Business Hat

SparkFun answers some tough business questions about its past, present, and future.

by Nate April 26, 2011 6:00 am UTC 72

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I love to wear my engineering hat. But over the years I've had to learn (sometimes kicking and screaming) about business. Somewhere along the path I started to enjoy it so forgive me if I sometimes put on my business toupee (after all, I really shouldn't be running a business).

SparkFun lived in a series of places over the past 8 years. Towards the beginning, I was like any other college student – I had roommates. Pete and I lived together for a glorious run of 4 years. He saw SparkFun and myself change considerably over those early years. The following post stems from an interview conducted by his younger brother, a business student here in Colorado. What originally started as a 'can I ask a few questions' turned huge. It was enough work that I thought I might share it on the homepage so that you too can get an insight into the business side of SparkFun. (Ben - I hope this helps with your class!)

I always like eye candy so here's a breakdown and timeline of some of the major events.

1. Could you tell me about how SparkFun Electronics got started? (When did it start? How did it get started? How big is it now?)

From our About Us page: SparkFun was founded in 2003 by CEO Nathan Seidle, then a University of Colorado - Boulder engineering student. While working on a class project, Nathan realized how difficult it was for the individual to get the parts necessary to make an electronics prototype come to life. After a frustrating battle to get the pieces he needed, he decided there had to be a better way! Nathan then created an easy to use website, maxed out his credit cards on inventory (and pizza) and SparkFun was born.

When did it start? I received my state sales tax exemption on January 3^rd, 2003 which was really the 'legal' start of SparkFun. That was also the day that I got a speeding ticket on my motorcycle. I was so excited that SparkFun was actually a legitimate entity that I neglected to see the speed limit sign. It was pretty memorable. I 'got' to go to court on Valentine's day for that one...

Our size? In 2010, SparkFun had revenues of about $18.4MM. As of April of 2011, we have around 120 employees, up from 87 a year ago (33 new incredible people!).

2. Where do you envision SparkFun Electronics going in the future? (Please describe how you see your firm 1-year, 5 years, 10 years into the future. How big do you want it to be?)

This is a really hard question! We hope to grow by 50% this year (2011) to around $28MM in sales. We expect to be in the 30-50MM range in the next 3-5. 10 years is crazy talk as we've only been around for 8 years. Perhaps $100MM? Probably not. Maybe? Not? No idea. For now I am simply enjoying my work and trying to hold on to this roller coaster of a ride.

How big do we want to be? As large as is necessary while still having fun. As long as we are able to continue to innovate and adapt, enable our customers' success, and so long as it’s needed, I have no preference for a company of 100 or 1,000 people. SparkFun must grow at a rate to fulfill these requirements.

3. What do you tell new customers about SparkFun Electronics and how things are done there? (What do you say about what is available for purchase? About the quality of your goods or services. About what to do if there’s a problem? Who are your customers?)

What do you say about what is available for purchase? That's all rolled up on the website! We post actual inventory levels. For example, we show that we have 34 of an item in stock. This is very different from most companies.

What if there is a problem? We have a fabulous customer service department that helps fix all sorts of problems and inquiries. More info on their Customer Service page.

Who are our customers? We sell to crafters and designers, artists and DJs, elementary teachers and college professors, and yes, electrical engineers. We have seen 5-year olds solder our kits and octogenarians attend our events. We believe anyone and everyone can play with cool electronic gadgets! So go on and let your geek shine - around here, we encourage it.

4. What do you say to new suppliers about SparkFun Electronics and how things are done? (What do you say about how you do purchasing? About the needed quality of what you purchase? About what you want to do if there’s a problem? Who are your suppliers? Do you have formal contracts with these suppliers?)

What do you say to new suppliers about SparkFun Electronics and how things are done? We don't really try to describe SparkFun to our suppliers. Either they simply don't get us, or if they really try to understand who we are their heads tend to explode. Really. I've seen it happen.

What do you say about how you do purchasing? How we 'do' purchasing is a huge discussion – it's crucial to our company but would take many pages of typing. I am very proud of our purchasing department and purchasing system. I consider inventory control one of our greatest assets.

Needed quality: We often order a sample from a new vendor to verify the function and quality of their product.

Who are your suppliers? At this point, we have over 500 suppliers located all over the world. See Made In Earth for more info. If there is a problem with a given supplier, we are sure to have many alternative suppliers ready to fill the void. A problem could be slow shipping, quality issues, or just lead time concerns. Supply chain diversification is really important to us.

Do we have formal contracts? Almost none. I think the only contract we have is with the guys who do the maintenance on our larger laser printers in the building. So no, none of our transactions are really contract based. Instead we operate on a 'we pay you, you send us stuff' type agreement.

5. If you were to tell me about a critical event in SparkFun Electronics past, what would that story be? (When did this happen? What did it teach you and the organization?)

You're kidding right? There's dozens, maybe hundreds. Checkout the SparkFun timeline.

