Business Hat


I love to wear my engineering hat. But over the years I've had to learn (sometimes kicking and screaming) about business. Somewhere along the path I started to enjoy it so forgive me if I sometimes put on my business toupee (after all, I really shouldn't be running a business).

SparkFun lived in a series of places over the past 8 years. Towards the beginning, I was like any other college student – I had roommates. Pete and I lived together for a glorious run of 4 years. He saw SparkFun and myself change considerably over those early years. The following post stems from an interview conducted by his younger brother, a business student here in Colorado. What originally started as a 'can I ask a few questions' turned huge. It was enough work that I thought I might share it on the homepage so that you too can get an insight into the business side of SparkFun. (Ben - I hope this helps with your class!)

http://dlnmh9ip6v2uc.cloudfront.net/newsimages/SparkFun-Timeline-Spring2011-M.jpg

I always like eye candy so here's a breakdown and timeline of some of the major events.

1. Could you tell me about how SparkFun Electronics got started? (When did it start? How did it get started? How big is it now?)

From our About Us page: SparkFun was founded in 2003 by CEO Nathan Seidle, then a University of Colorado - Boulder engineering student. While working on a class project, Nathan realized how difficult it was for the individual to get the parts necessary to make an electronics prototype come to life. After a frustrating battle to get the pieces he needed, he decided there had to be a better way! Nathan then created an easy to use website, maxed out his credit cards on inventory (and pizza) and SparkFun was born.

When did it start? I received my state sales tax exemption on January 3rd, 2003 which was really the 'legal' start of SparkFun. That was also the day that I got a speeding ticket on my motorcycle. I was so excited that SparkFun was actually a legitimate entity that I neglected to see the speed limit sign. It was pretty memorable. I 'got' to go to court on Valentine's day for that one...

Our size? In 2010, SparkFun had revenues of about $18.4MM. As of April of 2011, we have around 120 employees, up from 87 a year ago (33 new incredible people!).

2. Where do you envision SparkFun Electronics going in the future? (Please describe how you see your firm 1-year, 5 years, 10 years into the future. How big do you want it to be?)

This is a really hard question! We hope to grow by 50% this year (2011) to around $28MM in sales. We expect to be in the 30-50MM range in the next 3-5. 10 years is crazy talk as we've only been around for 8 years. Perhaps $100MM? Probably not. Maybe? Not? No idea. For now I am simply enjoying my work and trying to hold on to this roller coaster of a ride.

How big do we want to be? As large as is necessary while still having fun. As long as we are able to continue to innovate and adapt, enable our customers' success, and so long as it’s needed, I have no preference for a company of 100 or 1,000 people. SparkFun must grow at a rate to fulfill these requirements.

3. What do you tell new customers about SparkFun Electronics and how things are done there? (What do you say about what is available for purchase? About the quality of your goods or services. About what to do if there’s a problem? Who are your customers?)

What do you say about what is available for purchase? That's all rolled up on the website! We post actual inventory levels. For example, we show that we have 34 of an item in stock. This is very different from most companies.

What if there is a problem? We have a fabulous customer service department that helps fix all sorts of problems and inquiries. More info on their Customer Service page.

Who are our customers? We sell to crafters and designers, artists and DJs, elementary teachers and college professors, and yes, electrical engineers. We have seen 5-year olds solder our kits and octogenarians attend our events. We believe anyone and everyone can play with cool electronic gadgets! So go on and let your geek shine - around here, we encourage it.

4. What do you say to new suppliers about SparkFun Electronics and how things are done? (What do you say about how you do purchasing? About the needed quality of what you purchase? About what you want to do if there’s a problem? Who are your suppliers? Do you have formal contracts with these suppliers?)

What do you say to new suppliers about SparkFun Electronics and how things are done? We don't really try to describe SparkFun to our suppliers. Either they simply don't get us, or if they really try to understand who we are their heads tend to explode. Really. I've seen it happen.

What do you say about how you do purchasing? How we 'do' purchasing is a huge discussion – it's crucial to our company but would take many pages of typing. I am very proud of our purchasing department and purchasing system. I consider inventory control one of our greatest assets.

Needed quality: We often order a sample from a new vendor to verify the function and quality of their product.

Who are your suppliers? At this point, we have over 500 suppliers located all over the world. See Made In Earth for more info. If there is a problem with a given supplier, we are sure to have many alternative suppliers ready to fill the void. A problem could be slow shipping, quality issues, or just lead time concerns. Supply chain diversification is really important to us.

