Peter Ducato

STEL, LUNO, and Building Meaningful Brands

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I think a good place to start is STEL. What is STEL and how it was created?

STEL is a full turnkey product design firm that brings ideas to market. We mainly invest in working with brands that have meaningful stories or that we feel have a roadmap where we can assist in making an impact, either from social or environmental causes. In the beginning stages, we weren't really able to have too much of a choice in selecting clientele, but over time as we’ve ramped up in size and as our resume has grown, we've brought in some pretty amazing clients to work with.

Looking at your guys' website, you produce some of the coolest shit. Do you seek out your projects and clients or do you just happen to attract a certain type of company and aesthetic?

I would say word-of-mouth marketing has been the only type of marketing that we've been able to effectively bring clients in on. We never approached any of the clients on our site. It all started as a 3D printing company first. We built the first-ever 3D printing company in Santa Barbara and were able to collect all that SEO. We had the 3D printing Santa Barbara website and everything.

I was partnering with an engineer at the time, so with an ME and an ID background we knew as we started meeting with clients that anybody who needed prototyping expertise was also probably going to be going into manufacturing. At the very least they would be wanting to create more units than what 3D printing has the capacity for at the moment. Once the 3D printing services were off and running, we had enough clients to turn STEL into a small, full-functioning design firm. From there, we were able to attract a few good friends in the industry to work with us and eventually established really solid monthly retainers that generated steady income to fuel the design firm.

If somebody wants to start a design firm, I think you need to build strong relationships at the beginning that create a steady revenue stream. That allows you to be flexible and take on unique projects that are one-off clients or partners that you're not tied to on a month-to-month basis. That was the key to STEL’s success. Nomad, Keysmart, EDEC, and a few of these other local companies that we had built connections with, we knew we were gonna be working for years with.

What was the journey like in building the team at STEL?

STEL was started with another engineer who was keen on mechanical design. We then hired on a creative director for the Industrial Design department and also a director of engineering. We had a contractor here or there, but it stayed the four of us for about a year until we started hiring interns. From there we began hiring full-time industrial designers until we slowly built the team up to about 20 total people by 2018. We have since dialed it down a bit.

What made you get leaner?

We downsized because we began to start other companies. LUNO was created and it became a shift in priorities. Downsizing was going to allow me to focus on the e-commerce company that I'm passionate about. So purely that. STEL exists today but we focus on product and visual design. We could have grown the firm but it's hard man.

What makes it so hard to scale a design firm? I've heard this and even lived part of it before. It seems like it’s hard to scale unless you consistently have large companies on retainer to keep feeding you projects.

Honestly, that's what I would allude to. It's the insufficiency of big-time clients who are willing to stick with you. I think STEL would have been able to scale properly if we would have continued to push it for another 10 years. If you look at some of the most impactful design firms, they‘re the ones who started it all like Frog and IDEO. I'm missing out on more of them, but those were the true incubators at the beginning of time when design firms were first getting their start. They got to where they are now through patience, innovation, and consistently producing good work.

The variable is that as you mentioned, it’s securing a big company and contracts that allow you to be more stable, like what Boeing did with Teague, it’s insane. They get work every year with large budgets to build out concept work for aircraft which is a designer's dream.

So how do we get from STEL to LUNO? I’m curious how that was started and where the idea for that came from.

I’ve always looked at it through the lens of, what's the best way to start a company. And I recommend really understanding what are you good at, what is your service offering? Whatever that is, tap into it to build revenue, something that is profitable, to be able to invest in it later. Invest it into something in your future where, when you're ready, you’ll be able to pivot from a service-based company into something like e-commerce where you can create more passive income.

LUNO was that for me. It was an opportunity not to be full-time client-facing, working on something that almost has unlimited scalability. It’s disassociated from the hours I put in and the hourly pay the company received which is really exciting to me.

