We recently sat down with Phazon Founder Christian Houle to try to learn what the company has been going through over the past few years since their wildly successful Indiegogo campaign brought them more than $2.1 million. We detailed the tumultuous experience in a write up posted on Dealerscope, but we also wanted to share the full conversation with Chris, which we believe provides deeper insight into what Phazon has faced—from a manufacturing and supply chain standpoint, and what they’re doing to get their product to market as quickly as they believe they can.
A quick glance at the comments section on anything Phazon-related will give you a sense as to how split (and passionate) backers are in their perception of the company. For those who are seemingly inconsolable and beyond able to be reasoned with, they have every right to be upset with Houle and Phazon for the long delays—and Houle understands that. With as big a splash as they made in the early months of 2016, it’s a tough pill to swallow knowing that a finished product is still months away from being ready to ship.
In our conversation, though, I did get the sense that Houle and the team of Phazon engineers are working hard every day to try to get their product and production process right. They certainly could have mapped out their road to market a little better, but through the company blog and intermittent email communication, Phazon is trying to keep backers in the loop and informed about their progress.
Bottom line, Phazon is aiming to get their product out the door in 2018. But whether that’ll be enough to ease the tension with some backers remains to be seen.
With that, let’s dive into our conversation with Chris.
Dealerscope: Chris, we appreciate you taking the time to talk with us and provide an update on what’s happening at Phazon. We met a few years ago at CE Week, and I know you’ve been facing a pretty uphill battle to get your product to market since then. So, what’s the latest with Phazon right now? When do you think you’ll start shipping finished product?
Houle: So, that's been the biggest question that we have had. Taking in all of the experiences from this journey so far—unless you have that final prototype that is doing everything right that is should do, and it looks basically final, it's really hard to put an estimate on when you're going to ship, because it ends up being, 'Yeah, I'm expecting this to happen and then this to happen.' And, because you rely so much on other people, and the fact that it's a highly technical product, there's sometimes that you just don't know if they're going to ship as expected. So you have to basically cut through that.
But the last batch of prototypes that we received was really, really good. We finally have our PCB (printed circuit board) manufacturer nailed down. That took us so much time and made a big difference in our shipping process. Fortunately we were able to get that nailed down though, and if the next batch of PCB are good, which we really hope for because we feel that we're really at the end of this final prototype phase—if this goes well, we'll definitely have the pre-product design done and we'll be able to start final production anywhere in the next few months.
You mentioned the struggles with finding the manufacturer for this product. I don't know if you can get into the particulars of it, but why has it been such a struggle for you guys to find the right partner there?
Really good question, because that's the core of explaining our delay. So, what we're doing is different from the other competitors in terms of, our PCB is something we care a lot about and put a lot knowledge and expertise and advance techniques into so it could be really small but really effective in terms of connectivity, and that's, as you know, a big issue in the truly wireless market. So we wanted to make sure that was really good, and our senior engineer put down some really advanced techniques to ensure that. The PCB, it's kind of hard to visualize it, but it's definitely not the same kind of PCB that we see in our competitors' products out there. It's still within the industry standard, but it's likely at the end of the limit.
So we tried out local and Chinese manufacturers, and it didn't go well because those guys didn't really understand the technology and why we were doing the PCB the way that we were. So, we learned throughout the journey that manufacturers, because they want to have the lowest reject rate per batch, they tend to organize and edit the PCB source file in their own way. But since it's so advanced, they have a really hard time figuring out exactly why we did it this way. But they tend to do some editing on the source file without really knowing what's going on.
And the problem with that is, it's so dense—our PCB—that if you make just a slight modification on it, it's going to mix up the whole experience. It might work a little bit, but sometimes it just does not work. It's not like, say, buying a table in that when you receive it and something's missing you know that that's not what you ordered. A PCB, sometimes the issue might be visual, but most of the time it's not real visual because it's wiring and electrical issues. There are so many chemical processes involved that if you mess up just one it could screw up the whole experience and the product won't work.
