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Innovation Economy

Chasing success on a shoestring

Newton Peripherals’ Bluetooth headset, designed in Natick. Newton Peripherals’ Bluetooth headset, designed in Natick.
By Scott Kirsner
Globe Columnist / February 28, 2010

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Earlier this month, Stuart Nixdorff flew to Barcelona for the European launch of a new Bluetooth mobile phone headset his company had developed for Apple Inc.’s iPhone.

In a packed succession of days during the Mobile World Congress trade show, he participated in a press event to announce that Apple would be selling the headset through its online store in Europe, signed an exclusive distribution deal with a Swiss wireless carrier, and also hammered out deals with several distributors who would help sell the headset in various European countries.

It was a productive trip for Nixdorff and his company, Natick-based Newton Peripherals Inc. As a leader of one of a small number of start-up companies in Boston that develop tech products for consumers (rather than business buyers), Nixdorff knows that building momentum is everything: With limited marketing budgets and narrow profit margins, the goal is to generate positive buzz, while trying to ally with bigger partners that can assist with distribution and marketing.

“You have to stay focused, be guerilla, and find the right leverage points that can get you to some level of mass,’’ says Nixdorff. Selling thousands or even tens of thousands of products a year isn’t enough: Survival usually means a sales chart that heads toward the millions.

It’s a business nearly as fickle and fast-changing as the fashion industry: The Bluetooth wireless standard could be replaced tomorrow by something even better, the iPhone overshadowed by Google’s Android operating system or something else still in development.

Bose Corp., the Framingham-based maker of Wave radios and noise-canceling headphones, is the state’s big consumer electronics success story. Privately held and nearly a half-century old, it has annual revenue estimated to be in the neighborhood of $2 billion.

But few others have risen to that level, and failures are common - most of them low-profile, since consumer electronics start-ups in Massachusetts usually don’t have enough marketing money to spend on a splashy, attention-getting launch.

In 2004, Lexington-based Pepper Computer Inc. thought that Americans were ready for a rugged, pad-like device for browsing the Web, watching videos, or reading e-books. But the Pepper Pad, an $849 device that accessed the Internet via a Wi-Fi network, never took off. (Pepper offered many of the same features as Apple’s recently announced iPad device, which starts at $499.)

At Chestnut Hill Sound Inc., Steve Krampf assembled a team of about a dozen people and spent two years developing George, an iPod-compatible sound system with a sophisticated remote control. Despite winning awards and garnering favorable reviews, Krampf’s company was never able to raise enough money to support a major marketing campaign.

“It would’ve been good to have $100,000 a month to spend on marketing,’’ he says. And two of the retail chains that carried the George product, Sharper Image and Tweeter, went out of business.

Consumers, Krampf says, are more price-sensitive than he expected. Even though many reviews said George was well worth the $499 price, he wonders if it would have been wiser to have sold it for $350. “We might have gotten a little more traction and been able to thread the needle,’’ he says. Krampf is now hoping that other electronics makers might be interested in the company’s patent portfolio.

Other consumer electronics entrepreneurs aren’t dissuaded by what hasn’t worked in the past. They’re convinced that their products will fare better.

John Chuang, chief executive of Boston-based Litl LLC, started selling a sleek $699 device last year called the Litl Webbook, designed (just like the iPad and the Pepper Pad) for surfing the Web, watching videos, and using Web-based word processing or e-mail applications. Likening his 50-person company to Apple, Chuang says, “We are one of only two companies in the world that really build their own hardware and operating system and software.’’

A first batch of Litl Webbooks, released late last year, sold out, and Chuang says more will be available on the company’s website in March, though he wouldn’t share specifics about how many have been sold so far. Chuang, who was a founder of the global staffing firm Aquent LLC, says he has been supplying funding for Litl himself, adding, “We’re in it for the long haul.’’ The company hasn’t spent much so far on marketing or advertising. “I feel that markets are pretty efficient,’’ Chuang says. “If a better mousetrap exists, it will get sold.’’

Zeo Inc. cofounder Ben Rubin is taking a more concerted approach to marketing. The Newton company makes a sleep monitoring system that includes a wireless headband and a bedside alarm clock that collects data from the headband and wakes the wearer at an optimal moment in the sleep cycle. Having raised more than $14 million in venture capital, Rubin says the company has hired a public relations firm (which helped bring Zeo to the attention of the “Today Show’’), purchased Google ads, placed print ads in magazines such as The New Yorker, and recently has begun running two-minute commercials on cable. The “Today Show’’ segment, which aired last December, “gave us by far the biggest sales bump we’ve seen,’’ Rubin says.

One of the newest consumer electronics companies in town is Numote Inc., a Cambridge start-up founded by Harvard alum Vijay Kailas; the company received some early funding from David Rose, founder of Ambient Devices, another local consumer electronics company. Numote is developing software for mobile phones that will recommend TV programming you might enjoy and let you see what shows your Facebook friends are passionate about. A small $70 receiver perched atop your television - Kailas calls it “the pebble’’ - will also let you use your phone as a remote control. The company plans to launch both software (for iPhone and Android) and the pebble this spring.

At Newton Peripherals, Nixdorff says the company has sold more than 300,000 units of its MoGo Mouse, a slim wireless mouse that can be neatly affixed to the outside of a laptop’s lid for storage. He hopes to surpass that number with the $129 MoGo Talk, a Bluetooth headset that can be attached, remora-like, to the back of an iPhone or Blackberry. Rather than trying to find space on the crowded shelves of an electronics retailer, Newton Peripherals is focusing primarily on mobile phone stores. The company has raised about $7 million in funding from individual investors.

Still, Nixdorff acknowledges that start-ups trying to compete with consumer electronics behemoths like Apple, Sony Corp., and Logitech International SA either need to be incredibly lucky and develop a blockbuster product on a shoestring, or they need to find a potential acquirer with vast resources for marketing and continued product innovation.

“To get to really big scale in a market like this, you’re probably going to need to partner with someone,’’ he says, adding, “We’re in active discussions right now about that.’’

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter at @ScottKirsner.