Nick Mowbray — Zuru Toys
From Tokoroa boy to director of a half a billion dollar toy company. Nick Mowbray is interviewed by Jake Millar at Unfiltered Live, held in Auckland museum.
INTERVIEW JAKE MILLAR
Zuru is one of the world’s largest toy companies. Bunch O Balloons? Theirs. Robo Fish? And that. The Fidget Cube? Yep, that too. Astonishingly, Zuru is owned by three siblings from Tokoroa: Mat Mowbray (co-founder and co-CEO), Anna Mowbray (co-founder and COO) and Nick Mowbray (co-founder and co-CEO). Jake Millar interviewed the youngest of the three, Nick Mowbray, at his event, Unfiltered Live. (Our ed, Jenny, watched the interview, and immediately asked Jake if we could share Nick’s story, beause it’s SO BRILLIANT. Thank you, Jake for allowing us to print it!) To watch the interview in full, as well as hundreds of others with entrepreneurs and business leaders from around the world, visit unfiltered.tv.
Jake: The first time I met you, last year, I walked away thinking, how is this possible? I felt so proud that Zuru had been founded by three Kiwis. Tell us how it started.
Nick: My older brother, Mat, won the New Zealand Science Fair when he was 12 years old with a hot air balloon kit set. He made a few more, and we got our friends together and went door to door, selling these kits. We were a total start-up cliché! By the time we started selling them out of shops, Mat decided to drop out of university after a year, and founded Zuru. We converted a barn at my parents’ dairy farm in Tokoroa into our first factory. I had finished my first year at university studying law and wasn’t accepted for a second, so when Mat suggested we move to China and have a real go at the business, it was an easy ‘yes’. I was 18 years old. We borrowed about $20,000 from our parents and flew to China.
We slept in bushes outside the airport when we arrived, as the lights were too bright inside. We got hammered by mosquitos! We rented an apartment for about $20 a month in a little town called Shantou. It was absolutely tiny and a long, eight-storey climb up the stairs. We converted our living room into an office, hired our first member of staff, a Chinese girl called Ria, and went to a trade show. And that was the beginning.
Jake: Your story sounds so casual; I didn’t get into law school so I went to China as a teenager with my brother, slept in some bushes and started a toy company. Did you go there thinking you were going to build a multi-million dollar business?
Nick: We had huge inner confidence. Looking back, I was so naive. We had no idea about the industry. For example, we didn’t know that we could outsource manufacturing. We thought we had to build everything ourselves!
We rented this little garage, which was our first factory in China, and spent about half of our money on an injection moulding machine. Mat and Simon, who came with us from home and who is still with Zuru, welded our first production line. We had two products, which we had found online and copied: the Night Frisbee, and the Money Gobbler. My job was to go out and sell them.
I took our two products to a New York trade show and put my displays up on my stand, enthusiastically pitching my products to anyone who would listen. About two booths down, unbeknown to us, was the person whose Night Frisbee we had copied. He came screaming into our booth and went crazy, so under the unimpressed eye of our distributor, I took the product down.
It was disappointing, but I still had Money Gobbler, so carried on with gusto, until the inventor of that toy showed up from five aisles back. The anger of the Night Frisbee guy had nothing on this lady. Within an hour I had an empty stall, two lawsuits and learned that we couldn’t copy products.
We fought those two lawsuits, and since that day, we’ve been in about 16 lawsuits. Only now, it’s the other way round. Other people are copying our ideas, and we are suing them.
The other big realisation at the beginning, was that we had to think big: we wanted to work with the biggest retailers and manufacturers in the world with the best ideas. It’s as much work to build relationships with small retailers as it is to work with the biggest retailers. My attitude was that we were going to go as hard as possible, and think as big as possible, and we were going to get there.
Jake: And you’ve certainly done that. When I last saw you in New York, you had just walked out of a meeting with the CEO of Walmart. they employ 1.2 million people! How did such a small company like Zuru build relationships with these huge organisations?
Nick: It was all about persistence. I would stalk buyers in their hotel rooms, put samples under their doors, and send thousands and thousands of emails.
Back in our office in China, after that initial trade show, I rang absolutely anyone I could, trying to sell new products. Because of the time difference, I’d often be up at about 1 in the morning, cold calling. I was always trying to get hold of Walmart, Costco, Target: all the huge distributors. One day after months of calling, I got through to a guy called Ryan Halford at Walmart. I was totally thrown, as I wasn’t expecting him to answer. I burbled away about what a great company we were, when the reality was we were still operating out of the tin shed and our living room.
