TOWN MEETING February 2015
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It’s easy to thinkthings are going well.
0
12.5
25
37.5
50
2010 2011 2012 2013 2014
Gross Product Revenue Net Revenue
GROSS PRODUCT REVENUE
70% growth in Net Product Revenue in 2014
Does not count Service & Wink Revs.
PRODUCTS LAUNCHED
2011
22 new inventions
2 line extensions
2012
26 new inventions
38 line extensions
2013
30 new inventions
68 line extensions
2014
26 new inventions
49 line extensions
ORGANIZATION CONNECTED PRODUCTS HVACSTORAGE
CONNECTED LIGHTING
2012 2013 2014
# OF DIRECT UNITS 65,662 108,376 509,851
# OF INDIRECT UNITS 2 ,123,072 5,445,382 3,537,068
TOTAL 2,188,734 5,553,758 4,046,919
MORE PRODUCT SHIPPED
2012 2013 2014
# OF DIRECT ORDERS 26,760 43,468 129,924
# OF INDIRECT ORDERS 13,181 20,674 48,426
TOTAL 39,941 64,142 178,350
178.05% MORE ORDERS IN 2014 VS. PREVIOUS YEAR
2012 2013 2014
OCEAN SHIPMENTS 51 86 236
AIR SHIPMENTS 129 142 173
TOTAL 180 228 409
79.4% MORE SHIPMENTS IN 2014 VS. PREVIOUS YEAR
MORE PARTNERS
0
6,000
12,000
18,000
24,000
2011 2012 2013 2014
NEW RETAIL PARTNERS 2014
MORE ROBUST PARTNERSHIP WITH GE ON PRODUCT DEV.
NEW RETAIL PARTNERS 2014
MORE ROBUST PARTNERSHIP ON PRODUCT DEVELOPMENT
RETAIL GROWTH
MORE COMMUNITY
0
250,000
500,000
750,000
1,000,000
2011 2012 2013 2014
REGISTERED COMMUNITY MEMBERS
At the turn of 2015, we passed the 1MM community mark with 1,085,713 registered users
MORE IDEAS
IDEAS SUBMITTED TO QUIRKY
Just passed the +300k ideas submitted to Quirky LTD
0
30,000
60,000
90,000
120,000
2011 2012 2013 2014
ACROSS SO MANY CATEGORIES
4%5%6%
9%
11%
15%20%
29%ElectronicsHomeWildcardKitchenHealthTravelPlayParenting
SFO OFFICE
Wink is on fire.
Wink adds a new home every 60-90 seconds.
1mm users & 3.6mm devices
And is on track to end 2015 with more than
but this isn’t he full story.
For 6 Years, we’ve used Town Meeting as a forum for transparency.
Sharing the good, the bad, the ugly.
Tonight won’t be a rainbows and butterflies Town Meeting.
Tonight won’t be a rainbows and butterflies Town Meeting.
At scale, Quirky has a number of major challenges to
making invention accessible.
The last 6 monthshave been our hardest.
TWO BUCKETS:
COMMUNITY CHALLENGES
BUSINESS CHALLENGES
$
BUSINESS CHALLENGES
$
Quirky does not make money.
Our margins are consistently under pressure.
Why? Not enough scale in too many categories.
Storage Organization
Kitchen Cleaning
Toys Health Pets
Power Connected
Fitness Audio
Gadgets & Accessories
The only brand to span as wide of a retail footprint/
While we have scale…
11,789,414 million
units shipped
817 containers shipped
We don’t have true scale in any one category
And that means we lose money.
• Not enough weight with suppliers
• Not enough terms with retailers
• Not enough marketing money to shine a light one very product.
• Unable to realize economies of scale.
This does not make invention accessible.
Let’s illustrate the problem very clearly:
Invented by Gyro 3598 influencers picked at eval Jan 24, 2014
FREEWHEEL
TOOLING 100K
MANUFACTURING NRE 20K
REGULATORY CERTIFICATION 5K
APP DEVELOPMENT 60K
QUIRKY DEVELOPMENT COSTS ~$100K
EST. OVERALL SUNKEN COST 500K
FREEWHEEL STATS
36
But Quirky isn’t a toy company
• Despite being in 22k+ retail doors we don’t have distribution in toys.
• No brand recognition & consumer trust, etc.
Invented by Kansas 3183 influencers picked at eval Jan 9, 2014
VANISH
With Home Depot, we defined the goal of MSRP at $130 !
…so we spent about $360k dollars engineering it. !
VANISH WOULD HAVE TO RETAIL FOR OVER $250
Invented by Sonia 2280 influencers picked at eval June 5, 2012
SHEATH
MARGIN CHALLENGE ($15 scissor vs $5 competitors)
SHEATH GROWTH MARGIN
STANDARD SCISSOR/OFFICE PRODUCT CATEGORY GROSS MARGIN
-5%
+35%
Invented by Phil 4107 influencers picked at eval Dec 12, 2012
BEAT BOOSTER
FACTORY NRE $15,000
TOOLING $163,800
REGULATORY CERTIFICATION $14,048
SAMPLE BUILD $10,800
INTERNAL ENGINEERING / OPS COSTS $185,000
EST. OVERALL SUNKEN COST $388,648
WE’VE SOLD 28 UNITS SINCE DECEMBER
Are these great ideas?
