- Adventure and Travel
- Business Knowledge
- Venture Capital
Jenni Goodman is a Community Manager at Underscore, a Venture Capital Firm that uses an innovative community model for their portfolio companies.
Niche. Domain expertise. Master of One.
Innovation’s cultural zeitgeist has progressed towards idolizing those who specialize in hyper-specific subfields. I applied to college recently, and that sentiment was apparent in the countless online forums where embattled teens argue over application “spikes” and “hooks”.
To adherents of this new orthodoxy, Jenni Goodman has followed an unorthodox route. Skilled in logistics, planning, and relationship-building, she didn’t followed one pre-determined path. After graduating from Boston University in 2008, she worked in various jobs for various companies, from Pfizer to career management firm GetFive. She wasn’t quite sure what she wanted to do, but working in different industries helped her generalize her toolset across a broad range of functions.
Eventually, Jenni found her calling in startups. Her people-skills and planning abilities would transfer well to entrepreneurship; after all, employees at early stage companies often perform disparate duties. And in 2016, she had the opportunity to attend Babson for an MBA and collaborate with entrepreneurs. Her new job was at MassChallenge, a non-profit startup accelerator based out of Boston.
MassChallenge introduced Jenni to the diverse and fast-paced world of startups. There, she led their Health Tech Community. As a community manager, she experienced the trials and tribulations of running an early stage company, connecting founders with opportunities, customers, advisors, and resources to supercharge their growth. While it was tough, the experience helped her pick up dozens of skillsets from product marketing and technology to sales.
Jenni enjoyed her work at MassChallenge. She was absorbing a variety of skills and talking comfortably to people in different fields. And that’s when she got a call from Underscore.
Michael Skok was a former investor at North Bridge Capital before he founded Underscore in 2015. Frustrated with how VCs was being run, he decided to talk directly with founders to learn what they needed. After speaking with entrepreneurs across the country, he discovered that many startups were talent-strapped. They needed incredible first hires to shoot their companies to stardom, and they needed mentors to guide that rocket-ship of growth. So when Skok returned to Boston, he founded Underscore. The firm would provide the requisite capital, but it would also introduce a Core Community, a hand-built network of Boston business operators, leaders, and founders.
Underscore is Boston-Biased; they focus on Boston companies and the Boston startup ecosystem. Jenni also saw Boston’s potential from her time at MassChallenge, and acknowledged its lack of national coverage. Her dreams of putting Boston’s startup scene on the map meshed with Underscore’s investing ethos, so taking a job at the firm seemed like the right move.
Jenni would manage Underscore’s Core Community. And while most investors are hired because of niche domain expertise, Jenni pointed out that her multifaceted experiences landed her that job as a community manager.
She elaborated, “I didn’t have the typical venture career path, but because I had my hands in so many different things, that actually turned out being very helpful. I was more of that master of none, but that meant I got to touch a lot of different functions that are really important to my role now. I didn’t pigeon-hole myself which gave me the experience to know a lot about everything.” In other words, being a generalist had beaten being a specialist. Connecting Boston’s startup community would take a wide breadth of knowledge, and she had built just the skillset to do so.
To build a community is to juggle multiple different tasks. Jenni needed to understand the startup ecosystem’s needs to provide resources for Underscore’s companies. She also had to connect leaders in the community, encourage people to invest time and money, and drum up excitement around the Boston startup scene. “The goal is for people to eventually move to Boston and want to start their companies here.”
Luckily, those goals are intertwined. Building an incredible ecosystem helps new companies gain traction faster. More traction encourages community members to get involved. Increased involvement drives more public attention.
To grow the community and keep members engaged, Jenni and Underscore have implemented several strategies. The most visual component is their online portal. At first glance, Underscore’s Core Community website looks like a pared-down LinkedIn. You can search through their directory, make connections, and find a diverse set of professionals ranging from CEOs to sales managers and product heads. But the group is more niche, focused on Boston and startups specifically. There’s also a list of weekly events you can sign up for, giving members the chance to network and listen to industry experts.
But the main benefit of the Core Community comes to founders in Underscore’s portfolio. Those companies can immediately access a highly-vetted network of mentors and people to help their sourcing needs. You could call it a Boston alumni community of startup founders and leaders.
Getting into Underscore’s portfolio means embodying the ethos of their investing strategy: community. Underscore looks for the same traits in founders that would be useful in a Core Community member: grit and the ability to take feedback. “Taking feedback from your community and customers is an incredibly important trait to be able to succeed. And we’ve had issues when we’ve realized this person is not someone who could potentially succeed because of stubbornness and an inability to take advice from others,” Jenni added.
Investors balance risk and move capital into startups’ hands. Jenni takes the next step by providing nourishment and turning those investments into successes.
Among the resources provided for portfolio companies is the core partner program, which helps founders find powerful advisors without giving up control. Many founders have trouble finding mentors to guide them, and when they find qualified individuals, they often have to sacrifice considerable equity to attract them. To solve this, Underscore gives away their own stock to potential advisors. Founders can therefore leverage high-powered individuals with limited downside.
Startups can also access the Founders’ Core Forum. Running a startup can be isolating, so Underscore wants to ensure that all their founders are connected.
Monthly, the founders that are a part of Underscore will meet. They’ll discuss various topics. When this started, our topic was about the new normal and how people were handling everything. We discuss a variety of topics, and having a forum where our founders can connect and talk with each other has been incredibly important.
Especially during the coronavirus, when everything has changed, having a backbone of support can be super great. “How do we deal with employee engagement? What are we going to do with our leases where we’ve a signed a five year lease and no one is using it? And that’s a lot of money. How are we thinking about hiring or layoffs or saving cash?”
Ultimately, whatever’s on the founders’ minds is on the table for discussion. Whether it’s wellness, mental health, or current events, it’s a great way for them to trade tips, blow off steam, and become better acquainted.
While Covid-19 has introduced wrenches into many founders’ plans, it hasn’t stopped Underscore’s Core Community events. In fact, planning’s easier. Instead of booking a restaurant and inviting people to attend during a block of time, Underscore can host everything online. Virtual meetups also offer a different sense of closeness in comparison to real-world events. “If you want to have a small, intimate discussion, you could really just have a couple breakout rooms on Zoom. And I think people are just excited to engage because they miss being around people so much that the need for a community/conversation is larger nowadays.”
The Core Community has taken off. Since the last time I checked, there are hundreds of active members in the Core Community portal, and many are there to give back. Jenni said, “so many people get where they are in their career because they had an advisor or mentor and, now, want to do the same for someone else.”
In her two years at Underscore, the startup landscape has shifted, especially given the constraints of a pandemic. However, there is one constant: building a community is hard. People have conflicting schedules. Engagement is sometimes slow. And the topics that people care about are always changing.
But Jenni has a great support system. Her current boss, Jimmy, the CFO at Underscore, lets her have full agency over decisions. “He’s the type of person to be here for advice if you need feedback, but he won’t instruct you on what you have to do. He wants to be that person that helps you walk and talk through things.”
Just recently, Jenni returned to Underscore after being on maternity leave, and felt overwhelmed with everything that was going on, between the coronavirus and scheduling new events. Having someone who could guide her where she needed and see the big picture despite the difficulties helped her keep a level head. Just like it takes a community to build a startup, it also takes a community to build a community.
VC Pitching Tip
Ask for feedback. Even when you’re giving your pitch, just ask. Did that make sense? Do you have any questions? How can I improve on what I’m talking about? After workshops, send a thank you email and correspond. I love when people ask, what could I have done to improve that? So someone who is always eager to learn and improve themselves is someone you want to invest in because they realize that things can always be better. They want what’s best for their companies and they want to have the best product.
Learn as much as you can about the venture space, startup ecosystem, and founders. Reach out to people to get coffees and interview them to see what they’ve learned and what they’ve done. And the more connections you have in that space, the easier it will be to succeed. Reaching out to people cold is very different from warm intros. Get involved more in the ecosystem.
Rob Go is a co-founder and partner at Nextview, a Venture Capital Firm that invests in early-stage companies.
It was 2007, the eve before the great recession. Rob Go had come to Boston for a Harvard MBA and a chance to join a startup. But now, unexpectedly, he was holding two VC offers along with several startup opportunities with a difficult decision to make.
The Boston tech scene—later bolstered by accelerators like MassChallenge—had barely begun to sprout, and he could go either way to make an impact with his knowledge of consumer tech. With one decision, Rob would set himself on the path to starting his own VC, Nextview, which would cater to early-stage companies and nurture them through a hands-on investing approach.
So which path got him there?
To understand Rob’s journey into VC and founding his own firm, we’d have to go back twenty years. After graduating from Duke with a major in Economics, he worked for two years in management consulting. His real hopes, though, lay in the exploding tech scene situated in sunny California.
2003 had been an intense year for tech. Google was preparing for its IPO, Skype and WordPress had just been founded, and eBay had bought Paypal. So when Rob planned to move from Boston to California to be with his wife, he was ecstatic that a role was available at eBay.
Rob’s curiosity with consumer tech led him to a job in product marketing——a boon for a business generalist like himself. The experience was transformative. Ebay’s revenue grew $2.1 billion, and Rob witnessed massive growth at a consumer tech company. Working in a semi-technical role as a product lead also helped Rob develop domain experience on how Big Tech operated. When, in 2005, he moved back to Boston for an MBA at Harvard, he had acquired significant knowledge about the industry.
As graduation neared, Rob considered joining a startup, but received a call from a VC firm. Spark Capital was raising cash for their second big fund, and they were searching for someone with extensive consumer tech experience. Although Rob didn’t think of himself as an investor, it was an undeniably good opportunity.
You might say that investing in—or working with startups—was Rob’s destiny. He grew up in the Philipines and Hong Kong and witnessed his father start a series of businesses. Not all of them worked, but witnessing his dad go through the process multiple times stirred up an immense amount of excitement within Rob.
“Seeing him identify a market opportunity, assemble resources to pursue that opportunity, and give that a real go was very inspirational to me,” Rob reminisced. The backdrop of an entrepreneurial father would eventually play a guiding voice in his career decisions.
Although Rob originally aimed to work directly in a startup, VC could provide a mechanism through which he could interact directly with companies and help them, too. And in 2007, in the nascent tech industry of Boston, with investors excited about the “Next Big Unicorn Company”, Rob was in the right place at the right time to make that impact. Rob explained, “when an investor at a fund—let’s say early stage—is hiring somebody, they’re just thinking one thing: is this person going to help me invest in a company that I otherwise wouldn’t invest in?”
New hires typically offer a niche that these investors need. They can have crucial domain experience. They can be associated with otherwise inaccessible entrepreneurs. Or they could come out of a unique alumni network.
Rob fell into category one: he was a consumer internet expert, who had worked at one of Silicon Valley’s leading tech companies. Boston’s tech landscape was relatively low-key at the time, so it made him valuable as a potential VC investor.
