Our guest today is Makeship’s COO and Co-founder, Pablo Eder.
Makeship, is a crowdfunding platform founded in 2018 with the mission of helping the world transition to a creator economy.
Pablo has many years of experience in science, engineering, and business – having launched multiple start-ups. He is a Mexican-German who lived in Mexico most of his early life. He immigrated to Canada on a start-up visa with the goal of launching his entrepreneurial career while attending school in Ontario.
Pablo had a desire to become an entrepreneur from a very young age. His first venture, launched in 2013, was a 3D printing software automation company called Lani. From there, Pablo started Durata Consulting, a firm focused on machine learning and Blockchain. In 2018, he began his third venture, Bounty – a crowdfunding platform for influencers to fund content ideas.
Pablo joined Makeship as a Co-Founder in 2019 and is now the Chief Operating Officer. He manages the company’s design, operations and technology teams. In his free time, Pablo loves to go for bike rides or rock climbing. Pablo is fluent in English, German, and Spanish.
In This Conversation We Discuss:
- What lessons Pablo carried with him from his first few businesses
- When to say no and set up boundaries in business
- How Pablo works around the bias some people have towards foreigners
- How Makeship uses affiliate marketing
- How plush toys became Makeship’s main product and how they build campaigns through influencers
Resources:
Connect with Pablo Eder: LinkedIn
Makeship – https://www.makeship.com
Connect with Cameron: Website | LinkedIn
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In this episode, we have the Makeship COO and Cofounder Pablo Eder. Makeship is a crowdfunding platform founded in 2018 with the mission of helping the world transition to a creator economy. Pablo has many years of experience in science, engineering, and business and has launched multiple startups. He is a Mexican-German who lived most of his early life in Mexico. He immigrated to Canada on a startup visa with the goal of launching his entrepreneurial career while attending school in Ontario.
Pablo had the desire to become an entrepreneur from a very young age. His first venture launched in 2013 was a 3D printing software automation company called Lani. From there, Pablo started Durata Consulting, a firm focused on machine learning and blockchain. In 2018, he began his third venture, Bountey, a crowdfunding platform for influencers to fund content ideas. Pablo joined Makeship as a Cofounder in 2019 and is the Chief Operating Officer in 2022. He manages the company’s design, operations, and technology teams. In his free time, Pablo loves to go for bike rides or rock climbing. Pablo is also fluent in English, German, and Spanish. Pablo, welcome to the show.
Cameron, thank you so much for having me.
You’ve got an intriguing background from the Mexican and German components. You bring in European and Latin American sides. Where were you at school in Ontario?
I went to Waterloo.
For many of our American friends, Waterloo would be like the Stanford of Tech in Canada. You were a techie from an early age then?
I think so. When I was fifteen, I was spending a lot of time repairing computers and that’s how I make some money. I’ve always been a big techie.
You’ve had a couple of businesses that you’ve built along the way that brought you to where you are. From a couple of your first businesses, what lessons did you glean there that you carry with you?
In my first business, I wasn’t asking enough of my customers. Customers would ask me to do a lot of things and I would stretch myself very thin because I didn’t know how to set up boundaries or ask for more money. I was 19 or 20. I wasn’t sure about how to find the right product-market fit where customers want your product. The dynamics change versus when people don’t want your product and you’re willing to do more. From my first startup, I learned that. From the following startups, I learned a little bit more about unit economics hiring people and more operational stuff.
It’s interesting on the whole having boundaries, saying no, and asking for more money. I’ve never heard anyone say that. You’re bang on with that. Can you give us some examples of when you should have said no or created more boundaries and what that means?
I had a client that was one of our first customers. They kept requesting more and more personalized software solutions. At some point, I said, “For us to be able to afford that, we have to charge you this much.” They said, “You’re crazy. We’re not paying you that much.” I still went ahead and developed the features because it’s so important for us to have this large client. It ended up being a bad idea.
