Cont?r Hopes Diaper-Pad Invention Will Win Cup

A team from the University of Arkansas hopes to wipe the competition clean with its invention — a diaper-changing pad that minimizes baby turbulence.

The bottom line is they want caregivers to stop lifting babies by their feet to change diapers. That can be a problem, in particular, if babies have acid reflux disease.

Li Cai, a professor in the UA’s electrical engineering department, invented the diaper-changing pad at his home. With help from area companies and investors, Cai and three students — Paul McDaniel, Paul Sproles and Sarah Garton — have formed a company, Cont?r, to produce and market the pad.

McDaniel and Sproles, who are in the managerial MBA program, built a company around the diaper-changing pad that Cai invented to enter competitions. They’re going to the Donald W. Reynolds Governor’s Cup in Little Rock and the Rice University Business Plan Competition in Houston. A win could mean up to $239,000 in investment money from the two competitions.

But they’re not stopping there. The company execs have decided to go beyond the competitions and take the product to the real world.

“The consumers haven’t seen it yet,” McDaniel said. “We don’t know how big the market is yet, and we don’t know what the financials look like yet. It’s all just a dream right now. But, you know, so was FedEx once.”

Diaper Duty

Cai, who has patents on several other products, invented the diaper-changing pad three years ago.

The five-pound pad is 36 inches long, 18 inches wide and eight inches thick. It has a sliding panel that fits underneath the baby’s bottom and legs. A diaper can be attached to the panel, which slides down to create an opening under the baby’s bottom. This allows a caregiver to reach underneath and wipe the baby’s backside before attaching a clean diaper and sliding the panel up. The clean diaper can then be fastened.

For comfort, Sproles said the pad will have memory foam to help support the baby’s head and body.

“It’s about the baby being comfortable during the changing process,” McDaniel said. “It’s about new mothers and fathers who may not necessarily be comfortable with lifting their baby up by the feet.”

Cai started the patent process in August 2004 and received it a year later. Instead of selling the product to a large company, Cai was considering his options.

Around that time, McDaniel and Sproles were trying to find an invention to take to the Governor’s Cup competition in March. Carol Reeves, associate professor of entrepreneurship at the UA, got the students and Cai together on the project.

“This isn’t something Paul and I could go out and do,” McDaniel said. “I don’t know if we’d know how to do it if it wasn’t for the [managerial MBA] program.”

McDaniel said they wouldn’t be able to make the connections they have without the program and that he’s shocked at how many people in the community want to help.

One of those people is Gary Head, chairman and CEO of Signature Bank of Arkansas. Head was a guest speaker last semester in one of McDaniel and Sproles’ classes. After class, they talked to him about their project and asked Head if he would be on their board of advisers. Head jumped on board, asked to see their business plan and gave them some advice.

“He said the three things you need is an accountant, a lawyer and a banker,” remembers McDaniel.

That’s where they picked up Garton, a grad student in the master of accountancy program at the UA. She was one of the two people chosen as “outstanding accounting student” as an undergraduate at the UA in 2005. She also interned at Ernst & Young’s Rogers’ office.

The Market

The Cont?r team — with McDaniel as CEO, Sproles as chief marketing officer, Garton as the financial consultant and Cai as vice president of research and development — said they’ve studied the market and they’re confident there’s nothing that compares to their invention. There are other diaper-changing pad products on the market like Diaperbridge and Nap-Sac but none with their technology, Sproles said.

Cai said there should be a huge market for the product, especially in China, where there is a one-child policy. Because of that policy, there are many people who have money to spend on their child, he said.

In the U.S., McDaniel said, their target audience is first-time parents.

“It’s not easy,” McDaniel said. “[With] your first baby, it’s hard to change a diaper. Once you come home from the hospital, you have to figure it out.”

To test the market, Cai said they put the diaper-changing pad on eBay, the online auction site. What they got was a lot of feedback from people wanting to know more about it.

But they didn’t sell it. They can’t make any revenue from the pad until they compete in the Governor’s Cup and the Rice Business Plan Competition, which will be held in April. After the competitions, the group plans to market the invention.

McDaniel said the contests are very important because the judges “are real venture capitalists,” and he’s heard they sometimes offer to help fund projects.

Garton said she hasn’t come up with numbers on start-up costs, but so far they have spent about $10,000. Some of that cost came from Cai’s trip to China where he took the plastic prototype for a month to find a manufacturer to make the product. So far, they have had four bids from companies. Outsourcing the product keeps the cost down by not having to build a manufacturing plant in Northwest Arkansas, Garton said.

Instead, costs will come from building the inventory, marketing, third-party logistics and traveling to make the contacts to sell the product.

Production will cost about $39 to $59 per pad, McDaniel said. Because their product has more premium qualities, like the memory foam and technology, it will cost more than “generic” brands of baby changing pads. They want to find the middle ground in a market where costs can range anywhere from $19 for a “generic” pad to $200 for a table.

The first phase for the company will be to manufacture 1,000 units and sell them online, McDaniel said, possibly through Target.com and Babiesrus.com. Phase II will be a regional launch with a mass retailer like Wal-Mart Stores Inc.

“[Marketing online] keeps the inventory down for the most part,” Sproles said. “Before we ask a retailer to give us space on their floor, we need some kind of justification through sales.”

They have a plan to open up in Beijing and Shanghai in two years, Sproles said. They will contract with salespeople in China to sell their product for them.

McDaniel said Cont?r’s startup plan remains cautious because he and Sproles have full-time jobs and families to put first while they try to grow the business.

If the product doesn’t sell well, then they won’t be able to continue operating the business, Sproles said. But for now, they’re going to work hard to make it successful. He said within the next four months, they should know whether or not it will work.

Garton said many of the small businesses that go into the competition have venture capital anywhere from $300,000 to $1.5 million. But Sproles added that they would probably be on the lower end of that number because they don’t have many assets.

Sproles said one of their biggest advantages is having a community that is very entrepreneurial because of Wal-Mart’s regional influence.

“Here, everybody has an idea, and everybody is willing to help you out,” he said. “Luckily, you have Wal-Mart around to ask questions they don’t tell you in the MBA school.”

Kendal King Group in Bentonville offered its services to find the company an engineer who would produce a prototype, and Kendal King Group paid to make the prototype.

Ideally, Sproles said, they’d like to see a company like Graco, which produces many baby products, come in and decide that instead of competing against them, they will just purchase Cont?r. If that happens, then he said they will just move on to their next idea.

“There’s usually two good exit strategies for the investors,” Garton said. “Either we get acquired by someone like Graco, who sees the potential in our product and the payoff is immediate. Or five years down the line, the product is profitable enough that we can have a management leverage buyout. Either way, the investor is going to have a good return.”