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Anthony Franco / M.C. Squares: IP Comes to 'Shark Tank'

by Patents Integrated
March 24th 2021

M.C. Squares is creating a dry-erase renaissance, and Anthony Franco is leading the way. The company is reinventing the most basic of all business tools -- the whiteb... More

Hello and welcome to the novel and non obvious podcast where we discuss the intellectual property topics, impacting the startup world. My name is Yoriko mori to the host of this podcast and founder of patents integrated Today. We welcome Anthony franco founder of EMC squares. We'll be discussing I. P. Issues related to his company, which has a really unique product both on the design side and on the product side. So welcome Anthony thank you for having me. You're very welcome. So can you tell us a little bit about your company? Yeah. So EMC squares is a manufacturer of home and office products we manufacture here in Denver and we make really cool dry erase products for your home office for your home and for work. We're best known right now for a product line that we call stickies which are reusable dryer a sticky notes. We've sold enough of them to replace 1.5 billion paper sticky notes from going into landfills.

Cool. In the description that you gave me, you said you do it with a touch of style. So what we we say that just because we're not the staunch the old like office product company that you would buy out of a catalog. We care very much about the aesthetic of our products and and how they fit into your home or in a more contemporary office. So then what compelled you to start your company. So this is my 5th company And the other four were in tech. So I'm a serial entrepreneur and a reform technologist and my last company. I ran a lot of design thinking workshops and recognize the technology was getting in the way it was distracting from thinking and creativity. So I wanted to create products that enhanced that process. You know, the the thing that I discovered is you know, when, when ideas meet the real world, it's usually done first with the mark of a hand and so we wanted to make that process, that process of thinking out loud, really intuitive and easy and fun and creative and um and all of those, all of those things.

So with like the design workshops and things that you were talking about their, you know, usually I think of them as a group meeting where you are around a table with lots of sticky notes and markers and duct tape and tape and string and that kind of things. So how did that evolve into these reusable sticky notes? Really. Our first product was inspired by something I did in a design thinking workshops. So I was, I was intent on getting the quiet and cerebral to contribute into the, in those design thinking workshops. So they normally don't. And so initially I wrote an ipad app, it was beautiful. It was eclipsed in its beauty only by its massive failure. Um, and the, the reason was tak when some, when somebody's putting their ideas in an ipad app or writing their ideas down with a stylist. It's not psychologically safe. The perception is, it's being documented and being used against you.

So it actually inhibits the free flowing thinking that you want in those kinds of meetings. And so at a desperation I took a big, huge white board and cut it down into little squares and handed it out and it was like magic. There's something about dry race that there's no learning curve in its nature. It is temporary, right? I mean if you make a mistake, you just use your pinky finger and erase it and rewrite it so that that free nous of thinking really made a difference. And so when I, when I sold that last company, I decided to make a company that, that made products that help that process evolved both in design thinking workshops. But also just as I'm sitting here, I have dry race stuff all over my desk and that's how I take my notes and that's how, that's how I think. And there's a lot of people like that and if you don't think visually like that, then something's wrong with, you know, I'm kidding. It's just maybe you haven't explored it enough to realize that that's a very good way of thinking.

Okay, so then in starting the company, what were some things that you worried about now? Obviously this particular product really energized you and inspired you were there things that you're worried about as you were starting, you know, coming from a tech background, starting a hardware company. So in hindsight, there should have been but really I started EMC squares as a hobby. And so I wasn't fully aware. I I just like I thought to myself I want to build something, I want to see what it takes to build something in real life And I wanted to really understand what it took to design physical products. So I sold my last company was that I was lucky enough to afford to buy a really nice three d printer and just started playing it with designs and concepts both in cad software and then printing them out. And so I wasn't really super concerned in our early days of making a viable company out of it.

