New Startup Secret: Dumpster Diving - Rafe Needleman
Last week I covered Roku, the high-end digital media player for HDTV buyers with money to burn. Roku was founded and financed by Anthony Wood, who made out well when he sold ReplayTV to SonicBlue. He's a rich guy selling gizmos to other rich guys, but not all startups have Anthony's resources. Here is a success story from one resource-challenged startup. Wallflower, which is also in the digital photograph display business, managed to get itself off the ground with a strategy I've seen only once before: dumpster diving.
The company makes (expensive) digital picture frames that compete with Ceiva, Digiframe, and Pacific Digital. Nothing special there. But Wallflower's startup plan was based around building its high-end products with pieces from recycled computers. To get started, Wallflower founders Mitch Kahn and Gordon Clyne bought 150 old but unused laptops from liquidators and via eBay, for $25 to $150 each. They were obsolete as workstations (most had 133MHz CPUs and smallish hard drives) but had the right pieces to make nice picture framesmost importantly, working 12" LCD panels.
Mitch and Gordon's small team disassembled the machines, mounted the displays in handmade wood frames with the motherboard and hard disk, and added Wi-Fi and their own Linux-based software. Basically, the Wallflower displays are Web servers that appear on a Windows desktop as disk drivesyou put one on your network and you can just drag pictures onto it, and call up its internal home page to manage its settings. Now you have a nice big electronic photo frame to show your digital pictures, and changing the display is as easy as typing a URL into your home computer.
Frankly I can't see spending $500 for one of these thingsbut what do I know? Shortly after Forbes ran an article about the product, Wallflower sold out of its inventory of Frankensteined picture frames. Left with nice cashflow from its rising order volume, and needing more certainty in its supply chain than Weird Stuff Warehouse could provide, Wallflower recently gave up on the whole recycled kick and started buying components from manufacturers, the way most computer companies do.
With the new manufacturing strategy, the company is able to offer more features and bigger screens, but it had to raise its prices since these components are more expensive. Although I imagine they save a fortune in assembly costs, since they no longer have to dismantle laptops to get their parts.
There is a thriving economy in the leftover computer business. Another company in this space, RetroBox, makes money coming and going. First of all, they take in used computers from businesses that no longer need of them, and carefully scrub the hard disks clean of datacompanies are so worried that old machines will get out into the world with sensitive data on them that they'll pay nicely for this service. Then, of course, RetroBox is free to re-sell the scrubbed hardware to new users or to re-builders like Wallflower.
But back to Wallflower. I love this story, since it combines the identification of an unusual but growing market space (digital picture frames) with the extremely clever, low-cost startup strategy of making its first products from unloved, unsold, obsolete technology. The founders knew full well that strategy wouldn't scale if they became successful, and they were able to switch to more ordinary production methods when they did, about one-and-a-half years ahead of plan.
As I said earlier, this manufacturing model isn't completely new: In 2000, startup Scout Electromedia released the Modo, a pager-like
I figured they'd end up on UPN with Buffy and the gang...
Chris Griffin: Where do you think you go when you die? Southern boy: I learned from church that if you're good you go to heaven but if you're bad, you go to a place where the dead believe they're still living and they pray for death but death won't come. Chris Griffin: UPN?
Slashdot Mirror
Them's lights aren't "blinken" anymore!
Wow that's cheaper than buying a Linux license from SCO! I'm switching to Solaris right away!
Now if only they would GPL the code to Solaris...
... the article with links...
New Startup Secret: Dumpster Diving - Rafe Needleman
Last week I covered Roku, the high-end digital media player for HDTV buyers with money to burn. Roku was founded and financed by Anthony Wood, who made out well when he sold ReplayTV to SonicBlue. He's a rich guy selling gizmos to other rich guys, but not all startups have Anthony's resources. Here is a success story from one resource-challenged startup. Wallflower, which is also in the digital photograph display business, managed to get itself off the ground with a strategy I've seen only once before: dumpster diving.
The company makes (expensive) digital picture frames that compete with Ceiva, Digiframe, and Pacific Digital. Nothing special there. But Wallflower's startup plan was based around building its high-end products with pieces from recycled computers. To get started, Wallflower founders Mitch Kahn and Gordon Clyne bought 150 old but unused laptops from liquidators and via eBay, for $25 to $150 each. They were obsolete as workstations (most had 133MHz CPUs and smallish hard drives) but had the right pieces to make nice picture framesmost importantly, working 12" LCD panels.
Mitch and Gordon's small team disassembled the machines, mounted the displays in handmade wood frames with the motherboard and hard disk, and added Wi-Fi and their own Linux-based software. Basically, the Wallflower displays are Web servers that appear on a Windows desktop as disk drivesyou put one on your network and you can just drag pictures onto it, and call up its internal home page to manage its settings. Now you have a nice big electronic photo frame to show your digital pictures, and changing the display is as easy as typing a URL into your home computer.
Frankly I can't see spending $500 for one of these thingsbut what do I know? Shortly after Forbes ran an article about the product, Wallflower sold out of its inventory of Frankensteined picture frames. Left with nice cashflow from its rising order volume, and needing more certainty in its supply chain than Weird Stuff Warehouse could provide, Wallflower recently gave up on the whole recycled kick and started buying components from manufacturers, the way most computer companies do.
With the new manufacturing strategy, the company is able to offer more features and bigger screens, but it had to raise its prices since these components are more expensive. Although I imagine they save a fortune in assembly costs, since they no longer have to dismantle laptops to get their parts.
There is a thriving economy in the leftover computer business. Another company in this space, RetroBox, makes money coming and going. First of all, they take in used computers from businesses that no longer need of them, and carefully scrub the hard disks clean of datacompanies are so worried that old machines will get out into the world with sensitive data on them that they'll pay nicely for this service. Then, of course, RetroBox is free to re-sell the scrubbed hardware to new users or to re-builders like Wallflower.
But back to Wallflower. I love this story, since it combines the identification of an unusual but growing market space (digital picture frames) with the extremely clever, low-cost startup strategy of making its first products from unloved, unsold, obsolete technology. The founders knew full well that strategy wouldn't scale if they became successful, and they were able to switch to more ordinary production methods when they did, about one-and-a-half years ahead of plan.
As I said earlier, this manufacturing model isn't completely new: In 2000, startup Scout Electromedia released the Modo, a pager-like
I figured they'd end up on UPN with Buffy and the gang...
Chris Griffin: Where do you think you go when you die?
Southern boy: I learned from church that if you're good you go to heaven but if you're bad, you go to a place where the dead believe they're still living and they pray for death but death won't come.
Chris Griffin: UPN?
Amazon.com is awarded the patent for pre-paid cards for services and products....
Oh great, now my Robot Insurance premiums are going to go up!
I got one of these puppies and it has managed to keep the voices in my head at bay. Perhaps it could help those kids too...