The way I see it is I’d rather have 10 small clients than 1 client that is 10 times their size. Out of those ten, you learn a lot more. What all those ten want in common is the real value of your company versus someone else treating you like a consultant. If someone else treats you like a consultant, the problem solution is truly specific versus if you get ten customers that are smaller, you understand what’s valuable about what you’re offering.
I love when you’re giving that explanation of these clients that are asking for more. When you tell them the price, they run away. I’ve said for years that Microsoft could have built Microsoft Excel with maybe 50 features. That could have been it forever. We all would have been perfectly fine with it. 99.9% of the people, that’s all we ever needed. I’m sure they’ve got thousands of people still working on Microsoft Excel doing things that no one ever needs.
It’s probably consequential to the first thing. Microsoft Excel is so big and useful that they have to have every feature because they need to cover every single business case. It scales so well. They build this feature so it will grow to the next ten versions of Microsoft. They don’t even sell you by versions. You buy it as a subscription. You’re committed to the features in a way that would be difficult for a competitor. That’s why the competitors don’t even focus on the features. They focus a lot more on compatibility. Many users work at the same time and that kind of stuff. They tackle different angles and customer types.
What kind of a decision filter or process do you use to know when to listen to the customer, take their suggestions and run with them or when to listen to the customer and say, “Thank you, but we’re not taking those?” How do you decide?
It’s money. There’s this startup concept of being guerrilla-style when it comes to requesting features. Instead of saying, “Would you like this feature,” which inevitably says yes, you ask, “What is the problem that you’re having? How can this solution solve it better?” You then say, “We can solve this problem at this price point.” They can argue whether or not they want it.
There was this lesson from, I believe it was Stripe that was asking people, “Would you like to use our software?” Whenever they said yes, they would immediately charge them and install it on their computers personally. They’ll say, “Can you pass me your laptop?” It’s that type of aggressive like, “Let’s prove if you’re interested in interacting immediately with it.” Cornering you in that way gives you good results. It is the opposite of the mom test where your mom will always love everything you make, but if you ask people to use it, they might change their minds or charge more importantly.
I’ve been to 62 countries and 34 countries in the last few years. I feel like a complete idiot when I travel the world because I only speak English. I can speak French like a toddler. I want to ask you a question that I hope you receive in the right way because I’m quite intrigued. You’re smart. In Latin America, I’m a moron. I run through everything South of Mexico and they only speak Spanish with the exception of Brazil or they speak Portuguese. You’ve got an accent and North Americans have a heavy bias. How do you work around that bias to quickly show them that the accent means nothing? You have the intellect and capacity. How do you get by that?
It’s a tricky one because it doesn’t always work. There are certain circles where they see foreigners as a positive. In Waterloo, they had very smart people as international students. They associated accents with being smart. When I go to other places, I get treated very differently. Spanish is also an interesting one. There are not that many Mexicans in Canada versus in the US. Canadians don’t assume that my accent has the same implications as in the US or California.
I don’t know how to get around it, honestly. I’ve had bad experiences and good experiences. It’s something that people identify you by and something that people notice and point out. I don’t know. I don’t have a good answer. Like anything else, people treat you in a certain way and you learned to prove them differently if it’s a negative connotation.
I’ll tell you what I’m learning in Europe. In Europe, everybody has an accent to everybody else. It doesn’t matter which coffee shop you’re in. You’re hearing four other languages constantly. There’s no normal Ontario accent or Chicago accent. That doesn’t exist. When you went to school at Waterloo, how many years ago was that?
I got there in 2010.
When you left there and were starting into your business career, what did you pull out of that classic tech education that you still use in your role now? I want you to talk to me a little bit about Makeship as well.