“That’s just who I was, and that was very fortunate for me,” Rob said.
Rob received two VC offers along with several other roles in startups or product management. If he were to go the investment pathway, both decisions seemed like no-brainers. Spark Capital was headed by Bijan Sibet, Santo Politi, and Todd Dagres, who—just two years prior—raised a $265 million early-stage fund. His other offer came from a team with great chemistry and investments.
For Rob, his choice boiled down to one idea: investment quality. “What I’ve internalized is that this [Venture Capital] is a pattern recognition business. You’re training an algorithm and the better the data you use for training, the better the algorithm will be. And the best way to get the best training data is to join the firm that sees the best deals.”
In other words, your first VC job should center on building paradigms by observing how good investors invest in good companies. By seeing a lot of quality investments, you develop an idea of what makes a good company successful.
Spark seemed like a better decision because of that. And unbeknownst to Rob, one of Spark’s investments into a little company called Tumblr would end up reaping massive benefits years into the future.
Out of his options, Rob picked the VC route to Spark Capital, a decision that paved the pathway for his own fund a few years later. At his new job, he learned a valuable heuristic from Bijan Sabet—whose investments included Tumblr, Twitter, and Trello.
“Would I work for this person?”
Asking yourself whether a person is worth investing in is valuable because it spawns many other important questions that helped determine the potential behind a company.
“If I was an investor, would I be excited to work for this team? Is the founder inspiring? Is this a product I care about and believe in? Do I love the idea of building this thing and selling it over and over again?”
This idea of investing in extraordinary founders who attract talent made an impression on Rob, and he’d carry this idea with him whenever he made investments in the future.
After three years at Spark, though, Rob was feeling the itch to interact exclusively with early-stage companies. While he was on a good path at his job, he yearned for more agency and involvement with nascent startups. He knew who he wanted to work with, the demand for seed-stage firms was hitting double-digit growth, and at 30 years old, he was still early enough in his career to make the leap.
His new firm, Nextview, would be a dedicated seed-stage fund. But he also wanted to create an offering that supercharged the operations and growth of these startups. “We’re hyper-focused on the things that matter to companies at that stage: assemble a great team, build a great product, get more customers, don’t run out of money,” Rob reasoned.
Rob co-founded Nextview as a dedicated seed-stage fund, and the team settled on a theme for their investments: “We want to help design the future that we want to live in.” These companies make a meaningful impact in a highly commercial manner. They also occupy the Everyday Economy, or “the digital redesign of broad categories of everyday living.”
Founders in Nextview’s portfolio have ranged wildly in their offerings, but all hold a similar value of changing the way we approach our everyday life. Mealpal provides restaurant foods for lower prices by choosing the menu for you. Dia and Co. personalizes stylish clothing for plus-size women. Grove Collaborative simplifies shopping for sustainable home cleaning products.
These companies look good to Rob for two reasons: founder-market fit and JDCC. He explained:
“Founder-market fit is how well the attributes of the founders match the task at hand. JDCC stands for Jaw Dropping customer value through Competition Crushing business models. Basically, is this an extraordinary product offering that has the potential to be 5-10x better, faster, or cheaper? And is there an accumulating advantage? Is there a reason this company is a compounding machine? As it starts to win, will it be in a better position to keep on winning and win more?”
All these companies have an uncanny ability to build unique products and deliver them efficiently to customers (for more info on JDCC read Rob’s blog post here).
Drawing from the heuristic he learned at Spark, Rob also identifies if the founder is right for the job. From experience, he’s noticed that consistently successful entrepreneurs attract incredible teams, lean into their strengths, and identify deeply with their value proposition.
“I think the best ideas come out of deep-rooted personal experiences or needs. And the most inspiring leaders are the ones who are fully committed to success or doing what they can to make these companies work,” Rob elaborated.
Not every decision works, though, and that’s what makes venture capital extremely difficult. It’s a game of building mental training data, figuring out what companies can succeed, and generating exceptional returns.
“One of the interesting things about venture is that there’s a lot of futility in the business. You say no most of the time. Most of your decisions don’t work out. When you’re fundraising for a fund or a company, you hear a lot of no’s, too,” Rob said, “[but] There is something about my upbringing and the work ethic of being an Asian-American that made me very resilient.”
That said, Nextview has developed a unique business model to turn their investments into successes. Rob and his partners aspire to be the enthusiastic first yes, lead investment rounds, and be the first call for founders whenever they need them. And that business model is supported by the selective investments they make. “I have three other partners. We make 10-12 total core investments per year,” Rob told me, fewer investments per partner than any other seed fund in the country. Being selective allows them to spend more time working with each of their portfolio companies. This all-hands-on-deck effort ranges from a Talent Exchange program that helps founders recruit talent to product advising from leading product developers.
Moving from a consulting job, to a product lead at eBay, to investing with one of Boston’s biggest VCs and eventually starting Nextview, Rob’s certainly taken a unique path, one that might not have happened if he hadn’t decided to follow his wife across the country to the Bay Area.
I thought about the serendipity of choice, but Rob reminded me of the underlying, interlacing factors that lead inevitably to our futures:
“You don’t have to plan it out; you just have to make a great next step. And I think people get too caught up wondering how everything fits together. As a result, you end up getting non-exceptional outcomes because the only thing you can predict a couple steps in advance tends to be non-exceptional decisions.
“The exceptional decisions are the ones that lead to uncertain outcomes.”
Entrepreneur and Investor Advice
There’s a lot more transparency in the industry than there ever was thanks to social media content, podcasts, or interviews like this. So you have no excuse not to be well informed. The other thing I would say is: go out of the building, talk to customers, and don’t do things in a silo. You have to be very commercial and market-oriented. And don’t be afraid to sell something you don’t have to a customer.
It was an atypical summer for a 12 year old boy. For eight weeks, Stuart Draper climbed out of bed to work for his Brother-In-Law, Mike—a plumber. Every day, Mike would assign him new tasks. Dig a ditch. Cut some pipes. On some days, Mike would wrap up at 3pm, and they’d play at the lake instead.
Working for his self-employed Brother-in-Law was revelatory. While Stuart’s dad woke up to long, stiff hours in corporate America, Mike lived exactly how he wanted. Sure, he probably put in more hours, but he chose his schedule. He started when he wanted. He ended when he wanted. He picked his tasks and set his deadlines. Mike was his own boss, and as a 12 year old, Stuart was forever changed.
Why work for someone else when you could do it all yourself?
But it wasn’t until Stuart was laid off from his corporate job post-college that he actually pivoted towards a career in entrepreneurship.After getting laid off, Stuart sat at a crossroads. He explained, “I either had to find clients, start [a company], and have my clients be my boss or go find a new boss. And I chose to start a business.”
At the time, Stuart had been building his skillset in Google Ads. Using the platform, he had advertised for his brother-in-law, Mike, and helped a dentist expand his clientele for a record-breaking three months. Figuring he could use that first success as a testimonial, Stuart found other dentists who needed help running their Google Ads.
A rush of new business confirmed the merit of his digital marketing ideas. He officially started his company GetFoundFirst, became a Google certified partner, and grew hundreds of dental practices through his digital marketing knowhow. GetFoundFirst succeeded as his first foray into startups, and the thriving company needed interns.
That’s when everything changed.
As Stuart Draper was hiring interns, he realized many lacked the requisite skills for digital marketing—even though that’s exactly what they were applying for. Each majored in marketing, but none knew how to set up a Google Ad.
They knew the strategy. They knew how to think about the theories of marketing. But actually creating pieces of content that would perform well and convert people into customers, being able to actually build a website and do a good job of organizing that content on that webpage to convert visitors into buyers? That part of digital marketing and marketing in general terms, they didn’t really know.
And that was a problem. His company had to retrain all the students to become proficient enough to just do their jobs. Not ideal.
Later, Stuart signed up to teach as an adjunct faculty member for a marketing course. And he saw the exact same skills-gap reflected in the curriculum. The course materials were seriously out of date. The previous professor had left a word document with a list of hyperlinks to marketing resources. But some of the links were broken. Others were over three years old. Many times, Stuart had to notify his students that their reading assignment was obsolete, and they’d have to redo the homework with new materials.
Maybe the problem was confined to a select set of schools?
Stuart called colleagues from other universities and discovered a stunning reality: around 40% of the schools didn’t even teach digital marketing to their students.
So he decided to fix the problem by writing a digital marketing textbook and updating it twice a year. But when he researched publishers, he found most only permitted updates every two to three years.
A massive knowledge gap existed between what was useful in the workplace and what universities were teaching. His GetFoundFirst interns couldn’t properly optimize SEO or craft clickable google ads. Those interns lacked the knowledge because course curriculums were out of date. Outdated marketing curriculums and stringent publishing regulations meant that many schools couldn’t teach the newest advancements in digital marketing.
It was a recipe for disaster.
Stuart brainstormed solutions, but all his fixes operated within the system of colleges themselves. It wasn’t until a lunch with his mentor when he realized that he could turn his solution into a functioning company—changing marketing education from the outside. Over their meal, Stuart had casually mentioned that he was thinking of writing a book.
“Cory, if I got a hundred schools with a hundred students, paying me $100 a semester—that would be a million dollars a semester,” Stuart described, and that’s when it it hit him. He had a strong value proposition for modernizing marketing education, and he wouldn’t go broke doing so.
That night, he returned home and excitedly recounted his thought process with his wife. “I feel right about this. I need to go and start this other business,” he said. It was a huge risk, but it was also a huge opportunity, and who could give that up?
Stuart’s prior experience simplified his transition into his new company, Stukent. But he only had a rough idea of the product he needed to build. So the team conducted market research.
They learned that around 40% of schools didn’t teach digital marketing, and that most curriculums were about six years behind. Coincidentally, sending surveys attracted the attention of some professors for their new product. Stuart realized he could turn that nascent interest into pre-sales.
He also realized that to get those professors to pull the trigger and buy their product, he needed early adopters to buy into their idea and generate referrals. They first sold to BYU, a top 20 business school in the country at the time. Stuart was searching for early adopters, and called a professor that he knew.
“Hey, I’m teaching digital marketing,” Stuart said, and then listed off several of the key problems he was facing. “What problems are you facing?”
“It would be really cool if we had a digital marketing simulation,” the professor replied. A lightbulb went off in Stu’s head.
“If we build that, would you use it?”
“If we build this for you, what would it have?” Stuart asked.
The professor listed off several key features he wanted in the simulation. Stuart went back to his product development team, and they crafted a prototype—the Mimic Pro. It was a digital marketing simulation that gave students $50,000 simulated ad dollars to practice running their own campaign.
When they finished the product, Stuart returned to the professor and asked if he would want to use it for free. He said yes, and that was their foot in the door. It was also a confirmation that their sales strategy worked: learn about pain points, build an ideal product, and give for free use. According to Stuart, “Getting that first customer is the hardest. And getting each additional customer gets easier and easier. You learn how to sell them.”
