PTM 032 – How to Use Kickstarter to Launch a Business with Max Valverde of Morninghead

Philip Taylor: Hi. Welcome to the Part-time Money podcast. My name is Philip Taylor with ptmoney.com. Today I have the privilege of interviewing Max Valverde— is that how you say it Max?

Max Valverde: Yeah.

Philip Taylor: Max is the founder of Morning Head, which is described as a cure for bed head, but I’ll let him describe it further for you. Max still maintains his full-time job, while selling Morning Head online. I know he had a big, successful Kickstarter campaign last year, so I’m looking forward to talking to him about that, about his product and about how he manages all this while keeping a full-time job. So, welcome to the podcast, Max.

Max Valverde: Thank you very much. I’m looking forward to doing it.

Philip Taylor: Awesome. Why did you get started doing this? Why did you want to do something on the side like this?

Max Valverde: I’ve always been entrepreneurial for the past 10 years or so. In college a friend referred me to the book “Rich Dad, Poor Dad,” so I was always about getting assets above expenses. My wife and I have been extra frugal over the last few years. I’ve always had this entrepreneurial gene and always wanted to start something. I had lists of ideas. Finally, last year I decided to act on one of them. I started reviewing some of them and the issue with bed head has always been something that has plagued me. I shower at night typically after mountain biking, rock climbing or working out. The following morning it’s that stressful five seconds of, “Am I taking another shower even though I showered nine hours ago or am I going to wet my hair in the sink and make a mess everywhere?” My wife gets mad because there’s water everywhere. I don’t really like it. There was really no good solution so I pinged a bunch of friends. They were feeling the same kind of pain so I thought, “Hey, I might have some legs.” I developed the product, got my hands on a handful of them and sent them out to friends and had them test them. I did some surveys. Then someone suggested throwing it on Kickstarter. I threw it on Kickstarter and didn’t tell any friends I did that. I filmed the video in about four hours or so just to see. It worked for me and it worked for my friends. Everyone liked it. But it’s such a paradigm shift with respect to personal hygiene. I didn’t know if the world was ready for Morning Head. We threw it up on Kickstarter and threw it on Reddit. It got adopted pretty quickly and a short 30 days later, Morning Head was a thing. It was successfully funded and now it’s a somewhat thriving little entity on the side. My wife will send out orders in the morning and I’ll film a video every other weekend or so. It’s one of those things where I heard someone say one time, “In order to be an entrepreneur you have to put in 80 hours a week, 90 hours a week.” I’m working 40 to 45 hours—at most 50 hours a week in my day job as an engineer. If I’m not willing to put in that extra 30 hours a week at night or on the weekends, then I’m all talk. Another 25 minutes or so… we find time. That’s the long and short of where we are now.

Philip Taylor: I got you. That’s an awesome story. I definitely want to get into the Kickstarter part of that and also the product development part of that, because this is a physical product. I don’t often talk to a lot of people who are into the physical product space. It will be interesting to hear how you actually developed it. Just for clarification, for folks who are listening, what does Morning Head actually do?

Max Valverde: Morning Head looks like a regular shower cap. But on the inside there’s this super absorbent cloth material. What you do is you add a little water to it, put it on your head and your hair is completely wet as if you just got out of the shower. If you want, I can do a quick demonstration here.

Philip Taylor: If we were rolling video, I totally would have you do it.

Max Valverde: It’s a shower cap that has this thing that’s almost like a Sham-Wow material on the inside. It absorbs water in a crazy way. It can hold six or seven times its weight in water. You put the cap on your head, rub it around for a few seconds and all that water gets absorbed into your head. You don’t get water dripping down your neck. It just wets your hair so you’re at the point where you have dried off after the shower. You can style your wet hair however you normally would.

Philip Taylor: Yeah. I can totally relate. We’ve all been there with the towel around our neck trying to throw water on our head or to decide whether to jump back in the shower. I get it. It makes so much sense. When I saw the Kickstarter campaign I thought, “Yes, that is totally a useful product.” And obviously you’re seeing success through that. Now, it’s one thing to say, “This is an idea,” but it’s a different thing to actually have a physical product in your hand. So, how did you take it from that idea to figuring out how to build this thing?

