“We kept hearing ‘you really have something here.’ If you hear that enough, you can’t give up,” said Joseph Signorile, who is part of a team developing an innovative fitness product.
Signorile is part of South Florida’s fast-growing cadre of new entrepreneurs. In June, Miami landed at No. 2 on the Kauffman Foundation’s index for startup activity, just behind Austin, Texas, and ahead of Silicon Valley. People often equate “startup” with “high tech,” but Kauffman’s index includes all kinds of new businesses, including consumer product companies. South Florida is no different. In the Miami Herald’s annual Business Plan Challenge, for instance, typically 30 to 40 percent of the entries involve consumer products such as foods, fashion products, gadgets and accessories.
Yet product companies face challenges different from service businesses. Along with the common business needs of office systems, staffing, accounting and marketing, product entrepreneurs often also need to foot the cost of product development and manufacturing long before they see their first dollar in sales.
“Cash flow is a huge issue — they get the contracts and then they don’t have the cash flow in order to deliver,” said Pandwe Gibson, founder of EcoTech Visions, an incubator for local green manufacturing startups.
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Investment capital is a challenge too, as most banks want to see two to three years of tax returns that startups don’t yet have, she said. Venture and angel funds more typically flock to high-growth tech companies; in the case of consumer products, investors want to see sales. But the entrepreneurs still need capital to build their prototype and engineer the manufacturing process.
Some incubators and grant programs help entrepreneurs line up investment. But working with a variety of interests — manufacturers, suppliers and retailers — to get the costs down is critical. “Retailers often want unrealistic markups. People need to learn to compromise and work together,” said Sam Hollander, managing director of Concept One International, which has taken hundreds of products to market.
Distribution is another critical requirement — one that has become concentrated. Most product makers need to crack WalMart, Target or Amazon if they want to build a $100 million company, said Robert Hacker, who teaches entrepreneurship at Florida International University’s Honors College and is an instructor and mentor for the Goldman Sachs 10,000 Small Businesses Program at Miami Dade College.
“To succeed with those three, you have to become really effective at your own messaging,” he said. “Today the consumer pulls, the retailers no longer push the product. … You’ve got to be able to advertise and self-promote a lot more effectively because there is so much more competition.”
Like tech companies, consumer product companies should keep in-house those functions that are critical to success — such as product development, sales and customer experience — and outsource or take on partners to handle manufacturing, distribution and logistics, Hacker advises.
“Consumer companies tend to grow in stages, zero to $1 million in revenue is the proof of concept stage, $1 million to $3 million is where you’re seeking a depth of customers in your product-market fit, and $3 million to $10 million is where you are learning to scale,” said Hacker. But too often, Hacker says, companies get to the $1 million mark and stay there. “These companies provide their owners with a living and the owners get comfortable but they are afraid to push on. You just can’t get stuck at a million dollars.”
And as with tech companies, big payouts are possible — with the right innovative product and a sizable market opportunity. Take Spanx, for example. Founder Sara Blakely started her company in her Atlanta apartment with $5,000 at age 29. Twelve years later, her company generated $250 million in revenue, according to Forbes.
Few companies will become the proverbial overnight success story that often actually takes 10 or 15 years, said Jack Chadam, a marketing expert and mentor at FAU Tech Runway, an accelerator for startups. A big hit takes perseverance — and perhaps a little bit of luck.
“The challenge for an entrepreneur is to have something that is unique that you can protect and you can own, affording you with the first mover advantage — and you can do a heck of a lot with your product or other versions down the line,” said Chadam. “But it takes a real entrepreneur, not someone playing the entrepreneur. It takes someone who truly gets it, who truly understands the hustle and commitment.”
South Florida’s young product companies are riding entrepreneurial roller coasters. Here are a few of their startup stories.
KEEP AN EYE ON THE BEST BALL
Samuel Hollander has 35 years of go-to-market experience developing consumer products, the kind you’ve seen over the years on shopping channels and in big-box stores. Joseph Signorile is a University of Miami professor who is an expert in the science of fitness; he also wrote Bending the Aging Curve and co-authored the South Beach Diet Supercharged. About five years ago, the biking buddies found themselves reimagining a product that has been rolling around gyms and fitness centers for a half-century.