Do we have formal contracts? Almost none. I think the only contract we have is with the guys who do the maintenance on our larger laser printers in the building. So no, none of our transactions are really contract based. Instead we operate on a 'we pay you, you send us stuff' type agreement.

5. If you were to tell me about a critical event in SparkFun Electronics past, what would that story be? (When did this happen? What did it teach you and the organization?)

You're kidding right? There's dozens, maybe hundreds. Checkout the SparkFun timeline.

The one that comes to mind is the cease and desist from SPARC International. Read more here.

Or the time we learned that space heaters and laser printers were too much for residential household wiring. That's back when SparkFun was run out of a rental house with 2 roommates and a basement. (Here's a tutorial when Pete was testing wireless links out in front of the house).

Or the time the site got hacked in 2007.

Or the time that the financial sky fell (October of 2008) and our line of credit got kinked right at the time that we needed to borrow against it.

Or the time our purchasing system/tool went a bit out of control and we ended up ordering far more inventory than we should have.

Or the time our website was copied outright.

Or the time the pipes froze and we ended up with about an inch of water on the shipping/inventory floor.

The list goes on really...

6. Can you tell me about learning at SparkFun Electronics? (About leadership or management at your organization?)

These are two very disparate questions.

Learning? We are learning every day. SparkFun is constantly running up against new challenges. We try to teach our customers a lot as well. We also try to be as transparent with our customers as possible. We share A LOT of business information that most businesses horde. This post is a good example.

Leadership and management? We are a fairly normal 'benevolent dictator' type organization. There's me, then 8 directors who help me run the company. You can checkout the org chart - though it's a bit out of date. Oh! I have a newer one:

http://dlnmh9ip6v2uc.cloudfront.net/newsimages/SparkFun-OrgChart-2011-03-16-M.jpg

SparkFun as of March of 2011. Against my greatest efforts to mess it up, SparkFun continues to grow.

7. Tell me about your market, your industry, and your environment. (Has that changed in the past? Do you think that will change in the future? Why or why not?)

The market that SparkFun resides in is a new and emerging market segment. It wasn't really here 5 years ago. It started with micrcontrollers becoming 'flash' based around 2000. Then starting in 2005, the do-it-yourself re-emergence aligned with a handful of great new development tools and we've seen an explosion in electronics interest and awesome projects being created.

Do I think the market will change? Absolutely. Nothing stays the same for too long. I often look at Heathkit as an example. They were huge for decades, but eventually fizzled out. We may have the same sort of destiny if we allow it. Most likely, if we are good, we will morph over time. Nike is a good example. What was once a shoe company is now a sports clothing company. I hope SparkFun lives for a long time, but I don't doubt it will be very different in 5 years.

8. How do you obtain and use market intelligence regarding your competitors and other happenings in the industry?

We have some very large competitors (Mouser, Digikey, Allied, Future, etc) that are 100 times our size. We don't see a lot of benefit from comparing ourselves to these billion dollar giants. However, we are part of a fairly friendly market segment of about a dozen companies of less than 50MM in sales. But because we are all so new it's very hard to form market intelligence on this rag-tag group. Luckily, because we are all so friendly, the easiest way is to simply ask. Adafruit did precisely this in 2010.

9. What would you consider to be the greatest risk you have taken in your business?

Really good question! I have a few answers.

I don't think I would call it a risk, but I do call it trusting in the community. Everything we sell can be used for very good or very bad. We sell all sorts of bits and pieces that can assembled into the next cure for cancer or you can build devices that steal. We steadfastly choose to not throw the baby out with the bath water. Read more here.

We don't generally take a lot of financial risk. However, when we first moved into our current building in 2007 we weren't really sure how we would pay the rent. We went from 3,000 sq ft to 13,000 sq ft and weren't sure if we would grow to fill the space. Here we are 4 years later (expansion in 2008, again in 2010) trying to squeeze into 55,000 sq ft. It turned out not to be an issue.

One of our biggest risks is continuing to nurture our culture at the potential risk to the bottom line. What does this mean? We make it a priority to protect our culture – things like dogs in the workplace, skateboards, no dress code, and loud music. There are a lot of things that seem risky to the "Motorolas" of the world, but to us they are the way we want it done; the fun way. To us, by protecting our soul, we are indeed protecting the bottom line.

