Like most success stories, Lumio is the product of hard work, innovation and persistence. Max did not have the privilege of growing up in a wealthy family; the truth is his parents could not afford to buy him toys. However, Max began using his imagination early and instead of sitting in the house complaining of lack of toys. He recycled packaging and would skin pomelo and turn it into a car that he would drag along. Max dreamt of becoming an investment banker because back then, that is the career that people thought would earn them a living. His decision to change his career choice is what began the beautiful journey towards Lumio as detailed here.
How did Lumio come along?
When Max moved to the United States, he wanted to study economics, and in his first year, he began taking studio art classes. His interest in architecture was sparked in his second year at the university when his professor talked about Tadao Ando. Tadao is a self-taught Japanese architect whose expertise in natural light treatment, concrete and engagement with nature is highly regarded and led him to win the 1995 Pritzker Prize. In his third year. Max was fully settled on the idea of becoming an architect, and he, therefore, started training as an architect.
The turning point in his architectural journey came in 2012 when he realized that he was not fulfilling what he had set out to do. Although he was in the architectural field, at the time his work involved more of project management and less of creatively designing, which is what he wanted to do. Luckily he is more of a doer than a complainer so following the advice of his friend, Max began going to a workshop in his free time where he could use all sorts of big machinery, and it helped him start to picture just how far his creativity can go. Max enjoyed creating things, but then his entrepreneurial side kicked in, and he wondered if he can make a product good enough to be sold in the market.
Max reveals that he has always been fascinated by objects that can be transformed into a myriad of shapes and serve multiple functions. Max’s inspiration came from the Rolling Bridge in London, which is an urban sculpture that unfolds into a bridge. His first idea was to develop a modular folding home which a person can fit into a compact car, but that required money, which Max did not have, to come up with a working prototype. He, therefore, decided to go with something smaller which people would still enjoy.
The advice entrepreneurs usually give is that people should start with what they have, and that is what Max did. He had the habit of carrying folding paper models in his sketchbook, and it hit him that having a light fixture that can collapse into a notebook is a great way of packaging hence the concept of Lumio came about in September 2012 and he started working on it. While the folded papers in his notebook were a good enough proof-of-concept, Max had to look for a way to execute the idea into a working prototype that not only looked great but also did not need instructions to use. Max admits that the real challenge was to optimize the functionality of his light fixture without putting more features and so he had to deduct some of the elements and remain with only what was crucial.
Max, after many trials and errors, completed a few working prototypes as 2012 ended but now the question was if people would want to have such an object. The answer came when during a dinner Max brought his product along, and it captured the interest of the guests and right there and then Max knew he was onto something. He, therefore, launched the Kickstarter campaign in February 2013 to raise $60,000 hoping that the money would be enough to buy the basic machinery and a month later, the amount had gone almost ten times over to $578,000. Max objective was to have an assembly line in San Francisco that would make a few hundreds of the product, but then with the amount, he was faced with the tough question of how to manufacture 10,000 units of Lumio. He quit his job and moved to China to source for materials, and that is when he discovered that he was far from success; factory owners were hard to convince that Lumio was a good product.
Max was off to a great start because in 2013, the sales of Lumio had amounted to $1 million and the amazing thing about the product was that its beauty was enough to sell itself so not much money was spent on advertising. Demand continued rising, yet Max did not have the right capital to increase the supply of the product. Therefore, the best alternative was to look for a strategic partnership, and Shark Tank was the next step.
Taking Lumio to Shark Tank
The Shark Tank is about taking your business idea to the sharks who want to tear off the best part of the business for themselves, so anyone who winds up pitching must know what they are looking for otherwise desperation can have them ending up with a raw deal. Fortunately for Max, by the time he was pitching his idea to the sharks, his business was already raking in millions in profits. Therefore, he could not afford to have someone taking a big stake in his business; all he asked was $250,000 for 8% equity. Being the sharks they are, to them that was quite a significantly low stake and it was not until Max began speaking that they understood why he was not letting them in on so much of his business.
Max demonstrated how versatile Lumio is since it offers multi-directional lighting with its ability to turn 360 degrees. Besides, the notebook-like fixture can be attached to any metallic surface thanks to its strong hardwood cover that is a magnet. The faces of the sharks looked wowed when Max opened the notebook to portray several pages that shined so brightly you can hardly compare the light with other sources they had ever seen. Of course, that led to Mark commenting on how “cool” the product is while Robert’s best word to describe it was “beautiful.”