Waterloo is a good school for coming up with ideas and trying things out. What makes it different is that you have co-ops so you have to work. Every four months or something like that, you have to work at a company or do something. That teaches you to get good at building things or testing things. What I learned from Waterloo was a go-out-and-try-it type of mentality. That’s very useful for startups. As startups get bigger into more mature companies, it becomes a little bit less useful and almost in some cases bad. There are certain lessons that I have to unlearn or things that I have to change. Sub twenty employees are very useful.
Did you hire out from Waterloo? Is that something you lean back on and you look for that as a pipeline?
Yes. We hire very strongly from Waterloo. My cofounder went to Queen’s so I would say that Waterloo and Queen’s are probably our top hires just because of the people you know. In the beginning, a startup hires based on your network and that’s why you end up hiring a lot like that.
Was it Queen’s Engineering?
Yes.
I hired Kimbal Musk at Queen’s Engineering, Elon’s brother. For real. I hired him in 1993 to work for me at College Pro Painters and I hired his cousin, Peter Rive, who built SolarCity also.
Elon went to Queen’s as well and took Physics.
They’re wickedly smart. You got involved in the blockchain at a time when blockchain wasn’t that sexy. It was sexy in terms of it being tech, but nobody knew what the hell it was in 2017 and “18.
I saw a lot of interesting things. I got into blockchain in 2012 or 2013. I can’t remember, but in one of those years, my roommate at the time, who used to be my boss, and I decided to get into crypto. We turned off the furnace in winter, which you can imagine it’s a crazy decision. Instead, we put Bitcoin miners in the basement to produce the heat. We still have the furnace for certain temperatures, but we’re able to lower the minimum temperature. That was a cool experience.
I got into Bitcoin when it was $30 per Bitcoin. I got out when it was not very expensive, maybe $1,000. I never sold it for millions of dollars, but I thought it was crazy that it went from $30 to $1,000. From that experience, what I saw in the next generation with Ethereum and distributed computing with crypto was a lot of people were developing interesting applications.
The interesting one in 2017 was a lot of companies were trying to diversify or fundraise, utilizing those ICOs, which I thought was an interesting concept and a very gray area. In a lot of them, you could argue around securities and regulation so I was very interested. The first thing I did was set up a lot of meetings with securities lawyers. When I was in consulting, I was working with tons of law firms around securities, both in the US and Canada.
Canada is tricky because the regulation of security is done provincially as opposed to federally. I had to work with a lot of those. I thought it was interesting. I thought there were 2 big database moments in 2017, 1 of them being blockchain. A lot of companies were trying to figure out, “Is there an AI play with our large data sets?” They were either trying to make their data more open through blockchain and find a solution there or make it a little bit more processed than algorithmic through AI. I thought they were very interesting concepts.
Some are intriguing and interesting. Have you ever decided to get back into Bitcoin since the $1,000 moment?
There were NFTs and what’s going on with that. They’re very old. In 2017, we’re also already looking at those types of non-fungible contracts. It’s interesting from the perspective that smart people are working on it, but I still haven’t found applications that I find are practical enough or interesting enough for me to be like, “There’s something extremely valuable here.” When I was doing consulting, I was doing it mostly as a result of trying something new and figuring out why are so many people interested in Ethereum and what’s going on with the centralized applications.
When it comes to me, I haven’t used it yet. I don’t use any applications with crypto. I still find it super cool from the perspective of sending value around the world. I still think that there’s this interesting gap where there’s no efficient way of sending someone $2. I cannot send you $2 in any practical way. It’s always going to cost more than $2 or sub $2. There’s something there in terms of moving value around and that value being decentralized, but I’m very skeptical about whether or not crypto can scale and remain decentralized.
Plush Toys: Although crypto allows people to move value around, it must still be approached with extra care.
We had the second in command for Blockchain.com as a guest on our show as well. It’s interesting that you’re playing and thinking in such a big area. How do you prevent or allow that thought to stay within the business that you’re building? How do you restrain yourself to stay focused on what needs to get done? How do you pull yourself down from that 30,000-foot level to the, “Let’s get things done as well?”
