Dec 20, 2021 · 1h 6m · how-i-built-this
Spin Master/PAW Patrol: Ronnen Harary
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of How I Built This, Spin Master co-founder Ronnen Harari details how three childhood friends built a multi-billion-dollar toy and entertainment empire behind Air Hogs, Bakugan, and PAW Patrol. Harari shares insights into partnering with independent inventors, trusting intuition over market research, and navigating near-fatal financial downturns with strategic resilience.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 43.3% of the talking time here. How this is scored →
Guy as informed peer 1.4 Guest teaching 1.9 Guest disagreement 0.8 Guy pushing back 0.9
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:02:12 Ronnen reframes stepping down as stepping up into active stewardship
Ronnen immediately interrupts and corrects Guy's framing that he stepped down from leadership, insisting it was stepping up into a governance structure designed to outlive the founders.
Hardest push from Guy ▶ 28:15 Guy challenges Ronnen on committing company capital without market testingGuy presses hard on whether Spin Master conducted any empirical market testing before investing all company profits into Chinese tooling, emphasizing the existential risk.
Biggest teaching moment ▶ 37:29 Ronnen explains why management consulting methodologies fail in toysRonnen educates Guy on why corporate consultancy and focus groups produce false positives in toy design, asserting that play patterns and raw intuition govern the industry.
Guy holds their own ▶ 18:41 Guy identifies Devil Sticks niche demographics and cultural contextGuy demonstrates direct domain familiarity by identifying the exact mid-nineties college subculture and Grateful Dead crowd that drove the initial organic surge in Devil Sticks.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Call for Listener Questions | 0 | 0 | 0 | 0 | Guy opens with an announcement soliciting listener questions, followed by an introductory monologue summarizing Ronnen Harari's career and Spin Master's toy philosophy. | |
| Ronnen's Childhood, Dysgraphia, and Business Aspirations | 1 | 2 | 1 | 1 | Ronnen explains how living with dysgraphia taught him visual attention to detail, which he considers a learning gift rather than a disability. Guy asks clarifying questions about Ronnen's academic record and his early drive toward entrepreneurship. | |
| College Hustles: Fertilizer and Frosh Week Posters | 2 | 2 | 1 | 1 | Ronnen recounts his college ventures selling fertilizer and Frosh Week posters, followed by discovering grassheads via his mother. Guy clarifies how grassheads function and questions why Ronnen thought a quirky novelty item could become a viable Canadian business. | |
| Setting Up Factory Production and Bringing on Ben Varadi | 1 | 2 | 0 | 1 | Ronnen describes onboarding Ben Varadi and finding factory workers at a homeless shelter to fulfill a 26,000-unit Walmart order. Guy presses on how Ronnen managed to pitch Kmart directly, leading to Ronnen explaining his impromptu price reduction on the spot. | |
| Scaling Earth Buddies and Realizing Novelty Limits | 2 | 1 | 0 | 0 | Guy and Ronnen discuss the transition from novelty Earth Buddies to Devil Sticks and the origin of the company name Spin Master. Guy demonstrates cultural familiarity with the mid-1990s juggling baton fad among college demographics. | |
| Founder Debates and the Vision for Proprietary Toys | 1 | 1 | 1 | 1 | Guy asks about co-founder friction and decision-making mechanisms during their early multimillion-dollar growth. Ronnen explains their rule of unanimous consent, mutual apologies, and the strategic choice to pivot toward proprietary global intellectual property. | |
| Connecting with Toy Inventors and Discovering Air Hogs | 2 | 2 | 0 | 1 | Ronnen recounts discovering the Air Hogs pneumatic plane prototype after it had been rejected by major toy incumbents for five years. Guy explores the royalty licensing model and clarifies how rudimentary the initial prototype was before branding. | |
| The High-Stakes Engineering Gamble on Air Hogs | 1 | 3 | 1 | 2 | Guy presses Ronnen on whether Spin Master conducted any focus group testing or market research before betting all company profits on Chinese manufacturing. Ronnen bluntly admits they conducted zero research and relied purely on their intuitive excitement. | |
| Air Hogs Takes Flight: A $35 Million Breakthrough | 1 | 2 | 1 | 1 | Ronnen details the $35 million debut of Air Hogs in 1998, their marketing displays, and how mastering mechanical engineering established their credibility with global toy inventors. | |