“As we rode, we talked. One of the things that came up was the typical exercise stability ball, and we started joking about how people don’t use them, how you see them lined up against that wall,” said Signorile.
They thought about making a ball that would give people a greater sense of safety but would still roll, providing all the exercise value in core stability and balance.
The long road from idea to market is paved in perseverance. After too many nights and weekends to count and multiple iterations, the pair finally has a product.
Their first few ideas – putting the ball into a skeletal frame that would still allow it to roll somewhat — were ditched because shipping costs would be prohibitive.
“The packaging was monstrous,” said Hollander. “You can make the greatest product in the world, but how will you package it? How will you ship it? How much space will it take on a retailer’s shelf?”
Their idea shifted to adding resistance wings to the ball. “We covered the ball with sponge material where the wings would be and showed it to some engineers. Everyone thought the concept was terrific but no one understood how we could manufacture it,” Hollander said.
But on a trip to visit Chinese manufacturers, the new concept began to gel. They found the perfect — though expensive — biodegradable material. A high-quality ball manufacturer in China set out to make the mold, Hollander said. The first mold was a bust — a $40,000 bust at that — but No. 2 was a charm. “Now we have a product.”
Called the Best Ball, it’s a patented fitness ball that doesn’t roll out from under the person. Better yet, the wings create resistance that increases as the person rolls further away from the central balance point, creating a better workout, said Signorile, a professor of exercise physiology.
The patent process has been expensive, costing the pair about $55,000 in the U.S. and $20,000 in the EU plus separate fees for each country.
They haven’t determined a price for the product yet but it will be priced for the mass market, said Hollander, whose company, Concept One International, has helped develop hundreds of products for manufacturers and private label clients such as Target, WalMart and KMart. Quality is key. “Many [companies] say, how cheap can we make it? We say, how good can we make it?”
With Hollander’s experience, the packaging has been designed to include a ball, pump and training DVD, and additional training programs have been developed, such as one for yoga. Now they are ready to introduce it to the market. But today, making high quality infomercials and buying TV time is costly, and shopping channels like QVC and HSN often won’t touch the product until after it has had an infomercial, Hollander said.
To bring the Best Ball to market, Hollander and Signorile are seeking a partner, such as a fitness company or marketing company.
They have been showing their Best Ball off to fitness companies, gyms and yoga studios, rehabilitation centers and wellness clinics. “They all have their fitness experts, and we can’t get the ball away from them,” said Hollander.
So far, the endeavor has been financed by Hollander and Signorile — “a quarter of a million, conservatively,” said Hollander.
Said Signorile, “If it wasn’t for the fact I know Sam, I would have given up a long time ago. I look at the way this process works and sometimes I feel cheated and sometimes I feel disturbed, because you don’t understand what the heck the whole business process is like.”
Yet, Hollander and Signorile believe in the power of the product and are committed to seeing this through. They are meeting with potential partners and talking with a TV shopping channel. “We will not give up — we’re ready,” said Hollander, who hopes the Best Ball will be on the market by the start of the new year. That’s prime time for fitness products.
“You think, great, here’s my product, they are going to look at it, they are going to fall in love with it, and I’m going to make a lot of money, and that just isn’t the way it works. This is real R&D on a shoe string, much of it in my living room,” said Signorile. “This is hard work.”
Related video: Demonstration of the Best Ball
SHARK LOCKS UP DEAL WITH AQUAVAULT
Ever wonder what a Shark Tank appearance can do for your business?
AquaVault, maker of portable safes that can be locked onto the backs of beach chairs or onto bikes or even dorm room closet bars, not only got funded on the show, but the deal survived post-show due diligence. That puts the team in an impressive minority.
Daymond John, the Shark who tasted opportunity on the show and bit, is now an investor, said Jonathan Kinas, CEO, who would not disclose terms of the investment.