A first-of-its-kind marketing simulation represented a step forward for Stukent, as it was a unique value proposition and a leg up on the competition who hadn’t even gotten started. With each sale, they would obtain feedback, and adjust the product to the professors’ liking.
Stukent paired their marketing simulation with Stuart’s original idea—a textbook of the future—one that updated frequently to follow the newest marketing technologies. This simultaneously solved all of the problems that Stuart had listed before.
But Stuart cautioned with putting too much attention on product alone:
When you start a business, your first hire should be a killer sales guy because sales solves all the problems. If you have sales, then you have money, and you can justify getting money to fix the issues with your product or service. If you don’t have sales, then you don’t have money and time to justify fixing and improving your product or service.
This was especially important in EdTech. Universities take a long time to make decisions. And if they used Stuart’s product, Stukent would have to wait for over a year before they earned revenue. So working with as many early adopters as possible was crucial. “With early adopters you don’t retain all of them…but you will retain some of them. So you have to be able to have new sales and revenue to go and pay and fix the previous problems,” Stuart reasoned.
The sales team, therefore, had to balance between hiring new sales people and limiting costs so that they wouldn’t blow through their funding.
When they finally deployed the new textbook platform, Stuart believed it would be smooth sailing. They used frequent digital updates to track the evolution of the industry, and used their marketing simulation to help students with hands-on learning.
But something unforeseen popped up.
“Professors don’t want you to change their book in the middle of the semester, because they have a syllabus that they’re working off of,” Stuart explained. But they didn’t realize that at the time and changed the textbook in the middle of semester, throwing an entire class’s project into flux.
The professor raged on them in their online forum, and the team had to quickly come together to figure out a solution. After apologizing profusely, they sent a new update that would allow professors to work with certain versions of the book that doesn’t get changed for the entire semester. If you started before the update, you could stick with the old version.
Luckily, the professor is still a customer today, but the experience was a testament to navigating tricky customer satisfaction challenges—especially with a product that had never been used before.
Stuart saw these challenges as welcome, though. I was curious why.
“It’s hard, but hard is a barrier to entry. You have to find things about your business that are really hard for other businesses to go duplicate,” Stuart said.
Essentially, their complex product was good because it was hard to replicate. And since schools take a long time to make financial decisions, that long sales cycle which proved frustrating in the beginning was also good because it made it harder for other companies to penetrate the market.
If you can raise funding and overcome that barrier of waiting for 12 months to make money, now the next company has to start that same process of waiting 12 months to make money. And you’ve already overcome that. Now your money is flowing, you have that repeat business, and it’s easier for you.Stuart Draper
From business school conferences to webinars, the word for Stukent’s new product spread fast, and they quickly became the university standard for digital marketing education.
These days, Stukent is still developing their textbook in tandem with the Mimic Pro software. Their platform is used at numerous top institutions like Wharton, Northwestern, and UC Berkley. Inc. has also inducted them into their ranking of the 5000 fastest growing companies in America.
While Stukent may seem like another rendition of the textbooks that we’re so used to, Stuart approaches his product differently. For him, it’s a digital platform that teaches the newest developments and allows students to practice them at the same time.
Wait for the right opportunity, and vet that opportunity with market research, and then go all in. Don’t just force it. You have to wait for the right opportunity, prove that it’s really the right opportunity with market research, and then go all in.
To learn more about Stukent, visit them here. To see our interview with Le Tote click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
Oscar Hong Personal, Stories Brett Northart, Clothing Subscription, Entrepreneurship, Fashion Subscription, Le Tote, Lord and Taylor, Maternity Clothing, Rakesh Tondon, Startups, Waitlists, Women’s Apparel 0
Cowritten by Oscar Hong and Joseph Zhang
How much of the clothes in your wardrobe do you actually wear regularly? If you’re like most people, the answer is not nearly enough—and that was exactly the case for Rakesh Tondon and Brett Northart, the co-founders of Le Tote.
Le Tote is a subscription-based fashion startup that brings the cost of owning up-to-date clothes down to a fraction of the traditional price. By emphasizing the rewearable nature of clothes, they also reduce waste.
Tondon conceived the idea behind Le Tote when his wife was pregnant with their second child. During the pregnancy, she didn’t want to purchase maternity clothes that she knew would only be worn for a brief period of time. Instead, she wanted to borrow clothes from her friends and return them after, saving herself money and avoiding buying clothes that would “expire” in a few months.
“She didn’t want to buy things for maternity,” Tondon said. “Maternity is kind of a finite period in your life, [so] you don’t necessarily want to spend a bunch of money. So I think that’s kind of where my wife was. [She said] ‘I wish that I could share and swap clothing. I still have to go to work every day. I just don’t want to buy all these maternity clothes.’ And so that’s really what sparked the idea.”
During this period, Rakesh Tondon became good friends with a coworker at JP Morgan, Brett Northart.
When Tondon and Northart’s families met, their wives shared their experiences and realized that they held similar concerns. For Tondon and Northart, an idea manifested. Although they discovered an opportunity to make an impact on the maternity apparel market, a bigger hole existed within the fashion industry itself. From a wider perspective, clothing trends are always evolving, which means that “staying in style” isn’t cheap and can lead to a pileup of unworn, “outdated” clothing.
With their sights set on the broader women’s fashion market, Le Tote was almost born.
Although they had identified a major opportunity to effect change in the industry, the pair was hesitant to enter the startup lifestyle—and for good reason. Coming from careers in investment banking, the fashion industry was completely foreign to them. To add to the intimidation was the fact that they didn’t have much experience in startups. But after enough deliberation, they decided to press forward with their idea.
“We said, ‘we see this huge opportunity. We’re two guys that seem like we understand the problem well enough. If we’re gonna keep talking about it, we likely will never do it’,” Tondon said. “So after about a month and a half of evaluation, we jumped right in. We started the company and quit our jobs. You’d be doing a disservice to yourself if you didn’t take that chance.”
As expected, things proved tough in the beginning and the learning curve was huge. To familiarize themselves with the industry they just entered, they conducted market research.
“You talk to as many people as you know,” Tondon said when describing their early market research strategies. “You talk to and meet with as many people that take your calls. And you read up on as much as you can. Use a lot of common sense. And you have to fake it till you make it.”
During this period, they’d reach out to friends on LinkedIn and send mass emails to friends of friends. They entered the market with zero experience and few people willing to talk, but Tondon found a couple methods worked for maintaining relations.
First, they’d demonstrate that they did their research on that individual by understanding their background. Second, they’d ask the relevant types of questions and follow up.
After they finished their market research phase, they decided to press forward and launch their service. In the beginning, they targeted women aged from 20-26 who would use their service when going out with friends.
While women from that age group may have used Le Tote, Tondon and Northart discerned that their true customer demographic laid in middle aged women who used their services primarily for work clothes. With $200,000 of capital at risk of being lost from their failed venture, they had to initiate a quick pivot.
Aside from developing effective sales strategies, Le Tote needed to attract talent and raise capital to succeed. With his background in finance, Tandon understood the ideas behind raising capital, but the process still proved much harder than anticipated. Likewise, crafting the right team for the young startup wasn’t easy either.
“Businesses like ours require capital,” Tondon said. “So while we came from banking, and we knew a lot of the folks [who] we were going to reach out to, it was really hard to convince them that we knew the business, we knew fashion, we understood retail, and that we could do this. The other hard thing was recruiting people. You know, we didn’t come from technology [backgrounds], and this is a very complex data and logistics business. So understanding who to hire, how to hire, and how to attract these people was really hard. We struggled for the first year with hiring smart people to join the team.”
Eventually, however, things took a turn for the better. More users began using the service. As a matter of fact, too many users were signing up. With such a large demand, they didn’t have enough clothes to accommodate everyone. Rather than turn away customers they couldn’t service—and create angry users and missed revenue—they saw an opportunity: place everyone onto a waitlist unless they referred someone to Le Tote. To be bumped from the waitlist, priority was given to customers you referred others. As a result, this strategy generated even more users, helping Le Tote grow even more.
“Very quickly, we had a waitlist of about 40,000 potential customers,” Tondon said. “We let them in based on the number of people they referred. After we launched and let people in, we got a lot of press. The press was really helpful in finding a lot of this traffic. But I’d say for a year and a half to two years, it was primarily word of mouth and the virality that came from our exclusivity [that drove growth].”
With the help of media coverage, Le Tote was on its way to becoming a major disruptor in the fashion industry. In 2019, Le Tote went on to acquire Lord and Taylor, a company 10 times its size based on revenue.
Advice to Young Entrepreneurs
“I talk to a lot of entrepreneurs, I see a lot of entrepreneurs that give up too early sometimes. What I tell everyone is, ‘I was fortunate that I found my calling for a cause that I believe in early. I didn’t have to go through a lot of failures to understand what my calling was.’
So what I [would] tell to someone else, [is to] really believe in what you’re doing. Don’t do it for the heck of it, because the journeys are really tough. There are a lot of highs, but there are more lows. When you know you go from one low to another, you’re bound to give up if you don’t truly believe in the cause. So truly believe in what you’re doing and be passionate about it. Think hard about why you’re doing what you’re doing, and when you truly can get that idea out of your head, that’s when you should want to do it.
When you’re doing it, really commit to giving your 200%. Work really, really hard. Work smart, but work really, really hard—especially in the early days. That could be the difference between failure and success.
I see a lot of young entrepreneurs say, ‘I gave up because I didn’t have [a] work life balance.’ You should care less about work life balance today. If you want to really create a world class company, you can earn the work life balance at the appropriate time, five or 10 years from now. I’m not saying work yourself to death, but don’t give up just because you chose to not work harder.”
What’s an Interesting Fact About Le Tote?
“The amount of charity work we do outside of what we report. So we’re a company [that] tries to impact people’s lives. And so one of the things that we do is quite a bit of work for women and women’s charities, but we don’t actively talk about it.
We’ve chosen not to do that because we don’t believe that we need to get any marketing mileage out of it. If you read much about us, you’re never going to read the impact were making on people’s lives”
To learn more about Le Tote, visit them here. To see our interview with BMW click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
*Le Tote and Lord and Taylor recently filed for bankruptcy protection. Learn more here*
Cowritten by Joshua Gauthier and Joseph Zhang
The Ultimate Driving Machine
You can see trees, houses, and road signs ahead of you. In an instant, they whiz past at 75 miles per hour. The V-8 roars in your ears. Your hands grip the leather steering wheel. All the other motorists around you turn and stare at the swooping angles, the angled grill, and the blue and white emblem on the glistening hood. You’re not just driving any car; you’re in the “Ultimate Driving Machine”.