Naturally, I’m very a “let’s get things done” type of person. The other part is more philosophical or what I find cool. One part of you is like, “I find this cool.” Another part of you is like, “To move to the next step, I have to do this.” This is the type of stuff that I’m trying to unlearn. We’re getting to about 70 employees on Makeship.
I cannot just get things done because the company requires so much structure and many decisions are being made. Instead, I have to learn how to pass the task to other people, decentralize, scope better, and all this organizational stuff that I never did. It’s more like going back into strategy and vision and listening to getting stuff done. I’m trying to unlearn getting stuff done because it’s causing other issues. It’s tricky.
Tell us a bit about Makeship and also give us some of the scopes in terms of the size of the organization. How many people are we working with?
We’re about 70 people. What’s interesting is that we were only two people at the beginning of 2020. We pretty much did all of that without fundraising or a significant amount of fundraising at all. We’re one of the few companies in Canada that grew 40X in less than 3 years without outside funding. I find that to be rare, especially in a company like ours.
Makeship makes physical products typically for influencers and video game studios. The reason we work with them is that we find them to be a super fascinating market because they have this interesting problem where when you post a video on YouTube or a video game on Steam, you have super interesting unit economics where you don’t how many people are going to download your game.
It could be 1 person or 1 million people. You don’t know how many people are going to watch your Instagram post or YouTube video. It could be 1 or 1 million. The platforms will not charge you more money if it’s 100 million. Let’s say in some way, you have an infinite supply and unknown demand. You have these insane market dynamics where the demand-supply curve never crossed in this traditional sense or you don’t know what to expect so you don’t know your ability to solve the product. It’s very difficult. You’re typically a team of 1 or 2.
You have this super small niche team with insane unit economics that wants to make a physical product. Good luck. It’s super hard. If you try to manufacture it, you have to go to a sensor factory, order the units and put them in a warehouse. You don’t know how many units you’re going to sell. What Makeship is trying to solve is giving creators, especially emerging, independent thinkers the ability to make products as if they were a large team. We’re trying to maximize what they’re capable of doing.
Plush Toys: Makeship gives creators, especially emerging independent thinkers, the ability to make products as if they are a large team.
The only solution that we figure to make this into something where we can de-risk it is through crowdfunding. Essentially, you launch a product in Makeship. Makeship makes and designs it. We don’t charge you for customer support and logistics. We pay you a percentage of the revenue generated and handle everything. The trick is that we launched them as crowdfunding campaigns so they may fail. A lot of our campaigns fail and that’s okay. It’s part of the business model. Essentially, it allows you to test out a product and a market, which influencers enjoy because they have these interesting dynamics.
What kind of products are we talking about here? Is it digital products or physical products?
I’m holding a plushy. We mostly do plush toys. It is one of our main products. We’re going to launch two more products soon. The reason it’s plush toys is not random. I joined the company after a year. Rakan, my Cofounder and CEO, was working a lot with influencers and launching every imaginable product. One of the main things that I did when I joined Makeship was to focus on those. We went from 40 products we’re offering to 1. The reason for that is that it’s a lot easier to scale when you have a single type of product. That’s what our main focus is and that’s mostly based on the type of creators that we work with.
You make plush toys. That’s not where I was thinking and heading. It’s also confusing to me that you’ve got influencers and video studios. I’m even rubbing my eyes trying to wrap my head around the model because you’re going to get me there to walk me through this even deeper. What’s interesting though about plush toys is I’m seeing that everyone who’s seemingly launching with NFT on the art side seems to be doing something with the plush toys as well. You get a toy and the actual digital art piece. Was that somehow part of the tie-in here or not?
That happened as a happy coincidence. Plush toys though have an interesting history in the markets. You have companies like Beanie Babies that grew tremendously as a result of selling plush toys. Plush toys are very personalized and customized but are also extremely difficult to make. It’s a very high value of the entry. They have the right dynamics to be a starting product for us.
