Quirky: The Solution to the Innovator's Dilemma
Ben Kaufman was on the subway in New York City in 2005 when he had his light-bulb moment. He saw a girl--a stranger--sporting a pair of headphones he designed at mophie, the iPod accessories company he founded the day he graduated from high school.
"I saw something I invented out in the world, and it was the best feeling," Kaufman says. "That's when I realized I needed to help more people experience that."
Four years later, Kaufman launched Quirky, an online consumer products company with a social development twist: products for the people, created and designed by the people.
"We're making invention accessible," Kaufman says during a whirlwind tour of Quirky's offices, which occupy the third floor of a building in SoHo, one of New York City's busiest retail corridors. "Ninety-nine percent of people are armchair inventors. They have great product ideas, but most don't have the time or money or expertise to make them happen."
The goal at Quirky is to change that, and ultimately become the global, go-to brand for everyone who's ever dreamed of becoming an inventor.
Kaufman, it should be noted, is just 24. Occasionally foul-mouthed and dressed (as he always is) in jeans and a black T-shirt, he brims with brash energy and an irreverent attitude. (One of the company's core values is "Get s*** done!") His excitement nears fever pitch as he describes the plan for a new back-to-college partnership with Bed Bath & Beyond: The 6th Avenue location in Manhattan will be decked out with a huge display of Pivot Power, an adjustable power strip Quirky brought to market. Designers will be on-site to accept original product ideas from the public. And around the country, inventors will make appearances at local Bed Bath & Beyond stores.
The sprawling ambition of the campaign is a counterpoint to the controlled chaos back at headquarters. There's a stream of visitors this rainy Tuesday morning--government officials, a potential intern and a seven-person film crew that's been documenting the day-to-day for a Quirky TV show set to debut this month.
It's part design shop: stark white walls, naked bulb chandeliers, mounted flat-screens with up-to-the-second financial graphs and rows of long drawing tables and sleek Apple machines. All of it is set against the constant productive churn of "Bertha," a massive, top-of-the-line 3-D printer that, during move-in, required shutting down a stretch of Broadway and knocking down a wall so a crane could lift it through the window.
Then there's a jumble of stuff: a full-size bathtub and toilet brought in for product testing; a sliced-open teakettle hacked with a bed of nails, a prototype for a kettle that boils water twice as fast; and, most symbolically, in place of "invisible" cloud-basedproject management software, a gigantic metal bulletin board with hand-labeled magnets tracking where every product is in the development cycle. In typically irreverent Quirky fashion, one of the categories is "On a boat."
"We're like the oldest-school startup," Kaufman jokes--but it's not a bad way to describe a company that relies equally on a sophisticated technology platform and DIY hacking skills of the wood-and-saw variety.
A Community Effort
Quirky's online community (65,000 members, and growing by 20 percent every month) is at the heart of Kaufman's effort to democratize invention. Each week hundreds of inventor hopefuls, or "ideators," submit their concepts online. Now under development are tons of practical, slightly whimsical, things that no one else has gotten around to making yet: an auto-stirring microwavable bowl with steam-release function; a modular tent-making kit for use with couch cushions and throw quilts; a yoga mat with magnetic or Velcro closures. To simplify the development process, product ideas must retail for less than $150 and should not require integrated software.
The community, composed mainly of hobby inventors, students, retirees and product-design enthusiasts, votes on the submissions. The two most popular ideas are sent to an in-house team of engineers and designers to research, render and prototype. At every stage--design, colors, naming, logo--the community chimes in. The best suggestions are incorporated, earning secondary "influencers" a portion of future sales revenue. Finally, if enough units of a product are pre-sold, Quirky will manufacture it.
"For this [process] to work, you need to find the right people, ask the right questions and appeal to the right market," says Jeremy Brown, CEO of Sense Worldwide, a consultancy that has helped Nike and Procter & Gamble set up co-creation initiatives. Quirky, he adds, is successfully keeping its community engaged with social media and a user experience that allows people to feel comfortable sharing ideas online.
"Face-time is important, transparency is important," Kaufman says. There's a whole department dedicated to "inventor services," and the company regularly holds virtual town hall meetings with the whole staff, inviting community members to log on and ask anyone on the team questions. And there are YouTube videos galore--inventor profiles, product evaluation recaps, even one of an incredibly hyper Kaufman breaking the news, around dawn, that Quirky had made it into the New York Times. "But it's not because I get a kick out of it or anything," he says. "It's because we need people to feel comfortable that their ideas are going somewhere, that they're given credit for them, that it's OK to send their ideas to me since I don't seem like a bad dude."
Indeed. Talk to Kaufman about Pivot Power and he'll jump straight into a story about Jake Zien, who graduated from the Rhode Island School of Design this past spring. In high school, Zien came up with an idea to improve the subpar power-strip experience. His concept, which featured a flexible body that could be manipulated to efficiently fit electrical plugs of different sizes and shapes, languished in a portfolio until he discovered Quirky during his junior year. By the time graduation rolled around, the Pivot Power was gearing up for sales online, at Bed Bath & Beyond stores and through the Home Shopping Network.
The first week, Zien got a check for $28,000--pretty good, considering his total contribution was a nominal submission fee of $10 (to weed out people who aren't serious about the process) and participation in collaborative discussions with Quirky's staff and online community.
Kaufman puts the upfront costs of building a company around a single product at about $200,000--just to get the paperwork done and the first prototype out. Combined with the risk, most people never get their product idea anywhere near retail shelves. However, one of the hopes is that being guided through the process the first time might also jump-start the creation cycle. Zien, Kaufman notes, plans to use the money he makes to start a software company. "Maybe after these inventors have seen it happen and understand all the phases, some of them will want to do the next one on their own," he says.
