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MrSpeakers Ether 2 advances the art of headphone design
The Problem
Open-back headphones allow sound to flow through the ear cups into the room and vice-versa, which generally allows for a more natural sound. There’s only one problem: everyone around you hears what you hear. When I was at home jamming out with my open-back headphones, my wife could hear everything. We don’t exactly share the same taste in music, like The Talking Heads, and as I wanted to stay married I had to find an alternative. I tried out a number of closed-back headphones, but the sound just wasn’t the same. Without the air flowing in it felt “cuppy” and claustrophobic.
I knew I had to figure out a solution, so I decided to apply my loudspeaker design skills for modifying headphones. I joined a community of enthusiasts who modify headphones where I both learned and shared a lot. In the process I noticed many people saying “sounds fun but I can’t modify it.” So I decided to start a business modifying headphones to fund the development of my own “ground up” designs.
After deciding to tackle the task of designing and building my ideal closed headphone I turned my sights to comfort — like eliminating those annoying “hot spots” on your ears or head that distracts from the music and limit listening time and on keeping the headphone set light. To me an uncomfortable and heavy headphone is like a terrible seat at a concert; it’s a barrier to enjoying the music. And of course, for people not requiring a closed headphone, we set out to set a new standard for open headphone performance, comfort and value.
On behalf of our team, I wanted to thank you for your attention and consideration.
Dan Clark, Founder, and CEO
The Solution
Listening to music, playing games or enjoying video is an experience; we believe a headphone should not remind a user it’s on, allowing for an immersive experience that can last for hours. Our strategy is to combine the best possible sound with the highest level of comfort so the headphone “disappears,” leaving only the content. Every part of the design works in tandem to create a uniquely compelling and fun user experience.
To maximize reliability and sound quality while reducing weight we use carbon fiber, titanium, and aluminum for maximum rigidity and outstanding acoustic performance. In fact, our headphones are among the lightest in their price and performance class, in some cases weighing 60% less than competing planar magnetic headphones yet without compromising durability or sound quality.
To maximize sound quality, we have patented our V-planar(™) driver processing and TrueFlow(™) airflow management within the motor, eliminating numerous sources of distortion to create detailed, vivid, and natural-sounding music.
Our patented hinge-free headband design takes much of the weight out of the headband while delivering an incredibly comfortable experience with minimal “clamp” on the head. By using a nickel-titanium alloy called Nitinol (or “Memory Metal”) we have created possibly the lightest headband in the high-end headphone industry, yet it’s incredibly rugged.
The Market
The global earphones and headphones market is forecasted to reach a global revenue of $15.4B by 2024.
Ameri Research predicts bullish growth in the wireless market segment of the next few years, and we have already seen Apple’s move toward the wireless AirPods as an indicator of where the big players anticipate the future of the market.
One factor that is changing the audio market is the current pandemic. With people forced to stay home, traditional outlets like concerts or theaters for music and film are no longer available and consumers appear to be investing in upgraded gear to increase their at-home media enjoyment.
Further, many people are now forced to work at home, where video and audio conferences have replaced traditional meetings and where enjoying music while working is now an option for more people. Some companies such as Twitter have already announced many employees will now be able to work from home once restrictions are eased, potentially representing a permanent increase in demand for home-office audio products. For obvious reasons no market research is yet available to validate these claims, but our recent business performance indicates this is a trend worth noting.
Our Traction
We have secured five patents that are incorporated into our proprietary headphone designs. In addition we have recorded sales to more than 80 countries, and in 2019 posted $2M in revenues.
Our products have been awarded dozens of honors for top quality, from organizations as diverse as “hi-fi+” to“The absolute sound” and “HFN”.
We currently have a product offering of four proprietary headphone lines, ranging in price from our best-selling AEON 2 ($899.99) to our top-of-the-line VOCE Electrostatic Flagship($3299.99).
In addition, we recently launched an OEM design business and our first major partner (a large consumer electronics company) will be coming online in mid-2020.
What We Do
Our headphones are designed to produce the absolute best quality sound. While you could put retread tires on a Porsche, most owners realize the best results require great tires. In the same way, while our headphones work perfectly with a normal iPhone or other mobile phones, to get the full experience we recommend a higher quality amplifier and DAC.
With the recent success of our bundles tailored for the home office we are pursuing additional curated product offerings to help ensure our customers have the best possible experience while providing an additional incremental revenue stream.
