From a garage to $50M in revenue

Jesper Thomsen is the co-founder and CEO of Soundboks, which is the world's first battery-powered speaker with concert-level volume. He launched the company in 2015 and quickly went from building speakers in a garage to leading an internationally renowned brand with 100 employees and $50M in revenue. In this episode of Founder Secrets, he takes us behind the scenes of his entire journey, from building the very first speaker at the age of 16 to the challenges of transitioning from being a founder to being a CEO.

Finding product-market fit instantly

We have previously discussed this Paul Graham essay (How to get Startup Ideas) in other episodes of Founder Secrets. But it’s worth reiterating that "the very best startup ideas tend to have three things in common: they're something the founders themselves want, that they themselves can build, and that few others realize are worth doing." This is precisely how the Soundboks journey began.

It all started 12 years ago, when Jesper was just a 16-year old. “I wanted to go to a Danish festival and have the best camp and parties,” he recalls. “To do that, I needed the best sound system. I built one, brought it to the festival, but it lasted for 20 minutes before dying and never coming back to life. I realized there was a problem and that I wasn't the only one experiencing it.”

So Jesper and his friends started building more and more portable speakers. "A friend of ours asked us if we could build speakers for her camp. We thought, 'If we're going to build one, we might as well build a few.'" So Jesper posted an ad on a Danish marketplace without high expectations. "It was just a wooden box with some speaker units and a battery on the side, and we wanted $1000 for it," he explained. "We thought we could sell two, maybe three speakers. Instead, more than 200 people wanted to buy. That was when we knew we had something that we could turn into a business.”

So Jesper launched Soundboks in March 2015. "We reached product-market fit pretty much instantly,” he says. "Because we were building the product for ourselves." This is a testament to the importance of creating something that people truly want. No marketing or growth strategy can be as effective as solving a significant problem that people are willing to pay for.

Getting into Y Combinator

Y Combinator is perhaps the most renowned startup accelerator in the world. Its portfolio includes companies such as Airbnb, Reddit, Twitch, Coinbase, Quora, and Stripe. In 2015, Soundboks became one of only three Danish startups ever accepted into the program.

"It was in the winter of 2015," Jesper recalls. "My co-founder made a drunken bet about whether or not we could get in, so we applied.” Of course, the main "secret" to being accepted into YC is to have a good product and team. However, knowing how to pitch your startup to them can also influence the outcome.

"Your application," Jesper explains, "needs to be super short, succinct, and use honest and clear language without any marketing bullshit." For example, the first question of a YC application is to describe your idea in 50 characters or less. "Originally," says Jesper, "I wrote 'Great sound anywhere, anytime.' Then I had a call with an ex-YC alumnus, and she asked me, 'What the fuck are you guys building? Is it a streaming service? What is it?'” And that's how "Great sound anywhere, anytime" became "The loudest battery-powered speaker," which led to their acceptance into the program.

At Wefunder, we often provide advice to founders on their pitch decks. Sometimes, even after going through an entire deck, it's still unclear what the startup is about. The pitch reads along the lines of "AI-powered, data-driven platform using cutting-edge predictive technology, seamlessly integrated within a dynamically scalable, cloud-native infrastructure." This is a big mistake when pitching to investors. The longer it takes for them to understand the idea, the lower the chance they will invest.

Manufacturing challenges

Scaling production from a few hundred units to tens of thousands is one of the most challenging tasks for hardware companies. Scaling too fast without the right structure in place is often a recipe for disaster. That's why many hardware companies that try to scale too fast end up breaking. When you grow sustainably, you allow yourself to make some mistakes and learn from them.

"The first 400 units were rather easy," recalls Jesper. "We bought stock parts at the local hardware store and built them by hand in a garage. However, it was very difficult to scale from 400 units in 2015 to 5500 units in 2016. We had a lot of trouble outsourcing manufacturing. We made a lot of mistakes.”

