Waverly Labs is no stranger to crowdfunding. The company has raised two maxed-out rounds before, and those funds were put to use building the technology that has generated more than $9 million in revenue so far. This proven traction drives up Waverly Lab’s valuation. The company is valued at $40 million in this current round. This price is reasonable for a company with as much established operational history as Waverly, particularly given the proprietary, valuable nature of the company’s technology.

The global services translation market was valued at $43 billion in 2017 and is undoubtedly growing. Globalization drives increased need for translation, particularly as businesspeople forge more partnerships with contacts far from their home soil. However, this is still a very niche market compared to many others in hardware technology, and it doesn’t help that COVID-19 has halted virtually all in-person multilingual business communications. The market for a piece of technology like the Ambassador interpreter is relatively small. Furthermore, significant competition in the space from major tech giants like Google means that Waverly is probably destined to capture only a small piece of the pie. A small piece of a small pie is not a great playing ground for future revenue potential.

Waverly Labs is led by Andrew Ochoa, co-founder and CEO. The company’s StartEngine raise page describes Ochoa as the leader of business operations, sales, and marketing. That’s all we know about him, because his LinkedIn page doesn’t describe his background prior to Waverly. Ochoa’s co-founder, Vice President of Product Sergio Delrio Diaz, has a similarly mysterious background. He can’t be found on LinkedIn. The only way to judge the potential of Waverly Labs’ team is to assess the company’s operating history up to this point. That history is largely impressive with almost $10 million in revenue generated since 2014, though a major drop in revenue in the last couple of years is concerning.

When many people think of language translation, they think of Google Translate, the easy-to-use portal has been the go-to for text translation for years now. It’s no surprise, then, that Google is also the leader in real-time translation technology. Google’s Pixel Buds are primarily competitors to Apple’s AirPods (small, portable Bluetooth earbuds), but they also offer real-time translation capabilities. Pixel Buds are arguably Waverly Labs’ leading competition for in-ear audio translation technology. 

Waverly Labs argues that its Ambassador device is superior to Pixel Buds because Pixel Buds are only compatible with Pixel devices. However, this is incorrect. Pixel Buds are compatible with any device — iOS or Android — just like the Ambassador (though Pixel Buds are slower than AirPods to pair to iPhones, a pertinent detail only if evaluating them as Bluetooth earbuds). Waverly’s only true differentiator is that the Ambassador device is slightly better-fitted for business translations with features like multi-device pairing and live transcriptions in its mobile app. 

Overall, though, Waverly Labs’ device seems to come in second place when compared against Pixel Buds, and there are several other live audio translation devices competing as well. Waverly Labs’ lack of differentiation may be a difficult hurdle to overcome. 

Waverly Labs’ performance when selling its Pilot Smart Earbuds — a more consumer-oriented audio translation device — was impressive. That product generated $5.7 million in sales in just 18 months with more than 40,000 units sold. However, Waverly Labs has since pivoted away from the Pilot product to focus on the business-oriented Ambassador device. The company doesn’t explain the pivot in great detail, but a comment in the StartEngine forum indicates that Waverly (like many other competitors) was finding it difficult to compete against major tech giants in consumer audio and switched to a business-to-business (B2B) focus to carve out a better niche. 

At this point, results from the Ambassador phase of Waverly Labs’ history are not as promising. The company generated more than $6.5 million in 2018 and posted a strong profit of more than $3 million (quite impressive for an early-stage technology startup). However, revenues plummeted to $456,114 in 2019 with a $1 million net loss. Waverly doesn’t share many details about 2020 performance on its raise page, which would indicate that 2020 results weren’t too impressive (not surprising given COVID’s impact on international business). Unfortunately, it’s a bit too soon to tell whether the Ambassador interpreter device will perform up to the level of Waverly Labs’ Pilot Smart Earbuds.

Waverly Labs was undoubtedly a successful startup in its earlier years selling consumer-oriented Pilot Smart Earbuds. It was generating millions in revenue each year and was turning a large profit. However, results don’t seem to be as sunny after Waverly pivoted to a more B2B-focused strategy. Revenues in 2019 were extremely low relative to 2018, and 2020 results don’t seem to have been much better. 

While Waverly apparently pivoted to a business product due to concerns about competition from the likes of Google, it’s not clear that this shift really allows the company to escape from those competitive forces. Businesspeople seeking a translation device are just as liable to purchase Pixel Buds as consumers are, and the features that Waverly promotes as being superior for business don’t seem to be that distinctive. Moreover, it’s not a simple thing to reorganize a company to focus on business clients after chasing consumer eyes for several years. Marketing, sales cycles, contracts, and more could be very different strategies to manage. Without more information on the Waverly founders’ backgrounds, it’s hard to say whether they’re qualified to lead such a drastically different business. 

It’s simply too soon to tell whether Waverly will pull off a successful transition to its business-oriented Ambassador product, and there seems to be a meaningful risk that the company will succumb to competitors and fail to achieve its previous heights. 

While Waverly Labs is still navigating a significant pivot, it can’t be ignored that the company made $6.5 million in revenue with $3 million in profit three years ago. Waverly Labs’ founders are mysterious figures, but they grew a hardware-intensive technology startup from zero to millions in revenue in only a few years, which is a tremendous achievement. There seems to be some secret sauce that Waverly has harnessed to create highly functional technology products that appeal to customers, and there’s no clear reason why it’s not qualified to do so again. 

Plus, investors are purchasing equity in Waverly’s portfolio of proprietary technologies. More than any brand success or revenue results, that portfolio is a valuable asset. Major tech companies like Google and Amazon regularly acquire tech that could be an asset in their products, so Waverly could achieve an exit by selling its engineering know-how to a larger player. 

Waverly Labs has had a successful history of generating millions in revenue from a live audio translation product. It’s not easy to scale a hardware technology business, but Waverly’s founders have done just that. The company has a universe of hundreds of thousands of followers and former customers who could continue spurring it forward toward more growth. 

However, Waverly underwent a major pivot in recent years toward a business-oriented product that is dubiously differentiated from competitors like Pixel Buds. That pivot resulted in a significant loss in revenue. It’s still too soon to tell whether the company will be able to build back to its old heights. Therefore, Waverly Labs has been rated a Neutral Deal. 

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