“He is fully involved in the business. He has been instrumental in preparing us with certain deal structures and providing us with contacts and key insights that have been instrumental in making strategic decisions,” said Kinas. He and friends Avin Samtani and Robert Peck founded the Aventura company in 2014 after their valuables were stolen while they were enjoying the pool at a South Beach resort. The patented small, hard lockable case is large enough to easily hold a wallet, keys, smartphone and other valuables and can be locked onto a bar attached to a chair or bicycle.
In March, the month the Shark Tank show aired, the company logged about $100,000 in sales, more than the previous year, Kinas said. Customers now include retailers at hotels, water parks, theme parks, casinos, cruise ships and boutique stores, and individuals who purchase online at www.theaquavault.com. SeaWorld is a customer, and Disney World and Norwegian Cruise Line are testing the product, he said. “We are getting inquiries from distributors around the world on a weekly basis, and we attribute that to the publicity from Shark Tank.”
Calling entrepreneurship “the perfect roller coaster,” Kinas said big challenges have included developing a distribution strategy and figuring out how to market the product.
Shark Tank has helped with both.
“We are working harder now than we were before Shark Tank. Along with all the opportunities comes more hard work and efforts to make all these opportunities turn into success. To manage a business that explodes overnight, you have to prepare yourself for the unexpected,” said Kinas. “Any time we have any situations where we need a little bit of insight or a veteran’s opinion, we give Daymond a call.”
The AquaVault team appeared on HSN in July with John and sold out of 500 AcquaVaults in 10 minutes, said Kinas. The team has had interest from investors but currently is not raising capital, Kinas said.
“It’s always exciting to walk to the beach and see the product being used by people and knowing that we were drawing it on a napkin a few years ago.”
BLOQUV SEES A BRIGHT FUTURE
BloqUV is now in more than 6,650 retail stores and does a robust online business. But about five years ago, when the venture was just getting under way, the future didn’t look so bright for the company that makes sun protective active wear.
“I started it with my BFF who is no longer my BFF,” said Corina Biton, who had worked in marketing and public relations. “She had the apparel experience, I had the marketing, but it was all my money, my debt. so when it didn’t work out, I was left holding this bag of the business.”
To fund the business, she cashed out her 401(k), took out a loan on the equity in her condo, and sold her jewelry and artwork. She found a high-quality pattern maker, and learned the business on the go.
The first couple of years were particularly tough, but she found some help by locating her company in a Miami building full of both young and more mature fashion companies to share best practices and offer advice. Suddenly, the journey wasn’t as lonely.
Biton began selling her line to surf and swim stores, country clubs, golf stores, tennis stores, running stores, dermatologist offices and resorts and spas. Since 2011, business has been doubling every year, she said. She hopes to be in 900 stores by year’s end and expects to end the year with about $2.2 million in revenue. Online sales at Bloquv.com are growing steadily as more people discover her brand; it’s now about 15 percent of her business.
Like other entrepreneurs, Biton says cash flow is a continuing challenge. Small manufacturers typically have to pay in full when a shipment is delivered — even if the factory delivers more goods than the order specified. And the small business doesn’t make revenue until the items are sold.
“In the beginning, [the business] was a money pit. It sucked more than double what I thought it would. Now it is finally easier, but cash flow is still an issue. ... Business is doing great, knock on wood, but now I have to produce double.”
The sales cycle can take up to six months, particularly with private-label logoed products, because the order may sit in line for two weeks for embroidery before the clothing is put on the rack. After items are invoiced, BloqUV may not be paid for weeks or months. Now, finally, her manufacturer is willing to extend her credit.
Biton also has learned the customer is always right — even when the customer washes the item in bleach (a no-no in the care instructions) and then complains. (The company simply ate the cost.) And unexpected problems will creep up.
One year, “the yarn [made specifically for BloqUV] got damaged and [the manufacturer] had to start from scratch. That is a 30-day process,” said Biton. She lost the entire summer season.
BloqUV’s soft, sun protective clothing blocks 98 percent of the sun’s rays. It has always done well in the golf and tennis market, said Biton, in part because the company makes garments with long sleeves: “You’ll see other brands with UV but short sleeves, which sort of defeats the purpose.”
