This story appears in the December 1, 2013 issue of Forbes. Subscribe
Pivots happen often in Startupland. Flickr began as an online role-playing game. Podcast directory Odeo morphed into Twitter. Instagram started out as a check-in app. But customer epiphanies or no, few spin around as quickly as 4moms. "When good ideas come up, you have to be open to reacting to them," says Daley.
Capitalizing on good ideas, 4moms has doubled sales in each of the last four years and should close out 2013 grossing 45% to 50% on revenue of $30 million. Its state-of-the-art infant rockers, playpens, temperature-monitoring baby baths and electric-power folding strollers sell in 40-plus countries online and in the likes of
The cofounders met when Daley was a venture capitalist at PNC Equity Partners and Thorne, a former GM engineer who'd founded three robotics companies he still owns, needed startup capital. Nothing came of that, but the two became friends and began discussing various businesses, under the umbrella name Thorley, that exploited cheaper robotics and microchips to amp up existing products. Their thoughts circled around a water-temperature regulating system for showers. "We felt the opportunity was huge," remembers Thorne, 54.
Up came the trade show and the reeducation by moms. Overnight they built a bath spout and the next day started surveying both the elderly and parents pushing strollers, pumping them for feedback: 95% voted for the bath spout; 60% for the showerhead. "We became fully committed to that product that day," says Thorne.
But for whom--older folks or babies? That was easy. Senior consumer products don't usually live in big-box stores. "That's a biggie," says Thorne. Baby goods are sold in dedicated chains and department stores. Moreover, buying strollers and cribs is an event-driven purchase. "No matter what's happening in the overall economic environment around you," says Daley, "if you're one of the 2.1 million households bringing home your first child this year, you're going out and you're going to buy stuff." New parents, like those shopping for an engagement ring, are motivated overpayers, fueling the $18-billion-a-year market for baby gear, toys and furnishings.
A few wrinkles. Innovation Works, an economic development agency in Pittsburgh that invested $300,000, was convinced 4moms would get clobbered by the likes of giants Dorel, Fisher-Price and Graco. But orders started pouring in for the infant bath spout when Thorne and Daley took them to their first kiddie-product trade show. A bigger hurdle: the $29 (retail) spout cost $425 to make as a prototype. After raising $1.5 million from investors, including BlueTree Allied Angels, 4moms put the jigs in place to take its product to market, partnering with local manufacturer GeorgeKo and Talmolder of Canada and dramatically lowering costs. (Today most products are made in China.)
Leaning on its engineers--41 of 106 employees are engaged in product development--4moms branched out from bath spouts. The breeze, a $300 "playard," won a coveted "Best of the Best" Red Dot Award this year, a product design kudo almost always bestowed on
Thorne and Daley have together spent nearly $8 million of their own to create all this stuff. But they've also raised $40 million-plus from various investors, including a recent $20 million from Bain Capital. Even Newell Rubbermaid, which owns baby gear leader Graco, kicked in $5 million. Hasbro paid a seven-figure upfront sum, plus the promise of royalties, in exchange for 50-year rights to the breeze and the origami. Within a few months after the deal new management at the toy titan decided to focus on movies and jettisoned the idea of expanding into juvenile products; 4moms kept the payment. Incredibly, Daley and Thorne together still have a controlling stake, with more than 40% of 4moms.
Two years on, 4moms is fighting three suits from Wonderland Nurserygoods of Taiwan, all alleging patented design infringement. One claim has been ruled invalid by the U.S. Patent Office, though Wonderland has appealed. Thorne says the kerfuffle stems from an annual trade show in Cologne, Germany. Wonderland lawyers walked the floor and instructed police to grab breeze playards, claiming 4moms had stolen its fabric-attachment technology. A German court ruled that the seizure was illegal.
As Thorne and Daley prepare to roll out an infant car seat, as well as cheaper strollers and rockers, they haven't forgotten the lessons of pivoting. Their days are still filled with "lots of wire diagrams and conversations about what a product can be," says Daley. That's before any big push to develop new prototypes--not "when you don't even know whether you've got something that customers want."
Follow me on Twitter @KarstenStrauss