10. In terms of decision-making processes, are there situations where emotions affect the way you make decisions?

What an interesting question! Anyone who claims that decisions are made without emotion has an agenda. We are emotional beings by nature. What I have learned over these few years is the need to limit the amount of energy spent on emotions. To give you a sports analogy: Every athlete experiences a tremendous amount of pain. You can always pick out the novices because they grimace to show the world what pain they're in. An experienced athlete will not waste the energy to form a facial expression - rather, they save it for the final leg of the race. At SparkFun, we get hit with so many new challenges everyday, it's best for us to deal with the problem as simply as possible, saving as much time and energy for tomorrow's surprises.

One question that Ben didn't ask was: "What has made SparkFun so successful?" That might be the easiest question there is - it's the customers. We are continually amazed by the stuff you guys come up with and it is our very specific goal to "enable" you to keep creating, innovating, and inventing awesome projects. So thanks for all your hard work and we will continue to do our best to keep you outfitted with the parts and information you need to make your ideas a reality!

So there you have it. We like to be as transparent as possible - so what questions do you have? I probably won't be able to answer them all, but fire away in the comments and I'll see what I can do.


Comments 72 comments

  • Nate, always great to see how transparent SFE is!
    My question is, what fields of electronics (MCU, FPGA/CPLD, etc.) are you guys wanting to move in? Is this dictated by the customers or does SFE tend to guide customers in a certain direction?

    • We move in the direction that we find interesting. Up to this point, we’ve stumbled across the need for various tools, breakout boards for sensors, etc. For example, I’m really interested in Pulse Ox for various applications at the moment.
      So are we going to XYZ technology? Not until we run up against the need for it. I try to think in terms of a 90% use case.

      • Nate, that’s an amazing progress. You guys are really my heroes in openness, you just have your own, sparkfun vibe.
        As to the pulseox, I built one very simple unit using a red LED and your TEMT6000 light sensor connected straight to ADC. Check out my blog post:
        simple pulsoximeter

      • A friend of mine just picked up a cheap one for less than thirty bucks! Amazing stuff.

      • Oooh Pulse Ox would be great!
        Also, while we have your attention, what about a small food safe fluid pump? I have wanted to make a drinkbot for years, but the right pumps are hard to find! If you got a food safe fluid pump that was similar to the vacuum pump you added recently, it would be great! I’ve seen some on alibaba but they don’t usually like to sell in small quantities!

      • Awesome! I borrowed a Pulse Ox from a hospital. They’re fun to play with.

        • Why “borrow” when you can make your own?
          http://hackaday.com/2010/05/02/diy-pulse-oximeter/
          http://blog.makezine.com/archive/2010/05/diy-pulse-oximeter.html
          There’s even an Arduino-based one:
          http://tinkerish.com/blog/?p=181

        • You stole shit from a hospital? Classy. I pay over a thousand bucks a month for self employed health insurance for my family, healthcare costs enough without crap like that.

      • Yay for Biomedical electronics!!
        You guys (and girls) should look at carrying some things for bio-related measurements, like surface electrodes.

  • Excellent piece for everyone to read. Not only does it show how far SparkFun and come from its beginnings, it shows that you can be successful without having to be like corporate America.

  • Keep doing what your doing! It’s great!

  • I’m new to using SFE (just received my first order - I can see many little red boxes in my future) and I wish I would have known about you guys back in 2007-2008 while doing EE prototype-ish stuff in undergrad. The recap of how SFE began reminds me of my own troubles trying to find info/documentation/parts/etc on a number of occasions - if only I had known!

  • Awesome job nate.

  • Here’s what I’m talking about, here’s why I love what Nate is doing here:
    I want to use this part in a robot remote control I’m starting the design for this afternoon:
    http://www.sparkfun.com/products/9032
    Oh Noes! There’s no drawing. But wait! The part page ALSO has comments section! KaChing! dana linked the specs there. Now I know all I need to know to design in the part. I was about to waste what would have been at least an hour reverse engineering a CAD model for the part, too. This part has hard to measure surfaces, I could have easily made a costly error.
    But wait. There’s no way to just wire this part. It HAS to mount on a PCB. This is gunna cost me time and money. Or not!
    http://www.sparkfun.com/products/9110
    The only way for Nate to have better delivered on this part would have been to link the spec sheet onto the part page, and for most parts… it is. But not this one, so someone found it and linked it in the comments. Open Source Community for the win.
    Because of this, I’ll be able to finish the sheet metal design for the robot remote enclosure today. When I build it? I’ll put the design on my site for all to see.
    You just can’t go anywhere else for this. Thanks, Nate!