Does the world need & want them?
Yes.
Can quirky do them justice? sell them and scale them profitably?
No.
This wasn’t a problem for several years, because the investments we made in each idea were relatively small.
But we need to fix this.
Because Making Invention Accessible for 6 years isn’t the goal…
…Making Invention Accessible forever is.
These Ideas have value, and deserve to exist in the world. We just aren’t able to do this alone.
INTRODUCING POWERED BY QUIRKY “PbQ”
How it works.
• PbQ will enable 21st century invention.
!
• Brand partners leverage the Quirky platform for product ideation and development.
!
• Harness the power of the community to enable fast and meaningful growth.
Our platform provides the necessary services to enabling 21st-century invention. !
Categories that will remain owned and operated by Quirky as core categories:
HOME OFFICE TOYS PETS FITNESS
POWER CONNECTED APPLIANCES
ACCESSORIES
ORGANIZATION & FURNITURE
STATIONERY & WRITING
ELECTRONICS
KITCHEN
BATHROOM
CLEANING
STORAGE & ORGANIZATION
DECOR & LIFESTYLE
DIY, TOOLS & GARDEN
OUTDOOR
EDUCATIONAL, PUZZLES & BOARD GAMES
BABY
ARTS & CRAFTS
BUILDING
BIKES & RIDE-ONS
OUTDOORS
TRAVEL
FEEDING
HOME
GROOMING
PLAY
TEAM
FOOTWEAR
SPORTS
APPAREL
OUTDOOR
EXERCISE
ACCESSORIES
More to come…
TOYS PETS OFFICE AUDIO HOME
We are a platform for enabling invention, rather than a brand of products.
COMMUNITY CHALLENGES
Quirky was built by you, and for you.
We started small.
And have progressed into larger, more complicated things.
This has created a number of questions, complaints, suggestions… etc.
• What type of products does Quirky want, and which will they actually make?
• Can we really launch 3 products a week?
• What is the actual role of the community?
• “Similar” Issues and growing number of products in various cues.
• What is the role of our partners (do we listen to them, or our community)?
All things we intend on answering tonight.
Overall, things don’t feel like they should.
!
Community
Quirky (we’re all community)
!
Community vs
Quirky+
!
Community
Quirky (we’re all community)
!
Community vs
Quirky+
Removing Subjectivity
Truly putting data in the front seat.
Allowing the community to do more, so that we can !
do more & make more.
Quirky 2.0
Its been a year long project (With many distractions)
Focusing on submissions, collaboration & evaluation
SUBMISSIONS
Things to know: !
• You can still submit without being a designer, bring on the napkin sketches or not even napkin sketch stage ideas.
!
• You’ll fill in as much as you can
✓ Features & Functions
✓ Inspiration
✓ Sketches
✓ Renders
✓ Pitch Video
UPON SUBMISSION, THERE WILL BE PROJECTS.
THESE 5 PROJECTS NEED TO BE COMPLETE PRIOR TO EVAL
Very few people can do all this alone.
We are a community company
PUBLIC !Everyone can see, contribute, and help with your submission !
PRIVATE
Invite only for participation/viewing friends, named comm members etc !
VS
Incentivizing Collaboration
Influence Management
You have full control of what, who, and where your influence goes !
80% of influence will be in your control. 20% will be reserved for post-eval projects.
Let’s assume you’ve completed all of your projects !
Now what? !
How does something go to eval?
Submit to Eval (if a private idea, this will force it to become public) !
… or leave with your idea and all the work that’s been done on it.
Quirky quickly validates the check marks
A transparent “coming up in eval list / queue”
While in queue, Market Research project happens !
Comp Shop, Pricing, Etc
Eval 2.0 Overview
All complete ideas in every category every week.
(Unless its a challenge week)
Eval will proceed as always, ending in a vote.
But everyone will vote, not just people in NYC.
On PbQ ideas, there is double acceptance required to move forward. !
eval selection + partner approval.
Beta of 2.0 March 18th
OK, so lets talk about all of the change required to
facilitate making invention accessible in 2015 and
beyond.
FOCUSING
TO ENSURE WE HAVE A LONG & PROSPEROUS
FUTURE TOGETHER
1. We’re going to sunset E-commerce. !
We want to focus on being a community invention company & platform, not a retailer.
!
When: Quirky 2.0 launch
!
• 1051% jump in daily order volume in Nov & Dec (compared to previous 10 months)
• Daily email & call volume averaged 1510+ logs per day
RESULTS
• We averaged an extra 7 days to process & ship orders placed on Quirky.com
• Average Customer Service call resolution time went up 18 minutes, and we reached a volume high of 3,200 unanswered emails at one point
• Order abandon rate jumped to over 50%
We’ve been challenged by e-commerce:
Let the guys that specialize on this do the heavy lifting for us so
we can focus on making products
Quirky will still have product detail pages. They will link out to our most trusted retail partners.
