This Company Is Winning the Hoverboard Race

How PhunkeeDuck tapped into Instagram to create a viral vehicle.

Photographer: Giacamo Fortunato for Bloomberg Businessweek

Matt Waxman and Maxx Yellin careen into New York’s Madison Square Park one gray weekday afternoon riding two-wheeled scooters that look like Roombas for your feet. Before they can even roll to a stop, Hugo Melo, a 21-year-old freelance developer and “aspiring founder,” as he describes himself, points at their feet and asks, “What is that?”

“You want to try it out?” Waxman offers. Melo climbs up and perches uneasily while Waxman and Yellin support him on either side. He never quite gets going on his own, but he looks like he’s having a great time. “This is way better than walking!” Melo says. “I definitely want one.”

Yellin and Waxman get this all the time. The two are co-owners of PhunkeeDuck, makers of the $1,499 … thing. A two-wheeled self-balancing scooter would be the most accurate way to refer to it. But most people have gone with “hoverboard” because of its resemblance to Michael J. Fox’s preferred mode of conveyance in Back to the Future: Part II. (BuzzFeed suggests “nerdmover.”) No matter who makes them, all hoverboards look pretty much the same: Recall a Segway, then subtract the awkward handlebars, shrink the wheels, and split the platform in two. Tilt both feet forward, and the whole board moves forward. Tilt only one, and it turns.

In May, model and Keeping Up With the Kardashians co-star Kendall Jenner posted a video of herself zipping around the house on a hoverboard. Skrillex used one in live performances. Cleveland Cavaliers player J.R. Smith rode one onto the court before a game. In late summer, rapper Wiz Khalifa was handcuffed at LAX for refusing to dismount his. By August, demand for hoverboards in the U.S. had increased by a multiple of 30, according to DHGate, a Chinese wholesaler. The London police recently outlawed them on public property—instantly ensuring their appeal.

Thanks to celebrities and social media, PhunkeeDuck (whose name was inspired by Waxman’s 8-year-old brother, who likes to play Duck, Duck, Goose with hoverboards) has become the clear market leader when it comes to brand recognition, with 36,000 posts under its Instagram hashtag. “We haven’t paid a dollar in marketing fees, so it’s great,” Waxman says. “Without Instagram, particularly, I can’t say we would be where we are now. We were able to spread the word so fast.” According to Yellin, the company’s sales doubled from the first to second quarters of 2015.

Although they’ve done a good job of selling hoverboards, the pair didn’t invent them. Waxman, 26, and Yellin, 25, met in high school on Long Island. In 2012, as college students, they started a company called PhunkeeTree, which designs custom iPhone accessories. While visiting one of their manufacturer’s factories in China in October 2014, Waxman and Yellin discovered the board. “There was a manufacturer releasing this product and debuting it the week we were in China,” Waxman says. “We didn’t realize there would be that many knockoffs that quickly,” Yellin adds.

In the U.S., PhunkeeDuck faces competition from brands such as Hovertrax, IO Hawk, and MonoRover, all of which are marketing essentially the same product. Patent infringement suits are flying back and forth, with various companies—including Segway—claiming ownership of the technology. While a successful lawsuit could make production exclusive to a single company, it’s unlikely Segway will triumph, says Steven Crosby, a lawyer with the New York patent, trademark, and copyright firm Feldman Law Group. In fact, he says, all the legal action could wind up hurting Segway. “What if courts find that the claims that are being alleged as infringed are really invalid?” Segway’s patents “appear to cover so much, but how much does it really cover when it’s challenged in court?” Crosby asks. “These two-wheeled personal devices have been around for decades and decades.”

PhunkeeDuck has so far avoided becoming the target of any lawsuit—not because its product is dramatically different, but because it hasn’t made any claims to originality. Waxman and Yellin argued instead that their board is of higher quality than their competitors’ products. At upwards of 20 pounds, PhunkeeDuck is definitely heavier and, they contend, more stable; its wheels are made of rubber, and its top speed is 10 miles per hour, vs. 6 mph for the Hovertrax. Still, if the other lawsuits succeed, the company will be equally vulnerable. The law prohibits the selling of “a component of a patented machine.” Thus, PhunkeeDuck could also be forcibly shut down. “We have to try to figure out a way to coexist,” Waxman says.

The two founders say their largest market is “regular adults” who use the machine to get around. These include Brett Kohan, 25, a freelance film production coordinator in New York. Inspired by Instagram, Kohan picked up a PhunkeeDuck. “I was sick of walking for 15 minutes after my subway ride,” he says. “I charge it for a couple hours overnight next to my phone and hop on it in the morning.”

Surfing a fad presents certain business risks, as anyone who remembers the Segway can attest. The press before its debut in late 2001 was ecstatic: It was going to revolutionize personal transportation, be as big an advancement as the automobile. They were going to design cities around it. In early 2002 inventor Dean Kamen predicted 50,000 to 100,000 Segway sales in the first year. Seven years later, the company claimed to have shipped only “over 50,000” total. That is, ever.

Hoverboards have already far surpassed Segway’s sales. Almost a million were sold in 2014, according to Chinese market-research firm QY Research, before the social media boom. And though they’re hardly cheap, they’re more accessible than their predecessors. With a price tag of more than $5,000, a Segway is too expensive, says hoverboard owner David Jackson, 31, who invented a wallet that wraps around itself. “Also,” he adds, “they’re so dorky.”

PhunkeeDuck’s name might hold it back. “It’s ridiculous,” says David Coomer, chief creative officer at the branding agency Cornett. “You couldn’t reach that market on a sustainable level with that name.” Waxman and Yellin disagree. “Early adopters, they’re marketing it for us,” Yellin says. “When they ride it through the streets and people want to know what it is, they’re going to say it’s a PhunkeeDuck.”

After Melo, our developer friend, finishes his session, I give the PhunkeeDuck a go. To mount it, first you have to step onto one side of the board, keeping your foot level so the motors don’t kick in. Then you step up with the other, lean forward, and start moving. “It’s about the consistent pressure. The harder you push down, the faster you go,” Yellin explains as we roll through the park. Bystanders stare. The phenomenon is similar to seeing someone with Google Glass a year or two ago: The user seems either incomprehensibly advanced or just too silly to be socially acceptable. More likely the latter.

Waxman and Yellin don’t care which, as long as the market maintains its enthusiasm. Mark Cuban recently approached PhunkeeDuck about a partnership. “He envisioned himself engineering the product himself and selling it to us,” Waxman says, but negotiations stalled as the company sped past its competition. “We’re going forward with our own engineering.” For now, PhunkeeDuck is self-funded, but that may change. “We’re going to be looking for investors at the beginning of next year,” Yellin says. “Private investors and hedge funds have been calling.”

Eventually, I get comfortable enough on the board to stop staring at the ground and waiting to fall, but by then I have to give the board back. Waxman and Yellin step onto theirs and speed off toward the park exit, chatting easily, their blue taillights glowing in the distance. Total pros.

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