It is the seventh and penultimate episode of this special mini-series with the Nessa Group, in which the discussion is about a plush toy company that is a start-up. The toy company has been able to services from Verna Law and the Nessa Group in order to get started – a mixture of intellectual property and business know-how. There was even some highly creative market research done at Toy Fair.
Anthony Verna: (00:01)
Welcome to the seventh episode of our special mini-series with the NESSA Group. Jim Huerta, how’s it going?
It’s going well. I think we’re making great progress. Great conversation. I hope the audience will enjoy some of the points that we’re making.
I hope so too. Barry Kolevzon, how you feeling?
Feeling better every time we get involved in this area. And actually, …
You’ve got more…
where I think that we’ve got a nice length of time to build relationships. Thank you.
Thank you. Barry. Wil Jacques, patent connoisseur. How’s it going?
Another great day. Great to be here.
Wonderful. Justin Tripodi, brand king.
I was wondering if I was going to get a title this time. How you doing, Anthony?
Wonderful. Thank you. Scott Mautner, corporate attorney.
I’m doing well. Thank you. And I am with Harrington, Ocko and Monk before you ask.
Anthony Verna: (01:03)
And I am managing partner at Verna Law. So let’s talk about a little bit about the plush toy industry. Wil and I have lots of plush toy experience. Wil, you have written one patent or is it multiple patents…
For the plush toy you’re currently holding? Nobody can see that you’re holding it. So props don’t do very well on audio, but, but you are holding the product.
Well, the audience can hear him.
Anthony Verna: (01:48)
Let’s talk about the patent because it’s been published. So it is public. So let’s talk a little bit about the patent application that was made for this particular product. What makes it so unique?
Ah, very interesting. And actually only one of the patents has been published, but, the plush toy industry, you know, has seen some innovation obviously over the last 80 years. But there’s been very little has been done recently I think we would look to Jennifer Telfer’s pillow pets as an example of an innovation in the plush toy space. This particular toy actually tells a story, you know, around let’s say a fairy tale figure that kids are familiar with, but it provides that story by putting some elements or features as we patent folks like to call it into the plush toy.
Anthony Verna: (02:44)
Okay. So, so yeah, just tell us a little bit about what the patent discloses.
Okay. So essentially what the patent discloses is that this little bear allows you to take an object, let’s say it’s a tooth for instance, you’re able to put this thing into the mouth of this little bear and it drops down into a little chamber, let’s call it a heart section. And then the child is able to kind of, as we would like to say, it’s a teaching toy – share and care. So they’re sharing and carrying their fallen tooth into this little toy.
And there are some people who might have a problem wrapping their head around it, but a lot of people do have their baby teeth saved. And so this is a container that can do that as well as be a toy.
As well as be a toy, as well as allow the parents or the child or the user to be able to access and take that tooth or that object out of the toy later on, which is something that generally is not seen in a plush toy.
Anthony Verna: (03:50)
I mean it’s a plush toy. It’s a patent. I have to admit that combination is rare. To me that sounds like a unique selling proposition.
Yes, it is. I really like this particular product because the inventor was a home inventor and she was spurred on to creating this toy actually based on a rather negative experience with her own child who was actually afraid of dealing with this fairy tale figure in the middle of the night. And so, she came up with a way to kind of get rid of that fear but also bring some fun to the child.
So let’s talk a little bit about our experiences because we went around toy fair cause last year was my 10th toy fair. And so this year’s going to be my 11th toy fair. Apart from representing our firm you went around and, you spoke to a lot of people about the first prototype, for lack of a better phrase.
Yeah. Not usual, but that’s part of what a working with this group does. You start to take on a more interdisciplinary point with the products and the companies that come to you. So, you’re not looking at it strictly as I’m going to write a patent. What we want to do is to help realize value in the marketplace. And of course the value is the thing we believe will sustain that over some period of time.
Jim, let me ask you, what do you think of this approach of market research? I mean, on one hand, I see where it’s smart. On the other hand, I feel as if Wil went around asking a whole bunch of competitors, “What do you think of this product that might be competing with you?”
Jim Huerta: (05:42)
Yeah, I don’t see nothing wrong with that as long as there’s some kind of level of protection. Like if there is a patent and you have control of a patent, you have a head start there. So I don’t see that to be a problem at all actually. I think that I would probably do the same thing, but I have one thing to say. Wil put the bear down and walk away from the bear.
Squeaky voice (aka the bear):
Shut up, Uncle Jim.
