Start-ups part 3: Welcome, zebras and unicorns

By Sibylle Dorndorf

Come up with a business idea and do your thing – that’s yesterday’s approach. With even global players failing to maintain their hypergrowth in the face of multiple crises and geopolitical challenges, what does this all mean for the start-up scene?

The gold rush is over

And with it the age of unicorns. In start-up lingo, unicorns are not mythical creatures, but newcomers with an extremely high market valuation: new businesses valued at over one billion US dollars prior to going public and before an investor exit.
But when times get tough, neither unicorn glitter nor a trail of monetary stardust can help. These high flyers are brought back to earth with a bang. Although billions have been invested in start-ups for years, cash is no longer as easy to come by after the pandemic and given the global crises of our times.

The age of the zebra

Since the era of endless gains is over, an increasing number of founders are deliberately distancing themselves from the pressure to grow at a rapid pace. They are turning their focus elsewhere, as they understand that business profit and social responsibility are not mutually exclusive. However, it’s much harder for these founders to access funding and support compared to profit-oriented unicorn start-ups. Having united under the term “zebra”, they want their start-ups to also be valued for their positive social and environmental contributions. The animal’s black-and-white stripes embody a blend of two apparent opposites – profitability and sustainability.
 

Toy start-up expertise from Steve Reece

Steve Reece has been visiting the Spielwarenmesse for more than 25 years – and has been active in the toy industry for just as long. Early in his career, Steve Reece was responsible for classic brands such as Monopoly, Play-Doh and Trivial Pursuit at Hasbro. He later worked in various regions, roles and companies in the toy industry. He has led successful start-ups and managed iconic brands. Today, Steve Reece advises toy companies on how to strategically diversify their supply chains, recruit staff and establish foreign subsidiaries through his Kids Brand Insight consultancy Kids Brand Insight.

Interview

Steve, let’s talk about start-ups, one of your key areas of expertise. How many founders have you already advised?

Steve Reece: I’ve advised around 200 start-ups in the toy and non-digital game space over the last decade and a half. Many of these have been successful, but obviously there have also been some that didn’t make it. That’s how things go: bankruptcy and failure are all part of the start-up journey.
 

What’s unique about starting a business in the toy industry? 

Steve Reece: We’ve a very tightly defined annual sales cycle in our business. But it’s also true in other industries that even the best start-up in the history of mankind needs staying power to achieve a certain level of success.
 

That’s a bit disheartening to hear... 

Steve Reece: It is, but I’m just being honest with you. New market entrants often come to this supposedly playful industry with high expectations. They want to break all the rules, disrupt the market and so on, because they’ve read some smart books that say this is how things have to be done. The bottom line is that you can certainly achieve success as a rebellious, innovative, non-traditional start-up. You can directly reach the consumer via Amazon and gain a quarter or third of the market, which wouldn’t have been possible in the past. But this takes time and effort. If your business plan envisages that you’ll be carried by Walmart in your first year and go from zero to one hundred right away, then you’ve not realistically assessed the prevailing circumstances and the market. It simply doesn’t work like that.
 

Can you only sell what you love? 

Steve Reece: Obviously, founders think their product is amazing. And that’s only right. If you don’t truly believe in your product, how are you going to convince others to buy it? But remember that there are thousands of products and all of them have founders who feel this way about them. 
 

Are you speaking from experience here?

Steve Reece: I sure am. I know what it’s like to be a disillusioned product designer and inventor. And I’ve spoken and had dealings with hundreds of product inventors down through the years. 

The successful ones do this: they test their products and assess their likely appeal at an early stage with people whose opinions matter and who know what they’re talking about. Secondly, they separate their personal feelings from their creations and quickly switch into hard-nosed selling mode. And very importantly, they don’t get emotionally attached to products that the market doesn’t want for good reason!
 

But don’t you have to stay true to yourself as a founder?

Steve Reece: That’s a noble idea, but you’ve got to eat too. Many founders have a subjective idea of what the market wants. But when the market clearly favours a different path, then that’s the route you should follow. Whether you like it or not, you have to go where the demand is. Let’s say you develop a sophisticated product to be sold through high-end points of sale to discerning customers but the market is clearly indicating that the product is more suitable for a lower segment with a simpler presentation and reduced price point. What should you do? You can stick stubbornly to your path and miss out on the opportunity of success. I’d rather take the success and bank the money, but everyone has to make that decision for themselves. 
 

Steve, I’d like to thank you on behalf of our readers for your frank and professional insights. If any start-up founders are interested in learning more, can they reach out to you? 

Steve Reece: Of course! They can contact me via my consultancy by visiting Kids Brand Insight.

About the Author

Sibylle Dorndorf has been covering the toy industry for almost 30 years. The journalist last worked as the editor-in-chief at the TOYS family of magazines of the Göller Verlag publishing house from Baden-Baden, Germany. Her passion: Companies that reinvent themselves; brands that credibly position themselves; people who have something to say; and products with a future.