Entrepreneurs

How A Warehouse Full Of A Failed Launch Changed The Trajectory Of Lume Cube

In 2019, Lume Cube launched one of the first video conference lighting kits made for Zoom meetings at CES. After sales fell dramatically short of expectations, the company was sitting with over 20,000 units in their warehouse in March 2020. As the world moved to work from home, Lume Cube saw a tremendous reversal of fortunes. I sat down with Riley Stricklin, President and Co-Founder of Lume Cube to talk about the inspiration behind the business and the pivot the company went through during COVID as they wrestled with the unexpected demand.

Dave Knox: What inspired you and your co-founders to start Lume Cube?

Riley Stricklin: It was a team of three of us that were all working in the imaging industry at a software company.  We were traveling the country doing trade shows in the imaging space around 2012 to 2014.  In our industry, photo and video was captured on DSLR cameras. But we were in the midst of this moment where iPhones and GoPros were really taking over on the consumer side. All of the content you started seeing on social media was captured just on a cellphone without investing thousands of dollars of gear into camera equipment. What we noticed was that in the high-end photo and video industry, there was this entire ecosystem of accessories that included lenses, lighting, tripods, grips, and all these different things that you could buy for your camera. But on the GoPro and the iPhone side, as these were becoming the primary devices for capturing content, there wasn’t yet this accessory ecosystem. There were these little iPhone fish-eyed lenses that you could clip onto your iPhone type of stuff, and some accessories around the GoPro. But where we saw the hole was in the lighting space, and we knew that to capture any quality photo or video, great lighting is key. And there was not yet a light designed for the GoPro or the iPhone that could help you capture great content. Our original product, the Lume Cube 1.0, was a light specifically designed for that, to pair with your GoPro or your iPhone and capture great content on those smaller devices.

Knox:  To launch Lume Cube 1.0, you turned to Kickstarter for funding. What advice do you give to entrepreneurs that are following a similar path?

Stricklin: Kickstarter was great for us, not just because it helped us raise funds, but also allowed for some proof of concept. I think for any first-time entrepreneur, there is a lot of uncertainty and doubt. So, when you are investing that much time, energy, and capital into a product, you want to know if there is demand? Do people actually like it enough to open their wallets and purchase? That is what Kickstarter allowed us to do. And we only had about six prototypes in existence at the time, but we were able to pre-sell about 4,500 units on our Kickstarter. That made us much more comfortable moving forward with the idea, seeing the opportunity come to fruition, and gave us the capital to invest in that first production run. It was a different time in the history of Kickstarter and before the days of paid social media advertising. We did everything without a single dollar spent on Facebook Ads. It was all organic. Today, I would explore all the great avenues such as the Kickstarter specific agencies and paid media that you can to your advantage to really spread the word and target a specific audience.

Knox: As first-time entrepreneurs, how did your background in programming and software prepare you for starting Lume Cube?

Stricklin: I’d probably say not very well! As first-time entrepreneurs, the move from software to hardware was major. In software, you can literally create 200 new units by just hitting one button on an Excel spreadsheet. For us, there is a very fixed cost of manufacturing and dealing with China and dealing with all of the production that goes into creating a product. We made a lot of mistakes and learned the hard way in a lot of those instances. But at the end of the day, the perseverance is what makes a great entrepreneur and still being here and powering through the hard times is what you learn along the way.

Knox: Speaking of that perseverance, what’s the business’s growth look like over the past few years?

Stricklin: It’s been a pretty incredible jump particularly in the last three years. We did come out of the gate very hot. Technically 2016 would be our first year on the market. So we came out and, in our first 12 months, were able to put up a few million dollars in sales. As first-time entrepreneurs, particularly with manufacturing, you learn a lot about cashflow and how that can impact the business. There were definitely some challenging times there, but in the last three years, we have restructured the business, brought in some financial partners, and conservatively in the last three years, we’ve grown about 10 to 15X what we were in 2018.

Knox: With the rise of Work From Home over the last year, how did that change your strategy?

Stricklin: It was a big pivot for us, both in product and business structure. Prior to the pandemic, we had a fairly large retail and wholesale channel. We were in about 600 Apple stores, 300 Best Buy locations, and wholesale distribution in about 15 countries. That came to a pretty quick halt when the pandemic hit. All of our European business immediately halted, Best Buy shut their doors, and the same with Apple. We pivoted and leaned into the e-commerce and direct to consumer route, which was imperative to the business. We rebuilt our website platform and we made some strategic hires in digital marketing and e-commerce.