| The Constant Need for Freshness and Inventor Scouting | 2 | 2 | 1 | 1 | Guy questions whether working in the toy industry feels playful or high-pressure, prompting Ronnen to explain the hyper-competitive nature and rigorous inventor scouting operations. | |
| Instinct Over Research: From Monster Flops to Flick Trix | 2 | 4 | 2 | 1 | Guy wonders if arrogance led them to bypass market research for Flick Trix, prompting Ronnen to explain that consulting and formal research rarely work in toys because success depends on intuitive play patterns. | |
| Play Pattern Foundations and the Key Charm Cuties Mistake | 2 | 2 | 1 | 1 | Guy and Ronnen explore toy play patterns across historical categories, followed by Ronnen reflecting on Key Charm Cuties failing against Mattel's Polly Pocket brand power. | |
| Venturing to Japan: Tapping into Unique Toy Creativity | 2 | 2 | 0 | 0 | Guy shares childhood memories of living in Japan, and Ronnen explains how Japanese willingness to embrace bizarre concepts led to partnering with Sega Toys on Bakugan's micro-mechanisms. | |
| Bakugan's Billion-Dollar Anime and Entertainment Empire | 2 | 2 | 1 | 1 | Guy asks whether producing an anime series is essentially a commercial for toys, prompting Ronnen to reframe animation as an enhancer of character lore before addressing Bakugan's steep post-2010 sales decline. | |
| Restructuring, Layoffs, and Protecting the R&D Engine | 1 | 2 | 0 | 1 | Ronnen recounts the painful restructuring of laying off 350 staff members across four rounds while strictly protecting R&D investments to engineer their turnaround. | |
| Navigating Founder Friction During the Turnaround | 1 | 2 | 1 | 1 | Ronnen reflects on founder friction during financial strain, noting that growth hides sins. He then details issuing an open creative RFP for transformational preschool toys that led to Keith Chapman's PAW Patrol concept. | |
| Building a Generational Franchise: PAW Forever | 2 | 2 | 1 | 1 | Guy compares PAW Patrol to generational brands like Power Rangers, while Ronnen explains the PAW Forever philosophy, their IPO governance rationale, and strategic portfolio diversification. | |
| Stepping Up: Founder Transition and Luck vs. Effort | 1 | 2 | 2 | 1 | Ronnen corrects Guy's phrase about stepping down by calling it stepping up to preserve founder transition. He closes by balancing luck in finding partners with consistent hard work and a no-blame culture. |
Statements from this episode (38)
Harari: Dysgraphia Gave Him Heightened Visual Precision in Toy Development
“My attention to visual detail is, is very high. Like, when we were developing in toys or engineering, I could see, like, little changes when we were debugging the toys, and people would use rulers, and I could just see it with my eyes.”
Harari: College poster business grossed about $100,000 across five universities
“And then we ended up doing it in five universities across Ontario by the time we graduated. I think we grossed about a 100,000 dollars.”
Walmart Canada ordered 26,000 Earth Buddies units from Spin Master founders
“And two weeks later, they called us with an order for 26,000 pieces.”
Harari: Spin Master partnered with Ben Varadi in 45 minutes despite zero manufacturing experience
“He actually had no manufacturing experience. He came to our office, and we literally made a deal within 45 minutes, and then he went down and started running the factory.”
Harari: Spin Master recruited its first factory workers from a homeless shelter
“So Bob actually, when we started, the first place we actually went to look for people to work in the factory was we went to homeless shelter.”
Harari dropped Earth Buddies price by $1 on the spot pitching Kmart
“What went through my mind was, we were going to charge her two dollars and 65 cents U.S., and I dropped the price to one 65 in my mind right then and there.”
Kmart gave Spin Master an initial order of 48,000 Earth Buddies
“She said, okay, well, I'll give you an order for 48,000 pieces, and if it goes well, I'll give you an order for half a million pieces.”
Harari: Spin Master produced 17,500 Earth Buddies daily at peak
“Yeah, the product was selling very well, so we had money coming in from the other sales, and I mean, in our peak, we were producing 17,500 pieces a day.”
Harari: Spin Master's corporate name originated from Spin Master Devil Sticks
“No, Devil Sticks is the generic term, and so we called ours the Spin Master Devil Sticks. So that's actually, that's the origin of the company name, is from the Devil Sticks.”
Harari: Spin Master discovered the Air Hogs airplane invention in 1996
“In 96, we actually came across this invention, which was an airplane that you pumped up and would fly for about 45 seconds, and it came from these two British inventors, John Dixon and Peter Manning.”