The cliche business idea story is that I was snowboarding at Mammoth and I didn't want to sleep in a tent so I would stay in the back of my car. After a terrible night’s sleep, I knew there had to be a better way to outfit the back of the car to be slept in more comfortably. So I went overseas to China, hunkered down in a factory and I left with a prototype. On my way back, I stopped in Iceland to take a trip where I was able to test it. After I got back home, I marketed it to our inner design team, started an Instagram account, and then we bootstrapped from ground zero. With the money I had made and saved up, I was able to start investing slowly into LUNO and that allowed me to make the transition. Both companies are currently privately held and we haven't taken a dollar of outside investment.

From there, the other key for me was starting a company that required basically zero tooling costs. Luno is currently all soft goods. You're paying a minimum order quantity, which can still be expensive, but your tooling is like $500, and for a young company, that's amazing. On top of that, there is no requirement for complicated engineering. There's no electromechanical integration of PCB boards or anything that the tech world has to tap into. It is a simpler product offering if you want to put it that way.

Because the product is more simple, how do you address the challenge of copycats or imitations? What measures do you take to protect yourself from product copycats?

I love that question. In these scenarios, it's building a brand. I think with our industrial design backgrounds, that's so crucial. We know how to tell stories and write narratives that really allow people to feel included in what they're purchasing. We tend to go well beyond just the product offering, which is what I think is needed in our world today of Amazon product saturation.

"The companies that purely rely on IP protection, they're slow-moving. As industrial designers, our passion for a category we create in enables us to think deeply and innovate, owing to our immersion in it. We will always be ahead of the competition if we stay in this mindset."

However, you're never gonna be able to completely stop the copycats. It's always going to happen even with IP (intellectual property) protection, but it’s a great hurdle for copycats and competitors of your brand. I am all about it. We have utility patents, we have design patents, and our newest product offering, the Air Mattress 2.5 that's launching next year in ‘24 and is fully patented. We would go after companies if they start coming after us which can be expensive to do, but sometimes necessary. I would say the third and last comment I would add to your question is innovation. The companies that purely rely on IP protection, they're slow-moving. As industrial designers, our passion for a category we create in enables us to think deeply and innovate, owing to our immersion in it. We will always be ahead of the competition if we stay in this mindset.

I can send you a website where people are consistently ripping us off one for one and trying to catch up. However, they have no clue what's on our product roadmap or what we’re thinking about creating next because we're in it, we live this lifestyle so we're always producing new ideas first.

When you work like that, it’s hard for the competition to keep up. We’ve seen the same things with copycats of BruMate in a product space that is identically hard to innovate in. To stay ahead of the curve in your field also requires a great deal of creativity and innovation, I can imagine.

100%. Even with you and BruMate, you guys aren’t a super affordable brand. I mean I’m sure you guys have good margins and with that are able to reinvest the cash you have to fuel innovation.

I believe that when you create a brand that people trust to do the right things, you almost gain the respect of charging more for your product because you’re giving back in so many other ways (because you can now afford it) and enabling the company to continue innovating. It's a win-win for everybody. It’s a much better approach than those margin guys who are scrounging for pennies on the dollar and always trying to play catch up. There’s hardly ever room to make mistakes or innovate with this approach.

Yeah, there's definitely a balance between creating perceived value and true value-add whether that's through added functionality and innovation or through styling, but it’s definitely a balancing act.

How involved are you with the design process at LUNO and STEL?

With STEL, I am a little bit less involved in the drawing/concept creation process. I am involved with all of the client meetings, but when you have a creative director, you try to avoid stepping on any toes. For us, it’s a really helpful position to have in play. Through time and experience speaking with business owners and other entrepreneurs, you start to build a great understanding of what's manufacturable and what path is ultimately going to be best for companies. I would say I bring a lot of the strategy, construction, and product theory to the table but I was never involved in design phases per se.

With LUNO, it’s a bit different. I'm more heavily tied in with the product team because I don't have a creative director for Product quite yet. I'm not doing design and development work, however, I'm always sketching, always in on design reviews, and working directly with the team to flush out a product idea.

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Stress and Mentors

As a 32-year-old CEO, what are your biggest challenges and stressors, both personally and professionally?

I'd say professionally, my biggest stressors or weaknesses are understanding the finances, as a designer, we didn’t go to school studying finances; managing people; and knowing exactly how to scale the company. You try going with your gut on who to hire, who to talk to, and who to listen to that have done the same. Those three things, managing people; understanding finances; and scaling the company are probably my biggest challenges and stresses professionally.