I was more concerned about what product exploration. And then once we landed on the first product obviously I p was like this is really cool we need to protect it. And so I. P was one of our first concerns and then go how are we going to take this very unique product to market? Those were the two things. Once we realized we had something it's like all right how do I protect it? And how do I sell it? Okay so then how are you protecting it? Well we we we patented it with the design and utility patents. We actually now have 14 patents filed seven issued. Yeah it's um it's certainly part of our of our strategy. I wouldn't say if I'm being honest I think of I. P as a component of but not the most important component of our protective mode. Okay. What do you mean by that? I think building a brand building a brand in a very credible way is equally as impactful and powerful as having intellectual property protection.

So a broad customer base that you can launch new products to your your customers don't really care what's patented. And so we need to figure out designing products that they want first and then having them as avid fans so we can sell their products to them that that they're going to love and then protecting our intellectual property is certainly part of part of that the enterprise value. But it's I think a bigger part is our customer base. So then as far as you're building your brand. So I know you've been on shark tank, I know you've made other choices like that. What are the things that drive your decisions regarding creating your fans? Like you said it's really I really care about great products. So so the company is driven around not. Can we build something or can we sell something? But is it a great product? And is it something that so a lot of our products are things that have never existed before.

And so we're looking at new ways of thinking about the way we used to do stuff but only adding just a little bit of of our our creativity to it. And so I really think long term brands are built that way because fundamentally they're product driven company. Yes. All the other things matter finding you know you have to be able to sell it, you have to make profit products that are profitable. But if you don't if you're not starting with a good product you're just putting a significant disadvantage to yourself and trying to get to market. Okay So then how do you determine a great product? What is your definition of a great product? I wish there was some methodology to it. It's like do I think it's cool like the way we've structured and built the company so we self manufacture most of our products we manufacture ourselves. And so the first thing is do I think it's cool. The second thing is does Kristen who runs marketing and Ian who runs operations. Do they think it's cool? And then we prototype a couple and because we self manufacture we can bring a product to market for a couple 100 bucks and see see if there's a if it's a thing right?

And essentially we're white boarding our own products by testing them in the market. And then if our customers think it's cool then we we wrap a brand around it and we start protecting with I. P. Actually start protecting it with I. P. Before we bring it to market like we start provisionals and that kind of stuff and then we roll it out to a bigger audience. Okay so then you you mentioned that your self manufacturer which is a great advantage for hardware companies for physical product companies when you can do that, is there? Yeah. So then is there when you get to the stage where you're selling globally and you can't necessarily keep up with the self manufacturer or do you do you plan to increase the capacity of the self manufacturing like to vertically integrate or do you plan to outsource? Um The answer to that is yes. I haven't fully made a decision on when it makes the most sense to start outsourcing some of our manufacturing.

We certainly have some options there but there's also the ability to continue to automate what we do internally. So it's less labor intensive. So the same amount of people or a few more people can accomplish tanner 100 times out the throughput. And so we're looking at, I'm looking at both options. It's it is it's a complicated question and it depends it really depends on what product line you're talking about. The part of the reason why I asked is because you said you've been filing for patent protection all along. Which is great. But it does get complicated when you start both manufacturing abroad as well as distributing your product and selling your product internationally. So what sort of issues have you faced as you expand your company full transparency. We haven't done a good job at protecting our I. P. Outside of the U. S. And that is one of the things that kind of keeps me up at night. It's like how from what I understand it's difficult to take something that's in market here in the US and then protect it in europe.

Like what if you have a patent here, it doesn't mean that you're covered overseas. So and that's just been a capital constraints. It's expensive to file and it's an advantage a lot of big companies have is that they can file a patent internationally where startups don't. I wish there was an answer to that. So it's okay the U. S. Market is big enough and our brand is strong. That's why I think having a strong brand is really important because that brand is gonna carry through internationally but the I. P. Production makes it is difficult. Yeah definitely it's it's certainly is expensive that's for sure. But I'm assuming you do have international plans. It seems like a lot of your your products are really universal. Yeah we actually are expanding globally now. So we we just started shipping inventory to Japan UK Germany and Australia and so it's literally on a boat right now to launch on amazon in those countries. What are the things that you worry about as you expand internationally doing it wrong?