He said, “I’ll come and see you in your showroom in Hong Kong.” I was all, “Sure! Give me your email so I can send you the address!” We had no idea at the time, but it transpired that everything revolved around retailers visiting showrooms around the world. So I got on the next train to Hong Kong to find a showroom for him to visit us in. I saw that all the toy companies were in one little area, so I started knocking on doors, asking if I could rent some space in their toy room to sell my products. No one was willing, and then I found this tiny cubby hole, which was really expensive for us. We debated long and hard about taking the space. It was tiny. I lived in the space, which was just big enough for a table. I had a tiny mattress that I would unroll under the table to sleep on. The windows curved round the table. The first meeting I had there was with a lady from KMart Australia. She arrived early and I was still asleep. I was lying there in my boxer shorts, and could see her feet inches in front of my face under the curtain. I didn’t quite know what to do! I let her go away and emailed her, feigning ignorance, saying, ‘Err, weren’t we supposed to have a meeting?!’ She came back, and became one of our first customers.
One night I saw a buyer having dinner in a restaurant with about 20 other people. He worked for Dick’s Sporting Goods, one of the biggest sporting goods chains in America. I’d been contacting him for about a year and he’d always said no to a meeting. So I ran back to my showroom, the one with the hard mattress under the table, filled a bin bag with as many samples as I could, and crashed his dinner. It didn’t go down well at all. It wasn’t until years later that he started to work with us.
Jake: Persistence is a key factor in your success. Do you find you still have to be persistent, even though you are now in the big league?
Nick: Absolutely. The toy business is very much driven by fashion; you really need to have your finger on the pulse to find the next big thing, and the thing after that. That’s the area of the business where I spend most of my time. Toys can be very lucrative, and can also drain you of money.
I remember you and I were together, Jake, when I was trying to get hold of the rights to the Fidget Cube, the second most backed Kickstarter project of all time. The most backed was Bunch O Balloons, which we also have the rights to, and we bought from a Texan father of eight. The reason we won that over the big boys like Hasbro and Mattel, was because I knew we could automate their production, and that we could build the machines necessary for that automation. Fast.
The Fidget Cube started with two brothers, called Matt and Mark, in Colorado. They originally had a funding goal of about $15,000 and raised about $6 million in the first 30 days. So, they were suddenly being inundated. Everyone wanted a piece of them, trying to license the intellectual property (IP) and the patents. And I was one of those people. I was trying every way possible to get hold of them: on email, Instagram, Facebook, LinkedIn, phone books, everything. And I knew that every other toy company would be trying to do the same thing, because crowdfunding is a great barometer of popularity.
Our Vice President of Sales, James, mentioned they would have regisistered their IP to an address and that I should call our lawyer, who then flew over to the boys and staked out their home until they turned up. Which they did after two days. As soon as they got to the front door, he called me and handed them the phone.
I told them they needed us over every other toy company in the world. We had a great track record: Bunch O Balloons, in terms of revenue, is the most successful crowdfunded product of all time. I flew down to meet Matt and Mark, and we beat Mattel, the biggest toy company in the world, for the third time. (The others were Bunch O Ballons, Nimuno Loops, and a product called Moonlight, which we eventually pulled out of.)
Jake: You mentioned that the success of Bunch O Balloons is largely thanks to automation. You guys are world leaders in that area, aren’t you?
Nick: The world’s changing at such a fast pace. In the next 30 years, I believe half the world’s jobs will be gone and replaced by automation. We are moving heavily into that space and are working on a project that I can’t talk too much about, but it’s going to be world changing. Way bigger than toys.
Our innovation with automation has given us this ability to be really disruptive in the toy industry. And that’s my brother Mat’s area. Most of our competitors outsource their production to big, oriental toy manufacturers. But we have automated much of ours. Take Nerf, for example. We are now second to Nerf globally with our X-Shot brand. Last year we shipped 27 million dart blasters; this year we are closer to 40 million. Ours are all made through automation, but our competitors make theirs through production lines. So we can really disrupt these well established, ‘commodity’ toy lines with our value product. And we do that by owning our own factories, and the IP behind the automation engineering. We have four more toy categories in our sights, which we’ll enter over the next two years.
Jake: What’s also really interesting is how things work inside the company. Tell me about basing your business in China.
Nick: We originally went to China to manufacture. But it turns out this was an opportune time for other reasons. A bit like Japan a while ago, China has moved from being a manufacturing economy to an innovation economy. There is some insane talent in China. There are eight Ivy League schools here. We take the top 1% of the top 1%, mainly thanks to our reputation, so we have these incredibly talented automation engineers, designers, and marketers. The core of our business is entirely in China. Our business model, of investing in automation and the best talent, is very powerful and has made us very profitable.
Jake: If there’s one thing that’s really special and quite different about your story, it’s your team of three siblings. Mat is the product, engineering and R+D mastermind. your sister, Anna, is the COO and CFO – to run the operations as well as finances is incredible. And then there’s you, a business development and sales genius. How did that happen? Did you all study in different areas?
Nick: No, I think it was all mainly luck! My dad’s got an engineering brain, and my mum just talks a lot. I got part of her, my brother got more of my dad and my sister is a mix of both. Zuru has an unusual mix of Kiwi, Chinese, and our own Mowbray family culture running through it.