The Business Model
We sell directly to consumers online, as well as through US retailers and international distributors.
Our margins vary by distribution channel but as a company our gross margin is 57%. We have made a strategic decision to increase margins in 2020 by eliminating non-performing retailers in the US market. Our international distribution is strong, particularly in Germany, the UK, and China.
Our AOV for direct sales is $740 and our typical COGS is 25-35% of retail.
How We Are Different
We have two main sectors of competitors, which can be roughly broken up into larger companies (Sennheiser, Beyerdynamic, Apple, etc.) and smaller boutique vendors (Audeze, Focal or HiFiMan).
When it comes to smaller companies, our competitive advantage lies in comfort and value and a totally unique design aesthetic. Sonically, our headphones have won many awards, validating that independent experts believe we truly deliver a best-in-class experience. We are also very proud of the light weight and ergonomic design of our headphones that allow users to enjoy our headphones all day without the normal discomfort caused by so many heavier, less comfortable products. And we’re particularly proud of our closed headphones that deliver a uniquely “outside of your head” experience.
Relative to our larger competitors we are able to beat them on quality. By and large most of these large companies have price points far below ours and are focused on serving the mass market. We aren’t trying to outdo these vendors in the mass market, we’re addressing the market of owners who ask “how can I have a better experience.”
When faced with the question of why our products are hundred of dollars more expensive, many consumers will come to the correct answer that it is due to our superior quality and craftsmanship and our built-in-the-USA quality.
The Vision
We want to expand our product offerings to include wireless, in-ear, and other potential new markets in order to make our brand wider in scope and better serve our consumers and retail partners with a comprehensive line of innovative, fun products.
In addition, we are developing curated product bundles designed to simplify the purchasing process for customers new to the high-end headphone experience, or experts looking for choice recommendations they can rely on to ensure an exceptional experience.
Our first bundle was designed for the recent surge in home-office users, additional bundles will follow.
Our Team
Dan Clark, Founder, Chairman and CEO
Dan has a BS in engineering from Swarthmore College and an MBA from San Jose State. Dan spent 30 years in high-tech managerial and executive roles, working in companies ranging from small startups to Apple Computer, Compaq and Sun Microsystems.
Audio has been Dan’s passion since he was four years old and rocked out air-guitar to The Beatles on his dad’s McIntosh tube amp and Wharfedale speakers. During college he worked in a high-end retail audio boutique and focused his studies on analog power amplifiers for his senior thesis.
As Dan entered the high-tech industry, his passion for audio kept him involved in media intensive projects, including working at Apple on early multimedia “Hypercard” projects and contributing to the specifications for Quicktime with requirements for the education market. Subsequently he worked at C-Cube micro-systems where he was a product manager for one of the first MPEG chipsets, and later at Sun where he led creation of a multimedia inter-application messaging service.
In the late 1990’s, Dan started work as a loudspeaker design consultant for several high-end audio companies, developing several products including the critically acclaimed Platinum Audio series 2 loudspeakers. He began working on modifying and improving headphones around 2008 before starting Dan Clark Audio in 2012.
Andy Regan, President
Andy has been in the Audio Business for 40 years. He started his audio journey as a front of house and monitor Engineer for large scale touring acts and across a span of 13 years toured with legendary acts such as Fleetwood Mac, David Bowie, Aerosmith, The Commodores, and many more.
In 1984 he transitioned to the world of High End Audio and became National Sales Manager for Threshold Audio, one of the pioneering Amplifier companies. Over the next 20 years Andy held executive positions at Meridian Audio, AudioQuest, Snell Acoustics, and Cardas Audio.
Andy served as one of the leads of the “Beats” by Dre project at Monster Cable. After Beats sold to Apple (for $3 Billion) Andy became the President of Jerry Harvey Audio, the leading provider of custom in-ear monitors for the large scale touring industry. With Andy at the helm, JH Audio grew from $2.5 million to $13 million per year in sales in under 5 years.
Andy met Dan at Audio industry shows and became an admirer of the headphones Dan designed, seeing the possibilities to accelerate the company’s growth and actively pursued Dan to join the team.
Robert Jason Egger, Chief Engineer
Jason has been in the headphone business for 7 years, first as a consultant for MrSpeakers before joining as the Chief Engineer in 2014. Like Dan and Andy, Jason has had a lifelong enthusiasm for audio, and has a house full of homemade speakers and electronics to show for it.
