NutriSystem CEO gets into security

YARDLEY, Pa.—The guy who took NutriSystem from a $27 million company to an $800 million company using a direct-to-consumer, cut-out-the-middleman strategy, has set his sights on security as “another industry that's ripe for a change.”

Michael Hagan, former CEO of NutriSystem, has joined LifeShield Security, formerly InGrid Home Security, as CEO.

He and InGrid founder Lou Stilp (who is now COO of LifeShield) have raised $11 million in two funding rounds, opened a call center here, and assembled a staff of marketing experts who formerly worked with Hagan at NutriSystem. They've also brought some NFL starpower along: Hall of Famer Dan Marino is now an investor in the company and will be featured in LifeShield's television commercials.

All of this has been in the works for six months, said Stilp on June 22. “This is our coming out party.”

Stilp launched InGrid, which is a self-installed, professionally monitored, wireless digital home security system, in January of 2007. Over the next two years, Stilp raised funds and partnered with some traditional security companies and some cable companies to sell his product. He also partnered with Guardian Protection of Pittsburgh for professional monitoring. Guardian CEO Russ Cersosimo is also an investor in the company, as well.

The partnerships with cable companies and traditional alarm companies didn't flourish, so late in 2009 Stilp decided that InGrid should take control of its own destiny. That was the beginning of the company's conversion to a direct-to-consumer model, he explained.

“The product has not changed,” he said, just the business model.

He and Hagan bring different talents to the company. “He's quite the marketing guy, far more so than me,” Stilp said. “I'm the tech guy.”

Under Hagan's leadership, Forbes magazine in 2006 named Hagan entrepreneur of the year and NutriSystem as the top public small company.

When he joined NutriSystem in 2002, Hagan didn't know a lot about the weight loss industry, he said. It was an industry that was “tired and in need of a change.” By changing the business model, he “brought down the cost to consumer and convinced the consumer that they didn't need a middleman [franchises] as much as they thought.”

He views security as “a different product, but the same opportunity.” Customers can install their own security systems, he said.

His task is “really a customer acquisition game,” he said. He and his marketing team will take an analytical approach in deciding which mediums work best and how to reach consumers. He's starting with TV and radio, but will look at print and Internet.

It's what he did at NutriSystem: “You figure out what makes each [media] channel work,” and tailor offerings accordingly. “You turn a lot of different dials to optimize each marketing campaign.”

Hagan's divided the home security consumer market into three segments: those who would never install a security system, no matter how simple, by themselves; those who need a little help or encouragement to install the system; and, lastly those who are not intimidated by technology at all.

LifeShield is not targeting the first segment. He's providing a DVD, customer-service support and Web site assistance to the second segment, and he's actively targeting the third segment.

Hagan said he's not completely discarding the idea of partnering with traditional alarm companies in the future and he does believe that “nine out of 10” customers will continue to choose professional monitoring (still provided by Guardian).

He notes that the metrics are different for security than for the weight loss industry. “If you held a customer for 10 to 11 weeks that was a success, but in security, a successful company like Russ Cersosimo's holds customers for 10 to 11 years.”

Does Lifeshield hold the same promise for success as NutriSystem? “That was a special ride. If we have a fraction of that success I think we'll have created a great business,” Hagan said. “Our goal is to create an enduring, long term brand.”

First round investors include: Associated Partners, CenterPoint Ventures, Novak Biddle Venture Partners, Novitas Capital and Hagan. Second round investors include earlier investors with new additional funding coming from First Round Capital, MHS Capital, and NewSpring Growth Capital.