This picture, these emotions—they’re the core of what BMW wants for their customers to feel. A BMW is defined by emotion: the thrill of the drive. Some of BMW’s fans flock to the small, fun-to-drive sports cars for this reason. Others enjoy the high status that comes with owning one. The famed car of sports stars, CEO’s, and world leaders, BMW is a luxury brand. Whatever the motivation for the customer, it is clear that BMW’s brand is one of the company’s greatest assets. People aspire to own a BMW.
A brand like that requires a strong team behind it. Recently, I sat down with Adam Sykes, Vice President of Public Relations for North America, to glimpse into how BMW manages its image. But before diving any deeper, it’s important to know just what public relations is.
Public relations boils down to one major theme: sharing company events, news, and information with the general public. This ecompasses all aspects of a company. From financial information to new product launches, changes in management, or a crisis of some kind, it all connects to the Public Relations team. A public relations team acts as a liaison for the company to the public. Press releases, product launches or newsletters all fall under the purview of the public relations team.Working in Public Relations requires a great understanding of perspective, emotional intelligence, and, most important, people-skills. Adam Sykes learned quickly his strengths and his weaknesses. Harnessing that knowledge, he knew a job in Public relations was right for him
The Man Behind the Brand
Sykes’s English accent stuck out to me. Growing up in the United Kingdom, he quickly found an affinity for the study of languages. It was a highschool trip to Germany as an exchange student that made him see his true passion for other cultures. Though he didn’t know what he would do, he knew he loved languages and business. Fast-forward a few years and Sykes had finished his degree and went to work as an intern for a brake manufacturer, quickly developing a love of the auto industry. It was the diversity of the industry, the art of the automobile. It was being able to be in a place that touches so many areas of the world that kept things always interesting. Years later, the notion still holds water. Our interview was held in one of the most “interesting” times the world had ever seen, and I was eager to find out just how Sykes had managed the large shakeup that is COVID-19.
COVID-19’s Forced Change
When the United States put in place lockdown protocols, car dealerships were forced to close their doors temporarily. With a closure in dealers quickly came a closure of the plants that made the cars. When BMW stopped selling cars, they stopped making cars. Customers were understandably worried; many were unsure if BMW would offer temporary financial relief, be able to sell them their car, or service their vehicle. On the other hand, with no new cars being manufactured, dealers needed to know how BMW could keep them afloat. Could they sell their existing cars? Would they receive any new shipments of inventory? What do they tell their customers? An avalanche of questions and uncertainty.
Despite the sudden quarantine, BMW’s public relations team responded quickly. Dealers were prompted to pivot to non-contact delivery and purchase of new cars. The large American auto shows, where BMW often announced the release of new models, went online. The release of a new motorcycle was hosted at an online live event rather than at an in-person venue.
COVID-19’s challenges forced BMW’s public relations team to think outside the box. They realized they could save time, energy, and money if they simply conducted most meetings over the internet rather than in-person. Where before all company videos were slick, polished and scripted, quarantine made them realize that they could save time and money and post iPhone videos. People in the company even preferred the more personal, imperfect method of COVID-19 communication. Sykes observed that COVID-19 united BMW and emphasized “out of the box” thinking. The pandemic forced BMW to use our existing technology to its fullest extent. This realization brought me and Sykes back a few decades as we reflected on just how much Public Relations has changed with the advent of the internet.
Public Relations in the Age of the Internet
It’s the mid-1980’s. When a new BMW model is released, the journalists receive the news. Information travels from the Public Relations team to journalists and then to the people. Winning a positive report from big institutions like Motor Trend, Car and Driver, or television shows like BBC’s Top Gear means everything.
The internet age has increased both the amount of paths and the speed information can travel to the public. A positive story can spread like wildfire through the internet, drumming up enormous amounts of support. On the other hand, your CEO tweets something negative or a car catches fire, that too can spread and create the same wave. For Sykes, this change presents simply a different set of “rules for the road”.
Take Youtube automotive blogger Doug DeMouro (above), the perfect example of this change. His videos on youtube routinely rake in over a million views, and yet he is an “average joe”. He doesn’t work at Motor Trend or at Car in Driver. DeMouro enjoyed cars, worked at Porsche for a few years, then went and started his own internet blog.
His rise to fame was made possible by the freedom the internet gave to its users. It is that allowance of anyone to write just about anything that made things so different. The sheer volume of opinions and takes on every move a company makes is a result of this core tenet of the internet. Public relations teams have had to accept the elevated position of the public’s voice and change their events and activities to fit this influx of bloggers, enthusiasts and YouTubers onto the scene.
Just as the internet has given a voice to the public, the internet has played a role in connecting the world’s diverse peoples. Differences in language, social norms, and cultural values make establishing a unified brand a challenge for a multinational company like BMW. How does BMW transcend borders?
Tailoring the German Car to Global Roads
What if I told you that one of the hottest cars in China is a Buick minivan? Ask the average American customer, the words “Buick” and ‘Minivan” about feelings of senior citizens and youth soccer. Not exactly an attractive combination. Yet in China, those two words convey class and elegance. Why? The short answer is that Buicks automobiles have been the main choice for major Chinese dignitaries for better part of half of a century (Emperor Puyi owned one, Sun Yat-Sen was photographed in one in 1912, and Zhou En’lai kept a 1941 Buick at home in Shanghai). While sales fell in the United States, General Motors positioned Buick to become one of the best-selling luxury cars in China. Buick’s Chinese success can be largely attributed to this knowledge of the culture and a pivot to capitalize on it.
General Motors, like so many multinational corporations, tailored its brand to fit the market. Sykes described that certain aspects of BMW remain the same throughout markets. BMWs are well built, German, and luxurious. They’re fun to drive and uniquely styled. In addition, reporting financial information and metrics isn’t something that needs to be “tailored”. It’s the same in the United States as in Kenya.
But other aspects are vastly different. From the marketing materials to the offerings themselves, many things are fit for the particular needs of the region. Canadian customers, living in a cold climate, value options like all-wheel-drive and heated seats. American customers like large SUVs. German customers enjoy a sporty, agile sedan.
Each country has its own Public Relations specialist whose job it is to know these needs and help tailor the image while maintaining the core identity of the brand. They conduct research on cultural trends and monitor buying habits in order to better understand what will sell and what won’t. All of these specialists report to their regional Vice President. For North America, that’s Adam Sykes job. Sykes works with all the country’s specialists to formulate a full Public Relations strategy from Canada to Brazil, operating out of New York and continuously working with Munich to receive direction for his region.
Through his years of experience in working over borders, Sykes realized some of the important lessons and knowledge he gleaned early on provided him with the leg up he needed to excel in his job. The path he took to where he is today is a unique one.
The job at BMW, working in the Public Relations department, allowed Sykes to do what he was good at and what he loved in an industry he loved. His advice to high schoolers echoes so many others. Take what you’re good at, find the opportunities in that field, and capitalize on them. Going to a private college gives you the hallway with the most doors, but it’s you that has to open them. Do what you’re good at and what you love doing, and you’ll achieve success for yourself. He left me with the quote: “Be inspired”. Be inspired by what you do and be ready to pivot when you feel you need a change. When you’ve done that, pretty soon you too will be behind the wheel of your own BMW.
In 2009, the beauty industry was no where as saturated and developed as it is today. For Katia Beauchamp, co-founder and CEO of Birchbox, this was the perfect opportunity to launch a personalized beauty experience the industry had never seen before.
Katia was a finance major, but didn’t discover entrepreneurship until business school.
“I felt like I wanted to do more with my brain, and I didn’t feel like I was meeting my potential with the work that was in front of me. One of the things that struck me about entrepreneurship was the opportunity to try really hard things and see what was possible if you weren’t constrained by someone else’s rules or expectations. [The only constraints] are your own capabilities, and I became really fixated on entrepreneurship”
Katia and her co-founder noticed, in 2009, that the majority of online businesses targeting the female consumer were focusing on fashion. Beauty wasn’t being considered, and she got curious about why. The answer was simple: people wanted to smell, touch, and try beauty products before committing to buying a full sized product.
Katia wanted to solve this problem. Her solution was Birchbox, a personalized subscription box that delivers customers a curated package of finite choices.
The first and biggest challenge Katia encountered was getting well-known beauty brands to collaborate with Birchbox. Since it was a new company, well-known beauty brands didn’t want to invest their time and money. Eventually, the company got so big – going international just two years after launching – that they needed more samples and time to shift suppliers to figure out where they wanted to invest marketing dollars.
Katia says that they did not use any special marketing strategies, but their timing was key. They didn’t plan for it, but the time of their launch coincided with the rise of beauty vloggers on YouTube and other social media.
“It was honestly serendipity that the person creating content needed content, so they subscribed to BirchBox. We didn’t send them boxes, and we had no idea this community existed. They organically found us and that was really good timing and good fortune.”
As the market became more saturated with other competitors, Katia solidified the company mission, which became helping consumers that don’t know much about beauty or consider beauty to be a big part of their daily routine.
“Every other retailer/subscription service out there is there to help people who love beauty get in front of more beauty.”
With this change came a shift in products and business strategy. Birchbox became primarily focused on skincare and haircare over makeup. The company established algorithms and customer service experiences with this target consumer in mind. Their mission statement became “forever useful always delightful”.
“We are really passionate about being the intersection of delight and ethics. We want to give customers something that is worth their time and money. As well as bringing little bits of joys to customers’ lives. It’s fun to open, but it’s also about learning to take care of yourself and feeling confident. We want every consumer that isn’t passionate about beauty to know that BirchBox is the place for them.”
“If you have an idea, the best thing you can do is to start doing it. Letting go of the idea of a perfect product, but instead launching something to understand if this product has a market. Starting is a really important milestone.”
To see our interview with Winnie click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
Although the internet has bequeathed a bounty of information among new mothers, it still has its downfalls, especially for millennial parents of the tech generation.
Sarah Mauskopf of Winnie quickly realized that problem after her first child. Everything was new. Breastfeeding. Finding childcare. Safety. And when Sara returned to work, the act of childcare became a “never-ending problem to solve…[with] no tools to help.”
This never ending puzzle was rooted in the lack of local information. Sure, she could learn about helping her infant sleep. But where could she find childcare? What could they do on the weekends? And as a tech-fluent citizen, where was the app for parents like her?
Returning to work and emerging from the fog of parenthood, Sara realized there was an opportunity.
“We could build something that makes this information accessible and is mobile and personalized. So the big moment for me was having my daughter and experiencing these problems first-hand and realizing that I was well-positioned to solve these problems.”
For Sara, the market was clear. Modern parents didn’t have an easy tech solution for childcare woes. In the most tech dependent generation in history—with 90% of new parents being millennials—there needed to be a solution that provided parenting information at their fingertips.
Of course, the major business question centered around exactly what type of information parents prioritized. All parents face the typical challenges of breastfeeding, potty training, and dealing with rambunctious toddlers, but online guides provide sufficient help.