So I know that that there’s the protection there. Wil, what was some of the feedback that all of the competitors that you talked to told you? I mean, obviously they don’t see this as a competing product because they spoke to you, they gave you opinions at a convention. But what was some of the feedback from, from that first first attempt at a product?
So, we start with a concept. So we’re trying to patent or protect features around a concept first. The next thing we want to do is to kind of see our next generation of the toy. And so we have made some filings in that particular area as well. And that came from that sort of direct market research that we were doing. So we would show features, get feedback, and then come back and think about that and innovate even further to allow ourselves to even file new patents to protect features that we kind of saw based on our interview that would be coming down the line. So essentially trying to even increase the value of the toy going forward.
Justin, go ahead. I know you have a thought.
Justin Tripodi: (07:30)
One of the things I loved about what you did was you went to the subject domain experts, people who live in the industry, understand the industry, the ins and outs, the little nuances that you can’t get just by online research. And that’s a big thing for any business is if you are running a business and you don’t have yourself to subject domain expertise, surround yourself with it. What you found during that walkthrough gave you insights to further develop the product, not only from a patent point of view, but from a product point of view, learning about what a consumer, an end user might like and that’s valuable information.
Anthony Verna: (08:06)
I think from our experience last year, what struck me most was how many times people said that the first version of the toy looked like something that was old fashioned and while they understood that aesthetic, that’s not what kids of today are going to want and therefore it’s not what the parents of today are going to buy. So how do you have that conversation then, Wil, with the client on making the proper changes?
Again, part of that interdisciplinary type of thought that the NESSA Group would bring. And so, the utilitarian features were there. We had that covered as far as the patent was concerned. As Justin mentioned, some of the other issues that came out was manufacturability. How do we do this thing quickly? How do we do it easily? How do we do it inexpensively? And lastly, as you just questioned was how do you, let’s say dress it? What’s its trade dress going to look like in the industry that will kind of aid in and provide that uptake? The client was absolutely one of the best to work with because she was willing to listen. She knew what she didn’t know. She felt confident that she had employed people who were going to take her interests to heart. So it was easier then to kind of make the changes to bring this toy to where it is today.
Anthony Verna: (09:37)
Justin, how do you recommend the people who might have an idea in a certain area like this, but not have the expertise? Try to try to get some of that expertise? Try to talk to some competitors?
Depending on the level of protection and what can be disclosed, which needs to be seriously considered. I think there’s a lot of different ways that you can gain that insights. Most people are on LinkedIn. If you’re not, I heavily suggest you look into getting on, research people within the industry, research retired executives who worked at a Hasbro or a notable toy company, a research market, researchers within the industry, and reach out to them and contact them. They’re an impartial party who probably has that subject domain expertise, maybe not the relationships and the contacts, but can give you the information. And whatever you find within that, I think you have to complement and supplement where consumer research and consumer feedback as well.
But that’s a little later on. In terms of reaching those industry experts, you need to begin immersing yourself into that industry if you’re going to be running a business So start reaching out, start making contacts, even within businesses and startups I’ve been a part of, we sat down and spoke with our direct competitors in some cases. That’s not always the right thing to do depending on your industry and what you’re looking to achieve, but sometimes it is the best path, best path forward.
Jim, what opinions do you have on gaining that expertise? Because you’ve been in a lot of different types of businesses, but you know, sometimes there has to be something that you don’t understand the technology for.
Jim Huerta: (11:23)
I approach things that I don’t know a lot of the things that I should know and that’s the reason I asked the questions. And that’s the reason I think I build up on what my resources of information and what kind of research I’m doing. So there’s a good chance that any time you’ll see me working in something like this that I’m probably talking to people that could be used, could be inventors. I’m constantly looking for those answers for people who I consider much smarter than I am in the particular discipline.
Justin Tripodi: (11:54)
Can I follow up that? I don’t think the challenge for me is finding the answers. I think the challenge is asking the right questions and knowing what to ask her in the right order and at the right time. Because well, you could have very easily went out of order. You could have went with the first prototype if you didn’t have this walkthrough and potentially waste a lot of money in that first round of inventory.
Wil Jacques: (12:13)
Absolutely. That first walkthrough at the a toy fair actually taught us that what we were trying to manufacture, you know, forget about the outward facing, you know, features of the toy. We were headed down the wrong road. And so we immediately went back in and actually did not work with the first manufacturing company that we had. Not that they might not have gotten there, but in terms of speed to market we decided to go with a different manufacturer.
