The Lesson: Big markets mean big startup costs

ClipFix inventor Michael Strahl.
By GREGORY ZELLER //

From the Good Problem to Have Department comes ClipFix, the Commack tech startup looking to conquer the world one busted modular plug at a time.

Since ordering its first 50,000-unit production run in October, the brainchild of founder and president Michael Strahl has been working to lock down its best customer base. That’s familiar turf to any early-stage enterprise; most startups struggle to identify customers and the best channels to reach them.

For ClipFix, the dilemma is turned on its ear. Basically, everyone in the civilized world is a potential customer, and what sounds like bottom-line nirvana is actually a logistical nightmare requiring dogged discipline and solid strategy, according to Dave Mroczka, ClipFix vice president and GM.

“Just because you have a great product doesn’t mean you can just dump it on the marketplace,” Mroczka told Innovate LI. “So we’re taking a different approach. Instead of just blanket selling, we’re ramping up the business in a way that’s cost-effective and ensures the greatest likelihood of success.”

ClipFix LLC’s namesake product replaces the tiny depressible tabs that click into place when RJ-45 modular cables – which connect monitors, modems, phones, routers and other digital devices – are inserted into ports or wall jacks. When the flimsy tabs break, ClipFix snaps to it, helping plugs fit snugly into the ports and jacks and extending the lifespan of otherwise functional cables.

The product’s ubiquitous nature means ClipFix doesn’t have to look very hard for potential customers – they’re everywhere. But the company does have to be careful to pick the best markets to conquer first, according to Mroczka, who said ClipFix’s new slow-and-steady mantra is based directly on the advice of potential investors.

The veep wouldn’t name names, but Mroczka did note that ClipFix – which is looking to raise as much as $1 million, largely for marketing purposes – has been talking to a New York-based angel investment group, and those potential backers “really want us to follow this plan.”

The unnamed angels even sent Strahl and Mroczka a book, Bill Aulet’s “Disciplined Entrepreneurship: 24 Steps to a Successful Startup,” which Mroczka described as a “blueprint for what we want to do.”

“It sounds great when you say ‘literally anybody who has a wire is a potential customer,’” he said. “But how do you determine who you’re going to advertise to? Where is your beachhead market? How do you establish yourself first, and then sell from there?”

To that end, Mroczka added, ClipFix principles have been working the phones for months, “talking to customers and potential customers, understanding their buying habits, seeing if they like the product and how the use it, and also doing pilot sales.”

ClipFix has also recorded some sales through Amazon, where a 25-pack of the DIY fixers retails for $19.99. But those sales are almost incidental – “If someone finds it, they can buy it, but we’re not driving anybody there with advertising yet,” Mroczka said – as are the several thousand units ClipFix sold to a South Carolina company that repairs point-of-sale retail equipment, including cash registers and credit card machines.

Those one-off transactions are drops in the bucket compared to ClipFix’s grand plans – though that South Carolina company, Mroczka noted, could prove to be a template for the startup’s early customer base.

“We’re mapping out the distribution channels,” he said. “We’re also talking to a lot of end customers – folks in offices, folks in libraries, folks who service a lot of equipment.”

Another lesson learned over ClipFix’s months of research: Distribution ain’t cheap. A distributor may demand $15,000 or more “just to carry your product,” Mroczka noted, referencing one national distributor who insisted ClipFix front $35,000.

“They wouldn’t even discuss [a distribution deal] unless there were marketing fees involved,” he said.

ClipFix is about done with its fieldwork and is scheduled to catch up this week with the lead investor from that angel group. The idea, according to Mroczka, is to get feedback from the angels and modify the ClipFix business plan accordingly – thereby securing an angel investment that propels the startup to new heights.

How much the company will actually raise in this investment round is uncertain. ClipFix “threw two numbers” at those angels, according to Mroczka – $500,000 and $800,000 – but could ultimately raise seven figures, depending on the consensus pick for the best new worlds to conquer.

“Somewhere in that range,” Mroczka said. “It all depends on who, exactly, we’re going to target. Different channels require different funding, and that’s what we’ll be discussing with [the angels] this week.

“Within a month or two, we should have the funding to do the advertising and marketing we want to do,” he added. “We’ve bought into their process and we’re giving them the feedback they requested.”

Wherever ClipFix finds funding and whatever initial markets it chooses to infiltrate, the lessons company principals have already learned about sales and marketing – even when you have a product with undeniable global applications – are invaluable, according to Mroczka.

“It’s different if you have a product that you’re going to sell to automotive companies, for instance,” he said. “It’s easy to narrow in on your customers and start selling.

“But when everyone is a potential customer, where do you start?” Mroczka added. “It really helps to focus and have specific plans, instead of saying ‘we have 30 different types of customers, let’s go!’ You need to develop your sales channels first and get your partners on board, and all of that takes money.”