James Dyson was in a difficult spot when his board of directors fired him from his company in 1979. Luckily, he’d already been thinking about a new idea.
According to his autobiography, powder-coating dust at Kirk-Dyson was a problem. He learned that sawmills used cyclones to capture and extract sawdust, so he decided to build a thirty-foot cyclone at Kirk-Dyson for his powder-coating operation.
Around this time, he realized that vacuum cleaner bag designs limited suction because dust clogged the bag pores. As he built the Kirk-Dyson cyclone, he realized that a cyclone could solve his vacuum issue too. He created a cardboard cyclone using his old vacuum, and it worked. He had the first bagless vacuum.
He tried to persuade the Kirk-Dyson board to pursue the cyclone vacuum idea, but they refused. After being fired, he raised £25k from Jeremy Fry, used his savings, and took out a loan to launch his new company: Air Power Vacuum Cleaner Company.
Working in his home garage, James made 5,127 prototypes over three years, one painstaking change at a time. By 1982, he was frustrated, demoralized, depressed, and running out of money. He decided to license the Cyclone instead of selling it himself.
In 1982 and 1983, he talked to every manufacturer and was rejected. Eventually, Jeremy Fry’s company signed a licensing deal for £20,000 and a 5% royalty. It produced 500 units and learned a lot, but then it lost interest and sold its license.
Trying to feed his family, James was a one-man band on a mission to license the Cyclone. After three years, in 1984, he hadn’t made a penny and was going broke.
Amway Corporation reached out and they struck a licensing deal, but not before switching terms on James at the last minute. In May 1984, James signed off on the deal and got a £100,000 check. His relief was short-lived. By September, Amway was accusing him of fraud and misrepresentation. Jeremy, who was nearing retirement, didn’t want to be involved anymore. In 1985, they settled, and James repaid the £100,000. James was depressed and deeply in debt with a family to feed, but he was free from the Amway license and able to sell in the United States again.
James was in despair and questioning his own sanity for pursuing this project when Apex Inc., of Japan called after reading about James in a magazine. He struck a deal to license his design for sale in Japan, receiving £35,000 up front, a £25,000 design fee for completed drawings, and a 10% royalty with a £60,000 minimum annual payment. He lived in Japan for six weeks at a time for a year to launch the Cyclone.
The Cyclone does well, is priced at £1,200, and reaches £12 million in annual sales. But because Apex sells to wholesalers and because of how the royalty is calculated, James never sees more than £60,000 a year from the deal. He learned a valuable lesson: too many middlemen between the consumer and the manufacturer cut into his royalty payments and diminish his ability to control pricing. Everyone got rich from the deal except him.
In 1986, he met the CEO of Iona, a Canadian company. By November, they were ready to sign a licensing deal to sell in the United States to consumers when they learned that Amway had released a cyclone vacuum in the U.S. Amway had ripped off his design. James sued, claiming “misappropriation of confidential information,” and Iona pushed to renegotiate but paid James’s legal bills out of his royalties. Iona and James went head to head a bit more in a minor lawsuit but eventually settled, agreeing to split the legal costs and winnings from the lawsuit and continue working together.
In late 1990, S.C. Johnson called, and they struck a worldwide licensing deal to sell to businesses, paying James £120,000 upfront. He was selling through three licensing partners and digging himself out of debt. But he was still paying £300,000 a year for three years to lawyers to fight Amway.
James had the idea for the cyclone vacuum in 1979. It took three years and 5,127 prototypes before he had a working version in 1982. It took seven years before his first sale happened in Japan in 1986. It took almost twelve years before he had enough licensing revenue to work himself out of debt. All the while, he was emotionally strained, crisscrossing the globe, and fighting shady partners in court. But he was learning lessons from each negative experience and persevering.
His battles weren’t over, but after over a decade, things were slowly starting to turn the corner.
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