Launching a company in Silicon Valley these days, though much less expensive than a decade ago, is still a complex process, particularly when it comes to designing and selling physical goods rather than software.
Many venture capitalists are wary of getting involved in a company if they don’t see the potential for big payoffs down the line. They want hockey-stick growth and massive returns.
To Bill Burnett, the executive director of Stanford’s design program, who had been through this process multiple times in the past, there had to be another way.
“The last startup I did,” he recalls, “we raised $6 million, hired 15 engineers, and it took two years. The product failed, and we were done. [There] was an incredible amount of waste in that model.”
That’s why Burnett, along with cofounders Elisa Jagerson and Savannah Peterson, have launched Massive Labs, a Palo Alto, California product design startup that may well be the first of its kind, an “ultra light” company with almost no overhead and the ability to turn out hardware products thanks to experienced designers and the ability to get a perfect read on the market’s interest in its wares long before having to make any kind of substantial investment.
Massive Labs was built on the back of what by now an obviously well-established and well-oiled system: crowdfunding. In its simplest essence, the company is trying to raise money to develop, manufacture, and sell each of its products through crowdfunding campaigns.
“It’s a big game changer,” Burnett says of crowdfunding. “You take an idea, do the ethnography, understand the need, and take your idea straight to the crowd and get a thumbs-up or down. That changes product development significantly, allowing you to start with a much smaller team.”
In effect, Massive is leveraging all of the tricks that countless others have learned about how to make products via crowdfunding campaign. But where most designers have used those campaigns as one-offs–with some of course eventually leading to very profitable companies–Massive is using them for each individual product, all in the context of a company that treats each product as a discrete element, independent from the others.
The game plan is simple. Burnett and his cofounders work with Speck Design, a Palo Alto design firm that has done work for A-list clients like Google, Cisco, and Mercedes-Benz, when they need design or engineering work. If Speck Design is too busy, they can turn to other local design firms that are in the founders’ networks, or a company like PCH International.
All of that, Burnett says, makes its possible for Massive to “virtualize China,” meaning there’s no necessity for the expensive, and time-consuming process of creating prototypes, waiting for Chinese manufacturers to make them and ship them, then fix, and repeat.
With its crowdfunding approach, Massive can silo each project. If a product is successful, the company has a built-in community of evangelists, as well as a distribution model. It then can sell the product on Amazon, or take it to retail. If it’s not successful, it can write off its minimal investment in the project, and move on to the next one.
Therein lies the irony in the company’s name. “You’ve built an entire company with four or five people,” Burnett says. “That’s sort of the comedy of calling it Massive.”
Design Experience
What really sets Massive apart from others who have taken the crowdfunding approach to product design is the founders’ long experience in the field, as well as their network. After all, Burnett is also the head of Stanford’s design program. It’s that background that distinguishes the company, according to those who are familiar with what it’s attempting to do.
“With Massive Labs, they’re bringing [significant] product design experience” to the table, says Jessica Herrin, the founder and CEO of Stella & Dot, a San Francisco-based social selling company catering to women. That’s “often the hardest part, getting beyond prototype, and bringing out your first sellable goods. They’re bringing [years] of design and manufacturing [experience] to this market.”
Herrin says she thinks that Massive is smart to put its eggs in the crowdfunding basket, because that means the company can direct its real energies to products that have true potential. “What I love about it,” she says, “is you’re not going to get far unless there’s actual consumer demand.”
Craig Ciesla, the CEO of Tactus Technology, agrees. “I think that’s a pretty innovative approach to say, ‘We’re going to have a pipeline of products and the first step in our marketing validation will be crowdfunding,’” Ciesla says. “Contrast that with regular sales channels, where you have to have the product close to shipping before you get validation. Crowdfunding lets you get that validation far earlier and at a far lower cost.”
First Products
Massive’s first two products are a case for the Apple Pencil, and an “all-in-one media studio that fits in your hand” that’s sort of a selfie stick on steroids. Known as Johnny and Val, respectively, the two products were launched on Indiegogo, Johnny with a $65,000 goal, and Val $350,000.
Unfortunately for the company, those campaigns haven’t shown the promise that Massive hoped. The Apple Pencil case fell quite a bit short of its goal, and in the early going Val hasn’t caught fire in the way of some campaigns, like Exploding Kittens, the card game that blew past its $10,000 goal on Kickstarter and ended up raising more than $8 million.
Massive cofounder Peterson doesn’t think the poor performance of Val and Johnny undermine the company’s prospects.
“With Johnny, it’s pretty straightforward,” Peterson says. “The ‘botched’ roll-out of the Apple Pencil has made it challenging. [Johnny got] a fair amount of press and sells consistently daily, almost as the pencils are shipped out. We tried to time the launch perfectly, and couldn’t have known they’d be so delayed coming out.”
In a way, Peterson says, even if Val and/or Johnny don’t succeed, the experience still validates Massive’s model, because the company doesn’t have to put many resources behind either or both products and can move on to the next ones.
“Hardware takes a lot of iteration,” she says. “It isn’t daunting for us to show that side of the process too. The campaigns have opened dialogues that validate the market fit regardless as in, even if they don’t fund on Indiegogo, the campaigns attract enough attention to get the right parties on board.”
Six A Year
According to Burnett, Massive’s pipeline is likely to include about six products a year, roughly one every two months. Though the company may have more ideas than that, its small team can only handle so much. In fact, Burnett says, he thinks it will take more than Massive’s current roster of four to handle a product launch–and managing its Indiegogo or Kickstarter campaign– every two months.
So can Massive actually make money? Certainly, it will need its products to do better than Johnny and Val are doing, but Burnett believes that its lean team will allow it to be profitable even if just half of its products meet their funding goals.
One of the key metrics is that meeting a goal once greatly increases the chances of doing it again the next time. Burnett cited a Kickstarter study that suggested that only 45% of campaigns on that platform get funded. But if someone has done a second campaign, the rate rises to 60%, and third-timers succeed at a rate of 80%.
That’s because, he says, repeat product developers develop a brand or a sense of trustworthiness, as well as a following.
“I thought, ‘Wow,’” says Burnett, describing the impetus for starting Massive, “if you’re talking about a better than 80% chance of funding, I don’t know of any other model where you’re almost guaranteed to fund, where you’ve built a following of investors who don’t get any equity. They just get the product at the end.”
Correction: An earlier version of this post incorrectly identified Bill Burnett’s position at Stanford.
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