What were some of the qualities from one manufacturer to another that you and the client were looking at?
I’m an engineer, right?
Yes. I know you’re an engineer. Our first time together at toy fair, you would go, “Hey, hey, is this plastic number four? Is this plastic number five?” And you pulled the materials out perfectly our first time together at toy fair.
And a rocket scientist. So, sometimes, you know, that sort of engineering technical critical thought can get in the way. And, and so what we found was that it wasn’t so much about what the materials were, how we were going to make it, what type of fancy 3d machinery we were going to use, which is where the first manufacturer that’s the line that he was headed down. So it sounded really good. It sounded like the right way to approach doing this toy. And then, with the inventor, we took a step back and realize that what she had done was actually went to a goods store. She went to a novelty shop, she grabbed a whole of all of her little items and she actually made the first prototype at her kitchen table. Wow. And so what we did was in the discussions with the other manufacturer who realized that those things were not taken lightly, they decided, well, how do we duplicate that without all the fancy, fancy, expensive machinery which wasn’t needed in this particular case.
That’s how the direction, the new direction in manufacturing was sealed.
And is that the manufacturer going forward once the product is absolutely positively ready for sale and manufacture? Or are you going with the same factory then?
You know, I grew up in the Navy as an engineer. And so I ran projects and one of the first things I realized is that I tell my inventor, this is what we have today, but we will always attempt to find a second source. And so at some point after we’ve gotten to a launch, then we’ll start to look around, we’ll start to kind of understand what our costs are and then look to other manufacturers to come on board potentially.
Barry,, and to tie this into our fifth episode in this mini-series, we’re talking about manufacturing issues for that company as well. What’s some of the advice that you would have for a company making plush toys in dealing with a factory?
Barry Kolevzon: (15:31)
Well, I think it starts imagining what you want. Just sit down and try and come up with something that started with this and you’ve modernized it. I think the other thing is where you manufacture it is very, very important. That they’re very competent, they’re timely and they make a good product. And I think really you have to go down almost like any company and ask them questions.
Anthony Verna: (16:03)
I’m very much reminded of an episode of my own podcast of where I had a conversation with a friend and colleague named John Eastwood. John is a partner at a law firm, Eiger Law in Taipei. And if you are working with… speaking Barry of who to work with, if you are working with Chinese factories, having a law firm that’s in Taipei, in Shanghai, is very important but more important than that John would always in all of his writings and in that conversation with me emphasized the relationship between the business owner and the factory. That in China infringements happen because there’s a breakdown between the factory owner and the business owner. Like you need to have that relationship and Barry, what you just said reminded me of that because you need to have that relationship no matter who your factory is, no matter what factory it is.
And you want to see it.
Yes, absolutely. So how’s the relationship then with the factories that you’re looking at, Wil?
Well, great relationship to start.
I have no reason to believe that that will deteriorate over time. We leave open the possibility, hence why you would always want to at least look to other sources over time.
I mean, I have one question with the manufaction. What is it that’s of consideration when it comes to tooling for something like this? What are the pieces that you have to look at?
Well, again, that’s a great question, Jim, because even though it’s a plush toy, we have hardware residing within this plush toys. So, once we get past kind of early short runs of production runs, then we’ll look to moldings being bought and we will be looking at more sophisticated handling machinery in order to make sure that these hard pieces get placed in the right spot on a very soft piece so that line kind of runs a little smoother.
It seems there’s a level of intricacy and what you have there. I mean, it looks very simplistic, but you have something going to channel dumping and I have access to it for the back of me. A lot of things going on in which I would…
There’s a fair amount of things going on in and if you can imagine trying to put a hard good onto a cloud. Right? Sure.
Justin, I know that you had a thought about this.
Justin Tripodi: (18:41)
I was just curious, and you guys might not have considered this yet, but what sales channels do you foresee this being sold on? Are you a direct to consumer e-commerce brand? Are you looking to go wholesale and get into brick and mortar facilities?
Wil Jacques: (18:54)
That’s a great question, Justin, and is one that you’ll be hit with a little bit later. But you know, it’s always been the mantra of people I work with and certainly my mantra that, as we said in a previous episode, if you want to attract the attention of large distributors, if you want to attract the attention of other would be licensees, then I always suggest you start out by generating a track record yourself.
