Pop-culture collectibles company Funko is building an eye-catching Everett showcase and mulling a host of growth opportunities.
Sometime soon, drivers rolling down Wetmore Avenue in downtown Everett may see colorful, 8-to-10-foot statues of Spider-Man, Batman and other familiar characters looming over them from a skybridge and the ledges of an adjoining building.
They’re part of the plan for the new headquarters of Funko, the Everett-based pop-culture collectibles company that‘s been growing rapidly and has its eyes on a potential initial public offering of stock.
“We want you to drive by the building and say: ‘I’ve never seen anything like that before,’” said Brian Mariotti, Funko’s president and CEO.
Since its founding in 1998 as a nostalgia-tinged bobblehead company based in a Snohomish home, Funko has grown into a $400 million business, annually producing some 100 million vinyl figurines, action figures, bobbleheads and other collectibles. All are made under licenses from some of the biggest names in pop culture, among them Disney, Marvel, Lucasfilm, Warner Bros. and DC Comics.
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Along the way, Funko has become a force in the surging pop-culture collectibles market, selling fans stylized, adorable versions of characters from their favorite movies, TV shows, comic books and more.
It’s amplified collectors’ enthusiasm by cultivating community, both through in-person gatherings and regular interactions with enthusiasts on online forums and social media.
“Funko identified a trend in pop culture as a whole, and then aggressively went after being a bigger player in that,” said Mariotti, 49, whose office is lined with shelves full of colorful figures, most from his personal collection and familiar to those raised on after-school and Saturday-morning cartoons.
Mariotti says the company expects to log $425 million in sales this year, soaring from $274 million last year, $107 million in 2014 and $40 million in 2013. He said the privately owned company is “highly profitable” but wouldn’t be specific.
Funko’s products, manufactured primarily in China and Vietnam, are designed in Everett. They’re also marketed and shipped from the city, where the company has 380,000 square feet of warehouse space spread among three buildings.
Funko figures are now sold at big-box stores such as Wal-Mart and Target, mall specialty stores like GameStop and Hot Topic, online retailers including Amazon, and numerous small comic-book shops.
The company’s employee count has jumped from about 175 a year ago to some 300 now, and it’s still hiring for jobs ranging from accountant to designer.
Early next year, Funko plans to move from its current 30,000-square-foot headquarters in an Everett business park to the downtown Everett space, three times that size, that most recently housed Trinity Lutheran College.
There, the company will open its first retail store, currently planned for 10,000 square feet, with an additional 2,000 square feet for a museum. On the outside, among the other oversized Funko-ized figures will be company mascot Freddy Funko.
The company has been making other big moves lately. In recent months, it hired its first chief operating officer from Payless ShoeSource, a chief information officer from Microsoft and a general counsel from Inrix, the Kirkland traffic-data and automobile-technology company.
It also added board members who bring big-league corporate experience and connections: Charlie Denson, the former president of Nike Brand, which oversees Air Jordan and a host of other Nike operations; and Adam Kriger, former senior vice president and chief strategy officer for McDonald’s.
Is this all in preparation for taking the company public?
Mariotti says that’s a distinct possibility.
“As the revenues continue to grow, we’re doing everything we can to prepare ourselves to potentially entertain going public,” he said. “We want to make sure we’re ready by next year.”
But Mariotti added that the company is remaining flexible, keeping “all paths open to what our future is, whether it’s becoming a public company or finding a strategic partner that might want to acquire us.”
How it launched
It’s a long way from Funko’s early days. Founder Mike Becker wanted to buy a coin bank of the restaurant icon Big Boy but didn’t want to pay what collectors were charging. So he licensed the rights to make it, along with bobbleheads of Big Boy and other nostalgic characters, thus launching Funko.
Mariotti and two silent partners bought the company from Becker in 2005. (These days Becker still works for Funko as vice president of apparel in its San Diego office.)
An avid collector himself who once financed the purchase of his house by selling his Pez dispenser collection, Mariotti immediately looked to expand the company’s licensing portfolio and to move beyond bobbleheads.
The idea for Funko’s best-known, best-selling Pop! line came in 2010, when Warner Bros. Consumer Products was interested in a nonbobblehead line featuring some of its DC Comics characters. Mariotti and a Funko artist designed a figure with big, round eyes peering from an oversized square-ish head atop a small body — fun, whimsical and cute.