!
(we hear they ship products on time)
2. There are lots of ideas in lots of various phases in our pipeline that we need to bring clarity to.
Product State What Happens Now
Things not chosen at Eval We are not searching the archives, you can resubmit under new terms with launch of Q 2.0
Things chosen at eval and not designed
In owned categories, status quo, in Powered categories there will be a 30 day window after a PbQ deal is announced where we will let you know if parter is moving fwd with product or not.
Things chosen at eval and virtually launched
Things in manufacturing pipeline
Products on the market
3. We are going to allow kids to invent on Quirky.
When: Quirky 2.0 launch
Fuck, we better watch our mouths.
4. With the launch of 2.0, we are no longer searching the archives for “similars”, this is unscalable.
5. Some changes to our internal teams.
PRODUCT ENGINEERS +23.5%
QUALITY ENGINEERS +40%
WINK +140%
CUSTOMER SERVICE +487.5%
STAFF GROWTH BY DISCIPLINE
192 2412014 2015
Total Headcount:
\
We restructured our company to support PbQ
0
30
60
90
120
Engineering Customer Service Other
EMPLOYEES
Reduced the amount of folks here to service PbQ
2014 2015
EMPLOYEE RESTRUCTURING
6. No more referral payments
7. We are not going to force ourselves into 3 Virtual Launches per week.
$75 $50
8. Withdrawal limit dropped:
9. We are removing the requirement that every product we make has to start with a community idea.
How that works….
10. A topic we fight hard every day to avoid bringing up, but we just have to.
Community Rewards
2009 2014
A look back
DIRECT INDIRECT IP TRANS.
BEFORE 3/1/2010 30% 30% 30%
3/1/10 – 7/10/2013 30% 10% 30%
7/10/13 – 2/18/2015 10% 10% 10%
You’ve made 9 million,
We’ve lost over 100 million.
>$40,00030 members
>$10,000
>$5,000
105 members
195 members
>$100k10 members
We will always honor prior commitments
But with new opportunity (PbQ partners drive a lot more volume than little Quirky does/did)
100% of nothing is nothing.
… Comes a new structure
Effective tonight.
At midnight.
QUIRKY PRODUCT
ROYALTY BASED IP TRANSACTION (PBQ)
NON ROYALTY BASED IP TRANSACTION
INVENTOR EARNED
< 500K 5% 3.5% 10%
QUIRKY PRODUCT
ROYALTY BASED IP TRANSACTION (PBQ)
NON ROYALTY BASED IP TRANSACTION
INVENTOR EARNED
< 500K 5% 3.5% 10%
INVENTOR EARNED
> 500K 3% 1.5% 5%
Definitions:
• Quirky Product: Products we produce, manufacture, design, distribute, and own the IP for.
!
• Royalty Based Product: A product that is commercialized via a partner where we are paid
based upon revenue received by the partner. % is based upon the revenue received by the
partner, not % that quirky receives. This is how we structure PbQ deals.
!
• Non Royalty Based Revenue: Purchase of an idea by a partner, where price is not
dependent on Partner Revenue.
• Payout was based on sales less returns for the same time period.
!
• This calculation can overstate community payout since it does not take into account markdowns, promotions and other deductions
!
• Inconsistent payout schedules were mainly driven by delays in returns and other deductions processed by the customers
HISTORICAL COMMUNITY PAYOUT METHODOLOGY
• The historical community payout methodology lacked visibility and audit-ability
• The new methodology will be calculated quarterly and derived from Gross Product Revenue (what Quirky invoiced the customer for the quarter) less 15% reserve.
• This reserve will be trued-up in the following quarter based on actual returns and other deductions taken by the customers.
• The payout will be scheduled to be paid out 2 weeks after the quarter closes
NEW COMMUNITY PAYOUT METHODOLOGY
2014 True up Feb 27, 2015
Q1 2015 April 17, 2015
Q2 2015 July 17, 2015
Q3 2015 October 16, 2015
Q4 2015 January 15, 2016
Q1 Q2 Q3 Q4
GROSS PRODUCT SALES $150 $100 $250 $400
RESERVE (15%) ($22.5) ($15) ($37.5) ($60)
ACTUAL REDUCTIONS FROM PRIOR QUARTER $0 ($10) ($25) ($20)
RESERVE FROM PRIOR QUARTER $0 $22.5 $15 ($37.5)
ELIGIBLE SALES FOR COMMUNITY PAYOUT $127.5 $97.5 $202.5 $357.5
FROM CURRENT QUARTER $127.5 $85 $212.5 $340
FROM PRIOR QUARTER $0 $12.5 ($10) $17.5
PAYOUT METHODOLOGY EXAMPLE
Ask us anything. Tonight.
Tomorrow. Day after tomorrow. As long as it takes.