Is that is that a succinct enough answer for you. So so I think there are a lot of things to to think about someone Logistics becomes very difficult and very expensive, filing tax. The tax implications of selling things overseas is very complicated and right now we have a luxury because we manufacture things here in the US. The time from us when we're finished manufacturing it to where it hits the amazon warehouses is a week and once you start putting stuff on a boat it's now months. So you have to be a lot more mindful of inventory planning than we currently have two right now then there's the I. P. Issue. Are we adequately covering ourselves from an I. P. Perspective and we're not. Gosh what what else? There's there's a lot more in there that that I could unpack if you want. One thing that I do want to ask is have you had, have you been in situations where your product has been either copied or There are competitors who who are your competitors here?

So really for the dry erase sticky notes, we we invented the product, it's patent pending. So we have pretty good coverage here in the US. There are some knockoffs coming out of china. But another thing that we've that I was lucky enough to do is I found a material That is really incredible for these dry erase sticky notes. There's a backing on them that sticks to anything shiny so it sticks with suction. Not with adhesive. That's why you can reason 2000 times apiece and everything coming out of China is nowhere near as good. That's short lived I get it. But right now we have a superior product that helps also the material that we use. We have worldwide retail exclusivity on it. So we were able to um secure material exclusivity which is I think it's a really big deal for the for the products that were and were even we even trade, we have a trade name for it called bubble bond. And we're gonna be launching products with just that are just bubble bond coming up and then um we don't have an issued patent on it yet.

So once we do we'll start protect, start protecting the the I. P. Around it. Okay, so then that brings up an interesting point that with the material, exclusivity of this special material. What are other things that you can do with the material either as one of your products or licensed to someone else? Yeah, so we'll probably wind up just making the stuff because we're getting really good at at working with it. But think of um well here's a really good example and I know we're all audio only but I'm holding up a a product that we we we just actually Pat didn't have the first prototypes on, it's a dry eraser that has dry erase markers in it. Like it has holes in the dry erase marker and one side is a dry eraser. So it's a standard dry erase eraser on the back side we have double bond on it. So this eraser sticks to glass or two glass whiteboards or to your fridge if you have a calendar there.

So this is one example of how we can use bubble bond to adhere products to. Two other things. Now, imagine using this as a, as an iphone holder in your car or as a way to attach the remote to the back of the tv. So in some circumstances things that you might use velcro for bubble bond might be a good, a good alternative to it. Okay. Without the yucky sound, when you rip that stuff that are replacing all the refrigerator magnets that I have all over my, my house. Yes, yes, that's, that's definitely an area that we can expand into as well. How strong is it? Like, can you stick it on the side of a car and it'll stay, Yeah, I wouldn't do that for safety reasons, but yes, it would work that way. Okay. Yeah. So there's signage that you can do all sorts of things. Okay. Yeah, that's, that, that is a problem for us. Is that every time I start walking folks through our product line, they're like, and you can do this and you can, I'm like, yes, we, we have all of those things and more that we could be doing that.

We're not one because of capital and two because of focus. Like we're trying to stay focused on the products that are doing well right now. But yes, we have lots of extensions available to us. So then with all of these possibilities using the material as well as some of your designs and and and those sorts of things. How do you limit yourself to? How do you keep yourself focused? Because you know, you mentioned earlier on that you want to make great products, all of these different things can be great products, How do you make your decisions on what to pursue now and then what to pursue next week and then so and so forth. I have a really good team and purposefully built the team that that I have to feel empowered to tell me to stop or no or so. So christian who runs marketing and Ian who runs operations for us. I have no problem telling me to put the brakes on something until we can get to it. So um I rely on them very heavily to tell me whether or not we can do something in the time frame and do my very best to not push him on on trying to launch something sooner than than it's ready.

