Summary
One of my favorite things from my conversation with Wallace Santos, Founder & CEO of Maingear was that he said, “Our core customer that we build products for is me!” I couldn’t imagine a better type of founder to back than one who has turned his life’s passion into his business.
For the last 16 years, Wallace and his team have been building the premier PC gaming company in the country and in turn immense brand loyalty amongst gamers.
Now PC gaming is going through an unprecedented period of growth driven by the rise of eSports, and Wallace Santos and his team are sitting pretty ready to capitalize on this market growth.
It’s rare with equity crowdfunding deals to have a chance to invest in a company that is already producing millions in revenue and be cash flow positive. But then again it’s rare to find a founder like Wallace that would turn down a big time Venture Capital deal for fear of losing his company’s soul. That is the kind of company you want to back. Learn more about his journey and the Maingear company so that you can invest confidently.
Wallace, you founded Maingear all the way back in 2002, and have building high-end gaming computers since, so why the love for gaming computers?
There is no particular reason, I just love it. At the age of 12, my mentor who was actually my neighbor at the time would let me play with her computer and taught me a lot. It really just clicked for me. I loved hardware, and my passion was gaming so MAINGEAR is really just the intersection of those two things.
Once I learned that the PC was a much better gaming platform, my passion kept getting bigger and bigger for it. My revelation was when I bought a copy of Counter Strike at school and my friends and I installed it on multiple computers to play against each other, which to me was amazing. Being able to see my friend in the same level playing alongside me gave me goosebumps. That’s when I started to believe that PC gaming was the future.
For those that don’t know, how do you define Maingear as a business?
We are the Ferrari of PCs. Our products are the best in the industry both from a performance and an aesthetics standpoint and we focus on the gamer. However, we do have day traders, government organizations, schools, architectural firms and other users too, because of our quality, aesthetics and performance.
For individuals like myself who are not as in tune to the gaming space, what advantages does a Maingear computer provide over a traditional computer when it comes to gaming?
Your computer today is probably one of the most important tools you have. For some people it is more important than a car. If you think about your PC it is at the center of your life, be it for work or entertainment, it is the hub of most people’s lives. Because of that we have developed a product that we think wins on 2 key factors.
First off, our computers from the inside to the outside offer the most customizations on the market today. Be it the hardware or the aesthetics, we give you tons of options to fit your exact needs and wants. It is by far more customizable than any OEM computer out there.
Second, our we believe that people’s time is money, so we offer the best performance computers on the market. We source the fastest processor that silicon manufacturers can provide. In fact, we just launched something called the Apex Cooling System, the world’s most intelligent computer designed liquid cooling system on the market. Our performance is bar none above the rest, and most manufacturers just can’t keep up.
Lastly, in addition to being extremely powerful, our PCs happen to be extremely customizable from an aesthetics standpoint. It’s almost like a beautiful piece of furniture. We actually have several clients who purchase our computers to fit in with their office vibe.
What is the distribution strategy for Maingear, and do you sell through traditional channels such as a Best Buy?
Currently. 98% of our sales come organically through our website. However, a big reason for the current raise is to be able to expand to more sales channel and be able to provide products in more traditional retail outlets.
From a pricing standpoint, where do Maingear computers price out, and how large of a market opportunity is there for a high end gaming computer?
Today, we are in the high end space, but we will have more attainable products down the stack coming to market soon. We will always sell our Ferrari like computers, but we also think we should sell BMWs too so more people can enjoy our products.
By all means, we are priced above the commodity desktop space, though if you look at the growth trends in desktop computers, the commodity piece of the market is going away, while the gaming and high end computer space is exploding.
What’s helping to drive this is people are trying gaming on their mobile devices and then shifting to PCs as they become more savvy, and that’s where we really shine.
Speaking to the vast growth you are seeing in the gaming PC market as well as within your business, how much does the eSport movement play a role in this?