In addition, Jason has 11 years of experience designing, prototyping and producing products for the cinema and broadcasting market including underwater housings, user interfaces, accessories and optics used in high-end commercial and education production.
Jason’s an engineering jack of all trades. With deep expertise in mechanical and electromechanical design, CAM programming, machine operation, PCB designer, as well as the design of fully custom CNC, doohikeys and gizmos used in all aspects of R&D and production.
Jason is a lifelong creator, maker and purveyor of speakers, abstract sculpture art and life-size fiberglass animals.
Why Invest
We believe the success of a company like ours hinges on two things: The quality of the product, and having a mission well-matched to a market.
We believe our balanced blend of quality, comfort, and value is second-to-none. And our mission is to provide the best listening experience for users. It’s that simple.
Invest in Dan Clark Audio if you believe people want the best possible listening experience for their music, games, and video and are willing to pay a premium for it. We have proven over the last eight years that thousands of people agree.
MrSpeakers Ether 2 advances the art of headphone design
DAN CLARK AUDIO: AEON 2 OPEN-BACKED HEADPHONES – A FANTASTIC UPGRADE TO A CLASSIC!
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MrSpeakers Ether 2 Review – My Favorite Flagship
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AEON2 HEADPHONES FROM DAN CLARK
Company | : | Dan Clark Audio, Inc |
Corporate Address | : | 3366 Kurtz St, Suite 200, San Diego, CA 92110 |
Offering Minimum | : | $9,998.12 |
Offering Maximum | : | $1,069,989.80 |
Minimum Investment Amount(per investor) | : | $238.70 |
Offering Type | : | Equity |
Security Name | : | Common Stock |
Minimum Number of Shares Offered | : | 1,466 |
Maximum Number of Shares Offered | : | 156,890 |
Price per Share | : | $6.82 |
Pre-Money Valuation | : | $7,502,000.00 |
COVID Relief
This offering is being conducted on an expedited basis due to circumstances relating to COVID-19 and pursuant to the SEC’s temporary regulatory COVID-19 relief set out in Regulation Crowdfunding §227.201(z).
Expedited closing sooner than 21 days
Further, in reliance on Regulation Crowdfunding §227.303(g)(2) A funding portal that is an intermediary in a transaction involving the offer or sale of securities initiated between May 4, 2020, and August 31, 2020, in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)) by an issuer that is conducting an offering on an expedited basis due to circumstances relating to COVID-19 shall not be required to comply with the requirement in paragraph (e)(3)(i) of this section that a funding portal not direct a transmission of funds earlier than 21 days after the date on which the intermediary makes publicly available on its platform the information required to be provided by the issuer under §§227.201 and 227.203(a).
Voting Rights of Securities sold in this Offering
Voting Proxy. Each Subscriber shall appoint the Chief Executive Officer of the Company (the “CEO”), or his or her successor, as the Subscriber’s true and lawful proxy and attorney, with the power to act alone and with full power of substitution, to, consistent with this instrument and on behalf of the Subscriber, (i) vote all Securities, (ii) give and receive notices and communications, (iii) execute any instrument or document that the CEO determines is necessary or appropriate in the exercise of its authority under this instrument, and (iv) take all actions necessary or appropriate in the judgment of the CEO for the accomplishment of the foregoing. The proxy and power granted by the Subscriber pursuant to this Section are coupled with an interest. Such proxy and power will be irrevocable. The proxy and power, so long as the Subscriber is an individual, will survive the death, incompetency and disability of the Subscriber and, so long as the Subscriber is an entity, will survive the merger or reorganization of the Subscriber or any other entity holding the Securities. However, the Proxy will terminate upon the closing of a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933 covering the offer and sale of Common Stock or the effectiveness of a registration statement under the Securities Exchange Act of 1934 covering the Common Stock.
*Maximum Number of Shares Offered subject to adjustment for bonus shares. See Bonus info below.