Harari: Every major toy company rejected Air Hogs before Spin Master
“After we signed the product, we didn't realize that every toy company had turned it down.”
Harari: Standard toy industry licensing offers perpetuity for 5% royalties
“The way it works in the toy industry is you license the product in perpetuity, and you pay a five percent royalty on your sales.”
Harari: Spin Master reinvested all past profits into Air Hogs development
“When we signed the product, we basically put all the money we'd made to date into the design and development.”
Harari: Spin Master did zero market research before launching Air Hogs
“We did no research. Nothing.”
Harari: Spin Master grossed $35M in 1998 after launching Air Hogs
“You know, I can just tell you that by the end of. 1998. So we started marketing in that year. We had grossed thirty five million dollars in sales.”
Harari: Spin Master self-financed Air Hogs, only borrowing against receivables
“Entirely self-financed. Other than the bank would actually let us borrow against our inventory and receivables.”
Harari: Spin Master did 80% of inventor scouting on location
“They would literally go from city to city to city and visit the inventors and go to their offices, and I'd say that was like, 80% of the work was done that way, on location.”
Harari: Consulting does not work in the intuitive toy industry
“You cannot consult yourself in the toy industry. It is one of the most intuitive, creative industries out there. It's a feel industry, but it's also a history industry.”
Harari: The only real way to test a toy's magic is at retail
“Testing the magic, very difficult. The only way you're going to test it is by putting it at retail.”
Harari: Spin Master's Key Charm Cuties failed against Mattel on design and branding
“This really, we were up against Mattel and their marketing and their design, and our design couldn't compete. Like, our dolls didn't look as nice as theirs. Our packaging wasn't as good. Our commercial wasn't as good. We didn't have the brand. We didn't have e…”
Harari: Spin Master targeted Japan to scout products for North America
“We actually went there with a mission in hand, which was to try to find products in Japan that we could bring to North America.”
Harari: Aldrich Saucier Invented Concealing Action Figures Inside Marbles for Bakugan
“Aldrich invented the item, so his genius was the idea to put an action figure into a marble.”
Harari: Bakugan became a $1B franchise across 150 countries
“Yes, it became a billion dollar franchise. It aired in literally a 150 countries around the world. We did four seasons, over 200 episodes. It just captured the hearts and minds of kids.”
Harari: Spin Master's follow-up Redikai was a 'huge disaster'
“And then after Bakugan, we launched a show called Redikai, which was based on this really innovative card system that we created. Everybody was excited about it. All the retailers bought into it, and it was a huge disaster. Like, you could not give the product…”
Harari: Toy industry is recession-proof because parents cut kids' spending last
“Parents are not going to cut on, they're going to cut on their kids last.
in terms of consumer expenses and stuff like that.
It's quite recession proof.
The flip side of the toy industry, it's not a high growth industry, but it's just very stable.”
Harari: Spin Master sales dropped from $950M in 2010 to $500M in 2013
“So basically our sales went from 2010, I think we peaked at about nine hundred fifty million.
And then by 2013, the sales were down to five hundred million.”
Harari: Hit toy lines typically have a three-to-four-year life cycle
“Those types of toys have a certain life cycle to them, and they're usually a, it's a three or four year life cycle,
and then they actually go down.”
Harari: Spin Master retired Bakugan in 2013, dropping sales to zero
“So by 2013, we weren't, we actually retired Bakugan.
So it went from like hundreds and hundreds of millions of dollars a year in sales to zero.”
Harari: Spin Master cut 350 of 900 employees over 24 months
“At that point in time, I think we had about 900 employees, and we had to let go 350 people in a matter of 24 months.”
Harari: Spin Master maintained R&D spending through 2012 restructuring
“The one thing we didn't do is we didn't cut our R&D budget. We kept that, and we kept on spending, and we kept on investing.”
Harari: Preschool Is a Steady Toy Market Where Transformation Was Untapped
“It's an incredible demo for toys, very steady demo for toys and no one had ever done anything with that play pattern for that demographic.”
Harari: Spin Master Went Public So It Could Outlive Founders
“The real decision why it went public was to actually set the company up for success in the future. We felt that for the company to outlive the founders, it's best for the company to be in a public construct rather than a private company.”
Harari: Spin Master Is the Largest Manufacturer of Puzzles and Chess Sets
“We bought a company called Cardinal in 2015, so we're the largest manufacturer of puzzles and chess sets and poker chips and all that type of stuff.”