ZACH KAPLAN IS A VERY DOWN TO EARTH, soft-spoken kind of guy. The kind of person it’s hard not to immediately feel a sense of trust around. Maybe that is the secret to how he has found success in multiple businesses, starting with his very first.
“I started my first company my junior year at University of Illinois. I studied mechanical engineering and looked forward to my senior design project where you actually got to build a product for a corporate client. As it turned out, there wasn’t enough corporate involvement my senior year and I was asked to do finite element analysis of the car designed by the Society of Automotive Engineers. This was a pretty crushing blow but I channeled all the energy I would have poured into a new product development project for a major corporation into starting my own company, LeverWorks, instead. Lever Works had 3 offerings custom web software, hosting services, and off the shelf web software products. In December 2001, 6 months after graduating and a year and a half after starting the company, it was bought out by LeoMedia. The next month we went to Disney World to celebrate.”
“As a college student, owning that consulting company was exhilarating. From running it, I learned that when you are selling your time it is very hard to scale. Although our rates were relatively inexpensive compared to the big 1,000+ person consulting companies offering website development the profit of the company was directly proportional to the number of hours we could bill to the client. It was hard to grow that kind of business because revenue was directly coupled to our time.”
ZACH LOVED BUILDING THINGS while growing up in Northbrook, Illinois. He often dreamt of becoming an architect and would draw his future house. He would build elaborate roller-coasters, go-carts, and robots with parts from Lego kits without any instructions.
In grade school, his earliest entrepreneurial memory was selling special markers he had bought and modified so that his fellow 4th graders could blow in them and spray marker ink everywhere. That experimental spirit stayed with him through the years and being as resourceful as he is, when Zach first arrived in college he would once again find himself selling a unique product to make a little extra pocket cash.
“My sophomore year I was selling the cell phone from the movie The Matrix on e-Bay. I would order them in bulk from Europe and then sell them on-line in America. The funny part was the phone didn’t work in America and we clearly stated that on the posting. Our customers didn’t care, they were huge fans of The Matrix and just wanted the phone from the movie because it was the first phone to shoot out. At the time the phone was a coveted collector’s item and since they weren’t sold in America if you whipped it out people’s jaws dropped. I think we were buying them in boxes of ten or twenty for about $50 or $70 bucks each and we were selling them on e-Bay for $350 or $400. It was a time-sensitive arbitrage because obviously the sheen of The Matrix faded off and so did the little business.”
BEING AN ENTREPRENEURS WAS IN ZACH’S BLOOD. Both his grandfathers owned their own companies; one owned a custom electronic transformer business and the other owned a soda pop bottling company. So when Zach was graduating college, he told his family he wasn’t going the traditional corporate job route. Their reaction was, “Whatever you want to do.” They were even one of his first angel investors in his next business.
After the success of LeverWorks and the trip to Disney World, the seeds for Zach’s next company, Inventables, were planted. First came the name Inventables, which was invented in a brainstorm before the company was even born. Zach and his business partner at the time thought it was the perfect name to represent the energy and the “anything is possible” attitude they wanted to capitalize on.
In essence, Inventables is an online hardware store for R&D professionals. They sell materials and technologies to folks doing product development. The company has create a giant online catalog that includes materials for laser cutting, machining, and molding but also some inspirational and highly specialized materials; things like translucent concrete, gel magnets, aluminum foam. The company switched to its current business model of an “Innovator’s Hardware Store” in late 2010 after working exclusively as a subscription service for the past nine years.
“We wanted to change our business model to be more accessible to ‘the little guy’, not just Fortune 500 companies. Now we can service a one-person company, a start-up, or multi-billion dollar company. Customers regardless of size can go to the website and order any of our products with a credit card.”
While the company may be highly successful today, they got off to a rocky start.
“We started out by interviewing potential customers, mostly industrial designers and engineers in big companies and consulting firms that worked on product development. We wanted to understand how they learned about new materials and how their process went from inception to a product on the shelf. I think after 40 or 50 of these interviews, the idea for Inventables started to evolve.”