But the major transition came in the type of business and products that we focused on. Lighting is a commodity but we uniquely packaged it in a few different ways such as a small durable cube for photographers and a small, slim iPhone type panel for videographers, content creators, and YouTubers. Then we had this little LED light for mounting on computers for Zoom conferences. Believe it or not, we launched the first Zoom video conference lighting kit with Apple at CES in 2019. And we saw this video conference work from home thing coming a while ago. Yet it was the single largest flop of our company in 2019. It was a major problem on the books. We invested heavy in inventory and we sold very, very few units. And just so happened, in the beginning of COVID, we were sitting on over 20,000 units in our warehouse that we could not sell of this video conference lighting kit for work-from-home professionals. Lo and behold, we saw this as an opportunity, when the pandemic hit, to move through these units and we ended up selling those 20,000 units in about two and a half weeks.

With that success, we proceeded to innovate the product and make better variations of that video conference light. What we did was really pivot the company focusing on that content creator realm to this work-from-home professional. We realized there was a massive need for a solution. People were displaced from work, working at their kitchen tables and in their living rooms where they didn’t have a proper workspace. They were hopping on video calls, still trying to land deals with potential clients, and trying to work with their co-workers. Yet they were working in these horribly lit environments with all sorts of distractions. This product helps you work from home and helps you show up your best on your video calls. Although you still might be in sweatpants, you can still look professional and not be a complete silhouette to whoever is on the other line. That really was a big pivot, both leaning into e-commerce as it became 95 percent of the business and pivoting the product line, the website, and the marketing to really cater towards this transitioning work-from-home professional.

Knox: electronics are not exactly known for being the quickest lead times. When you sold those 20,000 units in two and a half weeks, what did you have to do with your supply chain to be able to catch up and take advantage of this opportunity?

Stricklin: It was incredibly challenging. We are very fortunate to have quite an incredible team behind the scenes managing our supply chain with decades of experience in China. We were able to do some forecasting and really see some things coming. During COVID, there was much, much less air traffic coming in. There were big holdups through customs and at the border, because they were intensely checking every container that was coming in. What ended up happening is we tried to put everything on the ships and containers, which is the most cost-efficient way to bring product in from China, but for about eight months through COVID, because of both the rate of sale and the demand in the market, we were exclusively air freighting everything in with next day air shipments from China. I do not even want to think about the bills that we were paying to FedEx at the time, but it was the necessity of the situation. We had to make the decision internally, “do we put the product as sold out and just sit and wait for our product to come in? Or do we incur these tens of thousands of dollars in shipping bills?” In the end, we were eating into the profit, but not only were we gaining and growing new customers, we were delivering what we felt was a really strong solution for these customers that they were looking for. So, we opted for that route. We had massive air freights coming in every week from China, pallets and pallets of products. Realistically, the minute they landed, they were pretty much pre-sold and going out the door within the same day.

Knox: Looking at where you are going as a business, how did that impact your strategy for 2021?

Stricklin: For 2021 and moving forward, we really are focused on becoming a top e-commerce and direct-to-consumer company. We learned a lot about what our customers look for and how they go through their shopping funnel, as well as how to acquire and how to seek out customers using B2C tactics such as Facebook and Instagram. We have a massive influencer program where we work with over 400 different influencers representing the brand and talking about the product, all with the intent of driving traffic and awareness back to our website. We have really focused on becoming an e-commerce company and that comes with the benefits of speaking directly to our customer and becoming much more economically in our favor. Margins are much higher. From a cashflow perspective, we get we get paid every day. If you spend $100 on our site, we have that $100 immediately versus when you spend $10 at Best Buy, I might not see that$ 100 for 90 days. That has really helped us. 

The world is a different world today. And what we have focused on is we look at ourselves as an innovative lighting company for a few growing markets. One is our original market of the photo and video realm. People are creating more content than ever in traditional photography and videography. Second, the video conference and work-from-home environment is changed forever. There will be people that embrace that hybrid model of working from home forever and Zoom is now going to be a thing that is a part of our daily environment. Helping people look great and show up and execute on their Zoom calls is going to be really important to us. Third, we’re really excited about the YouTuber vlogger space. With the pandemic putting people at home, we’ve seen the explosion of TikTok and these digital influencers. Now it seems like every person under the age of 18, when you ask them, what do they want to be when they grow up, they say a content creator and they want to have a YouTube channel and they want to work with brands. So, that market of people creating content is massively exploding. The fourth market that we are focusing on is that live streaming and gaming, online eSports audience. With Twitch, you have tens of millions of people who are streaming themselves on a webcam all day every day and doing this now as an income stream. The key to successful streaming is being a personality and looking good on camera when you are doing that streaming. Professional lighting is an imperative piece of that puzzle.  These are the major markets for and we are really focusing on digital marketing, growing into those markets and not only providing great products at the right price, but also then reaching those customers directly and wanting to speak to them through our own channels.

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