Here goes. Part 2.
For those of you that haven’t read the first, this is the second of two instalments, cataloguing some of the failures I have remembered and identified during a failed new product venture back in 2009/10. By all means you can read this one in isolation as all the points stand alone, but it might make a little more sense if you read Part 1 first. It sets the scene and gives you a bit of an overview of the product in question and the circumstances of the venture.
Points 1-6 feature in Part 1.
7. Never borrow money from family.
OK. So this one is tricky I’ll grant you, but my experience has certainly made me a darned sight more cautious about things like this.
When we initially started up, we had a pretty good 3D Printed prototype (SLA for those that are interested), a load of polished renders, a brand proposition and some fairly robust figures. We peddled these around a handful of private investors for some seed funding. These were people who had done well in their time in industry and had some cash sitting in piles waiting to be used. We weren’t asking for a pot load, and it was peanuts by today’s standards of early stage funding cycles. Whilst we had some great conversations and people were interested, there were aspects of the pitch that clearly didn’t quite click – in hindsight we found ourselves speaking to people who had worked in very highly ‘protected’ industries like semiconductors or medical devices – so our lack of secured IP gave them the wobbles (hence our wasted journey into IP land…see previous post).
Anyway, as a result, we decided to seek peppercorn funding from friends and family to get us the cash we needed to buy injection mould tooling, IP, packaging tooling and a bunch of other bits and pieces. It wasn’t a lot in the broader scheme of things – about £50K – but it required us to have lots of conversations with family and friends to secure this amount.
I’m still humbled by the faith that these willing people had in us and our vision, but it still haunts me to this day that we didn’t make that money work for them. Whilst every single one knew the risks, we wouldn’t have done it for a second had we not felt confident of giving them significantly more back in return for their faith. I know every startup probably feels the same, but I will never seek funding from close friends and family again, as it’s one of those things you can never escape from – nor should you.
Whilst I understand the desire to allow people close to you, to benefit from what might be favourable equity percentages, or early bird rates, I would still now go through a more formal investment platform (like SEEDRS for instance) and allow people to make their own mind up based on a fair and level playing field. It’s all too easy to get caught up in the fanfare and glitz of likely wealth and reward, and you rightly want that for your loved ones, but it’s a hard thing to reconcile when you realise you’ve spent the money and have nothing to give back to the people you so dearly wanted to. Very hard indeed.
8. Check. Check. Check.
There is a kind of surreal, excitable momentum that comes with developing a product of your own. Suddenly you are unencumbered by client demands, by proposal writing, by the endless rounds of reassurances and convincing. The stuff you assume is blockage to creative freedom.
However, that momentum can quite quickly get the better of you and as small time slips start to emerge, you put yourself under greater and greater pressure to keep things moving. It. feels good to announce that the injection moulding tooling is underway. It’s exciting to say that packaging is being manufactured. It reassures others of momentum. Of progress.
However, one thing we didn’t do enough of is checking. Not of the stuff we knew about, but more the stuff we didn’t know about. Which I know sounds odd.
I’ll give you an example.
We designed an overmoulded element of the case to support the phone in it’s polycarbonate hard shell. It was the only thing that physically touched the iPhone and the material was impregnated with conductive additive to facilitate use of the touchscreen whilst behind nearly 1mm of plastic. In order to create the waterproof seal, we built in a small ‘o-ring’ feature to the same overmoulded part, both to reduce part count and to improve manufacturing and assembly speed and cost. However, what we didn’t fully test was the compressibility of that ‘o-ring’ feature. Normal ‘o-rings’ sit in a channel into which the seal can deform when compressed, creating the necessary seal, or they have a hollow tube profile to facilitate the same material deformation.
We foolishly overlooked this, and I kick myself to this day.
It wasn’t critical. The plastic we chose to overmould was suitably deformable and it did indeed make a decent seal (when we eventually received decent mouldings from our manufacturing ‘partner’ – see earlier post!), but when we did submersion tests, after about 10 minutes, a very small bead of water started to emerge at a single point along the o-ring seal. It didn’t soak the phone. There was enough space in the case for the water to settle without cause any damage whatsoever, but it meant we couldn’t claim water PROOF, so we had to settle for water RESISTANT. Much less impactful and much less sexy.
We’d made some bold statements about what we were trying to achieve. We now had to back up the truck a little and embarrassingly say it wasn’t as waterproof as we’d anticipated. Not great. Not great at all.
All it needed was a few more tests and checks earlier on. Asking people to look at the design before it went for tooling, or at least design the tooling to facilitate straightforward change in that area.
Measure twice. Cut once. Stuff I know. Stuff I should’ve advocated.
It was that pesky excitable momentum. Not that I blame anyone per se.
I should have known better.
9. Prototype as much as you can.
As you’d expect, this is inherently linked to my previous point, but something you should allow greater budgeting for than you think.
Checking is important. Incredibly important. But to a certain extent, that’s the theoretical stuff. Using knowledge to reassure or acknowledge a truth or a lack thereof. Or to identify something that may require a bit of extra digging.