She said the clothing lasts six to seven years if washed correctly. “Our UV doesn’t wash away because we don’t dip it.”
Biton and her team log about 200 national and regional trade show days a year, where buyers purchase for the season. This month BloqUV exhibited at the Summer Outdoor Retailers Show in Salt Lake City with 27,000 buyers in attendance to exploit new market opportunities — the hiking market, marine stores and lifetime fitness, said Biton. She’s also recently added the ski market and will be hitting the Running Show in December.
Her expanding line is now in 20 colors and includes about 1,000 SKUs; most items are priced between $60 and $80. BloqUV recently added a crop top, a turtle neck for women, another running top, a men’s mock neck and a beach coverup. So far, she hasn’t touched the kid’s market. They grow out of the clothing too fast and she can’t get the price down enough, though she does offer extra extra small for women and small for men.
BloqUV’s biggest territory is Florida, followed by California. “My first customer was the Fontainebleau, and I’ll never forget that,” said Biton. It’s still a loyal customer.
TONE-Y-BANDS FIND A FITTING FAN BASE
Sometimes innovation is best achieved by taking an existing idea and improving it, said Janice Haley, founder and CEO of Tone-y-Bands, a new fitness product. She’s been through the entrepreneurial journey before. She and her husband Steve launched, grew and went public within seven years with Celsius, a Boca Raton company that created a calorie-burning drink that took off.
The Tone-y-Band is a stylish wrist band with weights that feels more like a comfortable watch than smelly Velcroed weight belts. So much so that customers are also wearing them outside the gym — like when they are doing the dishes.
In fact, the idea came to the Haleys about two years ago when her husband was at the sink and wondered if there was a way to get more exercise from the dish-washing experience. The first iteration was a bangle, but later became a black or white watch-like band weighing a half-pound or one pound.
“My passion is helping busy people fit fitness into their lives,” said Haley, who secured a manufacturer in China and is seeking one in the U.S. She began testing her product in 2013 and launched in late 2014. The product sells on toneybands.com and in some exercise studios.
To refine the bands, Haley has been testing them with customers to get feedback on the look and feel, colors and weight. She opened and manned a kiosk at Boca Town Center mall and sold them for four months this spring. “I learned a lot about my core consumer,” said Haley. “One market I didn’t think about was dog walkers; 90 percent of the people who came up walked dogs and wanted to get more exercise out of the experience.”
She also was recently accepted into FAU Tech Runway, an accelerator and entrepreneurship center run by the university but open to the community. “What I was most interested in was the mentors. I found they had everything you need from legal, accounting, operations, production and marketing, and they help prepare you for asking for funding.”
One of those mentors, branding expert Jack Chadam, had a connection with the Zumba program, the South Florida-based global fitness sensation. Next thing she knew, Haley had a meeting, and then was invited to exhibit her product at Zumba’s annual high-energy convention of 7,000 influential fitness instructors from around the world. Another of her mentors, Jean Evans, joined her in her Zumba booth.
“I had tested Tone-y-Bands in Zumba classes and [the instructors and students] loved it. They called them sexy, so I knew they would do well there.” During the four-day show, she sold out of some styles and had requests from studio owners to sell and stock Tone-y-Bands. Zumba instructors often also teach other fitness classes where Tone-y-Bands would be appropriate — such as barre, piloxing, step, yoga and spin.
Haley hopes to partner with Zumba on a private label product. She would also like to take her product to HSN or QVC.
One of her biggest challenges, she said, has been having limited resources. “As an entrepreneur, you do it all — accounting, sales, marketing. Many times, it’s the first time you’ve done something so there is a learning process, which takes additional time. That makes it hard to stay focused on the goals you’ve set.” FAU Tech Runway has helped her set goals and monitor progress.
So far, Haley’s pursuit has been self-funded with an investment of about $140,000. “It shows we have confidence in the product and the brand.”
Related video: Tone-y-Bands meets Zumba
SNOW LIZARD EVOLVES TO CONQUER
Snow Lizard may be just as resilient as the products it makes.
