Sub Club by RevenueCat

Episode: How Skylight Balances Growth and Profit for Sustainable Success

Guests: Michael Segal (CEO), Mark Ungerer (CPO), Skylight
Hosts: David Barnard, Jacob Eiting
Date: February 18, 2026

Episode Overview

This episode dives into the thriving world of hardware-enabled subscriptions, using Skylight—a leader in the space with products like the Skylight Frame and Skylight Calendar—as a case study. Michael Segal (CEO) and Mark Ungerer (CPO) discuss the strategy behind launching a subscription alongside hardware, how they balance growth and profitability, the intricacies of deciding what features to include in paid tiers, and the emotional calculus involved in subscription pricing. The discussion is dense with practical insights for anyone exploring or operating subscription businesses, whether digital or physical.

Key Discussion Points & Insights

The Rise of Hardware-Enabled Subscriptions

• Industry Trends

  • The holiday season has seen a dramatic rise in hardware-enabled subscriptions, with brands like Oura Ring, Backbone, Bird Buddy, and Skylight becoming major players.
    "It just seems like these categories are reaching mass adoption and maturity... So it just naturally skyrockets to the top of the charts." (Michael, 04:40)

• Market-by-Market Dynamics

  • Growth isn't uniform; each hardware category is its own market, and only a handful achieve mass-market adoption.
    "I don't think of it as a megatrend. It's like you have to have a really good idea... There are very precious few categories that are going to be new electronics that reach mass adoption." (Michael, 05:48)

Deciding When—and How—to Launch a Subscription

• Timing & Rationale

  • From the start, launching a subscription was a "must" from a business model perspective, particularly given high product satisfaction and daily usage.
    "A hardware business in consumer, without a subscription, is basically not building enterprise value with a rare exception." (Michael, 02:09)

• Balancing Free vs. Paid

  • The core value proposition (e.g., displaying family photos) remains free; incremental features (e.g., video functionality, advanced AI, meal planning) go behind a paywall.
    "If you kind of boil it down, you want what the customer is buying—the heart of why they want this thing—to be part of what they're getting and they're paying for that $300, or they'll feel sort of tricked." (Mark, 12:04)

Emotional Calculus—Not Just Data

• Guarding Against Consumer 'Disgust'

  • Decisions about paywalling features are led as much by customer emotion as by quantitative A/B tests.
    "There's a spectrum between 'I get why you're charging a subscription' and 'I'm feeling ripped off, angry, and disgusted.'...You will see it very quickly when you meet with people." (Michael, 13:19/52:13)

• Iterative Approach

  • Features are often added to the paywall first, then sometimes moved to the free tier as user sentiment evolves.
    "We have had times where we put something behind the paywall and it makes the numbers go up. But we learned through reviews that it's very begrudging or even anger-eliciting." (Michael, 13:19)

• Continuous Feedback

  • Qualitative feedback (user interviews, focus groups) is as crucial as metrics; sometimes "the numbers are going to be what the numbers are" (Michael, 52:13), but only after checking the emotional pulse.

Pricing, Profit, and Growth

• Hardware, Software, and Profit Mix

  • Skylight aims for profitability in both hardware and software but adjusts as market and supply chain conditions shift.
    "We make a bit of money off the hardware, make a good amount of money off the software, such that the profit...is about half and half." (Michael, 26:24)

• Bootstrapping vs. Outside Investment

  • Bootstrapping is highly capital-intensive for hardware, but they've used creative debt/inventory facilities rather than VC, choosing growth funded by real profits.
    "Do whatever you humanly can to pay back on day zero, because then you have no marketing payback time." (Michael, 29:10)

Growth Levers and Challenges

• Multipronged Growth: Product First

  • Authentic product excellence ("solid 40 NPS") is foundational before ramping up marketing.
  • Once strong, growth comes from influencers, multichannel (website, Amazon, retail), word-of-mouth, and strategic partnerships (e.g., Costco). "Influencers are huge and very authentic...Retail is the biggest influencer of all in our world." (Michael, 40:19)

• Channel Complexities

  • Subscription attach rates are much higher via owned channels (myskylight.com) than via retailers; strategies like offering a hardware discount for subscription sign-up help. "We give a discount on the hardware if you sign up with the subscription...We can't do that on Amazon, we can't do that in a retailer." (Mark, 41:34)

• Onboarding and Feature Discovery

  • Most users form habits in the first 30 days; unlocking deeper feature usage beyond that is tough—AI-powered onboarding is a possible future unlock. "After 30 days, it's pretty hard to change their behaviors. So our newer customers that set up the device with more features tend to use those things more." (Mark, 43:52)

