Did you know there are 110,000 unique searches a month on Google for “how to get rid of bed bugs”?

I didn’t either.  No one wants to talk about the fact that there’s a Bed Bug problem in our world.

No one but Cameron Wheeler, founder of ZappBug. He has no problem talking about how he can rid people of one of the worst and most traumatic infestations – Bed Bugs.

I met Cameron more than a year ago at a startup event here in Seattle and, to be honest, my first reaction when he told me what he was working on was “uh what was that again, I thought you said bed bugs!”

Turns out that’s exactly what he said.  I quickly found Cameron to be a smart dude and Bed Bugs to be a killer business.  But this story isn’t all about how to get rid of Bed Bugs (although you can find the link below).   Intrigued as an entrepreneur I wanted to learn more about how he was approaching this massive problem and how he built a physical product company in a web dominated startup world.  This is a story of how three normal guys started a product company that actually generates revenue without seeing a single bug.

Do You Have Bed Bugs?

First off, if you have the misfortune of Bed Bugs, you have to check out their solution.  ZappBug is meant to be a one-stop resource for how to get rid of bed bugs and their main products are multi-sized oven heaters to place clothing, luggage and other stuff meant to kill 100% of the bugs.  Basically, you can throw all your stuff in there and “heat em” just like a washing machine washes clothes.

Brilliant!

They’ve also designed a set of free tutorials that gives you all of the information you need to completely get rid of bed bugs in 8 steps. You don’t need to purchase the ZappBug Oven to use these steps, although it looks like oven is an extremely clever and helpful tool in getting rid of an infestation.

Check out ZappBug.

Starting A Company

“Looking back, I never saw myself as the leader of a startup with the sole purpose of killing bed bugs” says Cameron.   In 2009 he graduated with a degree in mechanical engineering and entered the big world. “But my definition of failure at that time included “working for a large, impersonal behemoth so….”

So naturally, starting a company was his only logical choice.

Cameron knew startups are quite different than large behemoth companies – they are smaller, more agile and generally more fun to work at.   I chimed in and said “But they are also cash strapped!”   Being low on capital they have a harder time building businesses around physical products, which was a problem in Cameron’s case.

So the question he had to figure out was: Is there a way to apply Lean Startup principles to physical products?  Could you actually produce and sell a physical product without a huge amount of capital and actually make a profit?

Turns out…there is. And this is exactly what they are doing at ZappBug.

Solving A Big Problem – Bed Bugs

Bed bugs are a real problem and many of us know someone who has encountered them (even though your friends might not tell you).  It all started when a neighbor of one of the company’s co-founders had bed bugs and they spread through the electrical outlets into units across the building into his apartment.  [Gross.]  Having to deal with this “fun” experience searched and searched and finally found out how to get rid of the bugs.

During the initial research process they learned that there was a real need for better solutions and more information. They found out the market is huge but fragmented. Pest control companies want to come to your home and sell. Bloggers spew tons of words with little actionable advice and sellers want to throw products at you.  They realized there weren’t really any great resources or solutions in market and thus, ZappBug was born.

To Cameron the bed bug market is unique for several reasons.  First, it’s new and a surprisingly large niche.  With approximately 110k unique searches for “How To Get Rid of Bed Bugs” a month, its obvious people are continually looking for a better solution.  According to goggle, that number rose by more than 400% in 2010 – so apparently  it’s becoming an even bigger problem – and bigger opportunity!

Also, the subject is Taboo… so there’s less competition that you would see in niches of a similar size.  There are virtually no comprehensive resources online for how to deal with bed bugs from start to finish.  By helping people get rid of bed bugs in their belongings, you are also helping them save thousands of dollars.  A lot of people panic and unwillingly throw away everything they own.

This further intrigued Wheeler and his team.

After some research, they found the elusive hole in the market – no one was providing high quality products at affordable prices so they decided they would develop a physical product and sell it directly to customers.  The idea was to develop a bed bug oven that could use heat to kill bed bugs in luggage and other personal belongings, saving peoples belongings in the end. “We chose to begin with this product because we had the technical competency to do it. Heat treatment is a proven way to kill bed bugs. The product could be used for both prevention and extermination and would be a great revenue generator.”

The Challenge With Physical Products

Apparently, ZappBug is not Wheeler’s first rodeo.  “Ecowell was my first major startup, coincidentally around physical products as well” says Cameron. “We made environmentally friendly, extremely expensive, vending machines. Yes, that’s right, we made a physical sheet metal box with an electromechanical mess of PLCs, solenoids, pumps, valves, filters, and syrups.  But, of course, we ran out of cash in 2010. I learned a lot from this including the fact that cash really is king.”