The Miami maker of a line of products that turn iPhones and iPads into outdoor electronics launched its Xtreme line with a successful Kickstarter crowdfunding campaign in early 2012, raising about $200,000. By the end of the year, the first version of its iPhone4 product was shipped.
“What we learned is there was a lot more uses for phones and tablets in the outdoors. Our SLXtreme line will convert an iPad into the poor man’s marine electronics for boating — that in itself is a big market,” said Steve Calle, CEO and co-founder of Snow Lizard, which sells its products globally now through Amazon and its own website, snowlizardproducts.com. Whether people want to take pictures or videos underwater, or use all the apps and not worry about the power, Snow Lizard not only powers and protects but enhances the personal device, said Calle. “It’s waterproof, solar powered battery powered, rugged — all together in one device.”
Reviews have been favorable — USA Today said “The SLXTreme cases from Snow Lizard take protection to an almost absurd level” — but being a consumer product company, the course is not always easy. Snow Lizard raised some capital from angel investors that enabled it to launch more products, such as its iPad and iPhone5 version, as well as waterproof cases. The company is packing more features in too, such as GPS inside an iPad model, and there is more to come with sensors and apps so the cases can do more, Calle said. An iPhone6 version is coming soon and available on pre-order.
But as with so many other product companies, manufacturing problems almost submerged the small company.
“We’ve had so many issues. It is really difficult to be a hardware company and be completely dependent on the factory,” said Calle, formerly director of engineering for Alienware. “If something happens you won’t get product. Without product, you won’t get revenue. With no revenue, it will be difficult to survive.
“We are dependent on Apple, so every time Apple changes its phones we have to change our product. Our factory lost its [Apple] certification, and we didn’t deliver for the holiday season. It was a big mess, but we are getting back on our feet and climbing out of it. We are on the move,” said Calle. To minimize risk, Snow Lizard is now working with two different Apple-certified Chinese factories.
Snow Lizard recently joined the incubator at downtown Miami’s Venture Hive and partnered with strategic investors who are experts in sales and logistics. “It’s personally challenging trying to grow a company by yourself. You don’t have all the answers and there are only so many people who can relate to you without being in the trenches,” said Calle. “Now these partners are handling big parts of the business and I don’t have to worry about it because I know they will do a good job.”
The next step is big retailers, and Calle is talking to boating, marine, outdoor and consumer electronics chains. Snow Lizard is also raising capital, seeking about $1.5 million.
Every Thursday at Venture Hive, Calle shares issues his company has confronted with other emerging hardware entrepreneurs.
“I tell them ... you have to have a great product and you have to be a great marketing company. This is what we learned at Alienware. We were competing with the likes of Dell and H-P and all these guys, and we stayed true to the marketing efforts of being high end and niche and gaming. ... We are sticking to our niches of high end, marine and outdoor, and if you market yourself very well, you can become a market leader in that niche and you can start playing with the mainstream guys.
“And that is how you grow exponentially.”
This story was first published Aug. 23, 2015 in the Miami Herald’s Business Monday. Follow Nancy Dahlberg on Twitter @ndahlberg.
Founders: Joseph Signorile, Samuel Hollander
Time frame: Five years since inception, product is ready, now seeking marketing partners.
Development costs so far: About $250,000
Founders: Jonathan Kinas, Avin Samtani and Robert Peck
Time frame: 18 months since inception; the team appeared on Shark Tank in March, catapulting sales and opportunities.
Development costs: The team invested “six figures” before Shark Tank funding.
Founder: Corina Biton
Time frame: Launched in 2009; sales began doubling annually in 2011; now in 665 stores and online.
Development costs: About $400,000
Founder: Janice Haley
Time frame: Two years since inception; launched the product on toneybands.com in 2014.
Development costs so far: About $140,000
Founders: Steve Calle, Andreas Haase
Timeframe: Launched successful Kickstarter for Xtreme line iPhone case in 2012; later added features and added models for the iPad, iPhone5 and other devices.
Funding raised: $600,000 from angels and strategic investors; $200,000 from Kickstarter.