So, that was a big struggle, and the most important part of that is that when they do some editing on the source file, they just don't tell us. And that's the big thing because we think they made the product as we requested it, but in the end it's not and we're left trying to figure out why it's not working.
Is that normal for a manufacturer to just edit a brand’s source file for a product like that and just not tell them?
It's somewhat standard because it's rare that you find a PCB that's so advanced and dense that you don't really need—you can play a bit with the source file and it shouldn't make any problems with their client's product. But ours is a real different situation, and they're not really comfortable with that kind of technology, but they still try to tinker with it and it just failed multiple times.
So is this a wider issue with the manufacturing industry in your opinion?
It is because we tried out manufacturers in Montreal, Ontario, the U.S.A., and China, and none of them told us when they played with the source code. We were just left having to dig more and ask questions. And finally when they admitted that they did that and we were knowledgeable of that, we were able to visit with them and explain to them in detail what we were doing. And just before they send the PCB to production we looked over the file again just to make sure that there weren't any edits and that we were OK with the design.
I come from an accounting background. When we do a modification on, say, the financial statements for a client, we would present them to the client so they know what's going on. But they don't really do that in the PCB manufacturing business, and I’m really just not sure why.
I know that the product is still available “for order” on your website. Are you guys doing anything as far as continuing to raise capital? Is Phazon in a good financial standing right now?
We're really frugal on our expenses. We have decent salary, really like on the lower end of what you might expect from our positions. But, for right now, we haven't started to raise capital, because I felt like unless we have the final prototype or something that really is the thing that we're going to go to market with, I might just lose a good amount of time searching for capital and not really being taken seriously. But we do have enough money for production, so that's not an issue. So, once we get in that final prototype, there's a really good chance that I'll be doing a roadshow to see what we can raise there.
I'm sure you've seen the comments on the Phazon Indiegogo campaign page and on your social media account and elsewhere from obviously frustrated early backers—not necessarily unjustly either as they’ve been left hanging for a few years now. What are you guys doing to work through that feedback and communicate with consumers?
You know, that's another journey. When working with B2Cs—directly to consumers like we've been from the start—things can start to go off pretty quickly. The vast, vast majority of our backers, I think they understand what we're facing. I mean, of course they're not super happy about the delays and they get impatient with that. But there are some backers who are extremely angry, and that's just part of the game. They're definitely a minority, but you still have to face them, and sometimes it's just not possible to reason with them. That's unfortunate, but other than that I think we're really doing fine with the backers because we communicate a lot, and, again, I appreciate them a lot because, yes, we're facing delays and they're being so patient and they're still with us.
I know you guys were in a weird situation because you hit the truly wireless earbud market before it really got hot. There weren’t many companies operating in that space in 2016. Your timing was perfect for entering the market, but obviously these delays don't help. Do you regret making that of big splash that early on, or do you think it was good for you guys to get out there when you did?
Early on, when we launched the campaign, we had some working prototypes but that were not commercially viable yet. When you're on the journey to market you think that some part of the process will go easier than expected, and really that manufacturing part is something that was our Achilles' heel, and it was just totally unexpected. But no, I think it was a great idea that we launched early, so we could get some brand equity around that, and so that people could recognize us.
Getting a supply chain—having a supply chain already established definitely would have been a lot better, but those are the things you learn as you go through this game. But again, I think it was a really good idea to launch early and, I mean, of course when we look at ourselves, sometimes it's not too cool when we're having those delays, but when you compare us to other crowdfunding campaigns, it's kind of the average, and usually they're not doing that much of a high-tech product, and they're still having to play catch-up with those kinds of delays.
What message would you want to share with those early backers who have been frustrated by this process?
I mean communication is really important with backers, so really we're trying to deliver updates as often as possible. At one point it was biweekly updates, now it's more marketing updates. But, I mean, we explain pretty much what's happening essentially with the technical development of the product. We refer that to them, but again, we basically apologize for the delays, and we understand that it's not the best situation that people like to be in. But we appreciate their support and understanding. And if they've got any other questions please let us know.