Sara pinpointed the lack of localized information as the biggest opportunity. Where could parents find parks, playgrounds, open spaces, and kid-friendly restaurants? While parents could ask friends or find obscure blog posts, there wasn’t one place that aggregated all that data at scale for any location across the United States.
Sara’s tech background also influenced the way she hoped to solve the problem. At the time, she and her co-founder worked at Postmates. But before then, she had built consumer products at Twitter, Youtube, Google, and Quora.
Building consumer-centric products inspired Sara’s vision for Winnie. At her previous jobs, the community created “the content whether it [was] YouTube or Twitter.” So Sara foresaw a two-sided solution for modern parenting. Users would drive content creation through posts and conversations. Software features like daycare and restaurant locators would curate customized, local recommendations for those parents too.
The platform would marry human interaction and big data.
Sara had a marketable idea, business model, and a clear opening, but in any other world, she might not have taken the jump. Sara told me that there were two types of entrepreneurs from her experience. Some start businesses from a young age for the sake of doing it. Others never expect to be a founder, but end up being so passionate about a problem that they become one anyways. Sara fell in the second bucket.
“If I felt like there was another company out there that was already working on this problem and I could join them, I think I would have done that. I didn’t see anyone even remotely addressing the problem that I thought existed in the world and the opportunity.”
Venturing out as a first time entrepreneur can be exciting, but nerve wracking. Fresh off the birth of her first child, Sara faced criticism from people around her who said that she shouldn’t start a company with an infant. But Sara knew that if there was any time to transform her idea into reality, it was then, because she would just be getting more busy in the future.
Regardless of others’ opinions, the early days were still exhilarating.
“You have this idea, you’re really motivated, and you don’t have any product out there to maintain or a user base to worry about,” Sara explained. “You’re really optimistic that everything is going to work. Those were some of the most fun times. I also got to write code which I like doing and really focus on the product. The early days are wonderful, and that’s the part of the startup that I’ve always imagined.”
In the early stages, she and her cofounder would chat with their advisors, write line after line of code in a small conference room, and flesh out their idea into a product. First, she looked at her competitors. Parents typically found childcare information on Google or Facebook, but those services were too general. Parenting wasn’t their focus.
Instead, Winnie would be a niche platform that addressed the specific issues around parenting, while acting as a safe space for new parents to discuss the trials of childcare. Winnie would focus on the community both in the information it provided and in the user interactions.
Sara wanted to attract that community through a host of helpful features, one of which was the comprehensive daycare and preschool search. The team dove deep and collected countless data points on daycares and preschools, plotted the locations on a map, and allowed users to look at important factors such as price and distance. It was the first comprehensive database of daycares.
In fact, the base of Winnie’s entire product is data driven. While parent-produced content is one of their main attractions, the technology underpinning the entire platform is just as important. They collect data through researchers, automated web scraping, and crowdsourcing. If a provider wanted to update information on a page (or claim it), much like Google, they could get access.
Building a product that integrated seamlessly into parents’ lives was exhilarating, but building is different from deploying.
“[Suddenly] You…have users and you raise money. You get employees and the stakes get a lot higher. It quickly went from being all fun and games to we have a real company that we’re running. And there’s a lot more responsibility.”
Six months in, Sara’s husband was also diagnosed with cancer. Fortunately, he’s fine now, but at the time, Sara was dealing with a whirlwind of emotions. She had a baby, her husband was sick, and yet there was still a company to run.
And she almost quit.
But having a cofounder made the idea of staying a little more palatable. Others could fill in duties while she took a break. So although she had to unplug for some time, her team supported her consistently.
When she returned full time to the company, Sara was barraged with a host of new issues, but none as big as user acquisition.
In the beginning, they didn’t show up in Google searches, had virtually no data for most of their services, and struggled to build up a critical mass of users.
So how did they solve this?
They started by launching their product fast. In their first three months, they built a beta and deployed it. Three months after that, they rode into the App Store. By introducing a suite of ready-to-use features, they made it effortless for any parent to immediately start using their service.
And those early users were crucial in determining where to steer their ship. They offered feedback, provided the initial data on local attractions, posted, and generated interest through word-of-mouth.
After those first few tenuous months, Winnie got rolling fast. “The system just kind of maintains itself because users come onto our service, and they create content. That content can drive traffic through search and social sharing and word-of-mouth. And so it’s just this nice self-sustaining system where we grow through our users,” Sara explained.
But their unique platform features varied from major attractions for early customers to veritable time sucks.
One area where they spent too much time in the beginning was their restaurant locator service. Winnie had acquired deep data on restaurants across the US, indexing factors from changing tables to kids menus and even if kids ate free.
Sara and the team loved the feature. But the majority of parents cared more about affordable daycare and safe play spaces for their kids. After spinning their wheels on the feature for a long time, they solicited feedback and realized parents didn’t care much about finding kid-friendly eateries.
Locating those restaurants was useful, but not highly demanded. It was an important lesson for Sara and her team: to build the most highly leverageable products, speak to the consumer first.
Procuring feedback and data from the community has therefore become the biggest driving force behind Winnie. And that same supporting community drives repeat use for new parents.
“I think that’s really the value of the Winnie community, is that no matter if you are dealing with some obscure issue or a common problem, there’s just this tower in the community of other parents and we help connect you to people who have similar concerns or who are in your area. You just feel less alone.”
These conversations—usefully enough—have become the backbone of Winnie’s SEO strategy. Popular parent conversation topics and posts gain more traction, rank better on search engines, and drive more parents to the platform.
Through this crazy experience of becoming an entrepreneur, Sara’s learned a major lesson: you can recover from anything.
“I didn’t think I could survive my husband having cancer, and I didn’t think some of the issues that we faced were problems we could solve. Then we solved them. For example, how to grow organically. It just took time for Google to index our pages and start ranking. You have to, as a CEO or as a founder, always think about how to give your company the most time to figure stuff out. And money is a part of that, but also building a culture where you’re working at a sustainable pace. If you go too hard at the beginning you might burn out. ”
Winnie’s changed the game for millions of households across the country, and they hope to continue making a difference into the future. Sara sees Winnie becoming the end-to-end tech solution for parents across the country, democratizing access to the best quality childcare knowledge.
“If you have an idea that you’re passionate about, something that you want to do, just go for it and do it. There’s never going to be a better time to do it. There’s never going to be more information that you need rather than just getting started. You’re going to learn everything you need to learn by getting started and that’s going to be the fastest way to figure it out. When I was wavering or deciding whether I was going to start a company, that was the piece of advice that really resonated with me most. There was nothing else that I needed to learn or figure out before starting because the fastest way to learning all that stuff would be too just getting started.”
To see our story on Bank Of America click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
Oscar Hong Finance, Stories Amadeo, Amadeo Peter Giannini, bank of america, bank of italy, branch banking, crisis banking, finance stories, giannini, great depression bank of america, populist lending, san francisco earthquake of 1906 0
Crisis is often a catalyst for innovation.
In 1883, before he entered the banking industry, Amadeo Peter Giannini quit school in his early teens to work for his stepfather as a fruit and vegetable merchant in San Francisco. By the time he was just 31, Amadeo had already amassed a net worth of $300,000 ($9 million inflation-adjusted), was retired and married.
However, Amadeo was never suited to live the life as a fruit merchant (despite his wild success). As someone who was described as “hot-tempered, egotistical, and often ruthless,” Amadeo was angered one day when he got “into a shouting match with the head of a local bank about its reluctance to make small loans to individual borrowers” (Zweig, The Wall Street Journal). Feeling bitter, Amadeo founded his own bank in 1904, the Bank of Italy.
At the time, most banks favored high net worth, high class, large institutional customers. For those who didn’t fit this criteria, banks viewed them “as credit risks not worth the paperwork.” Their options were limited. Some even resorted to using high-cost loan sharks. But Amadeo was about to change that.
Housed in a converted saloon, Bank of Italy disregarded the status-quo of banking practices at the time and dealt exclusively with “little fellow.” The bank serviced and solicited (another banking taboo) hardworking immigrants, small farmers, and businessmen (all of whom were ignored by other banks) offering them savings accounts and loans. Amadeo would go door-to-door, convincing immigrants that their cash was safer in a bank earning interest than under a mattress accruing dust.
The determining factor that Amadeo used to decide who received a loan was not a customer’s assets, but rather their character. “Within a year, deposits were soaring above $700,000 ($13.5 million in 2002 dollars)” (PBS.org).
In 1906, tragedy struck: a massive earthquake ripped through San Francisco and started fires that would burn down the Bank of Italy.
With some quick thinking, Amadeo trollied the bank’s money away in orange carts (to prevent looting) to store it in his home. While San Francisco was still burning and other bankers lost access to their overheated vaults, Amadeo created a makeshift bank on a wharf with a cardboard sign displaying, “OPEN FOR BUSINESS.” He offered loans to victims of the earthquake. Requiring his debtors to “raise half of what they needed elsewhere,” and loaning the other half, he often accepted handshakes and their characters as collateral (Zweig, The Wall Street Journal).
It’s reported that every single loan was later repaid.
With his eyes on becoming the biggest bank in California, then the United States, Amadeo needed to rise from the ashes of his burnt bank. By incorporating his philosophy of catering to little people in a radical new concept, branch banking, Amadeo quickly expanded across the state and grew to be its largest bank. He began purchasing stand-alone banks and reconverting them into branches, putting an end to the “independent bank” business model and providing essential services to many immigrant communities. Although regulators ordered him to stop purchasing branches, nothing could slow down his momentum (or his hatred of following others’ rules).
“We had money to sell and we went direct to the people to sell it.” Giannini said. “[Not just] to a favored few, [but] to all the people… Be ready to help people when they need it most. Get set to yank them out of a hole. The ‘glad hand’ is all right in sunshine, but it’s the helping hand in a dark day that folks remember to the end of time” (Zweig, The Wall Street Journal).
Amadeo believed that branch banking would protect his bank, which he renamed the Bank of America, from boom and busts across volatile industries. To bolster growth, Amadeo liked to do things himself. He “‘walked in rows beside farmers engaged in plowing’ to explain how banks make credit cheaper and more reliable. Town by town, he built the first statewide branching system in the nation” (Office of the Comptroller of the Currency).
Amadeo had made explosive progress. By 1921, Bank of America had 400,000 depositors. By 1927, it had 1 million depositors and was the 3rd largest bank in the US. During this time, Amadeo had made loans to everyone, from working class immigrants to promising projects like the filming of Snow White, the construction of the Golden Gate Bridge, and an oscilloscopes company called Hewlett-Packard. It was also because of his generous farm mortgage policies that the agricultural industry blossomed in central and northern California.
Content with his growing empire, Amadeo retired in 1930.
But the timing for his exit couldn’t have been worse. The Great Depression was uprooting America and its financial institutions like a force unlike any other.
