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Gore, Geldof, Venter...And This Guy?


At this year's gathering of tech and design luminaries, Ben Kaufman aims to create a big product—in 72 hours—for free

Al Gore will be there. Sir Bob Geldof is on the bill. So is Craig Venter, the genomic pioneer. As scores of global glitterati gather in Monterey, Calif., on Feb. 27 at the technology, entertainment, and design conference known as TED, they'll be joined by a 21-year-old who wears low-slung pants and an oversize coat. That would be Ben Kaufman, CEO of a Burlington (Vt.) software startup called Kluster. Kaufman has landed an entire room at TED—precious real estate—to demo his new social network. It's a Web site that brings people together to generate new ideas, products, and designs. If all goes according to plan, the event's great minds and celebs will converge on Kluster's virtual world to turn an idea, in the course of 72 hours, into a prototype—ideally something that will help fight disease, slow global warming, or ease the plight of the poor.

How did Ben Kaufman land a gig at this year's TED? He tends to get what he wants. Three years ago, when he was still in high school, Kaufman persuaded his mother to mortgage their Long Island home for $180,000 of startup capital to make headphones for iPods. He quickly founded a company, Mophie, and got a manufacturing line running in China. He rushed over to iron out a production glitch just days before his high school graduation.

Two years later he spent a quarter-million dollars on a booth at Macworld and turned it into an improvised studio. He invited attendees to contribute ideas for Mophie's next product, and 125 of them made recommendations. Then 30,000 people voted on the ideas. The result: an iPod case that doubled as a bottle opener and key ring. During the 72 hours of the show, he and his sleepless team went on to manufacture a prototype. They eventually sold 40,000 of the gadgets, called the Bevy, in 28 countries.

Kaufman launched his current startup, Kluster, last August, after he surprised his venture investors by announcing that he wanted to roll their investment in iPod accessories into a Web startup. They resisted at first. "Imagine you invest in a company that makes fire trucks, and then they tell you they want to sell chocolate bars," says Bo Peabody, founding partner of New York's Village Ventures, Kaufman's biggest investor. But Kaufman won over Peabody and his other backers. Within a week he sold Mophie, and the investors promptly poured $2 million into Kluster, later adding an additional $1 million.

With Kluster, Kaufman's idea is to distill the collaborative magic from that booth at Macworld. He describes it as a social network and virtual studio, complete with its own currency. If it works, he says, companies the world over will turn to Kluster to bring to life all sorts of projects.

With his new venture, Kaufman is in the thick of the latest rage in the networked world: the economy of free labor. Eager volunteers have created massive wealth online. They write and edit entries in Wikipedia, hone the Linux operating system, and populate sites such as Facebook and MySpace (NWS) with the details of their lives—all for free. Successful businesses, increasingly, are those that figure out how to engage large groups—employees, customers, even passersby—to pitch in their energy, ideas, and knowhow. And companies from IBM to a Chicago startup called Inkling are design- ing systems to harvest the wisdom of crowds.

TURNING PLAY MONEY INTO DOLLARS

How can businesses draw in these armies of volunteers? Kaufman and his 10-member tech team are betting they can build a bustling community around a virtual economy for innovation—one with its own currency, the Watt. When you click into Kluster, which debuted on Feb. 19, you bet Watts on your own ideas or invest in those proposed by others. It's a bidding system powered by algorithms. Ideas that attract investments prevail, and those who invest in them gain equity in the project—whether it's a logo, a toy, or a corporate marketing campaign. If a company buys a product or an idea from Kluster, Watts turn into dollars.

Even before the debut, Kaufman marketed a prototype of Kluster to major corporations and signed up four of them (he cannot disclose their names). The companies, in software, toys, beverages, and music, are scheduled to run development and event-planning projects on the system within the next six months. One possible glitch: intellectual-property rights for community- designed products. Lawyers are working on it, Kaufman says.

His opportunity at TED dates back to that Macworld booth, the scene of his original crowd-sourcing venture. One person drawn to the project was Tom Rielly, partnership director for the TED Conferences. "I hung out at the booth for an hour," he says, "and I said to myself: This is major chutzpah.'"

Months later, Kaufman was sitting across from Rielly at his New York office, pushing to make Kluster a chief sponsor at this year's TED. "I told him I could give him a six-foot table, two chairs, and a monitor," Rielly says. "He said: That's not enough.'" Rielly found a way to free up a room for him.

Not all the news is good. Two weeks before TED, Kaufman held brainstorming sessions in Burlington. His plan was to introduce a crowd to Kluster, luring folks into his downtown lair with vouchers for free drinks at local bars. He had hoped that ideas would percolate on the brand-new system, including a project for the TED attendees. More than 100 thirsty and curious visitors made their way in, but their ideas for TED came up short.

So it will be up to the celebs at TED to develop their own idea. Kaufman hopes they'll duck into the Kluster room between speeches, cocktails, and meals and pour their genius—and their Watts—into something new. In the process, of course, this horde of top-drawer talent will be laboring for free, working hard to piece together Ben Kaufman's next big idea.

Baker is a senior writer for BusinessWeek in New York.

Steve Ballmer, Power Forward
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