Personally, it's the fact that I don't really have a normal work schedule. Balancing the demands that are put on your shoulders on a weekly basis is tough. And then taking on the criticism of all the things that you could be doing better, or you know, the company is not doing XYZ, or somebody's feeling a certain way. You're responsible for anything that goes wrong in the company, no matter what.

I would say those pressures really start to weigh on you and stress you out. The pressures can affect the relationships you have with friends and family. Running a business becomes your baby and the people in your life can feel underserved or unimportant in these situations because your mind is just constantly thinking about the business. It can be draining for others around you, so I've been really trying to focus on that and offset that by saying, hey work is not always my number one priority. This is not my identity. How do I bring it back a little bit?

Do you have any resources or mentors that you go to for guidance for these types of things?

I do. I have a small board, and one of the board members' name is Dan. I mention Dan because he is my business mentor and now a close friend, and he's been so important to the business as it’s going through its growth stages. Having people to talk to outside of work and about work has been so important for me. I have two older gentlemen that I meet with for personal advice, and then I have Dan who I speak to about everything including topics inside of the company.

Did you have these personal relationships prior to starting the business or did you seek them out after? And had you sought after mentors with similar experiences to what you’re currently going through?

Yes to the first part of that. Dan is the father of one of my best friends here in Santa Barbara. So we definitely had a relationship and friendship before I started the business. We would have dinners together and it got to a point where we were talking about personal life, relationships, and work. He owns a company now too where he councils and trains CEOs, so it kind of lined up perfectly.

As to finding a mentor with similar experiences, no. I wouldn't say experience in a certain area is relevant. For me going forward, I would choose mentors based on their character and someone you inspire to be. Of course, they need to have the relevant experience of running a company or at least a large division of it, which Dan did, but ultimately he is somebody who I aspire to be like. I have noticed in the past that if they're not that type of person, I lose interest quickly over the course of a few months. Alternately, Dan and I will have full conversations that are essentially meaningless, you know? But by the end of it you know it was still a really great talk and I know we're just gonna pick it back up the next week when we meet for coffee or whatever. It's really been great.

Is it hard for him to translate his experience into specific advice for you, or do you think because he's had such a plethora of exposure, he can help you with most situations?

There is a total disconnect between what he does and what I do. He has never launched a startup, so if I could find somebody who has done that to complement the relationship that Dan and I have, that would be ideal. But I would say no, our conversations are more comparable to how you and I can talk. I think a lot of his CEO training comes from his personal growth and I think it’s really important the way he pursues life; he's been through it and he can provide a lot of invaluable insights and advice because of it.

If you take your and my toolkit of industrial design, you could ask us to design almost any product and we would likely figure it out from our experience and we're only getting better at it. Now, are we experts in something like footwear? No. However, you and I would have a pretty good idea of how to approach it, and using our experience in other categories, we could probably set you up in the right direction.

When it really comes down to it, I'm the one acting on it and Dan is there to ask me really great questions, be curious about the topics, and understand it at a level where he can help me process it and set me straight. So I usually don't need concrete answers from him. It's usually like Dan, this is happening, can you talk me through this, or what resources do I need to explore? It's genuinely helpful.

Kind of just thinking out loud with someone who has a lot of experience in the game.

Yeah exactly. I would encourage everyone to seek a mentor if they have the opportunity.  I don't know what it is man, but people later in life have such a gift to give. Being able to meet with somebody that’s like-minded to you, except they are in their 50s or 60s and can share their experience, that's what I also aspire to do.

If you approach with authenticity and express your genuine need for help and are vulnerable in the situation, hopefully, they will recognize the value of giving back and respond positively.

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Living the Founder Life

What advice would you have for someone who has a product idea and wants to launch? I assume there are quite a few people sitting on a good idea that have a decent head on their shoulders and just don't know where to start.

Yeah, it's crazy how often I have these conversations with people. When people come to me when they're just starting an idea, I know exactly what they’re going through at that moment.

