Larry Kay has won awards and endorsements for his DVD that aims to teach preschoolers values through pet care.
His investors include a co-founder of the successful stamps.com and the head of the Red Mango USA yogurt chain. His resume includes stints at children's entertainment giants Walt Disney Co., Activision Inc. and MGM.
So why can't Kay, head of Animal Wow Entertainment Inc. in Sherman Oaks, sell enough of his whimsical "Dogs Wow Dogs" DVDs and music CDs to get out of the red? He knows the 3-year-old firm needs to make a lot more than the $20,000 in sales it will earn this year.
"It's almost like origami; you can fold the problem in different ways," Kay says.
"Well, is it a management problem? Probably. Is it a marketing problem? Probably. Is it a financial problem? The symptom is we don't have enough sales."
This month he will let go the part-time worker who had helped out in his home office. At the now lower "burn rate," he figures he has enough cash to run the company for another two or three years.
Inspired in part by his golden retriever, Higgins, the native Angeleno started his company to teach preschoolers life skills by showing them how to be best friends with pets.
His research showed that the pet industry was expanding at a double-digit annual rate, that 75% of families with kids have pets and that there wasn't another product like his on the market. It looked like a value proposition.
And the 52-year-old Kay had the creative credibility to jump-start the effort. He has been a writer, producer and product manager in children's media, working with the Muppets and the Pink Panther and other characters. He says he was the original writer and co-designer of the Freddi Fish computer game series that won dozens of awards and sold more than 2.5 million copies worldwide.
The co-owner of Animal Wow spent more than two years developing his concept, tapping experts in early-childhood education and animal behavior and training.
The result is his 60-minute DVD that stars two singing, joking puppets, Stately the mutt and Remix the alley cat. A catchy theme song kicks off the two-episode educational entertainment product filled with comedy, upbeat songs, animation, cute kids and their pets.
"When our product gets into kids' hands, into parents' hands, they love it," Kay says.
That kind of word of mouth brought him to the attention of the Entertainment to Business program at Pepperdine University's Graziadio School of Business and Management.
A class of business students, most already in the business world, adopted his fledgling company as the class marketing project in 2003. They helped create an initial road map for the company that focused on cracking the pet store market.
He's hoping his newest distributor will draw additional customers.
With the help of his first distributor, Kay landed his DVD in PetSmart stores, selling several thousand. But a change in relationship between the national pet goods retailer and the distributor tanked his sales and reorders have dried up in recent months, he says.
To help boost sales, Kay oversaw the creation of a music CD of the songs on the DVD. And his garage is full of boxes of stuffed plush versions of Stately and Remix recently arrived from a Chinese manufacturer.
This month his "Animal Wow Dog Party Fun" activity book debuted. Sponsored by nonprofit groups, it will be distributed free to kids by a variety of government and nonprofit organizations.
The company's products have been endorsed by the American Humane Assn., which works to protect children and animals, and Kids First!, a nonprofit group that pushes for better children's viewing habits. The DVD has won awards from Pet Product News, iParenting Media and the Family Magazine Group.
He's been contacted about licensing and co-branding by a handful of consumer product companies in the pet industry and children's merchandising, but no contracts have been signed.
Kay is upfront about his lack of sales and marketing skills. He wants to hire a salesperson to make the calls and land the big deals that sometimes elude him.
"I'm not a closer," he says.
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Animal Wow Entertainment Inc.
Children's DVD, music CD, plush toys and activity books geared to teaching good values through pet care.
Founded: October 2004
Start-up funds: $100,000 of Kay's personal savings and home equity; $175,000 from private equity investors.
2007 sales: $20,000
Employees: One part-time worker.
Customers: Wholesale distributors and consumers who buy online.
Headquarters: Sherman Oaks
Main business challenge
To create a positive cash flow.