Pricing Psychology: The $39 to $79 Leap

• Doubling Price—With Restraint

  • Testing showed $99/year would have maximized average revenue per user, but they settled on $79 to avoid overreaching and risking user goodwill. "It was actually not the ARPU maximizing amount...I don't. It just felt like overreaching. We were doubling our price. We want good vibes to continue." (Mark, 51:26) "We knew 99 on paper penciled a little bit better, but that was getting into closer to that disgust territory." (Michael, 52:13)

• Grandfathering and Transparency

  • No price increase for existing subscribers; new users pay at the new rate. They honored the old price for anyone who asked, favoring customer loyalty over short-term revenue. "If they reached out to us, we honored the old price effectively indefinitely... be really nice to the existing customers, build for the next 10 million customers and don't try to squeeze every penny out." (Mark, 53:29)

In-App Purchases vs. Web Subscriptions

• Friction Over Fees

  • Although Apple's commission stings, the reduced friction of in-app purchase justifies the cost. "It pays for itself...it's like a fraction of our customers are subscribing on Apple because we have the direct channel... it seems like this juicy pot of money that... in the tests we've done has kind of paid itself off in an increased conversion through reduced friction." (Mark, 46:33)

• Focus on Growth

  • “Growth vs. profit” is the lens: “If you want to be a hundred million dollar business... you have to be everything, everywhere, all at once, including I suspect you can't get away from Apple subscriptions.” (Michael, 47:16)

Moats and Long-Term Defensibility

• Hardware as Moat?
  • Hardware creates short-term defensibility but isn’t a true moat in the long term—network effects, partnerships, and becoming the “Kleenex” of the category offer more durable advantages. "Neither hardware nor software are moats anymore... it's got to be something that your competitors cannot do or are not willing to do." (Michael, 34:55/35:00)

Experimentation & Resource Constraints

• Small Team = Careful Bets

  • Limited resources mean picking experiments carefully and favoring bigger levers (e.g., price increase) over many small tests.
    "Growth would be easier if we had a team for it... Right now, last year it was like, we're going to do one or two things." (Mark, 58:37)

• Hits and Misses

  • Biggest win: Price doubling for the subscription (from $39 to $79) with minimal churn (55:53).
  • Biggest fail: Free trial experiments didn’t move conversion—resource constraints limited iteration to learn why (57:09).

Notable Quotes & Memorable Moments

• Why Launch a Subscription:
  "A hardware business in consumer, without a subscription, is basically not building enterprise value with a rare exception." – Michael (02:09)

• Balancing Value and Emotion:
  "There's a spectrum between 'I get why you're charging a subscription' and 'I'm feeling ripped off, angry, and disgusted.'...That is not an emotion... you want to elicit." – Michael (13:19)

• Product Before Growth:
  "If your product isn't like a solid 40 NPS, I think marketing effort and dollars are kind of a waste of time because you're going to get a false negative." – Michael (38:19)

• On Pricing Sensitivity:
  "We knew 99 on paper penciled a little bit better but, but that was getting into closer to that disgust...territory." – Michael (52:13)

• On In-App Purchase vs. Web:
  "It pays for itself... reduced friction." – Mark (46:33)

• Bootstrapping Wisdom:
  "Just pay back on the first order... then you have no marketing payback time." – Michael (29:10)

Timestamps for Key Segments

• Hardware Subscriptions Boom & Market Dynamics: 01:18–09:12
• Launching Skylight’s Subscription: 02:09–03:45
• Free vs. Paid Feature Philosophy: 10:48–14:39
• When Data Fights Emotion: 13:19–15:06
• Bootstrapping, Profit & Debt: 26:24–32:55
• Growth Levers: DTC, Retail, Influencers: 38:01–41:34
• Feature Discovery & Onboarding Challenges: 43:52–45:21
• In-App vs. Web Subscription Tradeoffs: 46:07–49:57
• Subscription Price Increase—Process & Results: 50:18–54:23
• Wins, Fails & Final Reflections: 55:53–59:31

Final Reflections

Skylight’s journey reveals the art and science in hardware subscriptions: the necessity of empathy alongside analytics, pragmatism in pricing, and the imperative to always deliver authentic value. Their bootstrapped, user-focused approach and transparent storytelling make this episode a valuable playbook for both hardware and software founders navigating the complexities of the subscription business model.

Open roles at Skylight:
They're hiring a Growth Product Manager—apply if you want to help them scale!