The CEO Turning Passionate Gadget Fans Into Product Designers

(Bloomberg Businessweek) -- Growing up, Steve El-Hage was, in his words, “a phaser.” That is, every few months he would develop an obsession—electronic music, esports, sneakers—and immerse himself in that world. And for each of those phases he’d find an online community of enthusiasts to learn from.

One thing about those communities stood out, he says: When it came to gear, discussions weren’t focused on what was the coolest brand or who had the best marketing campaign. “It was more of, ‘What were the materials, what’s the price to performance?’ ” he says. Compared with the rest of the internet, “the way that enthusiast communities talked about products was just fundamentally different.”

In 2012 that insight inspired El-Hage, with co-founder Nelson Wu, to create Massdrop, a “community-driven commerce platform that was powered by enthusiasts.” The site’s 6 million users select areas of interest—currently there are 19, ranging from mainstream categories such as audiophile equipment, knitting, or watches to seemingly more obscure pursuits, such as mechanical keyboards. That community, El-Hage notes, is more than 2 million strong.

Within each group, users can start discussions and create polls. Then Massdrop will use this information to approach manufacturers and negotiate discounted group purchases, called “drops.” In orchestrating these releases, Massdrop often has enough numbers at its back to also ask the company to make modifications and improvements on the item requested by the users themselves.

When Massdrop approached German audio equipment maker Sennheiser Electronic GmbH about creating a customized version of its HD 650 headphones, the group asked for tweaks to make them more amenable to mobile listening, which included a detachable, shorter cord with a miniplug. And, instead of Sennheiser’s $500 asking price, users got them for $200. Within the first hour, the relabeled HD 6XX headphones received $1 million in orders, and almost 50,000 pairs sold by the end of the drop.

Partnering with Massdrop offers more than a chance to move units, says Keith Kranepool, Sennheiser’s vice president for sales: “To be able to reach this new audience, bring a product to market that they’re asking for, and to be able to get direct feedback and have a communication link with our end consumer—in real time—is a game changer for us.”

The company is looking beyond these kinds of collaborations to its own Massdrop Made line. In 2017 a team of nine designers, engineers, and product specialists (among a staff of about 100) created 80 original items ranging from pocket flashlights to selvage denim jeans. That team is up to 15 people now, says El-Hage, and “in 2018 we’re on track to make about 230 different products.”

Massdrop is betting that gear created in line with ardent hobbyists’ needs and wants will grow beyond any niche. Investments in the company from Kleiner Perkins and August Capital suggest this enthusiast-driven approach to commerce will be more than just a phase.

©2018 Bloomberg L.P.