Founded in 2006, Shawnimals is Shawn Smith's inventive line of designer toys that includes everything from plush stuffed blobs to personified vegetables and cuddly ninjas. The company has spawned more than 430 characters, a Nintendo DS game, an online narrative, and most recently, a partnership with Kidrobot. Smith spoke to from Comic-Con in San Diego, where he's announcing that a line of toy ninja figurines, the Ninjatown Wee Vinyl series, will be sold in Kidrobot stores. His Shawnimals operation is based out of a small business incubator space in Chicago's West Loop neighborhood. He explains how he got his start almost a decade ago in Chicago, and how the heartland has treated him kindly as a small business owner. What follows is an edited transcript.

I'm from Joliet, which is a small town outside the city. It's sort of a big Chicago suburb, but it's also surrounded by farmland. Growing up there I was always been drawn to creative things. I've been drawing my whole life, and even in high school for instance, I created a comic strip. I did a t-shirt line and sold them to my friends. I don't know why, my parents weren't small business owners, but I always liked making stuff, and I thought, "Why don't I sell it?" In my life there's always been a thread of creativity, and then monetizing it.

I worked at Electronic Gaming Monthly and was a reviewer there for years. I loved video games, but was still drawing. The outcome of this, all this that I'm now doing is all related to the games, and the drawing, and the creating. Over time, it all merged.

Before this thing was Shawnimals, it was a hobby. In August of 2001, I had left the magazine and gone back to college to get my painting degree. And I started making these crazy little things. During that time, strangely, I had a lot of support. The Chicago Sun-Times, the New York Times, everywhere started picking up on it. It wasn't until 2005 that my wife and I were like "what are we really doing here? Are we going to keep spinning my wheels, or are we really going to focus on this?"

At that particular time, it was a situation where we had to decide whether I was going to devote all my time on it and hope to thrive. In 2006, we incorporated. As great as Chicago is, there are a ton of licensing and permits needed. We initially got hooked up with an art incubator, sort of like a business incubator. There are people there doing all sorts of things, from video editing to button-making. The rent was incredibly competitive. That was the first time we were able to move out of our home space and into an office. That was in 2006. Part of that space, we met some really great people. We met these two women from Noon solar.

Two of the people we met were working with the University of Chicago Law School's [Institute for Justice Clinic on Entrepreneurship] project. It's this huge Washington, D.C.-based legal advocate that trains for a variety of things, but mostly for when law affects liberties of small businesses.

As we developed all of this intellectual property [in the form of brands and unique toys that were selling well], we knew we would need some protection. So we applied for the program. We still work with them today. We've had to consult law firms for certain things, but in the beginning, the law center being there was so integral. It easily that saved us tens of thousands of dollars, because they handled all of it pro bono.

It was at this time we started working with Nintendo on a DS game. Because that Ninendo contract came up so quickly after we incorporated, they worked with us on that contract. Maybe people would think we're crazy for working with law students on this 26-page contract, but it was really a great resource. And we learned just an absolute ton about contracts. Anything we deal with in designer toys is a cakewalk after that.

We initially worked also with an organization called Chicago community ventures. They're a not-for-profit that helps entrepreneurs with any aspect of their business. They have people who work on licensing and permits, they have people who work on legal issues. We worked with them and that's how we got turned onto a loan through the SBA.

These things and more, that's why we stayed in Chicago. I have pretty strong feelings about staying in Chicago. We're a pretty small team, all things considered, so we rely on these sorts of resources. We have four main positions, and a few rotating intern spots. That's it.
Recently, we really had to step back and reexamine what we are doing. We knew we could sell a product, but we needed the funding to get it produced. We knew it would sell. We went to family and friends just two months ago, because we needed the funds to wanted to manufacture one of our new characters. We had gone to banks with no luck. No lines of credit, no microloans we were comfortable with taking.

Well, it worked, and it was great. That was one thing. The second thing was focusing on making our website and our store a huge destination. We want people not only to see our world and our characters, but if they fall in love, we want them to see that they can purchase them there. We know our fans are looking for that stuff, and we want to keep them happy. The third thing is when we worked on the Nintendo DS game, that was a huge amount of exposure to us. That brought a lot of people to our website. If anyone was on the fence as to whether we were real, this was the breaker.

What wasn't great was that it came out at basically the worst time ever, the holidays 2008. We really didn't see, outside of the advance, any money in it. The reality of it is if it's not a blockbuster you're not going to make much money off of it. And this was a lot of work for us. We were like involved. We were providing all sorts of narratives and assets. We wanted to invest that sweat equity, because in our minds the payoff was going to be huge. The short of it was this: We came out of it without a guarantee of a sequel. Nothing.

So when it came to the iPhone game, we had the opportunity to work directly with the author. It came back to our roots of self-publishing. And it worked. It came out in May, and we've sold more than 140,000. That's generating a lot more revenue for us than the DS game. The app store: it's really leveled the playing field.

I don't want to sound overly cliché, but it's a really tricky time right now to start up. If you think you'll work with an angel firm or venture capitalist, but in reality, that is unlikely to happen. People need to step back and say "how can we be a little more scrappy?" What can you do instead? Is it a round of friends and family loans? Is it a round of SBA funding? We've gotten a couple loans from lenders that work with the SBA based on our personal credit that allowed us the flexibility we needed. I think it's important to investigate the different routes. If you think you love what you do, look at it really really hard, because you will be tested over and over again as to whether you really can stick to it.