This 24-year-old made $345,000 in 2 months by beating Kickstarters to market
Published originally on CNBC
Less than a month after starting a business, a 24-year-old entrepreneur CNBC has agreed to call “Jack” wired $70,000 to a factory in Shenzhen, China, praying that the money wasn’t going to disappear.
Weeks later, 15,000 plastic toy cubes with joysticks and clickers on their sides, designed to help people who fidgeted too often, arrived. A whole team exhaled, excited about the possibility of making $345,000 in just two months.
The Stress Cube staff knew they were taking risks as they tried to capitalize on the success of various products on crowdfunding sites. They also knew the rewards could be enormous.
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For Jack, this all started with an inflatable chair.
After graduating from college in Canada, Jack found himself bored of working on behalf of yet another social app hoping to one day garner a billion-dollar valuation.
I started realizing I wanted to run a company that actually sold something,” he recalls.
Around the same time he noticed a start-up that appeared poised to do that faster than anyone. It was an Indiegogo campaign for KAISR, an inflatable lounge chair made of parachute material that had surpassed its goal by raising $18,500 in 12 hours last March (and eventually over $4 million).
As the Indiegogo gained in popularity, Jack’s research led him to realize that the idea was far from unique. In fact, the Lamzac inflatable lounge chair had already gone viral, five years after the idea was presented by its Dutch inventor on Holland’s TV show “Best Idea of Holland.”
The only thing that was new about this chair was the buzz from the crowdfunding campaign.
Jack wondered if he might be able to produce his own successful knockoff. A cursory search on Alibaba revealed manufacturers based in China that were offering product samples, and after minor sampling fees and a little back and forth with the winning factory, Jack had his product: The Cozy Bag.
With about $5,000 they pulled together, Jack and a partner launched their company. They bought 250 air lounges and secured a domain name, plus a handful of Square credit card readers. Within weeks, the team sold lounges directly at concerts and fairs. They spent full days building brand awareness and a following on Instagram and Facebook.
Sales grew, but margins slipped as they spent more and more on advertising, which was necessary to battle competitors like WindPouch, Dumbo Lounge and Chillbo Baggins.
Total revenue neared the $100,000 mark. Then Jack looked to leverage everything he learned from the first experiment on an even bigger viral hit.
In August, Google Trends had alerted Jack to what would become one of Kickstarter’s top 10 most funded projects in history: The Fidget Cube.
A small, handheld toy outfitted with six sides’ worth of clickers and joysticks, The Fidget Cube promised to help anxious people occupy their hands. The campaign raised $15,000 on Kickstarter in less than a day and nearly $6.5 million in total.
But the project hit a snag when manufacturing issues caused a delay in deliveries. Many backers worried that they wouldn’t receive their cubes by Christmas.
As with Cozy Bag, Chinese manufacturers on Alibaba had been offering comparable products since shortly after the Kickstarter appeared. Thanks to their experience, Jack and his partners were able to pivot quickly and use WordPress and its sales plugin WooComerce to launch their Stress Cube site by the end of November.
They spent less than $5,000 on start-up costs, mostly on a bulk order of 1,000 plastic cubes at $3.65 apiece. The plan was to turn around and sell each for $19.99.