Time-Based Rewards:
The Superfan
Invest within the first 72 hours and receive 20% bonus shares
The Groupie
Invest within the first week and receive 15% bonus shares
The Trendsetter
Invest within the first 2 weeks and receive 10% bonus shares
Amount-Based Rewards:
$500+ | Join the Club
Gain access to Club DCA, receiving 15% off all purchases
$1,000+ | The Melody
Gain access to Club DCA, receiving 15% off all purchases + 6 months subscription to Qobuz Music Streaming
$2,500+ | The Chorus
Gain access to Club DCA, receiving 15% off all purchases + 6 months subscription to Qobuz High-Quality Music Streaming + Aeon RT Headphone
$5,000+ | Drop the bass
Gain access to Club DCA, receiving 15% of all purchases + 6 months subscription to Qobuz High-Quality Music Streaming + HeL Yeah Bundle (Includes AEON Headphones, Amp and Microphone)
$10,000+ | Hit the High Notes
Gain access to Club DCA, receiving 15% off all purchases + 1 year subscription to Qobuz High-Quality Music Streaming + Ether2 Headphones
$20,000+ | Drop the mic**
Gain access to Club DCA, receiving 15% off all purchases + 1 year subscription to Qobuz High-Quality Music Streaming + Trip to San Diego with a factory tour and headphones of your choice
*All perks occur after the Offering is completed.
**International investor pays travel costs, accommodations provided. Domestic investors receive air travel and accommodations.
The 10% Bonus for StartEngine Shareholders
Dan Clark Audio, Inc. will offer 10% additional bonus shares for all investments that are committed by investors that are eligible for the StartEngine Crowdfunding Inc. OWNer's bonus.
This means eligible StartEngine shareholders will receive a 10% bonus for any shares they purchase in this offering. For example, if you buy 100 shares of common stock at $6.82 / share, you will receive and own 110 shares for $682. Fractional shares will not be distributed and share bonuses will be determined by rounding down to the nearest whole share.
This 10% Bonus is only valid during the investors eligibility period. Investors eligible for this bonus will also have priority if they are on a waitlist to invest and the company surpasses its maximum funding goal. They will have the first opportunity to invest should room in the offering become available if prior investments are cancelled or fail.
Investors will only receive a single bonus, which will be the highest bonus rate they are eligible for.
A crowdfunding investment involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment. In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document. The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature. These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.
Hi Everyone! We're allowing our fundraising to close in two days, so it's last call!
Thanks to everyone for your support, it's made a big difference, and we're looking forward to an exciting 2021, and beyond!
Regards,
Dan
Hi everyone! We've just got a couple of days left on the fundraising, so it's last call time!
Thanks again to everyone who has invested in us, we are honored by your support!
Dan
Hi everyone! First, thanks so much for all the support for our crowdfunding campaign. The funds we've raised have made a big difference and we feel we're well prepared for the next phase of our business. As a result, we will not be extending our campaign further at this time, so please consider this a last call, for now!
Thanks again!
Dan Clark, and the whole team!
[The following is an automated notice from the StartEngine team].
Hello!
As you might know, Dan Clark Audio has exceeded its minimum funding goal. When a company reaches its minimum on StartEngine, it's about to begin withdrawing funds. If you invested in Dan Clark Audio be on the lookout for an email that describes more about the disbursement process.
This campaign will continue to accept investments until its indicated closing date.
Thanks for funding the future.
-StartEngine
Our ÆON 2 Noire is now our best-selling headphone, to the point we have trouble keeping it in stock.
With a bold high-gloss black finish, our signature comfort, an incredibly portable yet full-size design, loaded with our technologies from and an all new voicing, ÆON 2 Noire was designed to be a world-class headphone
Did we succeed? Read on!
https://headphone.guru/the-aeon-2-noire-the-black-beauty/
Our ÆON headphones continue to receive stellar reviews, and sales have been so strong we've been in backlog for the last month.
Check these out for your enjoyment...
Stereonet
"With fine build, superlative comfort and excellent accessories, this exotic new £900 pair of hi-fi headphones gets off to a strong start, but it’s the planar magnetic drivers that really do the business – plus that undeniably sweet styling. Available in a choice of open or closed back, it’s one of the best headphone designs around right now that doesn’t require a second mortgage."
stereonet-2020-product-of-the-year-awards
Audio Science Review
From Audio Science Review we received a rave review and the reviewer commented "We have seen this in electronics where companies that do their homework during development smell like roses in my reviews and measurements. We seem to have found the first company in that regard when it comes to headphones." It's a fun technical review, and includes a contrast to a $4000 headphone; guess which performed better?
[The following is an automated notice from the StartEngine team].
Hello!
