Plug-and-Play Cloud Storage At Home: Cloud Engines CEO Daniel Putterman (Part 6)

Sramana: It sounds as though you had a good product completed before you launched.

Daniel Putterman: We did, and it took a lot of hard work to do it. It was a leap of faith to launch it in the way we did. The clincher was that one of my lead investors is Foundry Group. Brad’s father came up to the booth at CES and told us that the Pogoplug was amazing, so he went and grabbed Brad. Brad told his father that he knew about us and that they were talking to us because they were interested. Brad’s father then told him “No, Brad, this is unbelievable and is going to change the Internet. I want to buy one right now!”

We told him that he had to go to our website to buy a device because we could not sell the device at CES. He told us that we had a Web-enabled terminal and that he wanted to go to the website right then and there to buy a device. He took out his credit card, and I think that is what ultimately led to our first round of funding and our first term sheet. When we finally took version one of the Pogoplug off the assembly line, the entire team signed it and we sent it to Brad’s father.

Sramana: How far did your e-commerce business model take you?

Daniel Putterman: It took us far enough. We knew we needed to expand into a channel. That is a strange and scary place.

Sramana: I keep running into people who have physical products but keep running into problems with channels. I constantly tell them to start a validation process with reviewers so they can approach channels with a validation. You have described a textbook case study of that approach.

Daniel Putterman: You have to be careful right now because companies like Best Buy are looking for emerging products. They approached us at CES. They were ready to do a trial. I knew from my background that there is no trial. You are either in the channel or you are not in the channel. Best Buy has more than 800 stores. You are either in those stores or you are not in those stores. That is a dangerous move to make if you are not ready for them yet.

We brought in expertise into the company that came from the hardware world. We brought in a third-party logistics manager who came from the hardware world who can handle shipping product to a distributor to get the product to retailers and e-tailers. This is so old-fashioned. For me it was a commitment to honor a sales infrastructure that was in place. That has been part of the growth curve of the company.

Sramana: How many units did you sell through your e-commerce store before you started channels?

Daniel Putterman: I want to say that we sold out of our first 40,000 units. The thing about Pogoplug is that when someone wants it, they just go get it. We went into Best Buy in October 2010. Once we went there. we quickly sold another couple hundred thousand units.

This segment is part 6 in the series : Plug-and-Play Cloud Storage At Home: Cloud Engines CEO Daniel Putterman
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