Do you have a specific influencer, a video game company, or something that is doing the plush toys? How are they doing it? Who’s buying them?
There are many. We work mostly with what I would call the top 1% of influencers but not the top 0.001%. We don’t work with maybe names that you might recognize. Unless maybe you’re a fan of StarCraft or Dungeons & Dragons or something like that, we have worked with creators that either work in those worlds or companies themselves.
We’ve worked with Blizzard Activision, which is one of the largest vegan publishers in the world. We mostly work with smaller creators. You’re talking 100,000 to 500,000 subscriber types that make relatively niche content, but that’s exactly what we love about them. Their audience understands their characters and who they are as opposed to the mainstream. The more mainstream you go does dilute the fandom, versus if you create extremely niche content, then you may get people that are very passionate about your content.
I don’t know if these two companies even exist anymore, but Mainframe Entertainment or Radical Entertainment were two companies out of Vancouver that did video games and stuff more for kids. It seems like you’re even more niche than that on where you’re going into.
We work with very hyper-specific niches. That’s where the internet is going, though. If you think of TikTok, you cannot even choose the content.
The long tail is very big.
Every time you go down by 1/3, let’s say from 100,000 to 30,000 subscribers, you multiply the number of creators that are in that space by 6 or 7-fold. Most of the revenue and creators are at the very top and everyone’s fighting for them. We said, “Why fight for that market when there’s this super interesting and passionate market right behind that we’d rather work with?”
You’re taking a percentage of revenue?
Exactly.
Are you also operating as a bit of an affiliate marketing company for these businesses as well in a way?
Yes, in a way. If you look at what we did with Blizzard Activision, we were working with their intellectual property called StarCraft, which is what I used to play as a kid. I love that we’re doing that. When you look at that deal and what we did there, we didn’t launch the plush toy exactly just with Blizzard. We launched it with one of the YouTubers that uses Blizzard IP called Carbot. Carbot makes animations of StarCraft characters, but you still need the StarCraft license to do it.
That was an affiliate type of deal because you have an extra player. You have Blizzard, the content creator, and Makeship. There are a little bit more interesting things there where we could potentially do deals with large IP companies and then any influencer that uses our IP could potentially work with us. That’s something that we’re looking at, but normally, within the affiliate. It’s a possibility and something that could be interesting.
When I say affiliate, I mean it with the highest respect too. One of my former clients and one of the founding members of our COO Alliance do affiliate marketing for Target, Uber, and Apple. Affiliate marketing is partnership marketing. It’s performance-based marketing. It’s been given a bad name when you think about Commission Junction, LinkShare, Befree, and places that did it in a schlocky way. I have another client of mine called GiddyUp that does some pretty massive affiliate marketing where they take all the risk but are similar to what you’re doing. I like the niche. How many employees have you guys got?
We’re close to 70. We were two people at the beginning of 2020 so it was quite a bit of growth. We did all of that mostly without fundraising. We fundraised the smallest amount to get some strategic people in, but by no means, we’re based on that. We’re focused on good unit economics.
I want to talk a little bit about the growth. You’ve also mentioned crowdfunding 2 or 3 times so I want to understand that. Why don’t we start with the crowdfunding and then we’ll go into how you scaled the business? Growing from 2 to 70 people in 2 years is rough. It’s tough to do. Maybe it was easy for you. On the crowdfunding side, how are you building that into your model? How are you leveraging and using crowdfunding?
What’s interesting about us is that when we make a product like a plush toy, the one I’m holding, we make a single one. There’s just one in the world. We send that to the influencer. This influencer has one out of one in the entire world and that’s all there is. That influencer shares with their audience what they designed with us. They have 21 days to hit a target of at least 200 units. If they don’t hit that, we refund everyone. The one-on-ones remain the one-on-one in the world. If they pass 200 units, we manufacture whatever amount.