“Then we hired a team of five interns one summer and set up office in Urbana. During our pilot program, we built three of what we called ‘innovation centers’ – a library of our vast collection of products – and traded three months free access to the library in exchange for customer feedback, mostly from the three major consulting firms who designed products for all the Fortune 500 companies. It turned out the customers all told us they thought our product was awesome.”
“In the final meeting at the end of the 3 months excited by their positive response I asked, ‘Would you pay $2,000 for it?’ They said, ‘Absolutely not.’ I was devastated.”
“Hearing that we had an awesome product juxtaposed to ‘But we’re not going to pay for it’ was gut-wrenching and confusing. I remember being in a meeting with a consultant and getting glowing reviews and thinking, ‘Oh, my God, we’re going to get our first order!’ And they were like, ‘We’re not paying for this.’ We knew our idea was great, but the feedback was very hard to understand. We didn’t know at the time that consultants didn’t really have budgets to do material research because they were just being hired by a client. Lucky for us after rejecting us one of them introduced us to a client of theirs and after hearing our pitch the client asked to place his order before we even had the chance to discuss price with him. We thought, ‘Whoa – who is this guy?’ It was a roller coaster of confusing emotions, but once we realized that it was the clients who were our target, things started to take off.”
LIKE SO MANY OTHER START UPS, Zach and his partner started out by working out of their apartment with no office rent or staff to pay. But they already had their first order two months before officially launching the company, and started generating revenue right when they launched around November 2002. They saw that they were onto something in March of 2003 when their customer base started growing.
There seemed to be an insatiable curiosity and demand for new materials because of a need to innovate for the marketplace. A huge percentage of products are commodities, so how a brand can differentiate itself in the marketplace sometimes comes down to materials or design. Once Zach and his partner realized this, they started to feel much more confident in the business model.
“We scoured everywhere for interesting materials: trade shows, the Internet, trade journals, even cold calling vendors. Most vendors thought it was really interesting and a novel idea – they had never heard of it before. We were offering a unique product: a subscription similar to a magazine to a vast library of materials that could help differentiate a new product. On top of that we had fun ordering all the materials, photographing the products, writing the articles, and shipping out the catalog.”
Even though the customer base was growing quickly, Zach took protecting his company’s vision and not losing control over the company very seriously and he waited years before looking for outside investors to further expand.
“I waited six or seven years before raising an institutional round of financing because I wanted to figure out the right business, the right way to approach it, and be sure to stay true to the vision. In the early days when I would speak to investors I was not able to articulate the vision well enough. Investors always wanted to change the business so I felt that if we took money before we were ready, we would risk being directed in a way that wasn’t aligned with our vision.
I grew up with the company. After about 5 years I bought out my co-founder and re-focused the team on why I started the company in the first place – to help companies innovate. Over the next two years the company grew 50% a year and we hit record revenue levels.
“At this point I looked for investors because we were at a point where we had built up the brand and the clients, we were profitable, and I was ready to take it to the next level. I thought the best way to grow was to leverage the Internet. When we first launched our company, the primary way customers found materials was by calling vendors they worked with or talking with their friends or peers. Six years later, the primary ways they find materials is Google. Eventually I took some investments from TrueVentures to scale up the business.”
HELPING OUT THE “LITTLE GUY” is fundamental to Zach’s life. It’s obvious that he has deep seeded sense of duty to all the inventors out there; to all the geeks, nerds, tinkerers, techies, hackers, builders, and scientists. Zach wants to help you build incredible things.
“We support anyone who wants to go out there and tinker and explore, and we’re working to make our resources more easily accessible to small business owners, students or inventors. And I’m excited about that!”
“In late 2010 we launched the innovator’s hardware store in an attempt to democratize access to the tailored library of materials we sold to our Fortune 500 customers. With the library subscription if you were working on tools, you could get materials related to tools. If you worked on shoes, you could get materials related to shoes. As the years went on customers wanted the materials we showed them to be even more specific. We responded by putting everything online in the hardware store and working on software that gets “smarter” the more it is used. The more our website is used, the more it will show you things you might find useful. The response has been tremendous and we continue to work on ways to make product development inspiring and easy to do. Our software engineering team is working on some exciting things that will launch next year.”