Amadeo’s successor decided that Bank of America’s path to survival meant embracing new conservative policies. After learning of this, Amadeo ousted him and other rivals to reclaim the helm. Between 1929 and 1932, their deposits shrank by a third.
In 1932, faced with the failure, Amadeo decided that survival depended on doing everything “by hand.” Over the course of three months, he traveled 26,000 miles and worked 14 hours per day talking to consumers, convincing them to make a deposit. He visited 410 branches and talked to hundreds of customers every day. One time, he drove three hours through a rainstorm to win back a consumer who had just transferred into another bank.
After 41 days of starting his laborious last-ditch effort, conditions began to improve. From 1929 to 1934, Bank of America’s deposits only decreased by 33%, compared with average local banks who tightened credit by twice as much (Zweig, The Wall Street Journal).
After weathering the Great Depression, Amadeo continued to work on the main floor of his bank, answering his own calls and speaking directly with dozens of customers a day. Upon his retirement in 1945, Bank of America became the world’s largest bank.
Before he left, he told employees, “If I ever hear that any of you are trying to play the big man’s game and forgetting the small man, I’ll be back in here fighting” (Zweig, The Wall Street Journal).
When he died, Bank of America had 500 branches and $6 billion in deposits.
Hundreds of regular people attended his funeral.
Amadeo pioneered the concept of branch banking and paved the way for future banks to create themselves as we know them today. He survived two major crises and came back stronger than when he entered each of them. Yet, throughout it all, Amadeo’s thesis of helping out the little guys was unwavering, and proved to the world that his “populist lending” strategy wasn’t as reckless as once thought.
Four years after his death, Bank of America’s average customer had $1,600 in checking accounts. The average balance at other banks (those that mainly serviced large institutions) was 20 times that, at around $32,000.
Although the Great Depression and San Francisco Earthquake of 1906 crises are far behind us, it’s important to remember that the best creations and innovations would be nothing without them. While the Coronavirus Pandemic will be remembered as a historic event rife with economic collapse and death, it also shouldn’t be forgotten that the next Apple or Airbnb is being created as you read this.
Only time will tell which innovations will come out of this, but one thing’s for sure: our current crisis is giving birth to our future.
To see our interview with StartEdUP click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
It seems that one of the writers on our platform had their account hacked. As such, you may have recently received a slew of spam posts. Please not that these posts are NOT representative of Businesses With Stories and they have been promptly deleted.
If you notice any other suspicious posting, please let me know through the website’s contact form.
Interview with Mara Behrens, VP of design and marketing at Chowbotics, an innovative food tech startup on a mission to bring fresh food anytime, anywhere.
Chowbotics CEO Deepak Sekar jokes that he got the idea for Sally the Robot back in 2014 as a lazy engineer. He wanted to create a robot to help him with the tedious tasks of home cooking, and so he began to develop small parts which would eventually evolve into Sally, the world’s first fresh food robot, today. For the first few years, Chowbotics was very much a concept based business, until Deepak met with an investor who worked with many fast food chains and was interested in getting a robot.
The company’s mission and promise to society is to serve and make fresh food accessible. Chowbotics is an innovative startup, and they are always working to develop new solutions and tech improvements through brainstorming and open forums.
Deepak reached out to Mara two years ago to join the team at Chowbotics. He was looking for someone to help the company push their brand and mission forward. Mara came from a creative world, working in startups for many years and dealing with graphic design. Her previous job was as a marketing leader at another food tech startup, which makes her creative specialty in the food tech industry a specific niche.
“I love younger startups since everyone comes from different backgrounds. For me, it’s all about understanding and cracking the code to what speaks to the consumers and how to tell our story in a meaningful way.”
Upon joining the team, the first major project she took on was related to branding. Although the company had already begun developing in the tech aspect, they needed an effective way to convey their mission and really sell their product. Mara helped the company understand what the product is, who the competitors are, and how to really tell the company’s story.
“Startups are really fun, but there’s always a lot of challenges. One of the biggest challenges is to really know what messages resonate best and to understand the pulse of the market. You need to understand why your product is unique and why it can really be a better solution than any other. I am all for the type of marketing that is not ‘I want to sell because I want to sell’, but that I really believe if I have a compelling product it can really help and be the best solution.”
The mentality at Chowbotics is customer focused, since the customers are the ones that drive the business forward. There have been many struggles in terms of budget and demand, as well as finding the correct target market since the product has so many opportunities. The company’s focus has seen a slight change with the impact of Covid-19.
“We are a much safer way to consume fresh products, and we are starting to become a replacement for salad bars. We always understood that hygiene and freshness is important, but now with COVID-19 we are highlighting this message even more. Bringing fresh food in this new world means with safety, and that is our mission we are continuing to improve our product on.”
Sally the Robot is a three step process for users: choose, pay, and receive the meal. There is a tablet for the user to customize their salad, yogurt parfait, or bowl, and the tablet also displays immediate and accurate nutritional value for every selection. There are currently 100 robots around the United States and Europe.
“We are a team of 36 people from different places over the United States, Canada, India, France, China, and Malaysia. It is a very global and agile startup.”
In the future, Mara sees Sally available everywhere from campuses to convenience and grocery stores. Not only are the robots absolutely transparent with nutritional facts, but they also enable people to make better choices in comparison to using a vending machine.
“I really think it’s going to be the way people access fresh foods in the future.”
To learn more about Chowbotics, visit them here. To see our interview with ProjectileX click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
Note: ProjectileX does not exist anymore, however the story is still compelling and quite remarkable, especially for two high school entrepreneurs
Prior to high school, Steven Li was an aspiring teen entrepreneur. He gathered all the business knowledge he could from reading spare business magazines around the house. However, upon entering high school, that soon changed.
At his high school, Steven decided to participate in DECA, an international organization that teaches students about the business world by hosting various competitions. Luckily for Steven, DECA seemed to be his forté as he advanced all the way to the international competition and become a finalist—an impressive (and rare) feat for any first-year competitor.
But although he received a business education, Steven wasn’t seeing the connection between what he was used to reading about and what DECA was offering.
“I’ve always read quite a bit about startups. I read TechCrunch, Business Insider, and these kinds of publications very frequently. And I found a lot of value in reading these things and didn’t really see the direct connection between what I was learning from DECA and what seems to be the practical means to start a business.”
Additionally, DECA had other major drawbacks. Aside from the high prices associated with the competitions, Steven noticed that not many students were doing DECA for the purpose of learning, but instead they viewed the events as opportunities to miss class.
“DECA doesn’t really incentivize you to build your own product at the end. You have a business plan that you pitch to a judge, but you’re not incentivized to build something. So it’s very easy for you and your peers to go to a conference and see it’s more of a way to skip school than a way to learn.”
After coming to these stark realisations, Steven, along with his co founder and fellow high schooler Rahul Bavirisetty, founded ProjectileX, a 501(c)(3) nonprofit, to provide a true education rooted in entrepreneurship to elementary and middle school students.
Inspired by his recent success in DECA, Steven admits that he—naively—wasn’t intimidated by the task he set himself upon.
“You should check your ego at the door when you’re starting [a business], unlike me. When I first started, I thought I could definitely do it. Truth is, I couldn’t have done it. I didn’t know how to do it, and I was pretty much destined to fail because I didn’t have the [necessary] skills.”
In fact, the path to success was more slow paced and laborious than the founders had expected. To create original, quality content for their programs, the two remembered “just sitting at [their] desks and reading tons and tons of books so that [they could] translate them into [a] curriculum that is both efficient and decipherable for kids.”
Aside from content creation, the other challenge was finding schools to pilot their program.
“We tried to get schools to [use] our program for four months, and not a single school said yes to us. We got 60 to 80 people who reached out and said, ‘look, you guys are in high school, and you’re not running a program at our elementary school.’ And these were the nicer people because most of the people didn’t even respond.”
Clearly, ProjectileX was off to a tough start. But soon enough, things began to improve. After “getting lucky” with a school, they were able to finally create user testimonials to provide credibility to their services and drive future sales. And with the help of a group of insightful advisors who hailed from many different backgrounds, ProjectileX finally began to scale.
Not too long after, they were able to leverage previous testimonials and the power of word of mouth marketing to onboard multiple schools and enroll over 120,000 students into their program.
While ProjectileX may not exist anymore, the lessons garnered through the experience of running can still find relevance in every sphere of today’s business world.
Thoughts from the Writer
As a fellow high school entrepreneur and former DECA competitor, this story really resonated with me. They were able to break free from the status quo that limited aspiring high school entrepreneurs to creating school clubs and competing in business competitions and create something that’s had an everlasting impact on thousands on people. And they were just two high schoolers.
After reflecting on their story, I’m inspired by their success, but more inspired for showing us (other high schoolers) that what they did is possible for all present and future entrepreneurs to come.
When I first interviewed Steven, I was in the middle of my high school career, dazzled by young entrepreneurs, and excited to get started myself. Though ProjectileX may have ended after Steven and Rahul graduated, the organization changed my paradigms on the glorification of startup culture and, more importantly, that with enough work, building a community out of nothing was possible.
And for that, thank you.
People think that they know much more than they actually do. I think that when you come to actually do something, you’ll come to realize how many people, even your own age, are far more accomplished than you are. You should really check your ego.
Your thesis should be unwavering, but the way that you got to where you want to be should be very flexible. Our content has changed, but it’s only because we figured out that it would help us better reach that end goal.
Biggest Entrepreneurial Lesson
You should realize what you don’t know so that you can actually take actionable steps in closing the gap between what you want to know and what you do know right now.
It’s important to define why you want to do things before you do them. The reason is you have too few hours in your life to be good at everything. So if you want to change all the issues in the world, then that’s not possible.
To see our interview with Boston Properties click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram!
The aid effort was failing.
That’s one of the first things Leila Janah noticed when she moved to Ghana for six months, during her high school senior year, to teach English to blind students in Ghana.
Talented people were struggling to live their lives because of the predatory aid model—which encouraged dependence—and geographic isolation—which limited good work opportunities.
It was a watershed experience. Inspired, she began school at Harvard by creating her own special major, African Development Studies, to dive into the issue. In school, she explained, “I spent all the time I could understanding what makes poor countries poor and what prevents low-income people within poor countries from moving quickly up the economic ladder.”
After graduating, she started as a management consultant at Katzenbach Partners (now Booz and Co.), founded Incentives for Global Health, and worked at a variety of NGOs.
Working in various fields opened her to eyes to the different factors affecting poverty.
As a teacher, spending time with low-income communities, she discovered that the paternalistic aid models prevented impoverished communities from becoming competitive on the global job market. People grew dependent on the money, creating a negative feedback loop.
At Incentives for Global Health, she used market-solutions to solve worldwide health issues. In her eyes, the capitalistic system was here to stay; instead of working against it, we could use it to solve the problems it created.
