnerships with retailers in the US and abroad. Across all distribution channels, DCA headphones sell at an average margin of 57%.
Dan Clark Audio boasts a deeply experienced leadership team with decades of experience in audio engineering. The company’s eponymous founder, Dan Clark, is an engineering executive with experience at Apple, Compaq, and Sun Microsystems. Audio engineering has always been a focus of his technology-focused career. In addition to his day jobs at tech companies, he worked as a loudspeaker design consultant for high-end audio firms and developed the critically-acclaimed Platinum Audio Series 2 loudspeakers. Clark developed the initial designs for DCA headphones out of a personal need for better-sounding, more comfortable closed headphones.
DCA’s President, Andy Regan, has 40 years of experience in audio. He began his career as an audio engineer for large-scale touring acts like Fleetwood Mac, David Bowie, Aerosmith, and more. He transitioned into the business of high-end audio in the 1980s and held executive positions at Meridian Audio, AudioQuest, Snell Acoustics, and Cardas Audio. He was one of the leads on the Beats by Dr. Dre project at Monster Cable, which later sold to Apple for $3 billion. He later grew Jerry Harvey Audio from $2.5 million to $13 million in annual revenue as the company’s President.
Jason Egger is Dan Clark Audio’s Chief Engineer. He began consulting for Clark’s headphone business and joined the company as Chief Engineer in 2014, leading several design and patent processes for the award-winning headphones. He has 11 years of experience designing, prototyping, and producing products in cinema and broadcasting and is an “engineering jack-of-all trades.”
Dan Clark saw increased sales as a result of the coronavirus pandemic (more people working from home means more people in need of high-quality headphones). In response, they designed a product bundle for home-office users getting started with their audio setup. The company plans to curate more product bundles to cater to customers unfamiliar with high-end audio. Ultimately the company will expand product offerings to include wireless, in-ear, and other audio devices.
Dan Clark Audio hints at a new line of business, stating in its raise materials that it recently launched an original equipment manufacturer (OEM) vertical and will be launching a partnership with a major consumer electronics company in 2020.
Why We Like it
- Impressively qualified team: It would be difficult to envision a more ideally-suited team for a high-end headphone business than the one that Dan Clark Audio has assembled. DCA’s three leadership team members blend cutting-edge high-tech experience, audio engineering expertise, and multimillion dollar business acumen from audio sales companies. Dan Clark himself has been managing this company for eight years and is clearly personally passionate about the products that his company produces.
- Strong traction within a niche market: Dan Clark headphones are not intended for the mass market, so total market potential is admittedly limited. However, the company is generating almost $2 million in revenue each year, and has sold tens of thousands of headphones in 80 countries over the last eight years. Dan Clark Audio is not a mere concept company: it has a strong track record of product success and operational execution.
- Award-winning intellectual property: Dan Clark Audio holds five patents for components of its proprietary headphone designs. DCA headphones are continuously listed among best-in-class lists for high-end headphones. The New York Times’ Wirecutter’s endorsement of DCA headphones is a major signal that DCA headphones are truly market leaders, making DCA’s intellectual property all the more valuable.
Dan Clark Audio manufactures headphones that the average buyer is not interested in. However, there clearly are many buyers who are interested in high-end headphones: tens of thousands of them, in fact, over the last eight years alone. This traction is combined with a stellar audio engineering and audio business team, making Dan Clark Audio is an attractive prospect for investors.
The Dan Clark Audio website is not a work of art, and prospective investors might wonder whether the Dan Clark team is properly equipped to create a premium brand with lasting appeal to buyers. It should also be noted that DCA generated approximately the same amount of revenue in both 2018 and 2019, raising questions about the company’s ability to grow beyond current performance. Dan Clark’s creation of an OEM vertical and upcoming partnership with a major consumer electronics company may ameliorate those concerns through the creation of additional revenue streams, but the success of that venture is not guaranteed.
Exit potential for this company is also debatable. The Beats by Dr. Dre project that one of the Dan Clark executives was involved in represented a notable victory for a relatively high-end audio company, though Beats products have much more mass-market appeal than DCA headphones. Dan Clark Audio’s most valuable asset is its intellectual property. Those patents could make the company an acquisition target by existing premium headphone brands (like Sennheiser and Beyerdynamic) or audio-adjacent companies seeking to expand their product lines (like Apple or Samsung).
Dan Clark Audio designs innovative, patented, and award-winning high-end headphones. Though DCA’s products are not designed for mass-market appeal, they have won a sizable following among audiophiles and have significant revenue to show for it. In addition, the company’s leadership team has the industry-specific experience needed to scale the business. For all of these reasons, Dan Clark Audio is a Deal to Watch.
About: Katy dolan
Katy is a marketing and research consultant to startups (including VC-backed companies, small businesses, and advocacy movements). With experience in tech, venture capital, politics, and non-profits, Katy partners with clients to strategize and execute compelling campaigns focused on user experience and empathetic narrative. Katy graduated cum laude from Harvard College with an AB in Sociology.