Quirky is Kaufman's third company. His first--mophie, the one that produced those epiphany-triggering headphones--began with a hard pitch to the parents. It was 2005, and he had an idea for an iPod accessory. "I was a horrible student, the Shuffle had just come out and I wanted some way to listen to music that the math teacher wouldn't notice," he says.
So Kaufman did what any model 18-year-old entrepreneur would do: He convinced his parents to remortgage the house, took the $185,000, flew to China, found a manufacturer and created the Song Sling, a retractable lanyard headphone. A few months later, mophie won Macworld's Best of Show award, and Kaufman's college career took a back seat to raising venture money.
He then one-upped himself at Macworld 2007 with the Illuminator project, which rallied attendees to design a new Apple accessory in 72 hours. The result was the Bevy, an all-in-one case/keychain/bottle opener for the Shuffle. The success of the product and the process prompted Kaufman to sell mophie in August 2007 and shift his focus to company number two, kluster, where he spent two years developing the technology that powers Quirky (and which Quirky now owns). Originally, kluster's platform was designed to enable collaborative decision-making on any type of project, but when Kaufman realized the process worked better for consumer products, he switched gears again.
Kaufman's approach to business has always been to do what feels right and makes sense. "I just wanted to create something that would help others create things," he says, "but not have to go through what I had to do with mophie and kluster."
That includes ignoring the naysayers. "I didn't get validation from f****** anywhere," he says. "People were telling me to shut down kluster and get a job because the economy was going to s***. And sure, I'd be down in the dumps for a few days, but I never considered shutting down. I'd just come back after thinking about how to prove that I made the right decision."
And he didn't just prove them wrong. He pioneered "the next step in retail co-creation," says Frank Piller, a director of the Smart Customization Group at the Massachusetts Institute of Technology, referring to the process of tapping into the creativity of consumers and meeting personalized needs with mass-production-like efficiencies. "There are companies that take ideas from customers, but very few go a step further and put products on the market that really involve customers in all stages of the value chain," Piller says.
And while direct competitors have cropped up, Quirky remains one of the first companies that rewards participants' input with cash payments. Thirty cents of every revenue dollar goes back to influencers, and a number of them have already earned tens of thousands of dollars.
Under this business model, Quirky is winning, too. The company retains the rights to all the cool ideas that are voted into the development process, and because the company gets validation from thousands of potential customers before making a move, Kaufman avoids all the costs associated with early design phases. Quirky, he says, never has to pony up money for manufacturing unless measurable demand (in the form of pre-orders) is there--and there's no missing out on any opportunities, since customers tell you exactly what they want to buy.
All this adds up to more money in the bank. Kaufman expects 2011 revenue to be between $6 million and $10 million, and to date, Quirky has raised $12.6 million in funding. That will allow Kaufman to double staff to about 80 by the end of this year, and to move to a warehouse in Manhattan's Chelsea neighborhood that will give the company more breathing room.
The growth has been crazy, says Nikki Laffel, a 2007 graduate of Princeton University who is head of people and culture and one of Quirky's three original employees. "When we started, we were in Ben's apartment on Avenue A. Now, we've outgrown this space and we're simultaneously running a design firm, a website, a social network, a manufacturing company, a retail line--and trying to get into two new product markets every week."
Kaufman wouldn't have it any other way. "Yes, it's very hard, but I think there's a difference in attitude and culture if you're in it for the flip, to build a company really fast, to sell it for a bajillion dollars," he says. "I want Quirky to be around in hundreds of years, and we're making decisions with that in mind."
This past spring, Kaufman went on a tour of top design schools around the country, spreading the Quirky gospel and soliciting submissions for the Bed Bath & Beyond back-to-college collaboration. "We're going to take your idea from your head to store shelves in six to eight weeks," he told crowds of design students, most hanging on to his every word and tittering at his occasional f-bombs.
The fruits of Quirky's nine-stop tour were roughly 350 submissions, three of which are on pre-sale now: Scribe, a desk that turns a bed into a workstation; the Flat Rack, a collapsible clothes-drying rack that can be used as a hanger; and, at press time, an as-yet-unnamed private pillowcase alarm clock that won't disturb roommates.
While the Bed Bath & Beyond partnership is a major milestone for the 2-year-old company, Kaufman says he's already looking forward to the day that a Quirky product wins a design award, and when sales volume gets high enough to make millionaires out of the ideators. He's confident it will happen because the company has "the perfect mix" of experts and community members to execute on great ideas.
By experts, he means employees like head engineer John Jacobsen, lured from the illustrious firm Smart Design, where he was a senior design specialist working on Oxo products; head architect Mike Lacy, who's done programming at Shutterfly, eMusic.com and his own startups; and CFO/COO John Lott, formerly senior vice president at Cerberus Capital Management.
And working alongside them are all the teachers, moms, dads, retirees and students who increasingly say they want to do their own thing. For them, Quirky represents a fast track to entrepreneurship, with little risk and an immediate payoff.
Quirky, too, is on a pretty fast track. In January, the Home Shopping Network began airing a monthly segment featuring Quirky products, and the Sundance Channel's August premiere of a reality TV show featuring Kaufman, Quirky employees, the inventors and their stories will raise the company's profile even more. Retailers also are closely watching what happens with Bed Bath & Beyond, since buying more, and diverse, products from a single company is far more efficient from a business standpoint.
Like every inventor, Kaufman has plenty of other ideas for what's next. He envisions future Quirky retail spaces where people can walk in from the street and design a product. He's also striving to make manufacturing "hot" again, and plans to do his part in bringing the industry back stateside.
But most of all, Kaufman wants the company to serve as a catalyst for innovation: "When anyone says, 'I have a great idea,' I want people to say, 'You have to take it to Quirky.'"