Shadow Test

When Rocky Santa Cruz and Vic Donati first posted an idea for a watch to a collectors' blog, they had no idea what to expect.

Immediately, people started commenting.

In late spring 2011, before attempting their first watch design, they asked watch lovers what they wanted. Tapping into a passionate community 100,000 users strong that follows limited-release watches, Santa Cruz and Donati secured valuable market research with the click of a mouse.

With full-time jobs in Internet marketing and advertising design, Santa Cruz and Donati are well versed in the power of building online support. It wasn't until a family lunch in April 2011 that the brothers-in-law decided to team up and use their talents to build a business. The two decided to take their love for watches to another level by creating Hexa Watches, a company focused on unique timepieces.

Santa Cruz, 32, and Donati, 38, have always enjoyed participating in online discussion forums about new watch releases. Which is why it seemed natural to use the posted threads on WatchUSeek.com, A Blog to Watch, and Watchfreeks.com to solicit advice for building the ultimate limited edition dive watch, a watch that could withstand the water sports they both enjoyed.

Using the requests from these online discussion forums, Donati, a designer with advertising firm 22squared in Tampa, sketched out the first Hexa watch. “Vic can pretty much design or draw anything,” Santa Cruz says.

Once the first sketches were complete, Santa Cruz, who manages Internet sales at Stadium Toyota, posted the drawings and specs online for additional feedback. Using this insight, they built the limited edition K500, a dive watch pressure tested to 500 meters with a light up face, Seiko movement and utilitarian design, ranging in price from $624 to $724, depending on the finish.

In August 2011, Santa Cruz and Donati released drawings and specs of the K500 to WatchUSeek.com, announcing that the watch design would be limited to 500 pieces worldwide, and offering a presale to 200 customers. In exchange for additional feedback on the first watches, presale customers received a 10% discount, first dibs at future Hexa pre-launches and printed recognition in the K500 user manual.

“People were putting money down on this months before it was released, just on specs and mock-ups,” Donati says. “We were selling watches to the guys that are probably the toughest customers.” The two received presale orders from people all over the world, including Singapore, Poland and Australia.

By the time the K500 went into production, Donati and Santa Cruz had secured 50% of deposits from close to 150 orders. The presales alone nearly covered the cost of production. With the help of the University of South Florida Small Business Development Center, they secured an initial business loan of $50,000 to get started.

Production proved to be a lengthy and arduous process as the two were challenged to find all the necessary watch components. They approached Mentor, Ohio-based Lüm-Tec, a watch manufacturer willing to take all of the various components of the watch and help make their drawings of the K500 a reality. Production on the 500 pieces began in fall 2012 and was completed in January.

Since then, Hexa has sold about 75% of those 500 watches, logging $250,000 in gross sales.

The two say finding a long-term stateside partner for production would be the first step in transitioning their after-hours hobby to a full-time business. Using manufacturers in the U.S. would allow them to pick up the phone to ask about a part, rather than email back and forth to a country in Asia, Santa Cruz says, but it would also increase costs. With the time they could save on production, they could move from a model that supports selling 500 watches a year, to one that sells 3,000 a year, he estimates. They also want to secure around $300,000 in funding before taking that step, Santa Cruz adds.

Selling a product before it actually exists, what online businesses dub “shadow testing,” is all about providing excellent customer service, Donati says. The brother-in-laws developed a positive reputation for themselves by sending regular updates on progress and maintaining a presence on the discussion boards.

Online-only business has its pros and cons, Donati says. In some respects, there's no better way to reach customers in a more targeted fashion, with instant access to a worldwide market of watch lovers just a few clicks away. On the other hand, it's difficult to gain sustainable recognition online without having a familiar retail brand name.

For future models, Donati and Santa Cruz agree they may shift to a larger scale with more traditional marketing and a higher quantity of pieces. “We are poised to be profitable after our first go-around,” Donati says. “But we're taking this first try as more of a learning experience.”