We’re getting a lot of messages right now asking where the hell the headphones are, which is fair enough. Pretty soon someone will probably stop us in town and go, "is this the headphone guy". Luckily the bailiff hasn’t taken anything, and we haven’t gone bankrupt either. Yet. The long-awaited headphones are currently being shipped to customers :D
We’ve tried to reply to everyone, but thanks to the “Business Finland subsidy shitstorm”, the messages have started getting a bit more aggressive after someone found us on the published subsidy lists too.
People have tried to blackmail us with negative social media attention and suggested that we must have some special reason for hoarding headphones instead of delivering them to customers.
Maybe this tells you something about the amount of feedback that’s piled up: the company’s first employee was hired to handle customer service, because the shareholders simply don’t have time to answer everyone.
At this point, it’s probably best to just lay everything out in the open and let everyone make up their own mind.
Last year we developed noise cancelling headphones, which we got on sale toward the end of the year. The development work and the first orders were financed with personally guaranteed borrowed money, because in 2018 the business wasn’t exactly huge. The headphones, and vacuums, and robot lawn mowers, and so on, sold just fine last year, and in the end we were left with a princely profit of 71 thousand euros, when the company had basically no expenses at all.
The shareholders didn’t take salaries, our own home was the warehouse, and there really weren’t any other costs besides product development. We wanted the company to be left with at least some money so the business could be developed. The dream was that maybe one day this could become a job and a living for us.
Because all the money earned in 2019 was going to be tied up in the spring headphone order, we decided to keep the sales channels open and allow pre-orders. Looking back, that probably wasn’t the smartest move, because this is where everything started going to shit.
Corona catches everyone off guard
First there was Chinese New Year, when the whole of communist China shuts down. Finland didn’t even do that during the state of emergency. We agreed on the deal and the price, but the actual order could only be placed after the New Year.
Well, the Chinese told us the headphones would be ready by the end of February. After that, the shit hit the fan right as people were ordering more and more headphones. China suddenly shut down, and there was no reliable information at all about deliveries. The manufacturer promised delivery in March instead, even though it had originally been meant for February.
We first sent customers a notice by email and on Facebook about coronavirus-related delays on 3 February. We said that “we can place an order for more headphones no earlier than 9 February, and delivery time will be a month if we’re lucky, more if we’re not”.
We informed customers about delays a second time on 11 February. At that point we still couldn’t place the order, and said that “we’ll be able to deliver more no earlier than the end of March, depending on how quickly China can return to normal operations”.
We informed customers a third time on 15 February, when we said more headphones would arrive no earlier than the end of March. That information was based on what the manufacturer told us about delivery times. Earlier schedules had held up, but in this situation they were too optimistic, and we believed them.
Hardly anyone in the world could have guessed how much corona would affect everything.
Schedules keep moving
Once the factories in China reopened, production finally started in early March, and on 19 March we announced that “production is running at full steam”. At that point the products were expected to arrive during the week of April Fool’s Day, meaning early April. There were delays here too compared to normal, because all the components had to be waited for. Naturally, our factory’s subcontractors and the country’s component manufacturers had also been shut down in February.
Normally all ordered headphones are delivered in one go. Because we were in a hurry and mildly panicking, we asked the Chinese to send whatever headphones were already finished and then send the rest right after, no matter what it cost. We informed customers of this on 26 March and predicted that the first batch would arrive in the first half of April and the second one at the end of April.
By 8 April it became clear to us that manufacturing wasn’t the only challenge. Because passenger flights had been cancelled and the whole world was panic-ordering masks, we now had trouble getting transport. The headphones had been waiting since the end of March for a free spot on a cargo plane so they could be brought to Finland.
As a bonus, the shipping companies pulled a Caruna and doubled shipping prices with a one-sided announcement. We told customers all of this on 8 April.
The first batch finally arrived to us on Friday 17 April, and the headphones for the people who had waited the longest were in the mail on Monday. The rest of the first batch should be shipped during this week as fast as they can be packed and sent. This batch should cover orders up to the latter half of March.
