And Then?

Jumping the Hurdles

Ashwin Kochiyil Philips, 32, co-founder with 30-year-old Rahul Shah of Boston-based Lydstrom Inc., invented SongBank, a machine that may ultimately make CD players useless. Their market? The music industry. You hook SongBank up to your stereo and pop your CDs in or download music from the Internet. The 10G version stores up to 7,000 songs (350 hours of music), allowing you to then throw your CDs away, put them in the attic or give them to a friend. Just use SongBank's remote control to access and play back your music, says Philips, "and it can play three songs at one time in different parts of the house. You can walk around and say, 'I'm in the kitchen, and I want to hear jazz' or 'I'm in the living room, and I want to hear blues' or 'I'm in the bedroom, and I want to hear rock.'"

Although Philips and Shah are now attempting to license Song-Bank to stereo equipment manufacturers, what has come before gives them an advantage. "If we were to go out and say, 'This is a new box that downloads music from the Internet,' nobody would buy it," muses Philips. "Well, not nobody, but the general population wouldn't understand what we are talking about. But when we say this is a really cool CD player, they grasp that [concept] quickly. And from there, we can expand upon it."

Not to mention that being an aftermarket makes manufacturing so much easier. "Obviously, you can utilize components that have already been built and use them as subcomponents," explains Philips.

Also, Philips says finding venture capitalists is easier for an aftermarket. "They tend to grasp things that have already been done with different twists. If you can show [investors] how [your product or service] resembles something that's been done, they associate it with something that's proven." With $5.5 million in funding, somebody besides Philips and Shah believes in their invention.

Does Philips see a downside to being an aftermarket? Not really. Things would get bad, of course, if everybody stopped listening to music, but music isn't going anywhere.

Neither are Beanie Babies-or so it seems. Mary Beth Sobolewski is the editor in chief of Mary Beth's Bean Bag World Monthly, a publication that will tell you everything you need to know about Beanie Babies. Selling for $5.95, the magazine maintains a circulation of 200,000.

But just because it's here today is no guarantee it won't be gone tomorrow. Sobolewski knows most toy fads are destined to fade. A magazine about Beanie Babies needs Beanie Babies to survive, so when Ty Inc. temporarily stopped producing the toys in October 1999, that could have been the end. Luckily for Sobolewski, the company introduced its Beanie Kids line in January 2000 and released seven new Beanie Babies this past January.

But the finicky nature of the market doesn't scare Sobolewski, who also published a guide to Pokémon for a while. It just makes her advice that much more important: "The thing that made Beanie Babies and Pokémon a sure thing is that there was something to collect. Beanie Babies are more than toys. There's got to be something else you can do with them. Like with Pokémon-you can collect; you can play the card game; you can play with all the toys. There's got to be more than one thing, but the big key is the collectibility." (See "The Rules")

Geoff Williams has written for numerous publications, including Entrepreneur, Consumer Reports, LIFE and Entertainment Weekly. He also is the author of Living Well with Bad Credit.

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This article was originally published in the April 2001 print edition of Entrepreneur with the headline: And Then?.

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