Bright Shiny Objects

Toy entrepreneur Jon Capriola learns his biggest business lessons through lessening the load in his wallet.

Like the time a year or so ago when he hired two toy industry veterans. These were pros. People who would use marketing and sales experience to build new business lines at Capriola's firm, Sarasota-based Laser Pegs. The company sells a variety of lighted construction toys and kits, from helicopters to race cars to dinosaurs. Think high-tech Legos that stack up and slide together.

But the hires, says Capriola, brought a lot of ego and not much know-how. He paid them each six-figure salaries before he let them go. Then he hired young and hungry employees who he says wanted to become part of something unique and industry-disruptive. Not puff their chests. Those hires, he says, were gems.

“The ones I paid very little came with all this desire and passion,” says Capriola. “They have broken down a lot of walls for me.”

Capriola, 39, thinks about that hiring lesson a lot these days given the lightning-fast growth at the company, which had $2 million in sales in 2010. Sales have since rocketed, to the point where Capriola projects at least $30 million in revenues in 2014. He declines to release specific annual sales figures.

The firm has 24 employees, including two in Hong Kong who oversee Chinese manufacturing, and it recently added four people to the payroll. Capriola says at least three more positions are open at the company, run out of a 30,000-square-foot facility off Fruitville Road, east of Interstate 75. The Sarasota office handles shipping and all other operations, while the toys are manufactured on a contract basis in China.

Jeffrey Kennis, a toy industry executive and board member with the Toy Industry Association, says the product, and Capriola, are rare finds in a cluttered industry. Even some breakout toys have a seasonal shelf life and fade away, but Kennis is optimistic in Laser Peg's staying power. “It's been a very dramatic ride,” says Kennis, who has a small ownership stake in Laser Pegs. “Jon's a walking, talking creative machine. He's created a wonderful product.”

Laser Pegs, with eight patents in the United States and more than 30 worldwide, are sold in 33 countries, online and in at least 6,000 stores. Prices range from around $10 to more than $100. Retailers that sell Laser Pegs in-store include Costco, Target, HobbyTown USA and Learning Express. The firm has licensing deals with a host of big-name players, including Major League Baseball, the NFL and National Geographic.

The NFL license, actually, is another business lesson Capriola learned through his wallet. His firm spent into the six figures last year to secure rights to sell products with the NFL logo through 2015, what Capriola thought was a huge score. But he learned some brands come with demanding and controlling stipulations that stifle creativity. “They are dictators,” Capriola says of the NFL. “They never allowed us to use our own product design.”

Capriola says Major League Baseball, on the other hand, gave Laser Pegs wide freedom to make its own product packages. The difference shows: The packaging for the MLB product is bright and colorful and folds out, while the NFL's box is black and bleak, with an NFL logo and a list of the 32 teams.

'Rough road'
Lessons like those aside, the challenge to trump all challenges Laser Pegs faces now is how to handle and manage the fast growth.

The firm recently bought a 3-D laser printer, a $130,000 purchase that Capriola hopes will merge the firm's creativity with efficiency. The company also recently spent $1.8 million to restructure the tools used on its assembly line in China, a six-month project that involved a redo of more than 200 product molds. That should also help make things more efficient.

“We are growing so fast we need money to buy inventory,” says Capriola. “It's a balancing act.”

That funding comes from a variety of sources. Capriola utilizes banks, and he also works with several private investors on an occasional order-specific driven basis. One of his current occasional investors is former pro golfer Greg Norman, whom Capriola met through a mutual friend. Capital like that is nice in a pinch, says Capriola, but he says it's “expensive money,” so he doesn't go there often. Another lesson learned through the wallet.

The early stages of the business, back in Capriola's garage in 2006, were also a financial struggle, just like many other startups. Capriola estimates he borrowed anywhere from $600,000 to $1 million in the first three years. “I had a rough road,” he says. “I would borrow money from anyone and everyone who would lend it to me.”

A longtime inventor, with patented creations that include glowing shoelaces and a headache relief band, Capriola tinkered with Laser Pegs for three years. By 2009 he had something he thought could sell. He reached out to toy stores nationwide, strictly cold calling. Within a few months, Capriola began to get some big orders, sometimes straining capacity.