Max Valverde: One day, I decided that I was going to figure this out. I tried with different acrylic hats, like winter hats. I was putting towels inside of baseball caps and just trying all of these different things. Then I started talking with someone in the medical device industry and there was a somewhat similar product being used in a completely different way. What I found is that you never really know until you start talking to people and start asking people. If I had stayed in my own little vacuum and tried to make this completely by myself, it would probably have taken six months and tens of thousands of dollars. Just going out there and talking to people and saying, “Hey, is there a product we can use? Is there a material that already exists?” I don’t want to get into too much depth because I’m somewhat proprietary, but I got in touch with some people who are making shower caps. I got in touch with people who can make this super absorbent material and just started talking with different manufacturers and got a prototype made up. In terms of other product ideas for some of your listeners— I work for a manufacturer as well. A good way to get products made is to know what you’re looking for. If you’re making, for example, a coffee mug that’s for rock climbers that has a little rock-climbing grip on the side of it, you would send a request for a quotation out to a bunch of different manufacturers with a really tight set of specifications. “I’m looking for a coffee mug somewhat similar to the mug in this photo. It needs to have these types of specifications. I would like to have a circular hole cut in this location and these special grips here.” Also, using manufacturing language such as, “Please give us minimum order quantities, volume discounts from 1,000, to 5,000, to 100,000 units.” Make yourself seem bigger than you are. You can oftentimes talk with these big manufacturers and get things made and get a prototype sent out to you— maybe even with no overhead. If you can really show the value and say, “Listen, we know what we’re doing. The demand is there. We just need to partner with a supplier that’s ready to work with us.”

Philip Taylor: Yeah.

Max Valverde: With some of these other ideas I’ve worked on you can get prototypes made up— or at least the raw materials for prototypes made up—for free, essentially. Then you can do a Kickstarter and through your initial dealings with the manufacturer you can figure out exactly what your minimum order quantity is. They can say, “Hey, it’s $10,000 or it’s $50,000 to get this made up. But we’ll make you one for free.” Or, “We’ll make you one for $500. In order to get the volume discounts you need to be profitable. You have to order 10,000.” That will start your Kickstarter crowd-funding number and you can say, “Here’s our one prototype for the Kickstarter video but we need $50,000 to launch this thing.”

Philip Taylor: What was that number they came back to you with?

Max Valverde: For me it wasn’t that much. It was around $1,000.

Philip Taylor: Okay. So you had that and then let’s transition over to Kickstarter. Tell everyone what Kickstarter is and why you chose that.

Max Valverde: Kickstarter is my favorite thing in the whole world now. I absolutely love Kickstarter. Indie Go-Go is another crowd-funding website that’s up-and-coming. What Kickstarter is, is you set a dollar amount. In the case of Morning Head, it was $1,000. It’s the money that you need to do what you want to do with some sort of design product or project. It can have anything to do with design or art. It can be a video you want to make, a movie, a cartoon. It can be a product that you’re designing. You set a dollar amount anywhere from a $1,000 up to a million dollars and say, “I need X-number of dollars to be able to manufacture this—to be able to fulfill this product idea. Will you pre-order this or back this product for any monetary value?” It can be one dollar up to a $5,000 backing. Those backings are technically not purchases.

Philip Taylor: Right.

Max Valverde: They are simply backing. And you can give them whatever you want as a reward. The reward can be a letter saying, “Thank you for that $5,000 backing.” It can be an email. It can be a product, once that product is done. For Morning Head, for $1 to $5 we said we would send you a Morning Head sticker. For $10 dollars that would be a two-pack and that was actually what we ended up having as our purchase price. It was a pre-order. Then there was a five-pack and a fifteen-pack. Those were simply pre-orders. The reason I love Kickstarter is that we didn’t have that inventory yet. We had one or two of these things to film the video with. We hit our goal and then we had these orders. When you work with MasterCard, Visa and you work with payment processing, it’s illegal to sell product when you don’t have inventory. From my understanding of the inter-charge rates of MasterCard and Visa— Kickstarter, because you’re not actually buying something, is a really beautiful thing for the manufacturer— for the up-and-coming startup. For the person who wants to sell the knit beard things. Anyone who wants to start a little thing, start something up on Kickstarter and you really don’t need to drop that $50,000 before you know if it’s a good idea. Not only was it pre-order and these were cool sales for us, it was a way to get the project with zero money.

Philip Taylor: Yeah, and it helped market the product, right?

Max Valverde: Definitely.

Philip Taylor: So, talk about that. Obviously, you can just throw up some text and say, “Here’s our product and here’s a picture of it.” But you did something cool, you put a video up. I think that was appropriate for your product and it was a pretty viral video. It was sort of snarky. And obviously you chose the name Morning Head so you’re going to be able to roll off that and get a lot of attention. Maybe just talk about that and what you did that was special with the marketing— using Kickstarter. And how you went to Reddit and stuff like that.