Kevin has always been hard to impress, but you could see he was becoming interested in the product hence he started working out if it’s worth staking his money on as was evidenced by the next question he asked regarding the battery life. Max had all bases covered, and he promptly answered that Lumio has a rechargeable battery, lithium-ion to be precise, which can keep the lamp illuminated for up to eight hours. Charging the lamp is also easy since it comes with a USB port.
With the sharks, it is all about profit margins and Robert was quick to ask about the cost and retail price to which Max replied that while the lamp cost him $65 to manufacture, he sold them for $190, which is almost three times the manufacturing cost hence a healthy profit margin. However, that had not always been the case because before his trip to China the cost of production was $80 per lamp but upon overseeing the production process in China he had managed to reduce it by $15 and was still hoping to lower it to $50 and increase the profit margin, if only one shark would be willing to work with him.
The fact that Max had gone this far without one shark declaring he was out was a rare thing considering that sometimes a shark will decline to give an offer simply because the product being pitched about is not in his line of business and would be a risk. Mark portrayed his interest by asking about the sales strategy to which Max said that at the time, his product was only available in the Museum Design Shop and smaller selected design shops yet he was still unable to meet the rising demand.
While it was looking profitable for the sharks, the viability of the business as a going concern is what every shark is interested in so Mark asked about what Max had in store for the future because he cannot stop at Lumio. Being the vision-oriented person Max has proven to be, Max already was thinking ahead and had a prototype for his next product; a miniature version of Lumio. According to Max, he wants the lamp to live in people’s bags, and that would only be possible if it fits comfortably in their pockets. Of course, in this generation of the internet craze, everyone wants to have something that can facilitate their social life; hence, Max said the mini-lamp could charge mobile devices.
At this point, Max had all the sharks eating from the palm of his hands, and they all were fighting for a deal. Robert was the first to jump with an offer of $250,000 in exchange for a 10% stake in the company, saying that the valuation was fair, and he shared in the vision of the product. Kevin was ready with an offer but as always contingent upon receiving a royalty. He, therefore, offered $250,000 as a loan but would take $7 for every unit sold until Max had repaid him the $500,000 after which he would take 4% equity. Kevin made a case for himself saying that he would also finance purchase orders adding that with his offer, he had doubled the value of Lumio to $6 million while Max’s valuation had the product valuation at $3.1 million.
Three more sharks were yet to make their offers, and after Max confirmed that he would major on E-Commerce as his sales platform, Mark offered $500,000 for 16% equity. The stakes were getting higher, and Lori also offered to give a $250,000 line of credit in addition to $250,000 in exchange for 12% equity. Lori is a giant in the beauty industry and her vision for Lumio was to have it emit colored light instead of only white light it was producing at the time. Daymond seemed like he was waiting to hear what the other sharks were offering so he could up his offer to a deal too good for Max to leave. Daymond, therefore, offered Max $750,000 for 20%, with a $10 million line of credit.
Max seemed overwhelmed by the offers, and since each shark wanted to go home with the deal, they began battling out with Daymond saying he and Lori were best qualified since they knew the product well. Kevin, on the other hand, pleaded his case saying he was the only one asking for the least amount of equity at only 4%. Robert realized his offer was the lowest, and he adjusted it to give $350,000 for 10%, and that is all it took for Max to grab the opportunity to partner with Robert. Max admitted that all along he was looking to partner with Robert and with the offer, he got a great deal.
What happened after Shark Tank?
The minute a shark gets a hold of your business, you can be sure you are heading in the right direction; it is like they have the King Midas touch. Consequently, we expected nothing less with Lumio when Robert got into the picture. Just like Max had envisioned the mini-lamp to hit the markets after getting a strategic partner, the mini-Lumio hit the market at $125 by November 2015.
Sales of the product have gone up; before he appeared on Shark Tank in January 2015, sales were $3 million by the end of 2014, and it has kept doubling after each year. Since the show is publicized in almost every corner of the world, by the time the show ended, he had received 3,000 orders. Lumio is now considered among the most successful products on Shark Tank, and Max focuses on having the product in high-end stores such as Design With Reach, Fondation Louis Vuitton and MoMA Store.