As you might know, Dan Clark Audio has exceeded its minimum funding goal. When a company reaches its minimum on StartEngine, it's about to begin withdrawing funds. If you invested in Dan Clark Audio be on the lookout for an email that describes more about the disbursement process.
This campaign will continue to accept investments until its indicated closing date.
Thanks for funding the future.
-StartEngine
SUMMARY
2020 was an interesting year, to say the least! With a pandemic, economic disruptions, and political tensions we all had a great many uncertainties to traverse. We had no idea in April if headphones would be a priority for home-bound people, but they were. As a result sales showed a 2.9% decline and a marked shift to direct sales that increased our margins. Our expenses decreased due to a focus on production efficiency and a decrease in rent and overhead and taken together with the extra margin from direct sales allowed us to retire more than 90% of our outstanding debt, materially improving our cash flow. While we posted an increased operating loss for 2020 this is a direct function of accrual revenue recognition timing rules rather than a change in the business. In summary, with steady sales, increased margin, reduced overhead, and decreased debt our financial and operating position is considerably improved entering FY 2021.
2020 highlights include:
1) Goss sales were down 2.9% relative to the prior year, despite the effects of the pandemic on the business and the broader economy.
2) On December 20 we announced ÆON Noire, which has been so popular it has been in backorder since introduction
3) Positive press continues and we’ve received a number of additional awards for product excellence from the audio trade press
4) Our operating overhead has improved materially from 2019 with lower rents and increased operating efficiency
5) Our PPP round 1 loan has qualified for forgiveness and our application is in process; this will be accounted for in the 2021 books once forgiveness is finalized
6) Of the two standard loans detailed in our prospectus, one was paid off in full and the other now has a balance of just $18,193 which we expect will be paid in full in March 2021. This will provide continuous cash-flow benefits in 2021 relative to 2020
7) New product development has benefited from increased investment resources derived from our equity crowd-funding, and several new products and patent filings are in process
Financial Details
The following numbers are our final, unaudited, 2020 results. Net sales were $1,897,488, a decrease of 2.9% from CY 2019. DCA uses accrual accounting and revenue can not be recognized until product has shipped. Unfortunately, pandemic-driven supplier and logistics delays affected DCA’s December production causing most December orders to be shipped in early January, and while the sales occurred in 2020 the revenue must be recognized in 2021. For this reason while sales were only off 2.9% from 2019, total Income declined 15.3% to $1,687,883 and we posted a Net Loss of $143,573. The flip side is that since the revenue is recognized in 2021 we’re off to a great start for the new year!
As the percentage of our revenue derived from direct sales increased so did our margin, and as a result our cash position and balance sheet improved materially. On the cash-flow side we have retired one of the commercial loans we held prior to our StartEngine campaign and have a balance of just $18,193 on the second, which we expect to pay off in March. Our PPP loan qualified for forgiveness and when this is processed we will have retired 100% our existing debt, increasing cash flow for operations and freeing us to explore future loans should we desire.
Major pandemic effects included:
1) Having to figure out how to distribute production to allow employees to build product from home with minimal staff in our facility. The good news is we successfully developed a distributed production model that will allow us to smoothly continue production regardless of office/work mandates we can reasonably anticipate.
2) A literal inversion of shopping trends. In 2019 the majority of revenue came through the retail channels, in 2020 the majority of revenue was direct. Pre-pandemic sales days were best on weekends, during the pandemic weekdays became our strongest sales days. Summer sales are historically our slowest but June, July, and August 2020 saw major jumps in revenue relative to 2019 and posted some of the best monthly results of the year, while fall and early-holiday sales were unusually weak, though late December sales were exceptionally strong
3) Significant supply-chain and air and ocean freight logistics disruptions created late deliveries from suppliers which delayed many of our December shipments and also caused delays in product launches, affecting our 2020 financials due to accrual revenue recognition rules
Due to the unpredictable nature of the pandemic it is impossible to forecast 2021 and we can make no representations about the 2021 outlook.
On behalf of the team I'd like to express our gratitude to the Start Engine community for your support!
These funds have made a real difference to our R&D efforts, and as a result we're looking forward to an exciting 2021.
Regards,
Dan
Continuing our winning streak of "best headphone" awards, ÆON 2 just picked up the "Best Over Ear Headphones" award from Stereonet!
"Available in a choice of open or closed back, it’s one of the best headphone designs around right now that doesn’t require a second mortgage. The delicate yet detailed sound is exquisite."
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