David Giuliani captivated and inspired us with his description
of the success of his startups Sonicare and Clarisonic, and his latest mission,
the Washington Business Alliance.
For David, it began with far away dreams. Both Sonicare and Clarisonic involved yet-to-be-invented
breakthrough technologies in established industries with mature markets,
dominated by major corporations. It was
high risk, but it was a lot of fun and he accomplished his mission. Both ventures were sold to major corporations
that could move the products forward to take advantage of unrealized
opportunities. Sonicare was sold to
Phillips and Clarisonic was sold to L’Oreal.
Both ventures ended up turning 40 – 60 to 1 on the early money.
Having fun is essential to success. If you don’t have fun, the people working for
you aren’t going to have fun, either. It’s
important to love your people, because they are the ones who are committing
themselves and making things happen. You
love your people by offering stock options to everyone, treating them as
owners, telling them what’s going on, reinforcing good behavior by telling
people who work for you what you like, and by being truthful. Make the environment an alive and thriving
environment with people who are excited to be involved with the risk of a small
company going somewhere and who are happy to be there, not people who are worn
out. The challenging work is inside the
company. By building your people, you
build yourself. It’s also essential for
your family to be supportive.
Brand your product and position it in the marketplace. For Sonicare, they formed focus groups to
find out what people were willing to pay, which was $30 to $50. They charged $195. They didn’t need to satisfy everyone in the
marketplace, only the early adopters. It
was a new product and with a new product, there is no price low enough that
everyone will buy it. Before Sonicare
was introduced into the marketplace, someone with periodontal disease heard
about the product and offered $1,000 for a prototype. That person’s dentist told him that if he
didn’t get his periodontal disease under control, his dentist was going to have
to perform surgery on him. David ended
up giving a prototype to the guy for nothing.
Your early adopters will take care of you over time.
No dental product has ever succeeded without the endorsement
of dentists. With Sonicare, they focused
on selling to dentists and dental hygienists, leveraging their credibility. They went to dental shows. With Clarisonic, aestheticians filled the
leverage role that dentists and hygienists filled for Sonicare. Retailers, particularly Nordstrom, were
important for Clarisonic. Nordstrom was
important because it’s local and has spas.
Public relations was by far the most effective tool in
growing the businesses. They sent their
PR person to the aquarium, where the keeper was using Sonicare on a seal with
periodontal disease. The seal loved
having Sonicare used on him. It was the Seal
of Approval. Sonicare is unusually
pleasant to use, especially for people.
Oprah was fabulous in helping the sales of both
products. Oprah called Sonicare, asking
for 350 units for her show, so that everyone in the audience could have
one. The Sonicare employee who talked to
Oprah initially thought it was a gag, not believing that Oprah would make her
own calls. It really was Oprah. On her show, she told everyone they had to
buy a Sonicare. She did the same thing
for Clarisonic, but that time someone else made the call on her behalf.
With Clarisonic, lots of people were willing to help. David showed a slide with an actress or model
walking down a runway with a Clarisonic.
They didn’t pay people to do things like that. If people love a product, they will endorse
it for free. With both Sonicare and
Clarisonic, it’s a great product that really works and that people love. Both products are based on sincerity and
The rise of the Internet was a difference between the 2
products, which were about 10 years apart.
The Clarisonic Facebook page was chosen as one of the top 20 company
Facebook pages. Customers seeing what
other customers are saying about the product leverages the customer loyalty.
L’Oreal saw a powerful brand in Clarisonic. Brand intensity is measured by the number of
people who are aware of the brand compared to the number of people who use
it. Brand intensity is high for
Both Sonicare and Clarisonic are backed by powerful
intellectual property rights, which were proven in court. The court wins increased the value of the
brands. One of the low points for David
occurred when Sonicare was in a major legal battle with a competitor. The competitor ignored Sonicare, to its
detriment. David realized they could
lose the lawsuit and the business. As he
was sitting in the hot tub one night, David felt a great sense of
confidence. He lives with integrity. He knew that no matter what happened, he
could feel good about what he did.
Although both Sonicare and Clarisonic are under FDA control,
they are not medical devices, so didn’t have to go through a medical device
approval process. They didn’t make
medical claims about these products. Sonicare
is a non classified device and Clarisonic is a cosmetic appliance. Clarisonic works well on acne, but they
couldn’t bring that up. They got around
that by selling an acne cream with Clarisonic, so that they could mention
Sonicare was initially based on technology licensed from the
University of Washington. That
technology was incapable of getting them where they needed to go, so they got
busy inventing something that would work.
During the development of Sonicare, they didn’t have money for clinical
trials. The co-founder is a
periodontist. He used the product on
himself to determine when they had it right.
In setting the price for Sonicare, they set the price to
value rather than cost plus. The price
needed to be higher than the competition, signifying that Sonicare was
significantly better. The manufacturing
cost of about $50 was in line with the price charged. In financing Sonicare, they went the straight
equity route, choosing not to use debt.
Sonicare is built in the U.S., which was crazy in those days. David knew how to run an overseas plant, as
he did it when he was in his 20s. David
believed that with the yield and inventory turns, Sonicare could be competitive
with products manufactured overseas.
Going international was daunting for both companies. They were under fulfilling their potential
and in danger of having others move in.
Both companies were sold at that point.
When the asset is more valuable to the purchaser than the seller, it’s
called “synergy” in business.” In real
life, it’s called “magic.” When selling
a company, make sure that the new owner gets full value for what it
bought. David never recruited people out
of the old company for the new venture.
With Clarisonic, they handed over a good, solid, 5 year agenda.
It takes a lot of fortitude and belief to stand up and build
a venture. With both Sonicare and
Clarisonic, they were builders. They
started out with a few people and built the company into many hundreds. They didn’t stop there. High performers are well on their way to a
new business by the time the existing business is ready to sell.
David demonstrated an impressive knowledge of the law when
describing how to avoid a taxable event when making stock option grants to
David also described his latest mission, the Washington
Business Alliance. The State of
Washington has not achieved its full potential.
The Alliance was created so that people in Washington could take
responsibility for their futures. The
Washington Business Alliance is nonpartisan, across state, inclusive and
The Washington Business Alliance is now in its third
year. It has over 120 members. The Alliance is working to develop a
strategic plan, a vision and specific enough goals to plan around. The current overall goal of the Alliance is
to be in the top 10% of states in the areas of education, health,
infrastructure, environment and governance by 2025.
The members of the Alliance have formed study groups to
study the best practices in the areas of education, health, fiscal governance,
strategic planning and infrastructure.
The Alliance is using this information to engage government, get onto
task forces and help get things done.
For example, the Alliance is working to reduce pollution in Puget Sound,
while working to reduce regulation.
David left his business cards for everyone to take. People who are interested in participating in
the Washington Business Alliance can contact David at firstname.lastname@example.org.
Thank you, David, for sharing your successes with your past
startups and your new calling, the Washington Business Alliance.