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TheStreet Open House

#DigitalSkeptic: CES Crowd-Designed Sound Sends Private Equity to a Dirt Nap

LAS VEGAS (TheStreet) -- Gavin Fish figures he's landed The Big Consumer Tech Lebowski when it comes to raising money.

"Our customers are smarter than we are," yelled the vice president of sales and marketing for LH Labs over cerveza, chips and blaring Jimmy Buffett music at this Mexican joint on the Vegas Strip. "And we figured out a way for them to tell us what products to design."

Fish was in town with about a half-dozen of his Sacramento, Calif.-based staff, celebrating one of the most fascinating and unlikely success stories from the just-wrapped 2014 International Consumer Electronics Show.

See, LH Labs is the fast-growing, hip new unit of established high-end audio component maker Light Harmonic. If you're a hopeless audio snob (as I am), life is simply not worth living unless one's headphones are pure awesomeness. That level of audio love often requires something called a digital audio converter -- or "DAC," rhymes with Jack. DACs turn gritty digital output from PCs and lux audio equipment into a luscious signal that better headphones (say, a Sennheiser Hd 850 or a Grado HP-2, can replicate perfectly. Light Harmonic DACs are as good as any model there is. And if you have to ask what it costs, well, you know ...

"Our top-end model runs $32,000," Fish said. "If I can figure out how to sell even 10 of those a year, that's huge. We work in a limited market."

Until now.

Fish and his team of Web marketers and interactive product designers have, quite literally, reinvented this high-end audio maker into a solid middle-market digital peripheral provider. And they did it all by themselves, overnight and without the aid of a bank, pricey private equity or any investors at all.

"What we realized was, we sit in the middle of a very passionate group of audio geeks," Fish said. "So we took advantage of new tools to communicate with them. And in the process, almost by accident raised north of $1.2 million."

Most remarkably, only part of that money was raised in a way investors might know. The $299 Geek Pulse DAC that is Light Harmonics' hot new product was funded on the by-now-standard Indiegogo social fundraising platform. But he did not spend a fortune walking the traditional crowdfunding line of designing a specific product, creating complex marketing video and running a sophisticated social media campaign, all in the hope of driving enough buzz to raise enough money during the roughly one-month window of the campaign.

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