Prototyping is slightly different. It serves to expose those aspects that you may not have thought were issues in the first place or had even had cognisance to consider. Like discovering a secret about somebody you’d never imagined, but then realising that secret defines them. Too existential? Sorry.
Now it’s easy to say “Prototype everything!” But it’s often simply not possible. Whether it’s budgetary constraints or the ability to prototype accurately enough to mitigate issues in manufacture, there are often restrictions to what you might be able to prototype and learn from. There is also a danger that you prototype too much and never actually move forward – staying in an infernal optimisation loop, afraid to take the plunge. Our specific complexities lay in the properties of materials and their combination that we simply couldn’t prototype easily. Overmoulded polymers with specific conductive additives. Compressive qualities of compounded materials. Flexibilities in moulded hard shell polycarbonates. Colour retention and accuracy in overmoulding with additives. The list goes on.
To a certain extent I think I used this as a bit of an excuse to move forward with hard tooling and I did a bit of a ‘stubborn ostrich’ routine. I figured that we could adjust the tooling if needs be and factored this into our budgeting and timescales.
But I was foolish. I should have tried to prototype aspects of the functionality in ways that could have at least taught us things that we could therefore mitigate slightly. Like the O-ring debacle. I could easily have produced a rig to test multiple o-ring compressive resistances and profiles but stubbornly thought we could do this by altering the choice of overmould material hardness.
I regret this, and wish we’d spent more time prototyping and proving stuff out.
But it’s easy to say that in hindsight and no pressure to deliver. We were fighting the advance of the new iPhone announcement. We had made promises to deliver and we felt that acutely. All I would say is that to anyone attempting anything similar…please factor in more testing and prototyping. It simply can’t hurt.
10. Be realistic about margins.
This is something we actually did rather well, but I’ve decided to include it here as it’s something that so often gets overlooked or under measured.
Margin.
One thing we both did from the outset is understand our competitive market. We purchased every product that could possibly be construed as ‘similar’ or within the same consideration set and took them apart. Physically and financially. We asked questions of distributors and retailers. I was lucky in that my business partner had direct prior experience of running an e-commerce retail site and understood all the idiosyncrasies of drop-shipping, distribution, third party fulfilment, stock-keeping, discounting…and any other retail trick and essential ingredient to get your product to the customer.
We made sure we knew from the outset what our profitability was and what to aim for when we designed the unit. We needed to sell it at £20-£25 to be competitive. So we worked out we needed to sell it to a distributor for £5 per unit to be realistically considered and for them to think it was worth stocking. Working back from that, we needed to manufacture a product that should cost us about £1.50 to allow us a decent margin per product. It certainly narrows your focus when you do these sorts of calculations at the start. The biggest mistake I’ve found in excitable entrepreneurs is in this initial calculation of profitability.
They forget about all the vultures in the queue between you and your customer. The distributors. The retailers. The brands. All needing their cut. Be it on product sales or a contribution to marketing spend to ‘support it’, you need to ensure your figures allow for this exploitation. Money for old rope. But money you need to find. It’s heartbreaking when you look at the tiny stack of coins you have to work with to provide other people with profit, but that was the status quo at the time.
We did it. We managed to produce a product, manufactured, assembled and packaged entirely in the UK for £1.50. I think our first batch ended up being slightly over this figure but we came in pretty much where we wanted. Unfortunately it was the other cacophony of errors that scuppered us, but I’ve already mentioned that a few times already!
As the years have passed, I’ve seen this equation alter somewhat. There’s less reliance on physical footfall in big box stores to shift your product, but much more on SEO and adword spend to ensure you have even a glimmer of hope of reaching enough people with your message, let alone commitment to purchase. The gradual demise of the high street is a good thing in one sense but creates huge issues in other ways. This equation will change yet again, but is something you need to really understand before you even put pen to paper with any design ideas.
It may be a non-starter from the outset, regardless of how well it satisfies a consumer need or ticks a specific market segment desire.
11. Exclusivity can kill your idea.
When it became clear that we were chasing our tails and were literally racing to try and sell as many of the units as we could to fund the iPhone 4 model (or at least that was Plan B once we realised Plan A was well and truly dead in the water), we decided to pimp ourselves to as many other distributors and retailers as possible. This was once the aforementioned slimy wormtongued distribution contacts we had been in discussion with (and who had encouraged us to continue with the 3GS model) had started refusing to return our calls and slide back under their slimy stones…despite reassurances all along that they were still onboard with us and would support our efforts to sell this version.
Anyway, I digress. We set up as many meetings as we could with people we thought might be able to stock our product in retail outlets or online.
These meetings went well. Really well. At least initially. Right up to the point where they said that they would take it on the basis of exclusivity.
Not because they wanted to be the proud owners of the product, but primarily so they didn’t enter a price war with online retailers who might then discount our product to ensure sales. Bear in mind, they would be discounting only a fraction of the margin they have already handsomely secured. This also extended to us and our own online store.
Bugger.