Max Valverde: What I did is, I did this video in about 4 hours. I knew what the general message was but I wanted to see what had been successful on Kickstarter. I looked at some comparable products. Off the top of my head I remember the 50-dollar Follow Focus was hot then. There was this woman selling “Bio-Chemmies.” They’re these stuffed animals that were based on molecules or something. Those were two similar-priced deals so I looked at those and a handful of others. I really broke them down and wrote down all their scripts in a spreadsheet to see what their intro, middle and end was. It seemed like it was always first-person video. It was always appealing to the Kickstarter community; starting with the problem, talking about the solution and then appealing at the end saying, “We really need your help.” I tried to structure it in that same structure. I got that video made. I added a little bit of humor because I’m a bit of a ham and I have to throw some humor in there. Also, I know from my experience on Reddit— I’ve been on Reddit for three or for years now, so I’m really comfortable with that community and I understand that you have to have a little humor in there to have anything go even semi-viral. I put the video up and didn’t tell any friends or family about it with the exception of my wife. I didn’t want any patronization from friends feeling sorry for me and backing my products. Just put it up on Reddit and appeal to the community. The thing with Reddit is, Redditor’s hate non-Redditor’s or people trying to—

Philip Taylor: Market within.

Max Valverde: Market within them and use them. Yeah. They don’t want to feel used. So I structured the Reddit post like, “Hey guys, I’m one of you. This has been a long time coming so here’s Morning Head and what do you think?” I used the Reddit posts to help kickstart the Kickstart. It was on the sub-Reddit “Gadgets,” or the sub-Reddit “Shut up and Take my Money.” Those happened in the first day or two and that hit it to $1,000 in 24 to 26 hours. Immediately, it had hit its goal. The Reddit posts died off. The Reddit traffic died off. But from there, the Kickstarter community kicked in and I didn’t realize how powerful the Kickstarter community itself would be. After the project was already funded it could be found through Boston or successfully funded products. People were finding it in Kickstart— and then Kickstart took over and took it to where it ended at which was five or six times the goal.

Philip Taylor: Right.

Max Valverde: Yeah. That’s all I did—the video and then posting it to Reddit. I didn’t have to market it much at all.

Philip Taylor: Okay, and that’s— we’re breaking up a little bit, so I’ll let it catch up. Talk about making the transition from the success of Kickstarter. Then into ongoing sales and ongoing marketing of the product. How have you leveraged that? Are you doing more things, or has that been enough to sustain it, and continue to drive it?

Max Valverde: That’s a great question. There is this dark place after Kickstarter ends that I’ve identified with a lot of other Kickstarters. There are a handful of aggregators that are trying to be that light at the end of the tunnel after Kickstarter ends. Orders went from— and this is just ballpark… But after the initial rush of maybe 100 orders in that first couple of days we were getting maybe 10 orders a day while it was on Kickstarter. So, it really fell off. Those companies tried to be that marketplace. None of them are really going crazy. So it will be interesting to see who takes the lead there and who takes over.

Philip Taylor: I got you.

Max Valverde: In the last few months, starting in December, we got pretty lucky with getting it up on TV through some interesting relationships on a television commercial in Phoenix and San Diego. We’ve been running a 30-second spot in Phoenix and San Diego for the last three months, now.

Philip Taylor: Oh, nice. So, you’re spending some money there.

Max Valverde: Funny enough— don’t ask me how I got this deal, but it’s a per-inquiry commission deal. We’re partnered with the broadcast company and they’re getting a large cut of every order.

Philip Taylor: So, this is probably a good time to talk about the name. Obviously, the name would have an appeal to the consumer but then trying to work with a broadcast company like this…was that a turn-off for them? Has that been a roadblock?

Max Valverde: Strangely enough, it hasn’t. I will get an errant email once a month from someone who— I’m not going to speculate on what type of person it is, but  someone who thinks that I am hurting the world with the name. My thoughts on the name are that the innuendo is subtle enough that it goes over a lot of people’s heads.

Philip Taylor: Yeah.

Max Valverde: A lot of people don’t even notice it. Then, if you do notice it, then you’re probably not going to be offended by it. I’d say 65 percent of people get the innuendo. Thirty percent of people don’t get it and 5 percent get it and are offended by it. It’s a very small percentage of people that take exception to the name. For example, one of the Kickstarter backers sent a response in saying, “Great product, love it. I use it every day. But don’t cheapen your product with this lowbrow humor.” So, I really have backed off on the innuendo a bit.

Philip Taylor: Right. Would you mind not sharing video, Max, going forward, because I think we’re starting to slow down a little bit.

Max Valverde: Sure.

Philip Taylor: Good stuff so far. We went in and out there a little bit. What are orders at today?