If we make 372, we make and ship 372 around the world. We give you a badge on your profile that tells you if you’re 1 out of 372 or number 2. That’s all there is and we don’t make it again, at least not now. That means that the creator created this unique product and it’s gone. We don’t have inventory and function like that.
We carbon offset the production and shipping of that product as well. That’s all that exists. It’s hyper-efficient, but what that allows us to do is grow like a software company. The problem with a hybrid company is that you’re always making too little or too much of the product. You have to make it and then sell it. We get all the money upfront instead and then we produce it. We always know that we’re going to be able to make it and hit the target.
Are you doing any of these plush toys for companies or brands at all?
No. We’re not a great model for them. If you’re a more mature company, you can predict how many units you’re going to sell. At that point, we make that.
Your model is intriguing. It’s funny the reason I asked. Years ago at 1-800-GOT-JUNK?, we purchased 500,000 little miniature 1-800-GOT-JUNK? trucks that we then gave out to all of our franchisees and they gave out to all the little kids. Do you know how much warehouse space 500,000 trucks take off?
I have no idea.
Neither do we. It was a full tractor trailer of little 1×2 inches trucks. That’s a lot of trucks. It was crazy. On the growth from 2 to 70 employees, how did you execute that? What mistakes did you make and learn along the way? What did you do well?
It’s tricky. At first, you’re going to mind that when you’re sub-ten, everyone is doing a lot of different things and then eventually, you have to specialize. There are some people that don’t do well in specializing. There are some people that are very creative but not very good at managerial. We have all these employees that were good before and then they were out of the water or the opposite also happens where maybe they felt a little bit uncomfortable before and then they fit perfectly with their roles.
Essentially, you’re just not adding people. You’re also seeing the dynamics of each person. When you’re 10 people, you can have a meeting where you meet everyone every morning and talk about what you’re going to do that day, but you’re going to do that to 70 people. I learned a lot of things about how to communicate. I’m still learning those things. I’m also learning a lot of things about how to create lattices around what it means to be an executive or a director.
Those words are meaningless when you have very few people, but they become increasingly important as you grow. You learn how to properly share information. That’s a tricky one that I didn’t expect to get that hard. At first when you communicate with 1 person in the company and you’re 3 people, with those 2 people, 70% of the communication already happened, but as you add more dots, there are more potential lines.
There’s no way that you can figure out what everyone is saying. How do you control the information? How do you control where everyone is? You have to think about how people are going to advance in their roles, where they are best positioned, and whom you need to hire. That gets super tricky too because you’re also hiring people that are better than you. How do you hire a software developer that is 10 times or 100 times better than you? Anything you ask them is not super-efficient.
If you’re hiring a lot of people that are better than you, that’s super tricky. You have to get a lot of advice from mentors. You have to ask a lot of people that grew those companies before you what to do. I don’t know what you would do if you were the first one. I have no idea. You talked a little bit about Microsoft. Microsoft and Apple grew at a time when there was not a lot of venture capital, which is a very new concept. Nobody had seen companies growing that quickly ever. I had no idea how they were able to perform. To me, that is so insane because I rely so much on other people.
You talked about the sharing of information. I used to say that when there were 2 people talking, 1 person could talk to 1 that 1 could talk to the other. There are two forms of communication. When you add a 3rd, it’s 6. The complexity grows. What also starts to grow though is conflict, politics, silos, and turf wars. Are you getting to that stage with the 70 people where you’re having to grapple with?
Not too much.
Not yet?
We’re a little bit protected because the whole company is remote. There are nasty interactions that don’t happen. Most nasty interactions are because you cannot get out of them. You’re trapped and someone’s pressuring you and making you react emotionally and a nasty situation may occur. Those don’t happen online as much because you have a quick exit or you’re just enjoying that. There are more passive ways to stop that. As a result, you’re also less efficient as a company. It’s a weird trade-off. I don’t think that we’ve gotten too bad there or maybe I’m unfamiliar and unaware. Maybe it’s happening all the time and I don’t know because I don’t see it.