Okay. It sounds like you've got a great sounding board with your team. Yeah. To wrap up, what is the one thing that you could use in order to take your company to the next level? We're acting on it right now. So we're capital is right now our biggest limiter to growth. We're growing so fast that we're not able to keep up with the growth because we don't have enough capital resources to do it. So it's, it's the right place for a startup to be, but it's also the uncomfortable place where you have to need to go out and get get more capital. We actually just opened regulation crowdfunding campaign on start engine that is starting off really well. And so we're, we're actively seeking capital from everyday investors to invest in our, in our success and hopefully, you know, have a front row seat to the american dream. Yeah. And, and I know that with your company, you know, you've explored a lot of different ways of raising that capital. What brought you to the regulations. Well, first of all, you know, when, when you talk to venture capital about dry erase sticky notes, they don't know what to do with that.

It's, it's not in this area that they normally even contemplate, like there's not a lot of VC money going to office products, It's just not happening. So that's been a very limited channel for us to raise capital. And so we have raised capital. So I have a lot of my own personal money in the business, so much so that this has to work. It has to work. And also we've been able to raise capital from Rocky Adventure Club and from Denver Angels. So some angel networks and they've been great, great supporters and mostly because they get to interact with me, so having direct access to the founder, like that helps and we're a local manufacturing company, which is great. And then we decided on Greg Cf because we have an amazing investor on our cap table. That's an evangelist. Kevin O'leary from shark tank is helping us go to market with our raise as well. So he has a great following and is pointing folks to r raise too. So it just seemed like the right avenue for us.

And what are you hoping to do with the capital that you raised grow, grow? As in like, so what are you gonna, what are you gonna spend it on? Like are you going to grow the team? Are you going to add more manufacturing capabilities in your in your office or? So when you're growing this fast as a product company, you have this interesting problem. So it's not hard to go get bank financing for inventory if you can prove that you can sell that amount of inventory next month. Right? So they look at your, your last six months and they go, okay, this is how much capital would we couldn't will loan you for inventory. But the problem is we're growing so fast, it's not enough like it's just not enough capital because we have the inventory plan three months ahead and three months ahead it's going to be so different than it was than it was three months ago. Right, So traditional bank financing is doesn't get us the the capital that we need to move forward. So in this circumstance, equity raises make a lot of sense. And then also it's funny big sales channel for us amazon and we have the same problem there when it comes to marketing.

So Amazon takes every dollar you spend on marketing, they take it out right away like you spend that dollar now, but they don't pay you for 60 or 90 days sometimes. So there's a float there. That has to happen. So those two, those two delays and cash flow make it a constraint for growth. And so we will put him putting capital into our continued growth in inventory and marketing. And yes, some some key operational hires to help us scale that way too. Well, thank you so much for your time, Anthony. We covered a lot of ground. Good luck to you with your current raise and let us know if we can help you with anything started dot com slash squares, shameless self plug. Alright, We'll get this podcast out as soon as we can. Alright, thank you. So we hope you enjoyed this episode of the novel and non obvious podcast. Feel free to send us comments or suggestions for startup in I. P related topics you'd like us to discuss on this podcast at info at patents. Integrated dot com. Our producer is Joel Davis of analog digital.

Our marketing specialist is Tim Sprinkle of Layup Content. Our theme music used with permission is the Workday Takata from A Life In a Day, composed by Sherry's Later and performed by Michelle Stanley and flute, Jeff le Quattro on guitar and the Australian cello. Here's our obligatory disclaimer. The content of this podcast is informational only and not intended to be legal advice. The novel and non obvious podcast is the production of patents integrated on all rights are reserved. See You next time. Mm hmm.

Anthony Franco / M.C. Squares: IP Comes to 'Shark Tank'
Anthony Franco / M.C. Squares: IP Comes to 'Shark Tank'
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