When they debuted the figures at San Diego Comic-Con that year, they noticed a departure from their typical demographic of “males who over-index on collecting,” Mariotti said. The figures attracted women as well as men, and fans of various ages.
Combining a wide variety of licenses with its stylized Pop! figure design proved to be the basis of Funko’s growth. It’s given that look to collectible versions of everyone from “Star Wars” and “Golden Girls” characters to National Football League players and even Hillary Clinton and Donald Trump.
At any given time, the company has about 175 different contracts encompassing some 10,000 characters. With the licenses, the company is able to seize on the proliferation of content online, on movie and TV screens, and elsewhere.
Funko has a knack for creating designs that appeal to fans of all ages and to retailers of various sizes, according to Julian Montoya, vice president of global toys for Warner Bros. Consumer Products.
“There isn’t a Warner Bros. Consumer Products franchise that can’t be translated into a Funko product,” Montoya said.
Funko’s cultivation of community — in person and online — also paid off as geek became chic, and people online shared their enthusiasm for their favorite shows, movies and characters, along with their latest collectible acquisitions. It didn’t hurt when celebrities started posing with their Funko likenesses.
Pete DeYoung, a 41-year-old neonatologist from San Antonio who has collected about a thousand Funko products, mostly Disney, said, “With collecting, people underestimate the community. Especially when you look for exclusive items, you build relationships and friendships. Over time, that’s what keeps you going [with collecting] as well.”
DeYoung has attended Funko Fundays, an annual gathering for enthusiasts that the company typically holds coinciding with San Diego Comic-Con. And he’s a moderator for the Funko Funatic forum, one of many online venues for Funko fans. Funko executives interact with collectors on the forum, which the company supports but doesn’t own, as well as on the company’s own Facebook, Instagram and Twitter accounts.
Since 2010, Funko has expanded its range of products, from its Pop!Vinyl line, which incorporates the large-eyed, square-faced Pop! design on vinyl figures that are about 3.5 inches tall; to the round-faced Dorbz figurines; small circular MyMojis; plush toys; action figures; and more. Prices typically range from $2.99 to $25, with most items around the $10 mark.
Funko is looking to expand further, possibly acquiring smaller companies, under its new owners. In 2013, private equity firm Fundamental Capital bought the company from Mariotti. And last year another private equity firm, Acon Investments, acquired a 60 percent stake in a deal that left Fundamental with 20 percent, and the management team, including Mariotti, with 20 percent.
Last year, Funko launched a subscription for mystery boxes, wherein customers pay $25 every other month to get a box filled with Funko products. Subscribers know the brand (such as Marvel) and theme (Spider-Man or Deadpool, for instance) but not the specific items that will come in each box. The company now has close to 200,000 subscribers.
Such mystery boxes — or “blind bags” — are one of the major drivers in selling action figure and play-set doll collectibles, a category that market-research firm NPD Group said had annual growth of 64 percent through September. It pegged annual sales at $922 million.
Sean McGowan, who spent 30 years as a toy-industry analyst, estimates that the collectibles market — by which he means relatively inexpensive and small items that older kids and adults want to buy in multiples to display — has been growing anywhere from 25 percent to 50 percent annually for the last several years.
It’s grown so much that traditional toy companies such as Mattel and Hasbro are focusing more attention on their collector-oriented products, said McGowan, who currently is a managing director at Liolios, a financial-communications firm that works with some of Funko’s competitors.
Funko, he said, is in “the sweet spot. Their products have a distinct look. They’re affordable, small enough that you can have 20 of them without being evicted. And they’re highly sought after.”
But whether the collectibles market will continue to grow so robustly is unpredictable.
“These products — nobody needs them,” McGowan said of collectibles in general. “They think they do until they don’t.”
Funko itself is looking beyond just physical collectibles. It’s planning an “immersive digital ecosystem” that would bring collectors together online to converse with each other and with the company, give enthusiasts a way of tracking everything the company has ever made, help them find items they’re seeking, and give them the ability to display their collections and trade with each other, Mariotti said.
Taking a cue from the rise of mobile gaming such as Nintendo’s Pokémon Go, as well as the growing popularity of digital trading cards, the company is creating digital 3D figures and avatars that customers can collect, trade and use on apps the company plans to produce.
They’re all ways the company is seeking to grow “at the epicenter of monetizing license and content,” Mariotti said. “That’s what the companies come to us for.”