Journey of a start-up

February 24, 2013 11:46 pm

MBA start-up is seen in a different light

Stuart Briers illustration©Stuart Briers

It was in May last year that Anna Stork and Andrea Sreshta, the founders of LuminAID Lab, a company that makes solar-powered lanterns, won first prize in Chicago Booth’s Social New Venture Challenge. Already the two have crossed off a number of big items on their start-up’s to-do list.

Land a partnership with a leading aid organisation? Done. Double the customer base and quadruple sales? Done. Score publicity from several national television news shows? Done.

More

On this story

Journey of a start-up

“We’ve moved past the business plan competition phase,” says Ms Sreshta, 29, a second-year MBA student at Booth.

There is plenty more to do, of course. During the next few months, they hope to ink a deal with Amazon.com and a retail chain, team up with an international distributor and get patents squared away. But perhaps the biggest outstanding chore, at least for Ms Sreshta, is to finish her MBA requirements so she can devote herself to the business full-time.

As it is, she has slowed her enrolment to two classes a term. “The school is really flexible [and it accommodates] students who have a side entrepreneurial focus. But it’s almost too flexible. I’m ready to be done.”

She will graduate this year and is “choosing courses” that have a direct application to LuminAID. “My managerial accounting class last term helped me to think about how we should better account for costs so that we might make informed decisions about things like prices.”

The company’s signature – and for now its only – product is the LuminAID, a lightweight, rechargeable lantern that inflates to the size of a small pillow. In the developing world, where power grids tend to be unreliable or non-existent, the LuminAID is valuable because it is waterproof and the light source is protected by the pillow-like housing. Its original purpose was for use in disaster situations, such as floods. The lantern has also found a market among people who enjoy outdoor activities, and as an extra light source at home. To serve both markets, the founders have developed a philanthropic commercial strategy, known in the social enterprise world as “buy one, give one”. This concept encourages customers to purchase a set number of lanterns for themselves while paying a little extra to donate lights to people in need. This charity model was pioneered by Tom’s Shoes, which gives a pair of shoes to a child in need for every pair sold and Warby Parker, which does the same with spectacles.

On LuminAID’s website, shoppers can choose the “give light, get light” package, costing $26.95, which includes a light for themselves and the donation of another. (A single unit costs $18.95, plus shipping.) About a quarter of the company’s total orders include a matching unit.

One of the primary recipients of the donated lights was the Joint UN Programme on HIV/Aids and the UN Department of Peacekeeping Operations. In a pilot programme running in five countries affected by conflict, both aid organisations are distributing LuminAID lanterns to women. In some countries, sexual violence has been used as a tool of warfare, contributing to the spread of HIV, according to Annemarie Hou, of UNAids.

“These are some of the most difficult issues to talk about in a community and the idea of ‘shining a light’ [on this issue] became a positive way to start a conversation,” she says. “The LuminAID lights [are] a physical symbol of this idea.”

Robert Gertner, professor of strategy and finance at Booth and an adviser to the team, says the partnership with the UN signals “big things” for the company.

“The right sort of endorsements through the UN and other organisations like it give [the team] a fair amount of credibility,” he says. “They’re building awareness of the value and usefulness of the product.”

Even so, says Prof Gertner, the challenge for LuminAID’s founders is discovering how to balance its disparate goals of making a sustainable difference in the lives of people in the developing world and making enough money to support the business. “When you have two distinct tasks, trying to pay the right amount of attention to each of them is a real challenge,” he says.

The pair must also keep a close eye on rivals, he adds. LuminAID is not the only start-up selling solar-powered lights. The founders are working with a lawyer to file patents. “They can’t ignore the competition,” says Prof Gertner. “They need to continue to move aggressively. They need to push to be out there in the right channels.”

During the holiday shopping season – roughly September to December – LuminAID sales increased by 435 per cent and its customer base by 275 per cent. (The company has more than 4,000 customers.) Sales were helped by some good publicity.

The founders are currently running LuminAID from two locations: Ms Sreshta is in Chicago and Ms Stork, 27, is on the outskirts of Boston. They have not seen each other in more than a year.

The distance has forced them to become proficient in using technology to run the business: they manage online sales through an ecommerce back-end called Magento; edit documents via the cloud; use communal email inboxes for customer service; and send about 50 text messages back and forth each day.

“Working apart has been good for us in some ways because we’re able to separate our roles,” says Ms Stork.

Ms Stork is working with international distributors and “building relationships to scale up” LuminAID’s retail and ecommerce sales.

“There are so many possible sales channels we have to focus on the ones that are going to have the most impact and be the most profitable for our company.”

But these are bootstrapping years. “I would love a salary but I don’t need it right now,” she adds. “Right now, [the money we make] really does have to go into building a business. With every production run, we make more money to put into the business – to double the next production run and put a little bit into the bank account to save.”

Related Topics

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

SHARE THIS QUOTE