California dreaming
Laser Pegs — the toy itself — has since gone through several iterations and changes. The current version, with modular and open-ended parts, has won numerous industry awards for play and design. Five years ago was a different story, when complaints trickled in about the quality. “When we first started the product wasn't good,” says Capriola. “It was junk, actually. But you have to sell a lot of iPhone 1s and 2s to get to a 5S.”

Capriola grew up poor and says he had a somewhat rough childhood in Florissant, Mo., outside St. Louis. He says he “quit school mentally” in eighth grade and by 10th grade he was a dropout for real. He didn't go to college. He lived in San Francisco and Silicon Valley for several years, where he attempted a career in acting and screenwriting. He moved to Sarasota with his then girlfriend, now wife, in 2002.

By 2010, Laser Pegs, after only six months on the market, surpassed the $2 million milestone in annual sales. The tough upbringing, Capriola says, has both made him hungry for more success and given him perspective of what's important in life. He learned about business, he says, through reading books and some online courses.

“No one wants to work for a company based totally on margins,” Capriola says. “I love money, but I don't want to be part of a company that only thinks of that.”

The Laser Pegs company culture plays off that theme. The office has a late 1990s Internet vibe, complete with employees in funky T-shirts, Converse and the occasional pair of flip-flops. Employees, including several Ringling College of Art and Design graduates, work in open spaces. They often hover over each other's desks to hash out a design or product.

Another unique feature of the office is the inspirational wall art: Nearly every door and wall has a sticky note or piece of paper with a motivational saying or quote. Themes revolve around innovation and work ethic. (See related story.)

Brand building
Even with the fast growth, one challenge Capriola doesn't fret about is the threat of being squashed by Lego — the toy construction industry's Google.

Many independent toy inventors and manufacturers have worries like that, given the top-heavy industry is dominated by a few giants. It would make sense if that worry were exacerbated at Laser Pegs because of the product's similar features to Legos. Lego bricks can even latch on to Laser Pegs.

Yet Capriola says he would love to get Lego, a $4.7 billion business, to buy Laser Pegs. That way Laser Pegs can grow even faster under the flag of the industry leader. Capriola's cultivated a friendship with Lego CEO Jorgen Vig Knudstorp over the past three years, he says, and they chat about once a week. But Lego, says Capriola, rarely makes acquisitions. “I've begged Lego to acquire us,” says Capriola. “It makes complete sense for them. But they feel like we can complement their brand.”

Short of an acquisition, Capriola and his team are focused on building the Laser Pegs brand. One long-term goal is to sell through more online channels where the firm can reach end-users quicker and avoid the complications of big-box retailers.

Laser Pegs also spends a considerable amount of time on two other tasks. Patent protection and improving what Capriola calls OBE: — the out-of-the-box experience a child gets when he or she opens a Laser Pegs product. On the former, Laser Pegs has taken some patent infringement cases to court. “You can knock us off,” he says, “but you can never build it better.”

On the package opening, Capriola aims for childhood delight. “We make sure kids have an out-of-box experience that's to die for,” Capriola says.

Laser Pegs also has a slew of new products in various stages of production. That includes a series of comic books that's also a sales catalog; a line of figures called Peg Heads built on the Laser Pegs concept; and video games. Says Capriola: “We have some amazing stuff in the works.”

Good Quote
Jon Capriola isn't only a passionate toy maker and entrepreneur.

He's also a devoted fan of inspirational work and life quotes. So much so that just about every door and wall of the office at Sarasota-based Laser Pegs, the firm he founded, is adorned with a message.
One of his recent favorites, which hasn't made a wall yet, is from billionaire entrepreneur Richard Branson. “Train people well enough so they can leave,” says Branson on Twitter and LinkedIn posts, “treat them well enough so they don't want to.”

A black and white poster in the firm's conference room — no headline, title or picture of a canyon or waterfall — summarizes Capriola's thought process behind what makes a good business better. The list:

Take risks. Do not play it safe.

Make mistakes. Do not try to avoid them.

Take initiative. Do not wait for instructions.

Spend energy on solutions, not emotions.

Welcome destruction. It's the first step in the creative process.

Focus on opportunity. Not problems.

Take personal responsibility for fixing things. Don't blame others.

Try easier not harder.

There are sponsors, not bosses.

Great communication = fun work.

This story has been update to correct the spelling of Capriola's name.