Max Valverde: Today, we’re getting about… Well, it fell off in the last few weeks so I’d say about 5 to 10 orders a day.

Philip Taylor: Okay.

Max Valverde: It’s pretty decent. In January we did about $3,000 revenue. I would love to hit $50,000 revenue in 2013. I’d love to do ten times that so we’ll see. It’s been streaky. We’re probably going to do a marketing spend with Hulu in the next week or two.

Philip Taylor: Oh, nice.

Max Valverde: That should be nice. Still trying to pick out which market to target with that but that would be a full-on, paid deal.

Philip Taylor: Okay.

Max Valverde: I’m excited about that.

Philip Taylor: So, investing some of the profits in there?

Max Valverde: Yeah. We’re putting everything back into it pretty much. Just trying to turn this into a self-sufficient deal and eventually outsource all of the shipping to a fulfillment center. I’m sure my wife is getting a little tired of shipping the orders. She wanted to take part. She wanted to be a big part of it so she’s actually handling all social media and shipping. It’s been a huge help.

Philip Taylor: You just stay at your job then?

Max Valverde: Yeah. Other than an interview here or there the day-to-day is not that— we’re not pushing super hard on it. I’ll push it at night. Maybe look at some advertising opportunities, maybe look at some P.R stuff at night. Other than that, it’s not a super demanding thing. My wife is a night shift nurse so she has a lot of time during the day sometimes. Her putting together 10 orders is not a big deal for her on a daily basis.

Philip Taylor. I got you. That’s awesome. You guys said that you have lived frugally so far. This extra $3,000, that’s revenue but the take-home from this has got to be helping out financially. But like you said, you’re choosing right now, to reinvest?

Max Valverde: Right. We’re reinvesting all of it back in. If we were just to say, “Hey, it is what it is and we’re cool with it now,” that would be nice.

Philip Taylor: Paying your mortgage.

Max Valverde: We’re not at a point yet where we’re happy with sales. Eventually, we’ll get it to a point where we can maybe put it on autopilot and outsource it to a fulfillment center and it’ll be a nice little beast that runs itself.

Philip Taylor: All right. Nice. Now, have you done any research into being able to gauge whether you have a bigger market for it? Or is that just your gut feeling at this point?

Max Valverde: Not really. Honestly, we have no real idea about the future. The thing is, it’s such a different thing than what people are actually doing in the mornings with their hair that it’s not something that’s just a lateral move. It’s almost like a complete 180 from how people are doing their hair. So it’s not going to be an overnight thing. Unless, maybe it gets picked up by… That’s the whole point behind the name— that it gets picked up by Kimmel or Jimmy Fallon or Conan, or someone that might monologue with it or make fun of it or something.

Philip Taylor: Right.

Max Valverde: That could give it a bit of a push. The thing is, it’s a funny, quirky thing. Maybe people will have use for it. It works for me but I just didn’t think that people would really get behind it. We probably have— if I had to estimate, I’d say 2,000 users right now.

Philip Taylor: Okay.

Max Valverde: And we have a full money-back guarantee. We’ve never had one sent back. We really haven’t had anyone complaining about the product’s use. We only had people writing in weekly saying how much it’s changed their mornings. They can’t live without it.

Philip Taylor: Awesome.

Max Valverde: A lot of people in high places. I thought it would be college kids. It’s like, bankers, engineers, investment bankers— all kinds of business professionals using this on a daily basis. It definitely has some legs. It’s just a matter of how we get there.

Philip Taylor: That’s awesome. Well, best of luck to you going forward. I’ve taken up a lot of your time today so I appreciate you talking to me about developing the product and how to work within Kickstarter. We’ve talked a little about marketing going forward. Is there any other thing I forgot to mention or ask about?

Max Valverde: No, I think that’s about it.

Philip Taylor: Okay. So, how can the guys out there get Morning Head?

Max Valverde: You know, the line at the end of our thing: “You asked your girlfriend or wife to give you Morning Head. When she slaps you, just direct her to MorningHead.com.” It’s kind of a tongue-in-cheek name but I always wanted to do a video where we show that— asking for Morning Head. It’s an excuse to see how far you can go with it. Then whenever you get the door slammed in your face, you just direct them to MorningHead.com. Yeah, MorningHead.com is where it’s at. We ship same-day or next-day and via USPS. Depending on where you are in the country, it’s with you within a week.

Philip Taylor: Alright, very good. Well, thanks so much Max, for being on with me. Best of luck in the future, man.

Max Valverde: Thanks, Philip. It’s been a pleasure and I’d like to keep in touch.