When Ben Kaufman founded Quirky in 2009 at the ripe old age of 22, it looked like a gimmick: Built upon the then-hot idea of crowdsourcing, the company sought to solicit would-be inventors for ideas and then have other users weigh in on those ideas, eventually bringing the best ones to production. The Quirky community itself would be the test market, buying up the goods they helped design (and getting a cut for their troubles). It sounded almost like a direct-marketing scheme. Questions hung in the air: Would they really be able to create anything other people wanted to buy? Were there enough people willing to trade their time for uncertain and potentially tiny rewards? Might the actual goods, ranging from flexible power strips to a better dustpan, just be vaporware?
Four years on, after the failure of many companies promising crowdsourced innovation, Quirky's skeptics have been silenced. Since 2011, the company has increasingly complemented its online sales by grabbing shelf space in the likes of the Container Store, Bed Bath & Beyond, and Target. And in late 2012, it raised $68 million from Andreessen Horowitz and Kleiner Perkins Caufield & Byers--cash that will go toward a bold series of retail experiments. In short, it's turning crowdsourcing into a scalable, big-time business.
The company is doing so by leaning on a never-ending stream of products steeped in consumer research. "For a retailer, it's simple," says Kaufman. "I say, 'I can deliver two products a week with guaranteed performance.'" Out of a community numbering in the 300,000s, there are 65 inventors, ranging from stay-at-home moms to teachers, each making more than $20,000 a year from their ideas. Most consumer product firms can offer only a few dozen products per season. Quirky's gushing pipeline never goes dry.
Competing companies such as kitchenware powerhouse Oxo have market research processes of their own, but Kaufman insists that such evaluations can't match the size of Quirky's vetting community. Rivals also rely on the insights of researchers and designers, which might expose them to a certain level of professional bias. Though Quirky's products can often seem like junk, Kaufman's model largely renders personal taste irrelevant. Case in point: One of Quirky's runaway successes is the Bandit, which is simply a rubber band with a hook. "There's video of me saying it's the stupidest thing ever," says Kaufman. In any other company, that would have been the end of it. At Quirky, the community overruled the CEO. Today, there are websites dedicated to sharing uses for the Bandit. When we spoke, Kaufman had just ordered 1 million more from his manufacturers.
Despite that success, Quirky, with $20 million in 2012 sales, is still looking up at Oxo, which does nearly $125 million a year. (Oxo is a division of Helen of Troy, a holding company.) That's why Quirky raised its latest funds with a pitch about scale. Rather than having inventors submit whatever ideas strike their fancy, Quirky plans to create subcommunities that will focus on specific verticals, ranging from pets to toys to moms. The idea is to go from producing two items a week to roughly 10.
But for all its ambition, Quirky's future depends on people continuing to buy its wares in stores, not just online. Here too Kaufman has a crowd-based solution: letting community members manage the shelves. Typically, that's done by a buyer at the store who hears pitches from vendors. Quirky is using its cash infusion to experiment with a new model. In exchange for guaranteeing stores a certain level of revenue per square foot, designated Quirky "ambassadors" will manage stock using an app that offers suggestions about what's likely to do well, and their gut. In return, they'll get a cut based on sales. Quirky estimates that three reps covering Long Island, for example, could make $250,000 to $300,000 annually among them. A trial run will go live early next year. "The ultimate goal is to build the 21st-century P&G," says Kaufman, "based on people who wouldn't otherwise have a voice."