It can really go so many ways. You're gonna be investing so much of your time into the idea no matter how small it is. You and I know that even if it's some keychain product, for example, that is going to be sold on Amazon, all the operations that go behind a launch like that are immense. I have come to realize through my experiences that when I’m working on certain ideas that I’m not particularly passionate about, it is easy for me to ignore them and not think about them. As opposed to when I am working on something that I am truly passionate about, it’s a motivator that drives me to wake up each day and dive right into it.

You have to be ready to live the product idea, it has to be your life whether you like it or not.

Yeah, there’s always going to be some level of association with you. I just read some meme that said something to the extent of “your company is not your passion, so set that thought aside and focus on doing good work ” and I was thinking no, I disagree. If I was working on a product where I couldn’t take it out and go enjoy it, or share it with my network or friends in some capacity it would bum me out. It's such a big part of your life that you're putting time into it that you better enjoy it, and it better be worth it. I think there’s a Steve Jobs quote to the point that we don't get a chance to do that many things in life, so whatever you do, it better be damn good, and it better be worth it.

It seems as though things fell into place naturally for you. LUNO operates in a space that you seem to thoroughly enjoy spending time in. Have you always wanted to launch a product, or was it simply your experience camping in Mammoth that sparked the idea and led you to realize that designing a product and launching a company was a way to address a real problem?

The ladder. That moment in Mammoth inspired me. I had previously gone through multiple iterations of trying to find a product idea that I could jump into e-commerce with. All of them had failed or I just became disinterested and decided not to pursue them.

In short, if you are setting out to create a product, really understand what an MVP (minimum viable product) looks like and get feedback on it as early as possible. I think people are so scared of sharing their idea because they're worried that it's going to get stolen or ripped off. Obviously, to some extent, that's relevant but this is your idea and if you're really passionate about it you need to open it up to friends, family, or people in the industry that can give you some feedback. Now it's not always feedback that needs to be taken seriously or critically. They won't understand your entire vision and the product won't be completely built out, so you can get easily discouraged, but there's a time and place where you dive in if you really believe in it. Just keep going.

You also have to think about how you want to raise money for your idea. Do you want to bootstrap? Are you going for funding? People forget about how they’re going to store the product and don't think about how they're gonna ship it. How are you going to market it? Store, ship, market.

Everyone becomes attached to their great idea, but once the idea is fully realized, it’s like cool, now you have to consider all of the next steps in bringing the idea to fruition. The real work comes with executing the idea and promoting it. Are you gonna go out and knock on doors and sell this idea or jump on social media to generate excitement and interest in the idea? It can really start to change the game quickly at that moment just knowing what type of investment has to go into that.

Once you have that initial idea and you decide to act on it, what are the first things that you should do?

The first thing I'd recommend is to build a one-pager. No more than a page outlining your idea. If someone can read that and be excited about it, then you know you're off to a good start. From there, I would build a pitch deck that includes visuals and preliminary designs that can be shared around.

Then start building social accounts or a platform where you can engage with a community to start conducting some form of contextual inquiry. Once you have a prototype, go test it with them and start building a following. Create a splash page on your website with a pop-up where you can collect emails from interested, potential customers so you can notify them when the product becomes available. We've even gone to the extent of doing some A-B testing on online ads. You can get some good feedback on how the ads perform and if you’re reaching who you’re trying to reach.

You can start looking at IP protection too if your idea is pretty fleshed out to understand if you can protect it. Talk with somebody who can connect you with a legal team and talk through a utility or design patent opportunity.

Why don't you think more industrial designers start their own companies? With all the tools and skills at our disposal, you would imagine designers have a leg up.

You know, I look at some of my design friends and some people just don't have the need in their lifestyle to take on that pressure or that type of responsibility. The deeper I get into owning my own company, I see the value in that. I had this conversation with a friend of mine recently and one thing that entrepreneurship can do is bring more income, but let me ask you this as a turnaround: what do you think most entrepreneurs are incentivized by?