More headphones should arrive for us next week, after which the stock situation should be such that they can be delivered straight from the warehouse. You can also be sure that from now on these headphones will only be sold from stock.
Corona money
Because a company’s business can’t, or shouldn’t, be built around one product forever, we’ve been constantly developing new products and services, just like any young company does.
We’ve looked for funding from investors, finance companies, and banks. In the end, earlier product development costs had to be financed by us with a loan, without really knowing how it would ever be paid back. And somehow that turned out to be worth it.
Investors think it’s stupid to go compete with giants like JBL and Sony, and there’s nothing remotely sexy about our business. From the bank’s point of view, the only way to get money is to sell your children into slavery, mortgage your house, and sign in blood a paper guaranteeing eternal debt prison if things go sideways. Even so, we have taken bank loans with our own personal guarantees.
In March, the so-called corona subsidies from Business Finland became available, and there’s now been a lot of noise about them. We don’t want to comment on whether the subsidies have been misused somewhere or applied for on shaky grounds, but our conscience is clean. When the state started pouring, we put a bucket underneath.
Business Finland said it would offer support of up to 100,000 euros for development projects with total costs of up to 125,000 euros. The criterion was that the corona epidemic had to have substantially affected the company’s operations, and the purpose was to develop new business or operating models that “improve the company’s opportunities during and after the disruption caused by corona. The measures must aim to create solutions that are new to the company in relation to products or production.”
Burbot from Finland
As described above, our business has been very vulnerable. We are practically dependent on China, and shutting it down because of corona nearly managed to piss away the whole business. Not to mention the transport problems caused by corona.
The purpose of Valco’s project is to bring products to market that are not dependent on the same supply channels and to try to start production in Finland. Exactly what Business Finland intended the funding for.
That’s right. Our goal has all along been that we could proudly be a Finnish manufacturer. We haven’t had the means to do it, and we still don’t on our own, but we’ve already opened discussions with several potential partners. Finland just doesn’t yet have the right infrastructure for doing this. Together with other companies, though, we can do it.
Our goal is that in the future we’ll have our own Valco products, designed in Finland and manufactured here or elsewhere depending on the model, that are high quality but still affordable enough for anyone to buy. It may be a crazy idea, but it’s ours.
With the help of Business Finland, we’ve been able to buy Finnish design work for our upcoming model, and it has made it possible to hire two people for product development and a third long-term unemployed person, whom we otherwise would not have dared to hire.
This isn’t even really about corona-related courage. It’s about the fact that we don’t want to hire anyone unless we are sure we can pay their salary. An entrepreneur is always responsible for the wellbeing of employees.
The entrepreneurs themselves still get their main income from elsewhere, because we look at this in the long term. Besides, we have personal experience of what it’s like to go work somewhere and then suddenly find out the work has dried up because the company didn’t actually have the money to pay. Valco Oy will never be that kind of employer.
In addition to domestic production, and production outside China, Business Finland funding is being used to develop a completely new kind of business that is 100% export business. The fact that this project has moved ahead this fast is also entirely thanks to Business Finland. We’ll definitely tell you more about that later.
Is it even worth doing anything here?
For some reason, all the reactions companies have been getting from a certain small but loud minority don’t exactly encourage anyone to build business here in dear old Finland. Mostly it just makes you think maybe we should do a Pentti Kouri and leave.
Luckily, most of our customers and followers are sensible people and understand how difficult the situation is for almost every company in a global mess like this.
We are living through a highly exceptional situation that may happen only once in our lifetime. Corona will probably be the defining experience of our generation.
The whole world, except Sweden, is in a state of emergency, and air freight prices are doubling every week even though for the first time in history the price of oil was negative today!
Even though it’s scary, we’re grateful that this is not a military crisis but a civilian one.
Anyway, we like you, and we hope you’ll stick with us on this adventure. We’re trying to establish Valco as a stable operation, hire more people, and develop something as weird as headphone manufacturing in Finland.
ps. If none of the previous announcements reached you, it’s probably a good idea to follow our email list.
pps. I’ll sell this company the second someone wants to buy it, but nobody will anyway because this business makes no damn sense.