There might be a little bit of both, but you are right. I’ve never even considered that before. You do have it now. When you’re online and the conflict is there, you’ve got the rest of the day to decompress and you don’t see the jerk seven more times in the office all day. He or she is not sitting across from you or having lunch with you. That’s interesting and you’re very right about that.
The growth in building a remote team and the days of that not happening are way behind us. Everyone’s remote. We’re all moving towards remote. You’ve built your entire company from the beginning that way. Are there any lessons on what you’ve done well and what you would do differently in building the remote teams?
I have a lot of thoughts on remote. At the beginning of 2020, you couldn’t buy a book on how to build a super fast-growing startup remotely because people were still going to San Francisco. It was important to be local to whatever you were part of and be very connected physically. You have to be very careful about whom you hire in terms of culture fit when you’re working remotely.
I don’t know if you read Ben Horowitz’s book on culture, which is his next book. One of the definitions of culture is what employees do when nobody’s looking or have you act in gray areas. That’s key here when it comes to remote hires. You have to nail whom you hire so you have to be extra careful around the culture component because you have to trust.
The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers
When people are at home, what are they doing? We don’t micromanage, but it’s especially impossible to micromanage remotely. Bad hires that we’ve done or bad decisions we’ve made were around maybe having not focused enough on the culture around or not having described the position well enough, which is very difficult when you’re growing quickly because you don’t even know what you need that much.
What I’ve learned is to be specific about what the activity is on the person, your culture, and culture fit. Take your time. Say no to other people. We say no to 99.5% of the people that want to work with us. You want to get the 0.1% or 0.5% of applicants. As a result, you want to put very strong culture-fit guidelines or rules.
How have you funded the business to this point?
Mostly through revenue. We did a tiny precede strategically to get cool partners that we work with, but over 99% of the money is flowing into the company’s revenue.
It’s unheard of.
Especially for hardware companies.
It’s hard to make a plush toy at all, let alone to build an entire business around it and you’re only going to do it once. Where are you manufacturing it, if it’s Asia, as I would guess? How are you dealing with the complexities that COVID and shipping have thrown into us? How do you manage the logistics?
That question could be an hour or some other episode, but long story short, my Cofounder, who is a Syrian-Canadian, decided he wanted to learn Mandarin so he moved to China for a year, as one would. He took a year off sabbatical on Queen’s. He decided to start a business where he would help companies in the West manufacture products in China. He’s very fluent in Mandarin now. It’s very impressive.
He started this company with this other partner we have whose name is Kevin Wang Tao. Wang Tao and him started a company called Rhino Manufacturing that manufactures a lot of products including plush toys. At first, they would go visit factories and buy 500 umbrellas, but they couldn’t sell a single one. They were trying all these different tactics to learn how to work with manufacturers, products, distribution, and shipping. They learned a lot through that. They grow the company to 30 people.
Makeship happened as a result of observing the power influencers had with their audiences and how many of them couldn’t afford to make products even though they had purchases and power. It’s what’s interesting about influencers. They, themselves, couldn’t get into inventory because they don’t know how many units they’re going to sell and how it’s going to perform, but they do have the ability to perform. By launching it as crowdfunding, you’re going to launch 100 campaigns and then the top 10 are going to perform extraordinarily well. The influencers never expect that. We’re venture capital in that way.
Plush Toys: By launching hundreds of small campaigns through crowdfunding, you can expect extraordinary results.
Going back to your question about how to manufacture and all the problems with logistics, you have to be constantly looking at how much fabric to buy and how much material to get. It’s tricky. There have been some decisions that we had to get very clever at. For example, we started being able to have ability to use glow-in-the-dark fabric, but it’s very expensive. They told me, “Pablo, you have to buy at least 1 kilometer square of this material. It’s going to be very expensive.” It’s $10,000 and we’re not that big. I’m like, “What do we do?” We decided, “What if all our influencers want to repeat their product all the time?”
