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Scaling a Consumer Products Start-Up

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Much of the information out there on scaling a start-up relates to tech companies. Little of it actually applies to the rare phenomenon known as the consumer products start-up.

Consumer Products Start-Up: (noun) a new venture that is NOT a tech company.

keanau reeves

For those of you who are unfamiliar, a physical product is one that you can hold, touch and feel. It takes up space in the world. It must be designed, manufactured, distributed and marketed. It requires inventory and logistics. When your customers use it, they buy it first…that’s called revenue!!! I know, mind blown.

Much of the information out there on scaling a start-up relates to tech companies. Key topics include: how to build your team, structure your organization, secure funding and acquire a user-base. I have discovered the key activities and economics are so fundamentally different in a consumer products company that those topics are largely irrelevant when trying to scale a business around physical products.

So how do you scale one of these mysterious organizations? I don’t have all of the answers, but here is my hunch:

  1. Make a damn good product. Ok, the principle isn’t all that different from a tech company, but I think the timing is important. Spend a few months selling your product and bootstrap like crazy – go door-to-door, send emails, ask your grandmother to send emails. Collect feedback to assess demand and market need and iterate on your product design until it’s pretty much perfect. Only once you have the product where you want it, can you scale. Otherwise, you may have 50,000 units of obsolete inventory on your hands. Ouch.
  2. Focus on the right activities. What does scaling even mean in this industry? I’m going to go out on a limb here and say it may have something to do with building economies of scale. It’s setting up your large-scale manufacturing, gaining distribution and creating brand awareness (marketing). This stuff is HARD, and it is not the same as a tech company. The nature of these tasks are quite different – you are building external partnerships and processes, which doesn’t require an army, but a couple of relentless people willing to work on a little bit of everything. These activities are critical in determining whether you can get your economics right before you decide to grow. As your volume increases, you will need to slowly add to your army to help maintain the initial processes you built, but again, the timing is different.
  3. Get the right mentors and leverage your connections. You will not be successful in the key activities mentioned in #2 if you don’t start building your network. Sourcing, manufacturing and distribution are extremely relationship driven. Nine times out of ten, you have to have a personal introduction or referral to gain serious traction. Yes network is important in tech, but that is largely for fundraising. In physical products, you need industry knowledge and introductions!
  4. Minimize focus on fundraising. Some initial fundraising will be required to build inventory, but, if you have a good product and the unit economics are promising (see #2), it should fund itself overtime, depending on how fast you want to grow. Self-funded growth is slower than you typically see at tech companies, but that is the nature of the industry, things just move a little bit slower. Remember, it is a physical product, you can’t download it under five seconds.

Here are a few interesting articles for more insight: Series C In Consumer Products: Why Investors Should Head For The Hills and Forget Growth Hacking: For Non-Tech Startups, Slow And Small Is The Name Of The Game.

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6 thoughts on “Scaling a Consumer Products Start-Up

  1. Great post Caitlin! One thing I might add to #2 is that timing is key to all those things. When I was at Blowfish (an OTC hangover cure) we got a huge awareness boost at product launch, but it ended up having a fairly limited end sales impact as we hadn’t yet gained scale in manufacturing and had near zero in-store distribution at the time. And once we had those things, it became much more difficult to replicate that original media bump.

    1. Thanks, Benjamin! Totally agree. The chicken and the egg conundrum – wanting to gauge demand and increase awareness enough to be confident to build inventory, but not wanting to waste the PR/buzz when you’re not ready to fulfill. Timing is everything, but sometimes difficult to control.

  2. Hi Caitlin! I just want to acknowledge you for writing about something other than tech. Very refreshing read!

  3. To your point about bootstrapping, this CircleUp post on consumer product startups supports your hunch (https://circleup.com/community/article/how-much-is-a-consumer-products-startup-with-1mm-in-revenue-worth/VgGEEx0AAOUAOyuM/):
    The average consumer product startup raising money on CircleUp already has annual revenues of $1.5MM when it is attempting to raise a seed round of capital (typically trying to raise around $550K).

    +1 to your advice on minimizing focus on fundraising. Consumer product startups can’t scale as quickly because the marginal cost of another unit is not 0. So getting the unit economics right up front is critical – raising money and adding users won’t solve that problem. Really interesting comparison!

    1. Great info, super helpful! Thanks for sharing – I forwarded your comments to my team.

  4. Really interesting post and refreshing on real world problems. I agree with operational difficulties and different type of problems consumer product startups are dealing comparing to tech ones, but honestly I think they are working is so much harder since they also need to figure out how much tech they need. I believe that technology is the one of the main elements in the retail business as well if you are targeting to sell end consumers. First examples in my mind are Bonobos and Warby Parker. These guys just want to build some cool, interesting products but a. because of the main problems you mentioned b.based on the core of target consumer habits, they started as e-commerce platforms and then turned into brick and mortar operations. Thus, even for non-tech real cool exciting consumer products, how much credit should we give to technological solutions or innovations?

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