The one that comes to mind is the cease and desist from SPARC International. Read more here.

Or the time we learned that space heaters and laser printers were too much for residential household wiring. That's back when SparkFun was run out of a rental house with 2 roommates and a basement. (Here's a tutorial when Pete was testing wireless links out in front of the house).

Or the time the site got hacked in 2007.

Or the time that the financial sky fell (October of 2008) and our line of credit got kinked right at the time that we needed to borrow against it.

Or the time our purchasing system/tool went a bit out of control and we ended up ordering far more inventory than we should have.

Or the time our website was copied outright.

Or the time the pipes froze and we ended up with about an inch of water on the shipping/inventory floor.

The list goes on really...

6. Can you tell me about learning at SparkFun Electronics? (About leadership or management at your organization?)

These are two very disparate questions.

Learning? We are learning every day. SparkFun is constantly running up against new challenges. We try to teach our customers a lot as well. We also try to be as transparent with our customers as possible. We share A LOT of business information that most businesses horde. This post is a good example.

Leadership and management? We are a fairly normal 'benevolent dictator' type organization. There's me, then 8 directors who help me run the company. You can checkout the org chart - though it's a bit out of date. Oh! I have a newer one:

SparkFun as of March of 2011. Against my greatest efforts to mess it up, SparkFun continues to grow.

7. Tell me about your market, your industry, and your environment. (Has that changed in the past? Do you think that will change in the future? Why or why not?)

The market that SparkFun resides in is a new and emerging market segment. It wasn't really here 5 years ago. It started with micrcontrollers becoming 'flash' based around 2000. Then starting in 2005, the do-it-yourself re-emergence aligned with a handful of great new development tools and we've seen an explosion in electronics interest and awesome projects being created.

Do I think the market will change? Absolutely. Nothing stays the same for too long. I often look at Heathkit as an example. They were huge for decades, but eventually fizzled out. We may have the same sort of destiny if we allow it. Most likely, if we are good, we will morph over time. Nike is a good example. What was once a shoe company is now a sports clothing company. I hope SparkFun lives for a long time, but I don't doubt it will be very different in 5 years.

8. How do you obtain and use market intelligence regarding your competitors and other happenings in the industry?

We have some very large competitors (Mouser, Digikey, Allied, Future, etc) that are 100 times our size. We don't see a lot of benefit from comparing ourselves to these billion dollar giants. However, we are part of a fairly friendly market segment of about a dozen companies of less than 50MM in sales. But because we are all so new it's very hard to form market intelligence on this rag-tag group. Luckily, because we are all so friendly, the easiest way is to simply ask. Adafruit did precisely this in 2010.

9. What would you consider to be the greatest risk you have taken in your business?

Really good question! I have a few answers.

I don't think I would call it a risk, but I do call it trusting in the community. Everything we sell can be used for very good or very bad. We sell all sorts of bits and pieces that can assembled into the next cure for cancer or you can build devices that steal. We steadfastly choose to not throw the baby out with the bath water. Read more here.

We don't generally take a lot of financial risk. However, when we first moved into our current building in 2007 we weren't really sure how we would pay the rent. We went from 3,000 sq ft to 13,000 sq ft and weren't sure if we would grow to fill the space. Here we are 4 years later (expansion in 2008, again in 2010) trying to squeeze into 55,000 sq ft. It turned out not to be an issue.

One of our biggest risks is continuing to nurture our culture at the potential risk to the bottom line. What does this mean? We make it a priority to protect our culture – things like dogs in the workplace, skateboards, no dress code, and loud music. There are a lot of things that seem risky to the "Motorolas" of the world, but to us they are the way we want it done; the fun way. To us, by protecting our soul, we are indeed protecting the bottom line.

10. In terms of decision-making processes, are there situations where emotions affect the way you make decisions?

What an interesting question! Anyone who claims that decisions are made without emotion has an agenda. We are emotional beings by nature. What I have learned over these few years is the need to limit the amount of energy spent on emotions. To give you a sports analogy: Every athlete experiences a tremendous amount of pain. You can always pick out the novices because they grimace to show the world what pain they're in. An experienced athlete will not waste the energy to form a facial expression - rather, they save it for the final leg of the race. At SparkFun, we get hit with so many new challenges everyday, it's best for us to deal with the problem as simply as possible, saving as much time and energy for tomorrow's surprises.

One question that Ben didn't ask was: "What has made SparkFun so successful?" That might be the easiest question there is - it's the customers. We are continually amazed by the stuff you guys come up with and it is our very specific goal to "enable" you to keep creating, innovating, and inventing awesome projects. So thanks for all your hard work and we will continue to do our best to keep you outfitted with the parts and information you need to make your ideas a reality!

So there you have it. We like to be as transparent as possible - so what questions do you have? I probably won't be able to answer them all, but fire away in the comments and I'll see what I can do.