But her epiphany surfaced as a consultant when she became aware of the transportation barriers affecting low-income communities. Her company assigned her to take a call center in India public. There, she talked with workers who had to commute many miles every day from the slums. After a particularly enlightening conversation, she asked the question, “what if we could locate the call center in the slums?” And from there, she realized that the same model of bringing work opportunities directly to communities could also work in countries like Ghana in East Africa.
Many would’ve tossed the idea as fairytale economics. After all, how could one combat poverty when its tendrils extended so deep into disconnected communities around the world.
But Leila was different.
“I was always hustling. I was always interested in social justice and environmental justice. It was a part of my upbringing, [and] it’s part of my family’s history and upbringing. I feel like it was as much destiny as there could be,” she told me, explaining how her childhood turned her into that kind of person.
She always had ideas, always acted on them, and loved forming teams to get started. In middle school, she kickstarted an International Club. In high school, she founded a chapter of the ACLU and led the Debate team.
For Leila, fleshing out her ideas in the real world was as much the community as it was the idea. She elaborated, “I think a company, at the end of the day, is just a community of people with a shared objective. It’s the same kind of concept of getting people excited about an idea and sharing a vision and executing on that vision together.”
Daunting as it may be, solving poverty one community at a time was destiny for Leila. With an idea and the experience of leadership across domains, Leila Janah founded Samasource. As she put it, “we connect low-income people to cutting edge artificial intelligence and machine learning work that moves them out of poverty.”
How did they come up with the idea behind this new model for poverty reduction? In emerging markets, giving too much aid money prevents people from developing marketable job skills. To help these people better compete in the global market and develop themselves, it’s necessary to pair them with well-paying jobs that bring the competitive global work (like AI) directly to their doors.
When Leila first started the company, it was challenging. Before they settled on AI, they tried a variety of work, ranging from remote assistance to travel booking. Many of those projects failed, and many of the people she worked with made it hard to push forward.
Some partners didn’t follow fair-pay guidelines for employees—which was the whole premise behind their company. Early on, they were also short on cash. Their San Francisco office, in fact, had challenges with managing a budget for HR because nobody would give them funding. Foundations thought Samasource was just another profit-grubbing business, while potential business investors thought the company was too “social-enterprisey.”
Leila struggled the most, however, with learning to run an international company. Most companies start domestic in a niche market. But since Samasource was premised on the idea of connecting developing communities with high skill jobs, Leila had to start out across borders immediately.
Cultural differences quickly manifested. Leila mused, “not everything that you read about in leadership guidelines in the US is appropriate in a different country, and yet some things are universal. Your core values are universal. [But] how you exercise those values can vary.”
In fact, when I called Leila, she was in Kenya at a delivery center working with a team to make some of their processes more efficient. Succeeding in diverse environments involved a lot of listening, learning, and sharing. Leila would hear the obstacles they faced, bring one of her best practices from Silicon Valley, and collaborate with native workers to adapt those procedures for that specific location. Something that works in California might not work in Kenya.
But then again, even with all the cultural barriers to cross, there was a high level of excitement in the company. Leila told me that when people saw something successful and meaningful, they wanted to be a part of it. And that greatly helped her in building up her team.
Despite the early successes, Leila often “felt challenged to the brink.” When the company was four or five years old, she got engaged. Company growth took over her life. Her relationship with her fiancée was tenuous. She saw herself sacrificing her personal life to control the internal chaos in the company.
And she almost quit.
However, on a phone call with friends from the Valley, Leila absorbed an important founder’s virtue. Do what’s best for your company and think about the impact of your decision three to four years from now. She didn’t quit. And it was the best choice she ever made because, in that time of intense changes, she realized that leaving would’ve caused the business to collapse.
It also helps to have a strong support group around you with complementary skill sets—relieving the pressure. In particular, Leila praised the current interim CEO, Wendy Gonzalez, who joined five years prior.
She is extremely patient and detail-oriented and is able to see in a large team all the moving parts. Once a thing’s broken, [she knows] what is needed to go in and fix it. She is very organizationally savvy. And on the flip side, I’m very creative and entrepreneurial. I see big picture trends. I see what’s happening in the market. I can woo an audience and get a new sales lead or funding lead but I often don’t have that organizational intelligence. And really both of those types of intelligence are needed to make a company grow and be successful.
Through building her team, overcoming cultural barriers, and finding reliable funding and support for her company, Leila learned two major lessons.
First is to trust your gut. Leila sometimes doubts her decisions. Listening to seniors on the team, she might go against her gut. But every single time it’s proven to be the wrong move. As a founder bestowed with the vision of where you want your company to go, you often know what’s best, even if others aren’t on board. But she warns, “this is not to say that you shouldn’t take input or a process for coming to decisions because often what my gut feeling might be telling me in a moment is not necessarily the right thing over time. Just observe that feeling over time, collect data, get input, and then check in with yourself.”
Second, Leila explains that you need to have confidence in your decisions. Similar to trusting your gut, once you’ve made a decision, go all in. When others—especially investor and board members—push back on your ideas, you have to have the resolve to say no and believe in your decisions. Endlessly capitulating on “rights” and “wrongs” will hurt your company. You’re better off sticking to your values.
But most of all, Leila pointed out what she thinks is the secret sauce to personal success as an entrepreneur.
I think not quitting is the single most important strength for an entrepreneur and frankly for a human. There are many many times when life gets so challenging that if you feel like it’s not worth it or it’s overwhelming or why am I even alive, and I think that it’s Brave and courageous to keep going and face those obstacles.
Samasource is, ultimately, a company focused on building a coalition around humanity. It’s even in their marketing message, which focused on storytelling and bringing benefits to customers for working with a social enterprise. They’ve successfully built AI training data with a marginalized workforce and have helped move tens of thousands of families and individuals out of poverty. They’re “the largest data services company in East Africa and probably the biggest AI company in Subsaharan Africa today.”
With a completely different approach to poverty reduction and a mission anyone can relate to, Samasource is one-of-a-kind as well.
A Note From The Editor
I interviewed Leila Janah last year, and she has had an unparalleled impact on me. Her message on social entrepreneurship and leveling the playing field even pushed me to start my own company. But my biggest takeaway from her was to not give up. To be confident in my decisions. And I saw that play out in her life. Her battle against cancer while running her company was immensely inspiring to me, and it pushed me to go out there and create more opportunities for others.
Without this serendipitous interview, I might not be where I am today. So for Leila, in memorial to your contributions to the world, thank you.
Be confident. Own it. Don’t be a shrinking violet.
To learn more about Samasource, visit them here. To see our interview with Little Miss Cupcape click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
Ever since she was a child, Taylor Stump knew she wanted to be an entrepreneur. In high school, Taylor would bake all different types of concoctions like ice cream cones with a cupcake in it and an Oreo on top. It wasn’t until her senior year of high school, when people began to order cupcakes from her, that she realized she wanted to own a cupcake shop.
Unlike many students, Taylor went into college knowing exactly what she wanted to do when she graduated: start a cupcake shop. At this time, cupcake shops like Sprinkles Cupcakes first began to pop up, so it was a trending new idea. Taylor opened up her first bakery in Cape Cod, a month after she graduated from Manhattan College in June 2014.
“College is great but you learn so much more in the real world and once you’re thrown into the field.”
What sets Little Miss Cupcape apart from other bakeries is that they bake from scratch daily and use all real ingredients. Although most bakeries claim that they bake from scratch daily, not many actually do. They use all real butter, sugar, and nothing is cut with lard. Another one of their distinct factors is the experience of entering the shop. The customers are greeted with over-the-top, whimsical, cupcake dressed employees. On top of that, all of the cupcakes are filled with frosting.
The biggest struggle for Taylor when she opened her shop was the brutal reality of the restaurant business. It was shocking for Taylor to realize that there were no lines out the door and that she was not making enough money. Just selling one product, in Taylor’s case cupcakes, was not enough to keep up with the costs of running a business. The location of her shop, Cape Cod, is also extremely seasonal so that was another factor. She quickly learned to listen to the demand and diversify her bakery by adding cookies, cake pops, cakes, and even an option for kids to host birthday parties at the shop.
Taylor recently faced another hurdle when a competitor selling similar baked goods moved in next door to the Cape location. Business began to slow down at her Cape store and instead of being upset about it, Taylor decided to think of new ways to set her bakery apart. She eventually decided on getting a liquor license for the Cape location.
Above all, it wasn’t the liquor license that sealed the deal for her hungry consumers, it was the guerrilla marketing, which is an advertisement strategy in which companies use unconventional interactions to promote a product. The most effective marketing strategies for Taylor have been guerrilla marketing and social media marketing.
“Especially in the food industry, you need to win people over by just giving them your food.”
One thing people might not know about Little Miss Cupcape is the involvement of Taylor’s family in the business. She is the face of the company, and her parents are her investors. Through their partnership, they have helped Taylor with managing the store. Another thing that many people might not know is that they also give out their unsold cupcakes to local businesses, shelters, and police stations at the end of the night so nothing goes to waste.
One of the biggest things Taylor has learned from being in the bakery industry is that the most consistent thing is inconsistency. There is no way to accurately determine which days will be busy since the busiest day could as well be a rainy Monday.
For the future, Taylor hopes to expand Little Miss Cupcape which has been her vision ever since she started. Taylor started Little Miss Cupcape and made it a scalable brand so that she could have a strong business for future expansion. Since coming to Boston, Taylor hopes to expand her shop to even more locations in the area. She also plans on starting a subscription box where people can get monthly boxes shipped to them.
“Go for your dream, but you don’t need to know how to do it as long as you have passion for it. Regardless of if you don’t know the tactics or how to tackle what you want to do, as long as you have a passion for it, you’re able to accomplish and teach yourself anything.”
Early in 2016, blockchain technology was gaining traction and data breaches were becoming a regular occurrence on news headlines. Realizing that the idea blockchain could potentially solve those breaches, Locke Brown and Nolan Smith created NuID.
After stumbling upon the current methods of data authentication, it became clear to them that something needed to change.
“Everyone’s familiar with the ‘email address and password people,’” Smith said. “You have this email address that you go by and this password that they authenticate you by. But what we found is that those don’t compose very well across services. Each one stores it differently and handles your data differently- some better than others, most bad.”
As they saw it, this problem was rooted in the fact that traditional password-based authentication is symmetric.
“You provide a value, you send that value over to the server, or the authenticating service, and they compare that same value to something that they have previously stored at that server,” Smith said. “If my password is ‘I love my dog,’ they’re going to make sure that what they have on their end is also ‘I love my dog.’ And they basically just say, ‘hey is what they gave me exactly equivalent to what I have stored here?’ If so, they let you in, if not, then you try again.”
In other words, all of your password protection is predicated on matching your input with something stored in the server… That’s it.