Initially, I think the biggest motivator is money. You can see the potential of bringing in a good amount of revenue everywhere you look online. I also think it's probably recognition and a little bit of a sense of accomplishment; I did this; I built this. I think those would be the two major reasons someone decides to pursue entrepreneurship. On the flip side, you have to wake up every morning, ready and eager to solve problems, whether it be on the finance side, the management side, the product side, everything. You're steering the ship and wearing a lot of hats. There’s also a ton of risk involved. It’s a risk in time, a risk of finances, a risk of lifestyle. I don't know, there are probably many reasons entrepreneurship deters designers from starting their own companies. For me personally, I think there's a part of us that makes us our own worst critic and we tend to overthink a lot of the details which equates to a failure to launch.

Money is probably the top answer. If we were on Family Feud that would be the first thing to roll over. But it's crazy because that is so far from what our morals and values should be aligned to go after, right? Sure, it can bring a certain degree of freedom and your own schedule, but that also takes a ton of work to balance out. Between the demands and pressures you assume by being an entrepreneur, you soon come to realize that the freedom and time you thought you’d have, becomes filled with responsibility.

It's such a double-edged sword because it’s important to consider that you may not necessarily  make more money. On the other hand, someone who works at a company like Google can make a high salary and can invest a portion of their income potentially earning more money in the long run. Whereas a business can be financially draining and it may take until you’re 40 before it becomes profitable.

Not to mention the person at Google can stop thinking about their job at 5 o'clock and start back up at 9 a.m. the next morning. Whereas the founder is living it nonstop, getting zero sleep and stressing.

That's why I respect individuals who choose not to pursue entrepreneurship, and sometimes even discourage it, you know? As I get older, I'm starting to understand how much more valuable life is, and have developed a perspective on running a business that prioritizes personal fulfillment over financial success. So in some cases, I would deter people from entrepreneurship. I know it can be a fire inside of you and sometimes you just can't let it go and I'm happy to support people there. But I will always give people an honest opinion. The money and whatever claim to fame that you're thinking about getting, I will let you know, it hasn't always been worth it for me. Sure the outcomes have been great, but the grass isn’t always greener on the other side. When I look at fellow designers or even close friends who are not running companies, I often wonder if they perceive my work/life as better and vice versa.

That may be pretty insightful to some people who read this.

You based your company around what you like to do and it still seems like you get to do a lot of cool shit. Surfing, paragliding, mountain biking, climbing all that. Does that have any correlation to your work? Is it something you purposefully seek out to separate yourself from the stresses of running a company?

Yeah, I think it's a type of band-aid. I think those experiences are best when they're shared with people, but you know, when you get up to that level too, others might not have the same accessibility. I definitely jump around and travel a lot just because I can come out to see you for a weekend and then I get to go see another friend another weekend. That autonomy is nice, but I would say it's not enough to justify the pressures of running a company. I would say that's not worth pursuing entrepreneurship for. Even though for some people it’s that value of autonomy or freedom. I've been in this space since I graduated college, so I'm kind of biased and I don't feel like I have a good picture of how it would be otherwise because I've been living this lifestyle since I started my career. It's hard to answer when I haven't had that full-time career yet.

Is there anything you can share about what you might want to do in the future, knowing what you know now, and what you've accomplished so far?

LUNO & STEL are my focus; however, I have this website called Xploreº Together. It's in concept form, but is an initiative where I'd like to acquire or invest in other outdoor companies and use my backbone of design to help further the impact of designing great products, contributing a portion of the profits from them, and focusing on social impact initiatives. It'd be something similar to a venture capital firm but with better business ethics. Essentially Xploreº is an impact venture capital firm partnering with innovative, outdoors-focused companies seeking to have a greater social and environmental impact. Through capital, community, and expertise, we look to maximize the value-creation of the companies we invest in. That’s the 10-year vision. I still really want to role model what it means to be a great outdoor company first and every department needs to be super solid, but it's just that, take LUNO and replicate it.

Aside from that, I would just like to live out the work-life balance better each day and continue, disconnecting when I have the opportunity to be with the people who mean the most to me in life. I have my faith and I would like to do more ministry work in the future as well. Being a Christian and wanting to make an impact outside of my career is super favorable to me, so I'll hopefully get to do that one day. We'll see, it's all the works.

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Peter Ducato is the Founder and CEO of STEL and LUNO in Bend, Oregon USA.