“We also host a lot of usability tests so designers, engineers and entrepreneurs who are building stuff can come to our office and share their experience of how they found their materials. We love meeting these folks. I want to start telling the stories of what they’ve done with these materials in a more meaningful way. We have so many great stories. It’s even inspired me to start building a few things of my own.”
“In the long run, my dream is that we make the site so easily accessible that you can find anything yourself and don’t need our concierge services. We are working on embedding our concierge capability into the software and the site itself, making it more collaborative so it learns what you are interested in, and connects you to other folks that can help you overcome obstacles.”
EMPLOYEES AT INVENTABLES DON’T WORK, THEY EXPLORE. Zach has been very mindful of how to maintain the innovative work culture that has helped his business grow and keep’s his customers so happy.
“We’ve put a lot of thought into keeping the culture the way it is. We have what we call Five-Minute Madness every Thursday where we buy lunch for the employees and they shares their updates on what they’re doing or put on a demo for us. We have Free Point Friday where every Friday the technical folks work on whatever they think is most important – no questions asked. We have an innovation budget that our employees use to build a product. This gives them the opportunity to experience what customer’s experience. It puts everyone in our office in the customer’s shoes and forces them to bump up against the same struggles a customer has doing their job. Every morning we have breakfast catered so we can socialize, get to know each other, then hit the ground running with work.”
“The work we do demands a lot of creativity from the people who are involved. That means they have to be given a chance to explore, try new things, and feel comfortable with stepping outside the lines. I find that when people are happy and like each other, they’re more likely to collaborate and come up with new ideas and work together on things beyond what you ask them to. If this were a more ‘traditional, corporate-punch-the-clock, go to your cubicle, type up your reports’ type of environment. If we had that, at best we would get exactly what we asked for, as opposed to that extra special something that you can’t ask for that comes from inspired employees.”
ZACH WANTS THAT “EXTRA SPECIAL SOMETHING” FROM EVERYONE, not just his employees. To get Chicago excited about innovation and disruptive ideas, Zach co-founded with Brian Fitzpatrick of Google Chicago, an invite only, two-day weekend camp every year called ORD Camp. The event includes some of the most well-known and interesting people involved in technology with a strong focus on the Chicago community.
Zach was invited by the Museum of Science and Industry to sit on the advisory committee for the Fast Forward exhibit. This exhibit showcases what modern day innovators are creating in the world in an attempt to keep the museum at the forefront of science and industry.
Zach wanted to contribute to the Chicago startup community, with the same kind of great mentoring he was given growing up and through college.
“I also got involved in Excelerate Labs because through their events I met people who were genuinely excited about what they were doing, unlike other networking events where people were just trying to find investors or the next customer. And as someone who had been running a company for a while, I was happy to share my lessons learned.”
And Zach isn’t done by a long shot.
Zach is also involved with the Technology Entrepreneurship Center, a new department started at the University of Illinois, along with 120 other companies. They help students start their own companies. In the last year he donated an Inventables material library formerly sold for $70,000 each to 10 Universities. The donations went to schools including IIT, U of I, UIC, Stanford, MIT, Carnegie Mellon, RISD, and a few more. “We chose Universities that are striving to grow their programs in the fields of industrial design, engineering, science and technology. We believe these programs will be responsible for the future growth of our country’s economy and the main source of people that will improve the quality of human life.
A WORLD FULL OF INVENTORS tinkering in basements, bedrooms, and garages is the future Zach wants to be a part of and he is determined to have Inventables play a leading role in that revolution.
“I’ve poured my whole adult life into this business and I’m encouraged by the progress. I think there is a compelling, interesting idea that is driving this business I see customers respond to. I’m excited to help private developers all over the world get access to materials to build and realize their dreams. I think democratizing access to materials for prototyping and R&D is a really powerful concept. I love sharing our inventive spirit with everybody in the world and watching what new products folks create.”
“The online hardware store has provided a scalable platform for Inventables. We’re really starting to put our foot on the gas and grow. So far the results have been encouraging but as we know from past experiences, being an entrepreneur can be a roller coaster ride filled with higher highs and lower lows than a traditional corporate job.”