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EBN@C-Level: Crowdsource Phenom Partners for Supply Chain Success

Too often, an electronic gadget that earns kudos from potential users, who vote with their dollars in a crowdsourced campaign, never get to market. Often, the entrepreneur who had the amazing idea can’t figure out how to get from one inspired product to millions manufactured.

In fact, 17% of failed electronics hardware crowdfunding projects can be traced to (at least in part) manufacturing challenges, according to research from CB Insights.  “Overestimating production capacity and expecting to scale sooner than supply chains or manufacturing bandwidth will allow was a common reason for failure. Manufacturing problems rooted in issues with materials, technology, or intellectual property were all identified as a factor for failure,” the report said.  

Magfast is one startup that is working to beat those stats. Founder and president Seymour Segnit conceived of a range of wireless chargers that addressed the pain points of current offerings, including poor quality, shifting connector standards, and product complexity.  The chargers are designed to charge a wide range of electronics products (including a wall charger, a car charger, several power bank sizes, an Apple Watch charger, and more), and the “building blocks” snap together magnetically to make setup simple. This is the second generation that expands beyond the original wall charging solution Segnit invented in 2013. 

Magfast product lineup. Image courtesy: Magfast.

Magfast product lineup. Image courtesy: Magfast.

In planning the product launch, Segnit closely studied Apple, an expert at worldwide product launches, to get some tips on how to get the word out quickly, clearly, and efficiently. The company created series of online demos, which promise attendees a free wall charger for their time and attention, to raise awareness. The company also committed to planting trees for every product purchased. The response to the crowdfunding campaign was phenomenal: $1.6 million from more than 4,000 backers on a goal of $300,000 (and still growing).

Seymour Segnit

Seymour Segnit

Now, the biggest challenge looms: getting products into the hands of customers in a timely way, with a system that optimizes cost and quality in product manufacturing. We sat down with Segnit to find out what the secret to clearing this next hurdle might be.

EBN: Tell us a little about how sourcing and manufacturing plays into your strategy?

Segnit: We work with a veteran New York-based, privately owned manufacturer of solution oriented consumer products called P3 International. They have been having stuff made in the Far East for 30 years. They find and design products, but they don’t operate factories, although they call themselves a manufacturer. Essentially, I came up with the product, a design for a consumer experience that packaged existing technology in an inventive and delightful way. I thought about what my ideal charging product would be, and what features and functions it would have. I thought about the reality that we are throwing electronics away and hurting the environment but doing a little to repair the damage we cause. I went to P3 and they said they could make it.

Most chargers are kind of junky. The idea of Magfast was to revolutionize a product that everyone uses every day. Everyone is plugging in and most are using portable power. 

The idea with Magfast is that it is this category that everyone is using every day. Everyone is plugging in, maybe using portable power. We tried to think about what is broken with the world of charging. We wanted to make them so that they would last. Then we looked at statistics on profitability in the smart phone market. Apple captures nearly 90% of smartphone industry profits, although they only account for 18% of units sold.  It demonstrates that premium products are the way to go. Offer customers a little bit of luxury.

I learned that there is no business if you can’t sell the product. The classic mistake is to say you’ve invented something, get 10,000 made and then have no idea of how to sell them. Crowdfunding lets you see whether anybody wants your idea, and to see if you can find those people and elicit that desire. Then, since I don’t know about manufacturing, I went to P3. We got some money from accredited investors and the rest we funded by pre-orders.

We have to run the business really, really tight. We have a small team and nobody is paid generously.  Before I launched the idea, I got rough quotes and confirmed that my idea was something that could be manufactured.  When the product took off, I met an entrepreneur named Christopher Hawker, president of Trident Design, and he spoke intelligently about how to get stuff made. He offered to help us source the right sized partner to make our product. P3 had the intersection of experience and an insane commitment to quality. They take a little longer to make things because they are super cautious. It was an immediate match in terms of temperate.

EBN: What is your supply chain strategy?

Segnit: My supply chain strategy is to go to P3 and trust them. I essentially designed the consumer experience keeping in mind that this thing does have to be made. I designed the external appearance. Then I worked with the experts to get into 3D modelling and understanding if the design can actually be made. P3 does the design for manufacturing work for me both internally and with a partner in Taiwan. 

We have a good rhythm in that they understand that I’m trying to make something amazing, and I understand it can only be amazing if it is made. There’s a push/pull that goes on for us that doesn’t go on for many or most charger manufacturers. Most don’t care if they are making junk. They want the cheapest stuff. We are trying to produce something world class at the best possible price. 

When you are designing a premium product with a premium price, there’s a little more flexibility. A cost of an extra 50 cents won’t kill the whole product. Before launching, we estimated how much it would cost to make each of these products.  We didn’t go through each component and cost it out. The amount of time and work to get to that wouldn’t have been worth it. It would have taken months and wouldn’t have contributed to answering the question of whether the product is a go. 

That’s why P3 is such a good fit for us. They’ve always made great products and are always trying to improve margins without compromising the product. 

EBN: At what point in product development, did supply chain planning come into play for you?

Segnit: Certainly, for Magfast, with us creating a second-generation product, I understood from the beginning that the supply chain was important, and partnership was critical. I was fortunate that we already had a partner in P3.  We have talked to them about wanting to ensure that we have multiple sources for components, but we don’t get into the details. There’s only so much energy to go around, so we decided to trust our partner.

EBN: You have thought a lot about the green aspects of your product. Talk about sourcing and design strategies that you leveraged?   

Segnit: There’s a lot more to be done in that area. The difficulty is that you can’t do everything all at once. You wouldn’t believe the number of SKUs we have—it’s insane how it balloons up. What we can do is make sure our electronics are really high quality so that they aren’t going into the landfill so quickly. We want them to last for six years instead of six months.  That’s a significant contribution.  We are also making sure the components themselves are highly efficient. Th Wall charging product, for example, has an environmental rating on the current scale of 6m, which means that you can’t measure the amount of power it is using when not in use. The third environmental piece is that we are planting trees for every product sold through Trees for the Future.

  

EBN: Do you have any advice for other electronics entrepreneurs who want to crowdsource and successfully build their product?

Segnit: Margins, margins, margins, margins. For those who have dreamt up their dream product, you can’t be making for $20 and selling it for $25. It sounds very obvious, but it’s often forgotten. Also, you need to be really careful with your partners.  We were fortunate in that regard, in that we found great partners. Plenty of inventors caught up with investors corporations that take hundreds and thousands for inventions each year but only bring a handful to market. When you try to invent a product, start with what is bad about the offerings at the moment and work backwards. For us, the world doesn’t need more chargers and there’s no point in making more unless you make something that is fundamentally better. You need to leapfrog what’s around at the time.

— Hailey Lynne McKeefry, Editor in Chief, EBN Circle me on Google+ Follow me on Twitter Visit my LinkedIn page Friend me on Facebook

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