Ten Have pitched the idea to a friend, Derek Elley, a serial entrepreneur who had recently left an Internet marketing company and was looking for something new. Elley, who now serves as Ponoko's chief strategy officer and second in command, is just three years older than ten Have, but the men are almost polar opposites. Elley is a marketing guy, an athlete, and a political centrist who tries his best to steer clear of ten Have's left-wing populism. When ten Have started talking up a brave new world with objects being manufactured by household appliances, Elley reacted skeptically.
He let ten Have finish and then went home, sure that his friend was out of his mind. But that night, as he thought about ways that they could turn ten Have's abstract goal into a profitable business, he started to get excited about the challenge. "To be able to take something on a piece of paper and turn it into a product at the last moment possible as close to you as possible," he says. "I mean -- wow."
Oh, my God.
As ten Have prepared to take the stage at TechCrunch, an annual tech conference in San Francisco at which entrepreneurs show off their products to venture capitalists, he was gripped by a sudden wave of fear. It was September 2007, and by most measures, Ponoko was off to a smashing start. Designers in New Zealand were already making and selling stuff, and the local press was covering the company's every move breathlessly. There was money in the bank -- he and Elley had pooled half a million dollars of their own money and raised almost as much from friends and local investors -- and they were sure they would lock up millions more in venture funding after the conference. And yet, as he looked around the room at the other entrepreneurs who were launching companies, he started to worry. There was App2You, a company that made creating Web applications easy; Trutap, a mobile social network; and Flock, a software plug-in for the Firefox Web browser. "All of these companies were really just tiny optimizations," he says. "I suddenly had this feeling that our idea was too big and scary."
Ten Have muddled through the presentation, but to his surprise the audience seemed genuinely impressed. The famed angel investor Ron Conway praised Ponoko during a Q&A that followed the presentation. "I think it's a very unique idea," Conway said. "If they can take the creators of something through the creation phase to the marketing phase, that's significant." In the months that followed, tech and design blogs wrote glowingly about Ponoko. Engadget, the widely read consumer electronics blog, observed, "We've seen start-ups galore founded on strokes of brilliance, and Ponoko seems to be well on its way to building a sufficient client base."
Only it wasn't. Despite scads of Web traffic, dozens of mentions in media outlets, and thousands of people signing up to create accounts, only a handful of people were actually paying money to make things. "The laser cutter would be quiet for days at a time," ten Have recalls. At the time, he wasn't particularly worried. The sales would come as word got out. But the most important thing, as far as he was concerned, was raising venture capital funds. He needed money to hire more software developers and to build a network of manufacturing hubs.
During the first half of 2008, ten Have and Elley made five trips between Wellington and the United States. They did dozens of pitch meetings with top VCs in Silicon Valley and New York. They did panels at MIT and South by Southwest. They hired software developers to help ten Have build the site, and they began negotiating to open a laser cutting office in the United States. They were spending like crazy -- and generating precious little revenue. Meanwhile, the global economy was collapsing, making the prospect of VC investment or a huge jump in revenue seem increasingly unlikely. By midyear, Ponoko had only a few months of operating capital left in the bank.
Ten Have never closed the big deal. The closest he came to raising additional funds was a meeting in the Silicon Valley office of Charles River Ventures. "We found Ponoko interesting, but the geography was a deterrent," says Bill Tai, a Charles River partner. Charles River eventually passed, which ten Have found humiliating. "The idea that VCs are just looking for big risky ideas is one of the biggest fictional stories ever told," he says, still obviously wounded by the final rejection. "They wanted another Twitter."
Of course, the investors were right. Ponoko needed to get serious as a business, and it needed to prove that people wanted what it was selling. But ten Have didn't realize this until he met Fred Durham, the co-founder and CEO of CafePress. Durham, whose company has sales of more than $100 million, showed up unannounced at a lunch meeting ten Have had scheduled with a CafePress manager. Durham told ten Have that he liked Ponoko's business model. He saw one problem: Ponoko was not focused on profitability. "A lot of people come to Silicon Valley and they get confused about who they're selling to," says Durham, who invested about $50,000 in the company and now sits on the board. "Is it the press, the VCs, or the customers? And for Ponoko, the customer was third on the list." Durham told ten Have to cut costs and focus on making existing customers happy.
Ten Have accepted the challenge. He laid off his three software developers and closed the company's U.S. laser cutter operation, which had been outsourced to a machine shop in Pleasanton, California. Ponoko would work out of New Zealand until there was enough demand for a second laser cutter.