  • Open Source Business, haha

    • Ditto. Thanks for being open about the business info as well as the tech stuff. Beware the paranoia that comes with age and success. Stay open.

  • This video proves how lenient SparkFun is when it comes to dress code, animals, etc.

  • I’ve always wanted to start my own company, but I’ve never been brave enough to take the plunge. Much respect. I really like posts about the history of Sparkfun. Anyway, it’s Thursday, so where is the wrap up of the race already? Vroom vroom.

  • Hi, I was wondering what software you used to make that org chart. It is really cool, and it could help us with our own.
    Thanks!

  • I for the most part like what sfe is doing, I like work places that allow people a little freedom like dogs and a beer or two, as long as everything that needs to get done, gets done. However, I can find most of the items here for sale at a much lower price elsewhere. Its the markup that bothers me. But I know you have to make money somehow. It pains me to see some of the requests that people make here for parts that they can already get much cheaper if they would just use google a little smarter. The major thing that sfe is great for is break out boards. I remember being able to prototype just about anything on a breadboard without any soldering. Everything came in a throughhole package and with a little veroboard, you could build a working device with great ease. Now its a major pain to make anything without etching a board, where one misplaced trace can ruin your day. Or trying to solder things so tiny you can hardly even see them. Or without breaking out the hot plate. Having a board thats premade, and everything already mounted is wonderful, and really where I feel that I’m getting the most for my money.

    • I think what you’re missing is that SFE is here for the breakout boards you like. The other parts like LEDs are there because customers want the convenience of getting them with their boards, and small quantities may even cost less due to shipping. If you prefer to order your LEDs from digikey, by all means do so. I don’t think SFE will mind. They know they can’t beat larger vendors prices on these parts, and I doubt they’re trying to.

  • Yup, you guys should definitely stick with the red boxes. They are good quality and the different sizes makes them great for organizing all of my parts and gizmos.
    http://tinypic.com/r/wrmi4n/7
    Thats where my current projects live when I am doing my school work (for a BS in Computer Engineering).

  • When are you going to start selling Ham radio projects?

  • The new education department, which I note has now even appeared on the org chart, was one of the more awesome things at the AVC. Having tried to find good science and engineering activities for the six-to-twelve year old crowd, it makes me really happy that you’ve added it. I expect even greater things to come from that!

    • Thank you for the kind words! We had a great time at the AVC and look forward to our future endeavors as well! Stay tuned… :)

  • Ah the C&D… I posted that article to slashdot ya know :P

    • Really? Thank you kindly! It was kind of spectacular to get the response that we did.

  • What tool did you used for creating that beautiful tree?

  • I hate your website. I pop over to see what’s new, and POOF! a whole hour and a half has disappeared. Again.
    RE: “the modern rule is any business should grow large enough to sustain a space program.”, how about
    High Altitude Balloon Launch
    http://www.sparkfun.com/tutorials/185

    • Sorry John :) Thanks for reading.
      And I’m still waiting for a call from a farmer about that lost payload. I need to launch again this year… Not enough time!

  • Hey,
    Here is my question … any advice for someone “arriving on the market” ? I developed several electronic stuff in the past months, including some pretty high end units (flight controller), and I have 2 options :
    - The current market leader - a German company - tested it and wants it to disappear (big cash …) and employ me;
    - A competitor - an Italian company - wants to produce it (maybe bigger cash, maybe not).
    Things to do / not do ?
    Regards,
    Thomas.

    • Depends. What’s more important to you?
      1) money
      2) helping people making cool projects
      > and working for a company that prefer buying competitors rather than compete in the market

      • The beauty of the Sparkfun concept as realized is that money can be made helping people make cool projects. I agree with where you are going, but the tension between the fun and commerce is a lot more artificial than we think.
        I happen to work for an electronic automobile parts manufacturer; the industry is full of places that are unpleasant to work for, but ours is not. Engineers who come here after working for one of the others in our sector refer to our place as “Wonderland” and “BizzaroWorld” because how much we encourage innovation and initiative. We are a billion+ dollar company, and it is fun to work here, but it is because of conscious decisions made as we grew to keep the organization flat and funky. It can keep working even as SF grows, I suspect, but choices to maximize some things at the expense of marginal profits in the short term are not bad business when the result is that you get a fiercely loyal workforce ready to do something better every day.