The initial mistake was attempting to work with large, tier-one manufacturers right from the start. As Jesper puts it, "I think that was a mistake because we were simply too small for them. They didn't care about us. We built the first 1000 units with them and then they ditched us."

After going through that negative experience, Soundboks moved to a local European manufacturer. "That was a good decision," notes Jesper. "However, the manufacturer could only assemble the products and not control the whole process. We had to purchase different components from various vendors." According to Jesper, this was a serious problem, as it was difficult to control from an administration and supply chain perspective and it was also detrimental to working capital.

Striking a balance: Brand and performance marketing

A common pattern among early-stage consumer brands is to spend almost 100% of their marketing budget on performance marketing. And that's understandable—with a small budget at your disposal, you might prefer to spend it on activities that can lead to the highest short-term ROI. However, the next step to becoming a long-lasting consumer brand is to move towards a better balance between brand and performance.

One of the lessons learned at Soundboks is that what works for brand building does not necessarily work for performance marketing. Jesper explains, "It's always a tricky balance between brand and performance because it's difficult to do both at the same time. For example, when we launch products, we create one big, brand-oriented hero movie. In the past, we've tried to create clips of that to use in performance marketing, but we've never really gotten that to work properly.” That's because performance marketing, for example on social media, often works best with creatives that are more similar to organic content.

Soundboks also works with many small communities around the world. They donate speakers and support them with their events, which become "powered by Soundboks." While these kinds of activities might not drive any short-term sales, they can be very effective for long-term brand building.

Building a 100-person team

"I think one of the reasons why we succeeded at Soundboks," Jesper explains, "is that we were extremely fortunate to work with people who are not only highly talented but also helped us build our company's culture. I trust them from the bottom of my heart.”

That has not happened by chance. Jesper notes, "From the beginning, we have always hired more for mentality than for skill, looking for people who are willing to learn with the same tenacity as us founders." They have then codified this culture into three fundamental values:

1. Always Aspire: "We always have high ambitions," says Jesper. "Always try to do better, both as individuals and as a business."

2. Be brave: "We want to be a place where you can be your whole self and not just a professional, a place where it's okay to have a bad day outside of work. And it's fine if that affects you at work as well," Jesper says. "You have to be brave to be your whole self.”

3. Champion community: "This is our most important value. It used to be 'Soundboks over ego'. It means that we don't have room for people who will step on others to bring themselves up, but only for those who will build others to build themselves up.”

Having company values is a good start, but it's only half the job. The other half is ensuring that team members live up to those values, which is the difficult part. "During performance reviews,” explains Jesper, “we focus 50% on what we do and 50% on how we do it, which means whether or not we are living up to our values."

Becoming a better leader

Building a startup and scaling it requires two very different sets of skills. That's why the biggest challenge for founders is often transitioning to being a CEO and a great leader.

As Jesper puts it, "Your job as a CEO is to make sure there's money in the bank, hire a great team, and ensure they work well together. You must set a clear direction and communicate it effectively so the entire company understands.”

The problem is, as Jesper puts it, that "Many entrepreneurs feel comfort in chaos. That's why they start companies, that's why they're good at it." And that's why, even for him, transitioning to being a CEO came with a great deal of challenges.

"I have some very clear weaknesses," says Jesper, "that could have made me unfit for the role if I hadn't worked on them. I'm not communicative enough, I love taking risks, and I'm not very structured. Sometimes I haven't been clear enough about our direction, and that has resulted in too much chaos.” According to Jesper, working on becoming a better leader is key and there are three main ways to do that:

1. Coaching: As Anna Gudmundson said in the very first episode of Founder Secrets, "You don't have to learn all the lessons the hard way. Others have been through it before." And Jesper agrees. "I've taken leadership coaching for the past seven years," he says, "and it has played a massive role in who I am today, both as a professional and as a person.”

2. Peers: Another way to become a better leader is to seek advice from people who have been through a similar journey and faced similar challenges before.

3. Introspective work: No matter how much advice you receive from others, it is still critical to engage in introspective work, such as reading books, meditating, and journaling.