Justin Tripodi: (19:25)
Well, yeah, with that and saying the limited that I’ve learned from this product and the company and the founder, there’s a story to be told. There’s a narrative around why this was created and the benefits of doing so and online content and online sales will probably be, as you said, your best mechanism to get started.
Wil Jacques: (19:43)
Yeah, there’s a website that’s already in production and it’s not open for the public to see at this particular point only because we are waiting for the first set of orders to come in from our manufacturers. So we want to kind of time it properly, not get too much ahead. One of the advantages, of course, of this toy is that since we are talking about children and losing teeth, that it’s evergreen and children are born every month and they lose teeth every month. And so it’s not tied to a particular holiday. It’s not tied to a particular time of year. It is a, kind of evergreen product that’s being sold year-round. So, we have the freedom and the option to kind of introduce the toy to the market.
Justin Tripodi: (20:27)
From the marketing perspective, the analytics that Facebook and Instagram provide you is a gold mine in terms of people reporting when they’re pregnant, having kids, their kids’ birthdays, how old they are. You know that a kid around X number of age old is going to start losing teeth and you can really refine your marketing and be super targeted to reach them.
Wil Jacques: (20:47)
The NESSA Group will be working with this client.
I think we will be…
Yeah, you have a one to twelve model …
Anthony Verna: (20:57)
Oh you mean from from one year to 12 years old.
Jim Huerta: (21:01)
Well one to 12 years old I think would be a reasonable thing, but I think, “Hey, here’s my first year tooth.”, which still looked back on and say, “No, I want a five year tooth.” It don’t put my tooth in at his fifth year when they’re getting changed and their mouth is getting formed.
As I look at the bear, that you refuse to let go? Different things come to my mind of what are the other uses or other ideas that you can come up with the same mechanism. Yes, and they, I think there is a slew of that that can go on and it doesn’t have to necessarily be for kids. I’m thinking Valentine’s day, what is it that you can cleverly do with Valentine’s with a heart and all that kind of stuff that you’re thinking about? How would that work and what can you put into it? There’s a whole bunch of…
Anthony Verna: (21:53)
There are. There are other uses, which actually goes back to our previous episode and talking about if you want to be a licensor or what are some of those thoughts that you have in there as well. Scott, let me, let me ask you this. If a company like this came to you and said they, they’re looking for VC because they need to fund the purchase orders that are coming in. They’ve got this great idea. Obviously there’s a little market traction because of that. What are some of the questions that you’re asking them in order to help them set up properly in order to keep growing?
Scott Mautner (22:25)
The real question has become uses of capital. So I would want them… because obviously when you raise more money, there’s a dilution effect to the current owners. So you really want to think about what is the amount of capital you need to get to the next stage and what are those uses going to be at this point? I think it’s what Justin was saying is going to be a lot of marketing and sort of sales channels to look at that you’re going to have to build out probably your sales team and look at your different sort of online apps and things like that where people can sell product and that would be where you’d want to most efficiently work with. And, frankly, until you have some decent traction in the market, you’re going to get diluted a little bit more, but you’re going to certainly be able to raise money and be able to push this to market pretty easily, I would think.
Go ahead, Justin.
Justin Tripodi: (23:26)
You raise a very good point. I think we touched upon this in the last two episodes, which is the need for business planning to understand what defines success. Any business, young or old has resources that have a termination date, if not properly used as a startup will w who you’re working with, they have limited resources with those resources, with the inventory you’re buying and the marketing dollars you could put be put behind it. You need to get somewhere. Where is that somewhere? What defines success? Is it going for another round or funding or that your first round of funding? Is it being able to be self-sufficient and produce revenue organically? But any business starting off does need to take an interdisciplinary look at what their business model is, what their plan is, and what defines success, what are their KPIs? And in episode five we talked about a business that didn’t seem to have that in place. They were kind of spinning their wheels. They didn’t understand how to leverage their resources to define success, how to lower their overhead and increase their revenue. So the business planning process is continuous from your first day of conceptualization to the day you decide to sell or close the doors. You’re constantly thinking ahead to the next evolution of your business and what that is defined by.
Anthony Verna: (24:43)
Thank you very much, Justin. And on that note, we will wrap up this discussion, which seems like a success to me. Jim…
I will tell you a little how to reach us and how to find us. That would be www.thenessagroup.net and hopefully we’ll have a lot of you folks getting in touch with us. Thank you.
Thank you Jim, and thanks, everybody. We’ll see you for our final episode of the mini-series soon.
Squeaky Voice (aka the bear):