        • Hey,
          After an update mail, the Italian guy is coming tomorrow directly from Italy to test the unit and talk business.
          Money is always important … having fun (and my family) is the most important.
          Regards,
          Thomas

  • Coolz! That looks awesome. I didnt know Open Source Hardware was such a lucrative business…btw what was the Cease/Desist Order for?

  • seems like Trevor and Matt have the most responsibility other than Nate. TJ seems redundant, only one person he is responsible for, also Lindsay L, C seem redundant. Is Orange and Green production and shipping?

    • Orange is Production, Green is Operations (which includes Shipping). As far as redundancies go - we don’t really think about humans as being redundant around here. Each person on that org chart brings something to the SparkFun table. The “Lindsays”, of which I am one, just branched off to form a new department (Education) very recently. Take my word, TJ is by no means redundant :)

      • In our house SF education is “ the Lindsai”

      • I merely meant from a chart observational perspective. TJ is probably the bomb, no devalue meant. :P
        LOL
        You are all important !!
        :)

        • “Well-well look. I already told you: I deal with the god d@mn customers so the engineers don’t have to. I have people skills; I am good at dealing with people. Can’t you understand that? What the hell is wrong with you people? ” - Tom Smykowski

  • For setting goals, the modern rule is any business should grow large enough to sustain a space program.

  • The openness with the business stats is greatly appreciated, and quite useful for gauging the growing maker movement which I think is one of the best things of the last decade. I don’t see an end in sight to it’s growth, SFE will smoke past $100MM.
    Did you have a date scheduled for the SFE IPO…?

  • I never knew you were hacked. What happened?

    • Long story. It was a re-direct hack. SparkFun search redirected to a soccer site. Very weird. That was the day I realized that we needed a full time person handling the website. After a few weeks, it became the IT department.

  • Nate & Team;
    Thanks for give us innovative solutions every day,keep going¡¡ From Chile.

  • Go public and give shares to all long-standing purchasers/friends of SparkFun.

  • I like the org chart. Everybody is connected to somebody else… except Nate!

  • truly impressive!

  • Great interview, Nate. Seems like it’s just about every day that I find something new to love about SFE. From people to products to the way your business operates, and treats not only its own, but those of us who come to you for all of our nerd needs. Thank you again for all of that, and for your unbelievable sense of openness and transparency. I’m looking forward to watching - and following - your direction in the future.

  • thanks for the awesome blog post!
    very inspiring!

  • Inspirational. I have a collecion of SFE red (shipping) boxes, and know it will be growing as this site continues as always matching my interests.

    • Thanks! I too am amassing a collection of red boxes. They double as fort making materials for my nieces and nephew.

      • Funny! One of the great extras of buying from you guys is the boxes! My wife loves them, and while she is only marginally interested in what I am doing with the stuff that comes in them (like when they make a bunch of noise or do cool blinky stuff) she always admires the boxes. She says that jewelry should come in them, and I told her that to a hardcore nerd like me, it does.

      • Here is my 5 foot tall collection of SFE Boxes: http://flic.kr/p/9C7qy1

        • There’s a cameo of one in a video I (re)made using Jeri Ellsworth’s existing soundtrack: http://www.youtube.com/watch?v=os1klnbKRbM&feature=watch_response

  • I guess only Lindsay’s can work in the Education Dept?!

    • FYI - We accept legal name changes…
      :)

    • This indeed seems to be the policy they have over there. I’m not complaining, though, as they’ve been awesome in the few weeks that their department’s existed! :)

  • Nate, its really cool to read this. Sure has come a long way! Thanks for taking the time to answer Ben’s questions!

    • Hey Pete! Glad you like it. It’s been a crazy ride since you and I lived over on Talbot. I hear the folks that live there now still get spam mail with SparkFun stamped on it!

  • Thanks to Nathan Seidle for creating a worthy successor for the long lost Heathkit. We love your company and will continue to support it with our credit cards and our word-of-mouth.
    However, LadyAda over there at AdaFruit is more alluring than Nathan!

  • Wow, you’re just a young one, aren'tcha Nate? I remember when I was your age. We didn’t have no fancy “Internets”, you couldn’t get no “Breakout board” for a part. You had to break that part out of whatever it was in with a rock and solder to it directly.
    Now? It’s a glorious time to be alive! Open Source! If I want a thumb joystick on my robot remote control, I can just order it! And a breakout board too! I don’t have to sacrifice a game system in some arcane ritual to the Prototyping Gods to get the part.
    Thank you, Nate! Good job!

  • Cease/Desist? Who did you piss off?
    Also what’s the story on your getting hacked?


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