Essentially, every person we spoke to wanted us to sell it only through them or to guarantee an RRP price ‘floor’ – below which we would never go. Given that we needed to shift stock and each retailer wasn’t prepared to take anything like enough to satisfy our sales requirements, we were left with the only option, which was to set up our own online store and sell it ourselves. That way, we could utilise third party drop shipping as a means to get more online sales, and at least we could exploit our margins as we didn’t have distributors or retailers to consider.
Sound simple right?
Not so. We hadn’t factored in the level of marketing budget we needed to get our brand name and message out there fast enough and wide enough, so we essentially rang every single printed and online publication we could think of to try and get some publicity and a picture feature, expert review, endorsement, ‘first test’ or similar other editorial, to drive traffic to our site.
It was back breaking work. Sending press packs and free samples to all those people with no guarantees of getting anything in return. We did quite well all told, and ended up with pretty decent visibility and reviews in around 30-40 magazines and publications in the end. Under normal circumstances I would be chuffed to bits with that, but in the ‘chasing the tail’ game, it simply wasn’t enough.
We sold a few thousand, but not nearly enough to do what we needed.
Just be careful about exclusivity. It ended up defining our sales strategy without us really intending to. If I were to do it again, I would probably want to have more conversations with more retailers and distributors to better understand the limitations and opportunities available to me.
In truth, the online landscape is a much more accommodating one than the one we inhabited back in 2010. We were relying on the physical world influencing the digital world, whereas now you can create a digital strategy that can be built entirely without the need for physical retail. I’m not suggesting it’s any easier, but I think you can be more calculated and less reliant on others. At least that’s the impression I get, but maybe that’s hindsight messing with me again?
12. Be something to someone.
From a marketing and product positioning standpoint, we tried to be everything to everyone.
Deliberately.
We created a product that we deliberately positioned to be as relevant to hikers as snowboarders as holiday makers by the pool as downhill nutters. We tried really hard. Our packaging talked about how relevant we were to everyone. We chose a brand that we could morph to communicate all the different ways our product could suit the different walks of life and hobbies people enjoyed. We produced our product in a huge range of colours, from desert sand to vibrant pink to demure purple and jungle green. Our features spoke about water and shock and sand and dirt resistance.
We tried really hard.
It didn’t work, because while we were trying to be everything to everyone, we ended up being nothing to no-one.
By trying to extend our message to all, we ended up being a bit too extreme for holidaymakers, a little too lightweight to downhillers, not sensational enough for festival goers, not convincing enough for canoeists…you get the drift. Even though our product was perfectly suited to every one of these applications (by deliberation and design) and would have satisfied the customer, we tried to spread ourselves too thin and wide and ended up becoming a form of background noise to all.
We needed to pick our market and drive it home hard. This would have pulled in peripheral markets and consumers by default and intrigue. The way people buy deep sea watches but never venture further than the hotel pool, or drive massive 4×4 behemoths to get the kids to an inner city school.
I’m still incredibly proud of the brand we created, the marketing material we generated and the appeal we created to those that purchased and engaged with us, but I would advise anyone else to be much more focussed about WHO you want to speak to.
I appreciate that it may sound bloody obvious now, but it all seemed to make sense to us when we were doing it. Appeal to more people = sell more product. Simples.
Doh!
13. You need money.
My final point and one that shouldn’t come as a surprise.
You need money to do this stuff properly.
Bootstrapping and peppercorn funding only works if your idea is not susceptible to the passage of time or trend, you don’t have to rely on this idea paying your mortgage, you can take your time and you are able to change direction when circumstances permit. However, this rarely happens as most people enter the ‘new product’ game with energy and commitment and with a desire to make a difference, and hit the market.
The only way to give yourself a fighting chance is to have money to fund your exploits.
Not millions. But enough to realistically cover your time (the biggest drain by some margin), capital expenditure (things like tooling and kit…and don’t underestimate this either – see earlier post), marketing (and be careful that this includes the unwritten commitment some will expect of you – see point 10), packaging (this was the easiest thing to control and define, but often overlooked) and prototyping (testing, third party support, physical parts…etc.).
There’s lots more to include but these are the biggies. Be really pessimistic when you do your budgeting and planning.
Everything will take longer. Everything will cost more. Everyone will most likely let you down.
The only way to survive is to ensure you have enough money to do it properly.
I hate to admit it. I’d love to say that the entrepreneurial spirit will guide you through these rocky waters, and in truth, this will certainly help. But spirit without money is just futile.
And the trick here is to have enough money to protect you from risk but not too much that you’ll never make it back. That’s vanity.
And pointless.
I’m not sure how useful this all is to anyone, but it’s been helpful to me to exorcise some of these thoughts and memories in these articles. It’s the broad brush advice I would give to any wide eyed inventor or entrepreneur who approached my old design business looking for support (although I’d probably keep it a little more professional and a little less ranty!).
It’s also the reason that I decided to only work with 2 ‘inventors’ in any one calendar year.
‘Freds in sheds’ as we affectionately called them.
They are exciting to work with as they are eager, energetic and often genuinely innovative. But they can also pull you into a chaos vortex unlike anything you’ve experienced if you are not clear about what they are about to embark on and you ‘manage their expectations’ clearly.
No one likes a chaos vortex.
Over and out.
