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Xmi's Sound System

Singapore entrepreneur Ryan Lee had an idea: small, portable speakers. For his company, Xmi, the potential is anything but small

Published: Feb 11, 2012 06:42:12 AM IST
Updated: Feb 7, 2012 02:48:52 PM IST
Xmi's Sound System
Image: Munshi Ahmed for Forbes

Five years ago, Singaporean entrepreneur Ryan Lee was a 29-year-old with a maxed-out credit card, an office in his brother’s living room and a vision to make it big from something small. Today his brainchild, Xmi, has created a new genre of small speakers, turning this niche market into a global brand sold in stores in 80 countries.

While portable music players have been around since well before the Sony Walkman, the age of iPods and digital content on the go has spurred a growing demand for small speakers. Xmi developed the audio technology to deliver high-quality sound with pocket-size speakers and packaged them with built-in rechargeable batteries and an expandable base. No longer tethered to the nearest electrical outlet, people can use the speakers to play their favorite music at the beach, listen to podcasts in any room at home, or give laptop presentations an audio boost at work.

Xmi says it turned a profit in its first year—and every year since—and that last year it nearly doubled its revenue to $23.2 million. This year it says it expects sales to climb to $38.4 million, but it declines to give a profit forecast.

The backdrop to Lee’s success is a Singapore that’s reinventing itself. After decades of building its manufacturing sector, which created a demand for risk-averse workers who spent long hours on an assembly line in return for a steady paycheck, the country has focussed on becoming more innovative. Over the past 15 years the government has worked to remake the country into an entrepreneurial hub—encouraging critical thinking in schools, cutting red tape for businesses and offering aid to start-ups. The number of new businesses registered each year in Singapore grew 48 percent over a decade, to 53,700 in 2010, according to the Accounting & Corporate Regulatory Authority.

Lee’s story began as a child growing up with a large world map on his living room wall. “Every time we walked past it, my dad would say, ‘This is us … this is the world. Don’t ever let your dreams be limited to our shores.’” So he went to Australia, getting a BA in economics and finance from RMIT University and earning a master’s in economics from Melbourne’s Monash University in 2002. He then worked as a business development manager at the Singapore research firm that created Zircon, one of the first Palm-based PDA smartphones, before spending a year in Mongolia with an electronics-distribution firm.

It was after Lee returned again to Singapore, as a regional manager for Qool Labs, a Singaporean maker of digital technology products, that the idea for X-mini speakers was born. He launched Xmi in 2006, using his savings and borrowing nearly $20,000 from his brother, Reuben, who had been working as a private equity lawyer in London and had just moved back to Singapore. Headquarters was Reuben’s three-bedroom condominium close to downtown.

Ryan created a prototype, then used his credit card to hire staff in sales and design. He quickly knew he had a winner, receiving so much positive feedback from inside the industry that he was confident his speakers would sell.

He then made the critical decision not to launch the X-mini in Singapore and instead sold the speakers in Western Europe through distribution channels he secured largely through contacts in the electronics business. “We knew we needed to manufacture in huge quantities,” says Lee. “The company wouldn’t survive as a business if it had to depend on Singapore’s small consumer population.”

Xmi's Sound System
Image: Munshi Ahmed for Forbes
SMALL WONDER Xmi's small speakers cater to on-the-go music demands

In its first year Xmi recouped the initial investment and generated a $550,000 profit. Then it began selling globally, including in Singapore, which now accounts for 5 percent of its revenue. The country’s advantages, such as its mix of cultures and languages, helped  Xmi establish global sales networks and bridge the cultural gap in dealing with suppliers in China, says Lee.

Xmi’s success in developing a new type of speaker—it was the first to sell speakers that could fit in your pocket—has come with its own unique headaches. Within six months of unveiling the X-mini the first copy-cats appeared. “It was a hard hit early on,” says Lee. “We looked like any other fake on the market because we had just one product at that time.” The company quickly produced its next model, the X-mini Max, and also determinedly entered competitions to gain recognition as the creators of the capsule speaker, a term coined by Lee and his staff. Xmi has registered patents in Singapore, China and other markets, but Lee believes the problem demands a business solution rather than a legal one. Because copies appear very quickly, Xmi focusses on upgrading its speakers and extending its product range to differentiate itself from rivals. “You can’t sue all those little manufacturers who will never pay you, and the only person making anything is your lawyer,” he says. “So you might as well forget the money and go back to R&D and make a new product.” The X-mini line now comprises eight models, with the latest addition, the X-mini KAI, offering Bluetooth capability and a built-in microphone for conference calls.

While Lee and his marketing and communications head, Darrelle Eng, insist that Xmi doesn’t target a specific demographic, the company’s online persona tells a different story. Xmi earnestly associates itself with the young and hip, tapping the interests of Generation-Z that reflect “the fun and exciting vibes of our product.” It promotes tie-ups with DJs and nightclubs, and last year it helped sponsor 20 action sports events, including the Asian Formula Drift Championship in Indonesia, a motor race in which drivers intentionally manoeuver cars into sideway slides at high speeds. US pro inline skater Brian Aragon, Singaporean wakeboarder David Ngiam and French music producer Xeum are among the 12 “ambassadors” who represent the speakers and feature prominently on the company’s Web site.

At the same time Xmi eschews traditional forms of advertising. “We are a small company, and we have to reach 80 countries,” says Eng. “More important, we want people to talk about us more than we talk about ourselves.”

Social media is a key to Xmi staying in touch with its online community, keeping customers up to date on news and trends and giving them a platform to share conversations about X-minis. Lee and his product development staff regularly scroll through the online comments, using the feedback to make improvements. That’s one way the company distinguishes itself from copy-cats and competitors. “Of course there will be issues,” says Eng. “We don’t think that denying them will get us anywhere. A [manufacturer of a] fake won’t help you if there are problems.”

Xmi has developed such an expertise in marketing and global distribution that Lee is now in talks with two Singapore tech startups to provide advice in promoting their products overseas.

(This story appears in the 17 February, 2012 issue of Forbes India. To visit our Archives, click here.)

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