We never make it again and they’re like, “Pablo, I want to make it again.” I’m like, “That has been slightly different.” I called our top ten influencers and said, “I’m going to launch this event where all of you are going to use glow-in-the-dark fabric and you get to repeat the design that you had before.” A lot of them are committed to that. I was able to buy the kilometer squared and then launch the product. That was very successful.
We only launched the product as a crowdfunding campaign so I didn’t have to buy that material ever again until the next year. Something that protects us is buying the material, using it and then the product is gone. Our model protects us a little bit from that, but in terms of shipping, we’ve increased our prices tremendously because shipping has gone crazy. It was very expensive.
I have a feeling you’re going to blow my mind here, but when these influencers are selling these plush toys, what’s the average target price they’re selling something for?
We sell our products on average, and $2,899 is our average price. The average campaign probably makes about $30,000 or something like that in terms of total revenue.
It’s not big.
It’s not. It’s very small.
The long tail is just big. It’s super intriguing.
What’s not so about Makeship is that we’re producing 1,000 products with a company of 70 people. We produce more than ten products per person in the company. We have to be extremely good at the signing.
Do you need to scale the team at this point or can you operate with the team you have and scale from there? WhatsApp sold for $1.8 billion with 55 people.
It’s like, “How can we separate our growth from our expenses?” That’s the next stage for Makeship. We’re about to go to even smaller creators than the ones we work with. 50,000 subscribers are probably around the smaller size we work with and we’re about to go down to 25,000. It’s even more volume, campaigns, and science. How do you do that without hiring a million people? It keeps costs afloat.
The answer to a lot of that is extremely good pipelines, technology, and libraries. You don’t want to redesign the wheel. If you already made a product, you have to keep track of that product so that you can grab elements from it in the future or something like that. The next stage for us is we want to be able to double or triple with that significantly growing employee count. We’re probably adding another 50% of people to add another 200% of revenue. The answer is technology.
It’s either the work has to be done by computers or your customers, self-onboarding and clicking. We’re going to use all the tricks in the book. You optimize your work. Make sure that you’re only doing the things that you have to do. Pass to your customers some of the work like they have to fill out their names. Things like that are crucial. Make sure you’re relying on technology and computers.
Here’s the second to the last question before we wrap up. Are you doing any work with Gary Vaynerchuk and the VeeFriends? Could you do plush toys for each of the VeeFriends that he’s got?
Probably. I don’t have the contact, but if you have it, I would be happy to talk to him.
I’ll introduce you to his former COO who is a guest on our show. I’ll do an intro, but there could be something intriguing there where everyone who owns VeeFriends or whatever it is and has a limited edition of those get sold could be super cool.
We’ve seen that a lot. We’ve tried and modeled it. Those work well for us.
That’ll be fun. I’ll do that. I want to go back to the 21-year-old or 22-year-old Pablo. You’re graduating from Waterloo in Canada and you’re going to start your business career. What advice would you give the 21 or 22-year-old that you know to be true now but you wish you’d known back then?
Going back to your first question, I wish I was stricter about product-market fit and as a result, I was more confident to say no to bad customers. I wish I was better at iterating products so I could find product-market fit. Once you’d hit product-market fit, the dynamics changed completely. Instead of trying to bend backward and going in one direction. It’s useful to some degree to figure out the customer, but if you’re going into specifics, you’re not going to capture more customers at volume. That lesson took me too many years.
You got to make it easier for them to say yes. Pablo Eder, the COO and Cofounder for Makeship, thanks so much for sharing with us on the show.
Thank you so much, Cameron. Have a nice day.
Important Links
- Makeship
- Lane Kasselman – Past Episode
- Blockchain.com