Being passionate about our own areas and having completely different skill sets has allowed us to grow quickly. We argue like crazy, and each of us likes to win, and I think that helps us end up with the best decision. We do a huge amount together, too. We have just bought a house together at home in New Zealand in Coatesville.
Jake: All three of you seem so laser-focused on your business. Has it always been that way?
Nick: Our first big hit was a deal we did with the David Beckham Academy. I was about 20. We made a whole load of money, and lost focus. So the three of us sat down, and we said out loud, “From this day on, we are never going to have another unprofitable month.” Not a quarter, half, nothing. We are going to spend every bit of our time, energy and resource on being profitable. And as soon as we made that conscious decision, 10 years ago, every month we have become more and more profitable. It’s funny really, looking back. It was just a conscious decision. I think the global obsession with valuations takes focus away from the nitty gritty of building a really good, profitable company. When you make profit, you can do so many things.
Jake: What’s your vision for the future? Do you have an exit strategy? Do you want to sell? Or is this a lifelong job?
Nick: I’m a never say never kind of guy. We love what we do, and we’ve got ambitions that are far bigger and more world changing than toys. That’s all driven by my brother, Mat, and his automation team. I don’t think that far ahead to be honest. I just think about how we can do better than last year. We can always improve. Not just to become more profitable, but to improve every aspect of the business all the time. We have a relentless approach to doing better.
Jake: University. Is that something you’d recommend? Or should we just get out there and start?
Nick: I was lucky that I had competing parents. My mum wanted us to go off and study, but my father believes that from the age of 18 until you have children, you should be out there taking risks, and experimenting. So Dad encouraged us and was passionate about us not going to university, whereas my mother strongly pushed for us to go!
Yes, of course, get out there as early as possible. The world is moving so fast with artifical intelligence, social, and digital. And our education system is really quite linear in terms of what we are teaching our children. I think we need to start entrepreneurship lessons. Our education needs to keep up with the pace of the world.
Jake: What piece of advice would you give your 18-year-old self?
Nick: Get a mentor early. We were so overly naive and overly confident that anything we did would come together and work. I look back at the number of mistakes we made. Today, I could teach someone so quickly how to not make those same mistakes.
Get a mentor!
And look after yourself better. I’ve probably burnt the candle at both ends for a bit too long. I think building any business you have to be passionate, because it’s hard. And you need to be obsessed, because you have to stick at it for a really long period of time. You aren’t going to get any good if you aren’t passionate and don’t keep plugging away. You only need a little bit of smarts; it’s more about the hunger, persistence and passion. They are the three things which help you learn, and help you get better and better. And whilst that obsession is great for growing businesses, it’s not necessarily that healthy.
Jake: What do you want now?
Nick: What do I want now? It’s not a question I really think of. I compete with myself. I always think about how we can get better. That’s what I get off on, and I enjoy pushing for the next level, and I love competing. When I look at our competitors doing something well, I boil inside a little bit, and I push everyone further to get to that level.
Jake: What’s your billion dollar piece of advice in the world of entrepreneurship?
Nick: The way to building a really profitable business is to keep things simple. Keep looking at how you can simplify, rationalise, and streamline everything. I could spend hours on the power of simplicity, and how that drives a great business. But I’ll give you an example in my industry. Take Lego in the early 2000s. They might have looked fine from the outside, but they were about a year away from bankruptcy. Today, they are worth about $20 billion. And to become that profitable, they changed very few things.
A young guy called Jorgen Vig Knudstorp was brought in as the first non-Kristiansen to head the family firm since it started in 1932. He realised they were making new bricks for each product. That meant more design, manufacturing, packaging, the whole lot. It was expensive. They were pretty much redesigning from scratch every time. Effective immediately, he decided each product would be made up by 75% of existing bricks, and only 25% of new bricks. And he reduced the number of Pantone colours used from 200 to 10. He worked out that 90% of Lego’s bricks were unprofitable. That little tweak transformed the whole business.
Look at KMart. In Australia, 10 years ago, they were losing money. Guy Russo came in from McDonalds and asked, “Why is KMart trying to be all things to all people? How can we simplify things?” So instead of selling 10 barbeques, they worked out who their customer was and what they wanted, and stocked just one great product. He drastically cut down the number of items KMart stocked. That meant less inventory, less quality control, less buyers, and they could go all the way down the value chain and get the best price because they were benefiting from economies of scale. KMart could then spend much more time buying each product, making sure they got a better deal. The changes also cleaned up the shopping experience. Six years later, they are more profitable than the other seven hardware stores in Australia combined. The model was getting more and more complicated, and he just simplified it.
Simplicity is really powerful in building a profitable business. People have a tendency to get more and more complicated, and we have a habit, as we get bigger and bigger, to add more and more products. But that actually doesn’t serve the business very well. Less is more.
Jake: Less is more. Great final words!