# Finic News

Startup Labs First post – introduction

first post

I never thought I would create a startup involving manufacturing. Over the last five years, I was purely involved in online businesses. As a serial entrepreneur, I generated a plethora of ideas. I had a list of more than a hundred of them. The list grew by at least a couple ideas per week. It was hard to decide which idea was worth my time. I’d fall in love with an idea, only to google it for competitors and find that it already exists.

At the end of 2013, right after I closed my office in Minsk and fired more than ninety employees, I moved from Vancouver, Canada to Vancouver, WA with my wife and kids. We rented a house and decided to add some decor and personalized canvas prints to the walls. We had a multitude of digital photos but never had time to turn them into art.

After searching Google for canvas print companies, my wife and I ordered a few pieces from what we felt was the most reliable company we found. In about a week, I received an email stating that my order was ready to ship.

It sounded too long for a manufacturing process.

Another week went by, and then we received the package. The quality was unacceptable, so we decided to ship it back and find a different company. Then we received a second package that we had ordered from another print company. Unfortunately, the quality was even worse than the first package.

After sharing my story with colleagues and friends, I realized I wasn’t alone in my dissatisfaction with print companies. Everyone had their story to share. It was then my colleagues and I decided to investigate the matter further. It was fun. We placed over 40 orders from 30 print companies. We documented the process with several pictures and videos.

Please enjoy this short video we made:

 

Then we started brainstorming. First, we wrote a list of problems that required fixing.
Here is the list of problems we found:

  1. Complicated ordering process
  2. Bad support
  3. Long manufacturing time (most companies outsource manufacturing)
  4. Paid and occasionally expensive shipping
  5. Paid returns
  6. Bad packaging
  7. Low-quality prints
  8. Bad assembling and stretching
  9. Cheap materials
  10. Lack of information
  11. No post-sale support
  12. High prices

It took us about two months to understand the problem and come up with a solution.

 

So, what is the fix?

My team and I have always loved companies like Apple, Google, Nest, Moleskin and other companies with a similar approach business. We love them because they create things with passion and always strive for improvement. Beyond just creating a great product, they create a great experience for the customer. That’s why people love them.

We admired this approach: taking an existing product and creating something ten times better, as well as creating a great experience for the customer.

Our goal was to exceed the client’s expectations. We were also determined to create more value than the actual cost of the product. We desired to over deliver, add innovations, enhance an experience, save people’s time and, in doing so, help create a better life for millions of people and make them happy. We believe our clients deserve this.

 

Idea

While working at our previous company, we devoted at least 50 percent of our time to the research and development of our idea. We knew the problem needed to be solved, but we were unsure of what to do next. After brainstorming, we decided to create a marketplace for photographers and artists who would receive a 25 percent commission cut from each sale we would help them make. We were going to promote the product, fulfill the orders and do all the manufacturing.

 

Then we found a name, Finic.com

Why Finic? Frankly, it is difficult to find a perfect domain name. So we made a list of 50+ domain names and narrowed it down to five. We consulted our friends and relatives for opinions about the five names and tested the ease or difficulty of the spelling and pronunciation of the names. Being only five letters, Finic was the shortest name on the list. The decision was made, and we purchased it from BrandBucket for $3,200.

We created a list of steps to take next

  • Research on manufacturing
  • Find warehouse/shop
  • Find developers and designers
  • Find suppliers

Because we felt like we were well-informed about the problem, we were ready to tackle it and start working on a viable fix. Everyone on the team felt passionate about embarking on this adventure. We just paid off $400K in fines and salaries to close the Minsk office but still had $400K left in cash. The company generated around $500K in gross revenue and had about $150K of income per month.

To me, the best option was to self-finance and get it going. My team was on the same page. We left the company and invested all our focus into Finic. Four of us left, and two stayed to support the existing business so it could generate enough cash for all spendings and investments at Finic.

Many of my friends and relatives were shocked that I took another monumental risk, creating something new without any experience. What they couldn’t understand is my entrepreneurship spirit. I found a problem, so I had to fix it. My whole life was about taking risks and creating something new. It’s in my blood and DNA.

 

Goals

I knew that it was almost impossible to find and bring together the right team of great local web developers and designers in a short period, but that was not going to hinder me from trying. The idea was to outsource development and start building a local team of developers. We made a business plan, but not a real, formal “business plan” containing tons of pages. All we created were a few spreadsheets with numbers, dates and various information.

This is what it looked like:

introduction

As you can see, we had very aggressive plans to develop everything and launch in just four to five months. In July, we planned to put out 20 orders and grew to 1,400 orders per Month by the end of the year. By our estimates, we were supposed to generate a gross income of $830,000. We set our budget. It was $924,000 until the end of the year. We planned to start making money in about five months, so I decided to invest $500,000 in Finic, Inc.

We developed competitor’s research and analysis:

first post

Based on our research, we decided to start with 21 different sizes, three stretch bar thicknesses and one floater frame profile with six colors.

After searching, we decided that we needed to find suppliers in China because local ones are too expensive. Using Alibaba, we found a few suppliers in China. Next, Sergey Kuzminskiy and I traveled to Shanghai, China.

In China, we met with six manufacturing companies and chose the one, which manufactured nearly everything we needed. They also agreed to be our agent in
China and obtain other supplies, such as stretch bars, canvas, hardware, packaging materials, tools, machines, etc., for a small brokerage fee. Right after we returned to Portland, Oregon, we agreed on final terms, signed the contract and prepaid 30 percent. They promised to ship everything we ordered from them in one month.
These were the next things we crossed off our to-do list:

  • Found local suppliers for materials, tools, and machines placed the first order
  • Found place for production
  • Signed contracts with design and development firms
  • Talked to 40 potential clients (business and residential)

Then we set our goals:

first post

At this point, our goals had changed. We knew that we were unable to launch earlier than we had planned. Our new goals were still aggressive, but we didn’t want to set easy goals.

