12 Apr Confoti: Revisiting a dotcom business model
It’s easy to be fooled by first impressions. And I have to admit that when my former colleague Jim Forbes decided to profile Confoti in the January 2002 issue of DEMOletter, I was rather dismissive. After all, the company offered customized confetti sold over the Internet. Dot-com businesses were imploding left and right and I was certain that this cute little party supply site wouldn’t be around for long.
I couldn’t have been more wrong. More than two years later, Confoti is going strong. Founded in February 2001, the company has been making revenue since its tenth month. It has significant partnerships with Kodak, 1-800-FLOWERS, and the Wedding Channel. Its commercial customers include Anheuser Busch, HBO, Veuve Clicquot, NBC, Disney, and Stanford University. Some 20 percent of its customers make repeat purchases within 12 months. The company’s products have a better than 55 percent margin. And the company is on track to reach operational profitability by the third quarter of this year.
And, yes, the company makes customized confetti. And stickers. And labels. And it is potentially a very big market. Confoti uses IDC and InfoTrends data to predict a $450M annual market for its photo-customized products. That’s a lot of confetti.
But don’t let the festive party goods façade fool you, as it initially did me. There is some very compelling technology behind these colorful chips of paper. That technology gives Confoti the right to claim additional advantage in the $30B annual corporate promotional and gifting market, and the emerging $20B-$40B annual international vanity postage market.
Traditionally, custom printing, with its standard setup fees, is very expensive for short run jobs. In fact, you’d be hard pressed to find a printer to produce custom, die-cut confetti for under $120. Confoti can do it for less than $17. And they can do it on lower mid-range color printers. In fact, the capital goods to run a Confoti print franchise would be as low as $7,000.
Confoti manages this better than 10X cost reduction through a series of processes that effectively normalize customer-driven product specifications and a printing process that calibrates and corrects for specific printer variances at the time of output. These processes eliminate the work involved in specifying and setting up a print run – work that contains most of the cost in custom printing. The real-time correction also dramatically reduces waste on die-cut paper.
Confoti has been awarded four patents for this engineering and has patents pending on what the company calls Massive Virtual Dynamic Adaptive Printing (MV-DAP) and Precision Inversion Raster Image Correction (PIRIC).
What do these acronyms really mean? Behind the little bits of paper that can be sold for $17 a bag, Confoti developed an incredibly difficult printing technology that fills a huge void in the commercial custom printing market, providing low-cost, fast-turnaround, small print runs. Or, as CEO and Co-founder Corinne Wayshak says, “It’s not about the confetti, it’s about the customization.”
It would be easy to mistake Wayshak for a photo-snapping soccer mom. And here again, first impressions can fool you. Wayshak is a mom and she does carry her digital camera everywhere she goes. And she has a degree in computer science from MIT where she also studied information design at the Media Lab. That experience was followed by a term at Apple Computer where she led OEM product design. From Apple, Wayshak formed her own engineering design firm, Muse, Inc., where she provided external product design and development for Fortune 100 clients. Wayshak’s co-founder and CTO is Chris Burmester, a UC Berkeley Ph.D. Burmester is no stranger to start-ups; Confoti is his fourth such venture.
Wayshak and Burmester have assembled a small team of very bright people with deep experience in consumer brand marketing. Together, that team is moving the company steadily toward profitability.
According to Wayshak, the company will be profitable in the first quarter of 2005 with a modest additional investment of $1M. They can accelerate that goal by a quarter or more with a $3M-$4M additional investment. To date, the company has operated on just about $1M in angel financing.
To reach their profitability goals, Confoti is focused on licensing deals with major brands, such as 1-800-FLOWERS. It expects these licensing deals to move them into the multi- billion-dollar consumer packaged goods and gifting markets. Then comes the emerging international vanity postage market. Countries including Canada, the United Kingdom, Taiwan, France, Japan, and Australia have plans to enable tourists to create postage stamps that include their vacation photos. Confoti’s technology, Wayshak contends, is the perfect solution for what is estimated to be at least a $20B market annually.
With so much opportunity, Confoti remains a small company, facing small company challenges of market and business development. As they continue an almost grass-roots consumer marketing effort that is generating revenue growth, the company is busy knocking on the doors of major brand and technology partners. And it’s sometimes difficult to get the attention of the Big Guys who will too easily dismiss Confoti as a party goods provider. But as I said, first impressions can be deceiving. Confoti is most certainly worth a second and closer look.
DEMO and DEMOmobile alumni have been enjoying an influx of cash over the past few weeks. Several start-ups have been knee-deep in financing rounds and have emerged with filled pockets. DigitalPersona brought in $13 million in its most recent funding effort. Led by Vantage Point Ventures, the financing included Chess Ventures, Fininvest, IDG Ventures, and Invesco Private Equity. A creator of fingerprint authentication products for the enterprise and consumer, DigitalPersona says it will use the investment money to broaden its sales, marketing, and engineering infrastructure. DigitalPersona’s offerings let users replace passwords with a fingerprint. . . Shazam Entertainment has gathered up $5 million in new funding. This follows on the heels of the start-up’s recent announcement of major expansion plans. Shazam, which bills itself as a developer of mobile music for mobile operators, has also added to its executive team. Will Mills joined as head of music to drive focus on music industry partnerships. Chee Wong also signed on with the company as chief operations officer to help the U.K.-based company boost expansion in EMEA, Asia, and the Americas. With the Shazam service, customers can use their mobile phones as a music recognition device. . . Finally, Digit Wireless, makers of the Fastap keypad, closed $4.3 million in its second round of funding. Included in this round were QUALCOMM Inc. and TELUS Ventures. Digit Wireless hopes to use the funds to continue its global expansion in the U.S., Europe, and Asia. Fastap lets users easily enter alphanumeric information on their wireless devices.
Are you ready to lauch at DEMOmobiles 2004?
The search is under way to find the 50 products that will launch at DEMOmobile 2004, September 8-10, 2004, in La Jolla, California. DEMOmobile is a high-visibility launch platform that will set your company on the path to success. It’s the best venue for positioning new mobile and wireless products and establishing strategic relationships with the players who will lead you to success. The conference’s stringent selection process and excellent reputation serves as an endorsement for your product as it comes to market. DEMO events have helped companies like Palm, Handspring, IBM Pervasive Computing, Logitech, Mirra, Tapwave, Macromedia – even Microsoft – launch their products, create critical business relationships, and sell to thought-leading early adopters. DEMOmobile 2003 demonstrators benefited from more than 162 million media impressions before, during, and long after the event. Visit: http://www.idgexecforums.com/demonstrate/tour/index-demo2.html to learn more and complete an online application.
September 8-10, 2004
Hilton La Jolla
Torrey Pines, La Jolla, CA
Chris Shipley is the executive producer of NetworkWorld’s DEMO Conferences, Editor of DEMOletter and a technology industry analyst for nearly 20 years. She can be reached at firstname.lastname@example.org. Shipley, has covered the personal technology business since 1984 and is regarded as one of the top analysts covering the technology industry today. Shipley has worked as a writer and editor for variety of technology consumer magazines, including PC Week, PC Magazine, PC/Computing, and InfoWorld, US Magazine and Working Woman. She has written two books on communications and Internet technology, has won numerous awards for journalistic excellence, and was named the #1 newsletter editor by Marketing Computers for two years in a row. To subscribe to DEMOletter please visit: http://www.idgexecforums.com/demoletter/index.html.
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