Two newcomers to Philadelphia's start-up world have found each other and are well-positioned for mutual reward.
One is Mohamed Zerban, a senior at Drexel University and founder of Tern Water, a company developing a smart water filter he hopes will become a standard fixture in homes worldwide.
The other is Kevin Michals, who in 2010 founded Cross Properties, a real estate investment and development company with 15 rental properties in Philadelphia and on the Main Line. A year ago, he created Cross Capital to make investments in early-stage technology companies serving the real estate industry.
Cross Capital has selected Tern Water as its first recipient, providing "a six-figure" seed-round investment, the specifics of which Michals and Zerban would not disclose.
The funding will be followed by an order from Cross Properties for Tern Faucets "as soon as they are ready," Michals said.
"I believe this can be the next great company," he said of the start-up, which has no sales yet and is based in the Baiada Institute for Entrepreneurship, an incubator at Drexel.
The Cross Capital investment is doubly satisfying, Zerban said, because he was not seeking it when he first met Michals in August.
"We were really approaching Kevin not as an investor but as a potential buyer [of the Tern Faucet], and he got excited about this enough that he wanted to invest and wanted to be more a part of what we're doing," Zerban recalled. "It feels good."
Tern Water, which Zerban, a mechanical-engineering major, founded in late 2015, is trying to raise $100,000. Cross Capital is the only investor it has closed with so far, but negotiations are underway with others, he said.
The funds will be used to finalize prototypes, provide demonstration models, secure a supply chain that can handle the type of growth Zerban envisions, and launch a water-testing initiative, #KnowYourWater, to raise awareness of the Tern Faucet.
Designed to attach to kitchen faucets, the Tern Faucet, expected to retail for about $199, purifies water and provides information on water consumption and efficiency, as well as filter longevity. Its sensors detect changes in consistency and flow and communicate that information to a user's desktop, Android, or iOS devices. A new filter is automatically sent once one is detected to no longer be effective.
Demonstrations are slated to begin in April, with apartment owners and operators Tern Water's target market.
"My dream is to see them in almost all kitchen faucets," Zerban, 22, a native of Egypt, said last week. "That is why bringing Kevin on board was a wise decision on our end. It helps us really tackle these apartment developers and builders much better and secure more deals."
As part of Cross Capital's investment, Michals will be a member of Tern Water's board and serve as an adviser for business development in the real estate market.
From the perspective of an apartment developer and operator, Michals said he found Tern Faucet an offering to enhance Cross Properties' "commitment to innovation within our communities."
"We're always looking for features and benefits we can infuse in our communities to differentiate ... us as a developer with the tenants' best interests in mind," he said. "The convenience factor of having filters delivered to you without you even thinking about it makes our tenants' lives a little bit easier."
From an investor perspective, the technology-laden, data-abundant Tern Faucet "is part of the ecosphere of connecting everything," Michals said, referring to a variety of "elements of smartness to the products that we use in our home," including the ability to adjust thermostats, turn lights on and off, and monitor air quality from mobile devices. "In my opinion, it should be done with water."
Particularly in cities with aging infrastructure, Michals believes there will be a market for data on what contaminants drinking water picks up, say, between its source, where quality is usually monitored, and your kitchen tap.
"Someone is going to find value in that data," he said. "That could be the game-changer for Tern Water."
Michals noted that Google bought the three-year-old smart-thermostat start-up Nest in 2014 for $3.2 billion.
That might be getting a little ahead of the game for Tern Water, which expects to start taking orders by spring, with product delivery likely one year after finalizing orders, Zerban said.
"Whatever helps us reach our vision of smart, sustainable, and healthy water for all users is what we will be doing," he said. In the meantime, "we are spending a lot of our efforts ensuring a great user experience." And building consumer awareness.