 

MVP. Minimum Viable Product.

The warehouse we rented had 800 SQ/ft office, and we decided to move there.

first post

warehouse

Right around that time, we received raw materials from China and a minimum set of tools and machines.

We started working on first prototypes. However, the canvas we received from China was poor quality – much lower than we expected. We could not use it and found a new supplier, in the US, who sold the highest quality canvas on the market.

The stretch bars we received didn’t suit our standards either, so we made them in-house, which took a little time.

Prototyping is a long but fun part of the whole process. We made numerous prototypes, and every other was better than the previous one. We created a few new techniques for assembling and stretching. Simultaneously, we worked on creating better packaging by creating different prototypes.

In a couple of months, everything was in place. All of our suppliers provided the best possible material at the best price. The product itself looked incredibly promising.

Everybody on the team ordered prints for their homes, up to ten prints per home. Finally, I was able to hang high-quality canvas prints at my house. My wife, Marina, was happy.

We are not Zappos, but we began to deliver happiness by selling products to our relatives and friends. They brought us even more clients. All was offline or through email and Skype. We got a card reader from PayPal and were able to accept payments offline.

We received lots of positive feedback. People liked our product and came back for more. The quality of our product was at least five times better than our competitors.

But even then, I saw many areas that required improvement in the company. I wasn’t one-hundred percent satisfied with the quality, manufacturing process, timing, development, etc., but knew that it was just a matter of time before things improved. I had a certain vision for how everything should come together. The great feedback from our early customers gave us the energy to work even harder.

I filed a few patents for things I developed, such as the way of assembling canvas prints and a new type of picture hanging. The new way of assembling and hanging was especially innovative because nobody on the market was doing anything like it. I believe this hanging system could solve a lot of problems, making it easy to hang a picture, achieving correct leveling and keeping the picture in place.

Because our web development was postponed and slow paced, we had time to sell even more products to new customers through our relatives and friends. We created giveaways on social networks, like Facebook and Instagram, to build communities and hear feedback.

Again, all feedback we received was 100 percent positive. Most of the time, clients didn’t expect to receive this level of quality. And this was only the beginning. The product was ready to ship, but the web development was very far from completion.

I felt like we were almost ready to launch. We had a very buggy working website on a development server. The process was akin to building a home. You can spend three months building a house and its foundation; then three more months on all final touch ups and details. It was the same thing here. We built our foundation, but the miniscule details were yet to be finalized.

Also, all development was based on Magento, which slowed down the process. It hit me that we could spend six more months waiting without a sure guarantee that our development team from Russia was going to finish our website. The worst part was having no control over that process.

 

Pivot

Time was running out, and the website wasn’t finished yet, so we decided to create a simple test with the help of one outsource web developer.

We came up with a hypothesis: what would happen if we sell our product without taking any payments or credit card information up front from our customers? Then, after they receive the product, they can choose to pay if they want to keep the product or ship it back at no cost. And because they would have to print their picture, my guess was that they would decide to keep the product and that at least 70 percent of them would pay the price because most humans don’t want to be ridden with guilt.

I spent two days on mockups and technical specs. Finally, one developer created it all in ten days. The site was ugly. It was void of design and a front-end developer’s touch. It wasn’t optimized for mobile. But it was just a test.

finic test

Soon, we created an ad campaign on Facebook and started sending traffic to the website and in parallel optimizing campaign. In the beginning, it was close to $2 per click, and we ended up paying only $0.7 per click. The conversion rate was 5%, and the cost of each sale was $14, which is a little high. But this is just an average. When we started, the cost of sale was over $30 and in the end it was less than $8.

During two weeks, we generated close to 300 sales and then stopped advertising on Facebook. Then we started receiving payments for orders, but much less than I expected. At the end of the two-week period, only 40% of clients paid for their orders, and only two of them returned the product.

Our trial run didn’t work, and we closed the “pay later” option on the test website. All of a sudden, more orders were placed from previous clients. They liked the product and came back. A few of them even ordered more than 20 items. It was almost too good to be true; we even wondered whether it was some kind of scam or fraud.

Now, six months later, we have received more than 300 additional orders that came from the same clients or new clients. Since then, we have had no advertising, email marketing or anything else. Orders came from returned customers and word of mouth and all through the crappy website.

After some debate, we ended our relationship with outsourcing firms and focused on hiring local developers. We got lucky and found our first developer Arkadiy Dorokhov who became our CTO and helped us build the team. With his experience, we were able to find everyone we were looking for in just under two months.

Arkadiy examined the code of the existing website and determined it was best to start over. The code was a complete mess. Instead of rewriting everything, we started developing a service where clients could upload their photos and build what they needed using a configurator.

 

The facts:

As of now, we spent a little over $1.4M and still have nothing to show to the public. But we know that we have done a pretty decent amount of work.

• We have developed a product which is better than anything on the market. Not just by a little, but by a lot. I mean it.
• We tested the product and sold over 1,000 pieces to friends, family, and other clients. We received 100% positive feedback, and this means a lot to us.
• We tested demand and found that it is huge. After we had spoken with several office management companies, we knew that we can meet our goals in time and sell tens of thousands of pieces to a single client.
• We have built the right team, a dream team. We understand each other from just half a word. All of us, at Finic, are passionate about what we are doing. And not one of us is doing this for money. We are doing this because we desire to change the industry for the better.
• We developed the web version. It is currently in testing mode, almost ready to launch.
• We are in the middle of developing an iPhone app.

 

This blog is not about how to do it right. This blog is about how I have done it.