The eSports movement is playing a massive role in our growth. What’s happening in eSports right now is unprecedented. The following is growing by the day and it’s becoming big business. For instance, The League of Legends gaming tournament sold out staples center in minutes with 80K people buying tickets, if you go on Twitch.com, you can find 600K people watching at any one time people like Drake taking on eSports stars in Fortnight.
Young celebrities are cropping up that are 14 and 15 years old making millions of dollars because they are good at a game. And now big networks like ESPN and big brands like Coke and Monster are taking notice, which I think speaks to the frenzy that is eSports right now. Even casinos are calling us about helping to build eSports arenas.
Maingear is focused on providing handbuilt computers for your customers. What challenges does that create in scaling a business, and how do you protect your margins?
That’s the key right there. We realized that it would be very hard to scale if we wanted to take our Ferrari business to the masses. In reality, it would not be possible. Instead, we have decided to take our terrific brand name, and like an orange we are going to start squeezing more juice out of it.
What I mean by that is we have such a good brand, we can take that brand recognition, and begin to offer a more affordable standardized version as well as accessories to the masses.
One of the ways that we can scale by building a BMW version of our computers is through one of our patented technologies that enables us to build certain components of the computer that would take hours in just 15 minutes. It’s pretty revolutionary and that kind of manufacturing prowess will allow us to scale to larger production while maintaining top-of-the-line quality.
How are you planning to expand internationally?
We are expanding internationally a couple different ways. As a business we need to stay focused on where the treasure is, which is here in the US where we are today.
However, we can expand Internationally by closing deals with partners. We just closed a deal in Brazil with Globalk. Globalk is the same group that licensed the Compaq name and built them in Brazil. Soon you will see Maingear PCs available there as well.
The plan is to continue to close partnership deals in other countries like this!
You’ve been around for 15 years, have around a million in assets on the balance sheet and were cash flow positive last year, so why raise capital now?
We are at a point where we built a great brand and business and now it’s time to expand that business into other retail outlets as eSports and the gaming market start to really take off. Raising capital rather than funding off of our current assets is the best approach for us because it gives us more flexibility and capability to expand.
Why did the Maingear team decide to pursue an equity crowdfunding raise via Netcapital, and how do you plan to deploy the capital?
We actually had a deal with a well known VC on the table after a six month diligence process that we ended up turning down. Overall, it wasn’t a great experience for me and I didn’t feel good about it. The reality is it is very easy to lose the soul of a company through a bad VC deal, and I think we have a real treasure here. The last thing I wanted to do was grow the business while compromising the brand.
That’s how we ended up deciding to raise capital via the community instead. I started speaking with my business partner Raul, and we ran across Netcapital. We think that equity crowdfunding is a great way to build our business, because we can engage our customers and our community in our future growth. It felt a lot more like we could keep the soul of the company intact this way. And so far it’s working in a big way. We’ve already raised a couple hundred thousand and we are just getting started.
I don’t know if you saw but we even had deadmau5 make an investment in Maingear via Netcapital. He has a huge following of gamers, is constantly doing live streams on the internet and he really just wanted a piece of the action, which I think speaks to the power of equity crowdfunding.
If you had to pick one computer game to play the rest of your life, what would it be and why?
Wow, only one? Then I’d have to go with Counterstrike. It never gets old, its the game that basically got me to love the PC platform and it’s been around forever and will continue to be around forever.
It’s hard not to get excited by the potential for Maingear. They have so many dynamic ways to grow their business by piggybacking on the powerful brand they have built in the PC gaming market.
Between international expansion, new distribution channels, and a more affordable line of products, it feels as though Maingear has three high growth levers to transform this 16 year old startup into a fast growing PC gaming behemoth.
Wallace’s commitment to the brand and to the company’s mission is something that I think will serve it well as it looks to expand in order to service even more customers that love their products. By keeping the customer first, and committed to great products, Wallace and the team are well positioned to have huge upside. If you haven’t already, this is an investment worth looking into.