Through previously failed startups, he learned the importance of applying lean principles to product development and market testing.  Also, as a product manager responsible for overseas manufacturing at Direct Global Sales, he learned how easy it was to get things made in China.  “When my cofounders and I talked about the opportunity, things began to move quickly. I soon developed a strategy for low volume overseas manufacturing and developing an MVP to bring us into the market.”  

Although the “Lean Startup” phenomenon wasn’t out yet, Cameron had intuitively learned the basic concepts of product validation and cash flow and determined to build ZappBug with those in mind.

This is why I have been so interested in Cameron’s approach to ZappBug, and why I wanted to dive deeper into the mechanics of his business.  It can be very expensive to start a company that makes physical products. Testing and manufacturing alone can require more time/money than software products. And there is the fact that each unit costs money. You need working capital up front to buy inventory. Also, you need to make enough units in each production run to meet the minimum order quantities required by factories producing your product. There is no Amazon Web Services for physical products, just Chinese factories…which are a far cry from the affordable but flexible services we are used to in web services.

But there are also advantages!

“The biggest being that people actually pay money for physical products.  I don’t know about you but I spend about $20 a week on coffee and maybe only about $20 a year on apps,” says Wheeler.

So it was obvious they had some good ideas.  But first, they needed something to manufacture.

We Need A Prototype!

The team had the idea, but they needed a prototype.  “I went to home depot and got a heater, some insulation and a storage container. Then I brought all of my nerd tools home and pulled out my Arduino. By the end of the day, I had a working prototype.”

He basically built an oven from scratch.  The goal of the simple bed bug oven was to heat items and hold them lethal temperatures for a period of time.  After a few days of testing they had a really good idea of the max size and how the product was going to operate.  “We then found a guy on craigslist who used to design clothes for Nordstrom and was willing to sew up some samples for us. After a couple of revisions and a lot of testing, we already had a design that was ready to manufacture.”

About that little issue of manufacturing…?

Producing textiles like their “insulated folding box” (aka bed bug oven) is not feasible in the U.S. because of labor costs and minimum order sizes.  Most People don’t really understand how you can go from a prototype in your garage to a factory sample and then a production run.  Cameron, remembering what he learned at his previous job, started looking for a small factory in China to make their stuff.

So how did they find one?

“We took some pictures of the prototype and sent an email to the factories! We sent out hundreds of emails to manufacturers across China and got replies from most and then just started negotiating from there.”

And before he knew it, Cameron was off to China!

Once things in China were in the works they spent some time developing the website and by June of 2012, everything was done. The product was loaded into a shipping container bound for Seattle. Before the container arrived, they rented out two storage units near the port to store the products.

Everything was ready!

The Cosco Seattle arrived with the goods on June 28, 2012. They started selling the product on Amazon immediately and sales went well.  So well they quickly sold out of the first shipment.  Needing more, they made another manufacturing run and landed their first full shipping container of product in December of 2012.  Cameron passed on the opportunity to talk specific revenue numbers but he did mention they are driving margins “double the wholesale average” and their sales are solid and growing with the latest (and larger) run of heaters.

Lessons Learned

Major lesson # 1: “Chinese manufacturers have a much different concept of what “next week” means.  We had a lot of difficulty getting samples and product out of factories in a timely manner.  Next time I will press harder and be less friendly.  Those guys are tough and everything is a negotiation.  You cannot let your guard down.”

Major Lesson #2: “Get it right the first time.  We had to go though several prototype iterations with the factory. Each one took about a month and it was a painful process.  But we could not afford to do a manufacturing run on a product that we couldn’t sell.  Looking back, this process would have been a lot smoother if we had spent more time perfecting the design ‘state side’ where the iterations would have taken less time.”  

Author’s Lesson:  Cameron is solving a big problem and thus has a nice growing revenue curve to support his business.  With ZappBug, people simply search and find a solution to a nasty problem.  And not too mention, when people have a pressing issue they will not hesitate to spend money on an easy to find solution.  Huge lesson for entrepreneurs out there – solve an urgent problem for people and money will follow.

What’s Next?

ZappBug now has a validated product and the cash to design much more sophisticated products. It’s open road ahead.  “Our goal is to be a one-stop resource to help people get rid of bed bugs.  Anyone coming to our site will find free informational videos and tutorials as well as products that will help them get rid of bed bugs.”  Already, they are looking ahead to larger and more value generating products.  The next will be called The ZappBug Room and will be large enough for a couch or a mattress meant for professionals and consumers.

“I really don’t think this could have been possible just a few years ago” notes Cameron.  Using (mostly free) tools from the modern world allowed a small team in Seattle to quickly build an international operation with very little capital.  “We used google translate, craigslist, wordpress, amazon.com, Alibaba and several other amazing resources.  At the end of the day, our lean approach to ZappBug allowed three normal guys to start a company that now generates enough revenue to pay each of us and grow the company.”

Who knew Bed Bugs could be such a killer business?