So, with all of this in mind, Brown and Smith decided to solve this major security hole with the help of blockchain—a technology that transforms the symmetric nature of current password-based authentications into a more asymmetric design. To do this (in layman’s terms), they “replaced the email address with a pseudonymous transaction ID and replaced the password with a zero-knowledge protocol.”
As explained by Smith, NuID “can expose the same user experience of what people are used to with their passwords, but play a very very different ballgame regarding the sensitivity of data that is being intercepted or when data is accidentally lost or breached.”
With NuID, all the magic occurs behind the curtains. While users may not recognize any difference while using NuID, they can rest assured that their data is being protected by an entirely new, more secure, authentication system.
After developing NuID’s unique solution, all that was left to do was gain wide-spread adoption. Clearly, this was easier said than done. Even now, Smith admits this is a hard process.
“People tend to connect with the problem where, ‘you have a bunch of passwords, everyone has a bunch of passwords, and managing it is kind of a bummer and they’re being breached everywhere,’” Smith explained. “‘And when they’re being breached, you can be impersonated because you probably reuse a bunch of passwords.’ So people can really connect with this. I don’t think this is the hard part. I think the hard part is really about convincing them that what we’re proposing will actually solve those problems.”
However, after “long tedious conversations, selling the problem, pointing to concrete things we thought we could solve, and [with] the support from a group of great investors,” the momentum behind NuID began to get rolling.
Today, NuID is continuing to revolutionize the password-based authentication process and working towards a data breach-free future.
Know what you’re signing up for. Know that you’re not just signing up to build something. You should consider that the easy part. It helps to have a very realistic understanding and perspective on what you’re getting into.
There are dimensions to starting a company that go well beyond what you’re making or what you’re producing. If you weren’t to know that going in, or if you weren’t expecting that, it would be a brutal surprise, and something that if it did take you by surprise, it would be a more questioning experience. You would consider “damn, what did I get myself into.” That’s probably my biggest thing. And knowing that you have to have enough care for everyone on the playing field. You have to have enough desire to see this out there such that it overflows into others. And you have to have enough constantly to share.
Interesting Fact About NuID
It is true that we have an (imaginary) shadow employee, verrrrrrrrrrry similar—some may say identical—in nature and appearance to Ethan Landau, named Ethan Millen. No one has ever seen or heard from Millen since the very earliest of days at the company, to everyone’s utter bemusement. The insider knowledge is that this shadow employee is a result of my thinking, for the longest time after we started working together, that Ethan’s last name was in fact Millen, and called him that to his face for months. So “Millen” basically became a company goblin that we blame for any minor operational mishap, and that seems to work pretty well.
To learn more about NuID, visit them here. To see our interview with Open Listings click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!
Judd Schoenholtz loved his job as a designer. He had been working at Huge, an agency based in New York, for nine years, leading a team in Los Angeles while building and designing products for big companies like Target, JetBlue, and Fox.
Yet, in 2014, Judd was at a crucial fork in his life, looking down two incredibly different paths. One led towards a comfortable and enjoyable life in his current job. The other was not so certain. But he took the leap. That mysterious path was known as entrepreneurship, and he knew that if he wasn’t going to try it now, he wasn’t going to do it ever.
Two decades before, there were no signs that Judd was going suddenly change the direction of his life. He had normal jobs as a teen, working at the grocery store and the now defunct Toys R Us. He went to Columbia University, graduated, and got a job as a software developer for a year before switching over to doing design at Huge. When Judd joined as the fifteenth employee, the agency—which now has thousands of employees—was tiny. Given a large slate of duties, he had to tackle some tough design problems, doing business consulting through product design.
When Target wanted to move off the Amazon platform and do their own ecommerce, he had to figure out how to communicate their brand through online shopping. On a project for JetBlue, he helped design their online booking service when booking plane tickets looked quite different. Towards the end of his time at Huge, he designed video apps for streaming services like Fox and FX, answering questions like “How does the cable subscription experience translate across different platforms”?
These numerous, almost overlapping threads in his work experience taught him how to deal with complicated user problems. Many also involved modernizing an old process with a new, sleek design. For these nine years, he had conditioned his mind to see how different things could be solved in a user friendly way.
Around 2011, Judd moved to LA to open an office there for Huge. As he searched for homes, he noticed multiple issues in the real estate process that could be fixed; his design oriented mind quickly sketched out solutions each time he encountered something he didn’t like.
For starters, the home buying market moves incredibly fast, but every real estate experience is map based. Judd pointed out:
You open up the experience, and you get a list of all the homes on the market based on their location, represented by a map pin. You as a user are saying what’s different, what’s new, or what’s happened since the last time I opened this app. You don’t really have a sense of what’s changing over time or what’s new, and you have no sense of urgency.Judd Schoenholtz
A fan of feed based products like Instagram, he saw that users could get a better idea of homes on the market with a time-based interface.
Another problem was the lack of a buy button to purchase a house. Instead, the process was manual, slow, and agent-driven. He thought that there must be a way to move the whole thing online and make the offer process streamlined and self-service.
Of course there were other small problems: data on homes, on-demand touring, and getting answers to questions without an agent. But what he had already experienced was enough. As a designer accustomed to building on-demand, self service tools, the real estate market was ripe for innovation.
The road to his life split into two distinct directions, now all he had to do was choose. We know that Judd took the stranger and more obscured path of entrepreneurship, but at the time, he was still unsure.
“As a first-time founder, it was something that I’ve read about forever and obviously wanted to do, but I think it was an incredibly scary transition to go from a job that I liked and had been doing for 9 or 10 years to start over with no money, no salary, no office, and no co-workers. That’s crazy,” Judd said.
Despite the fear, there was something that tugged Judd forward. He felt that if he didn’t take advantage of this great business idea, he would regret it. And so began the process of leaving behind his old job, rallying together cofounders, and building a minimum viable product.
Judd aimed to change the entire experience of homebuying by making it self-serviced and on demand instead of agent-driven. Their closest competitor Redfin, had also moved real estate online, but they were still an agent-driven service. Open Listings wanted to limit the influence of agents and connect the customer directly to the home of their dreams. The agent would, instead, act as a tool rather than an integral component. In the end, Judd hoped to productize homebuying and introduce aspects of ecommerce.
In the first year, 2014, he focused on building the product and understanding the market. He obtained a real estate license, closed the first twenty deals on his own, and discovered several pain points for homebuyers. When Judd returned to the office he and his co-founders would continue building their minimum viable product with the newfound information that he had gained.
During those first few months, Judd also realized that he needed strong business connections to actually be viable. But without prior experience in the startup ecosystem, the team felt lost, so they decided to get into an incubator. The famed startup accelerator, Y Combinator (YC), rejected their first application; their product just wasn’t well defined enough. The second time, they tried something different. They wrote a blogpost about their experience getting rejected and reapplying, made significant progress on product efficiency, acquired customers, and further defined their vision.
“Going through the application process is really valuable,” Judd said. “You’re forced to answer these questions and really define your business and be brief. They ask the hardest questions on purpose because those are the questions you should be thinking about as an entrepreneur.”
YC opened plenty of doors for the company. And when they graduated in 2015, they were well on track to obtaining VC funding, getting their first employees, and relocating. The next step? To further grow the company and expand the product, Judd searched for funding. He met with anyone who was open, asked friends for referrals, and persisted to set up meetings with many potential investors. It turns out that going from meetings to cash infusements was easier than he expected for one reason: the real estate market. The market was huge. Trillions of dollars worth of homes were sold every year and the commission rates racked up to $70 billion annually. With Open Listing’s easy, on-demand service, they could eat up quite a bit of market share.
Judd’s persistence paid off. Y Combinator and an influx of funding kickstarted Open Listing’s growth. In 2016 they sold over 100 homes, and rapidly acquired new customers. In a market where the costs are high and there is a potentially large risk to using a new product, users had the right to be wary. So Judd changed his approach.
He dropped the idea of making an immediate sale and simply asked for feedback. Like his strategy for investors, he aimed to talk to as many people as he could. He said, laughing
You have to be willing to be annoying, bother people, follow-up, and talk to people who you don’t really know. You just have to hound them. Show it to a wide variety of people. We were showing it to real estate agents to tell us why it didn’t work. If you know one person, then that one person can introduce you to a second person, and then at some point you can get that to be a hundred users of anything. But it’s hard, and it’s manual.
That strategy worked. The next year they grew their user base by 500% and had fully integrated all their features, affectionately called “magic moments”.
Say you’re looking to buy a home in California. The typical process would take a few weeks. Your agent would show you several houses, and you’d fill out a lot of paperwork. Let’s say, one Sunday night you go on this amazing tour and fall in love with the house. The asking price is modest, it has four bedrooms, and it’s located in a nice neighborhood near a top school. You want to move forward, but it’s a popular home, and your agent is off work today with her family at a nice sushi restaurant.
How do you get an offer on this perfect house?
This is the thought process that Judd and his co-founders went through to figure out what to automate and make easier: their “magic moments”. They added instant offer creation. You could pair with an agent in less than 15 minutes, finalize, and submit your offer with any questions. Within minutes, you had your foot in the door. If the asking price went up the next day, you could void, change your offer price, and send it in again. In less than a minute. No paperwork would need to be redone.
Open Listings was proud of its automation. Even then, they couldn’t make everything self-service. Housing market norms meant they had to insert agents at some places. For example, sending in an offer and going on a tour still needed a third party involved. Still, they tried to make everything else highly on-demand. One unique selling advantage that arose out of their product development lab was a commission refund. Buyers who normally paid 5-6% to agents, saved money because the commission rate was dramatically lower.
This all happened in 2016. The next year wasn’t any smaller. They expanded to more states and got $6.5 million for their series A round. With a full featured product, they shifted considerable energy to marketing and PR. “What we’ve found is some of those press pieces drove our best customers,” Judd observed. “Some of our most effective advertising has been boosting and promoting organic press and PR.”
It all goes back to building trust and credibility in a market where the transactions are paramount and people are making a serious investment into their future and taking out hundreds of thousands of dollars to finance it. Through building backlinks and getting good PR, they have been able to vastly expand their reach and customer base.
For four years, Judd has sat on top of this steady growth. From their first hired employee to their latest, from product-centric management to sales, and from rejection to success, he’s grown too as a person. He’s gone from chief teammate to chief executor, created better management processes, and focused on recruiting the best people to the team.
As for the market, it’s slowly moving online, not at the glacial pace we might think is happening. Like many other traditional things that have become digitized, real estate is moving in that direction. Right now 89% of homes are being sold with the assistance of a real estate agent, but the process has gotten easier to do alone in recent years, and Judd Schoenholtz wants to be ahead of the curve.
To learn more about Open Listings, visit them here. To see our interview with Pathrise click here. If you’re interested in the most recent business secrets, check out our Business Knowledge page. If you want to stay up to date with the most recent BWS news, follow us on Instagram and Twitter!