Journey of a start-up

September 22, 2013 11:51 pm

Social venture makes light work of expansion

Hands of light illustration by James Ferguson

 It was not so long ago that Anna Stork and Andrea Sreshta – founders of LuminAID Lab, a social enterprise that makes solar-powered lanterns – sold their flashlights in batches of one or two through a website they cobbled together themselves. They responded to every single customer inquiry personally and single-handedly ran a successful crowdfunding campaign, “Give Light, Get Light”, where customers bought and also donated thousands of lights for people in the developing world.

Now, a little over two years after Ms Stork and Ms Sreshta took first prize in the University of Chicago Booth’s Social New Venture Challenge, a business plan competition for social enterprises, things are different.

Sales have doubled over the past six months, buoyed by 35 new wholesale accounts and a new sales channel on Amazon. The partners received an infusion of $100,000 in the form of a grant from the Clean Energy Trust in Chicago. And in July and August, the company hired – and paid – a team of undergraduate interns to run its social media efforts.

“They are getting there,” says Craig Wortman, professor of entrepreneurship at Booth and an informal adviser to Ms Stork and Ms Sreshta.

The past few months have been a time of clarity for LuminAID Lab. It has two distinct ambitions: to provide lights – at a deep discount – to humanitarian agencies that work in disaster-hit regions so that relief workers and victims can function after dark; and to sell lights to outdoor enthusiasts and campers at a sufficient profit to support the business. These goals require markedly different sales strategies, marketing plans and pricing models – things that would be tricky for an established company to pull off and are incredibly challenging for a start-up.

“For a while there were so many sales avenues to pursue we weren’t sure which ones to devote our time and energy to,” says Ms Stork, 27. “But recently we’ve had really good sales through both traditional retail and disaster relief channels. It’s an affirmation that this model can work.”

In July the partners inked a deal to sell the LuminAID on Amazon, the world’s largest online retailer, and formed partnerships with international distributors to sell the light in camping stores across the UK, Japan, Korea and Germany. They also won accounts with several state emergency management systems in the US and international aid agencies, including Shelterbox, a UK-based group that distributes kits filled with supplies in post-disaster and conflict areas.

Ms Sreshta, 29, is a second-year MBA student at Chicago Booth. This semester she is taking one course. “If we have customers that need to be talked to, I don’t want to put that off because I have to go to class. I want to make sure we’re doing everything we can to move the business forward.”

The biggest priority for the company this year is to crack into a large, name-brand sport and camping store. Indeed, “getting early traction with selling” is critical to LuminAID’s future growth, according to Prof Wortman. “They need to get aggressive and network their way into [a big retail outlet] by doing what aggressive sales people do,” he says.

“We are working on building relationships with retailers, refining our packaging and taking a close look at potential displays,” says Ms Stork.

In late May, the business partners introduced an updated version of their light. The model is similar to the old one – a white rectangle, sealed in a sturdy, inflatable plastic bag – but provides light for a day and a half after only five to seven hours of sun exposure. The previous model provided eight hours of light after about six hours of sun exposure. “This [shorter charge time] is critical because in many places you don’t have continuous sunlight,” says Ms Sreshta.

They are also working on a second product: a brighter solar-powered light that requires even less charge time and also powers mobile phones.

While the business partners are eager to diversify their product offerings, Prof Wortman is more cautious. ”That’s a tough one,” he says. “The problem with expanding the product line is that you’re doing product development and you’re not selling.”

For now the company is self-financed. The partners have received close to $200,000 in “free money” from business plan competitions and grants and each chipped in several thousand dollars of their personal savings. Neither Ms Stork nor Ms Sreshta take a pay cheque and beyond a handful of part-time workers who help with web development, and PR, they are the only two employees.

“We are still trying to run things as leanly as possible and scale up in a smart way,” says Ms Sreshta, adding that they occasionally consider the possibility of taking venture funding. “We are always asking ourselves: what does this business need?”

 

Lost in a crowded, competitive market

 

A little more than a year after winning a business plan competition, tech start-up Spotted has called it a day on its venture. Their plan to launch an app to help people network more effectively did not make it on to the market.

But although the four co-founders of the team, MBA graduates from Mannheim Business School in Germany, have now secured full-time jobs, they have no regrets about starting a business together.

The Spotted mobile app was designed to help people attending large-scale events to network easily with each other. The team considered deploying the software in conferences and trade shows before focusing on careers fairs. Using the app, jobseekers and employers would be able to create online profiles and set up meetings during the event. The aim was to reduce the element of chance when it came to professional networking and to put the face-to-face interaction back into social networking.

Yet despite winning the European Business Plan of the Year competition 2012 the team – Alistair Bruce, Moritz Hertler, Stefan Reuter and Christian Uhrich – knew that this was no guarantee of success.

One of the main problems for Spotted was in securing sufficient funding. Earlier this year, their application for grants from the German government was turned down. If the economic climate had been better Mr Reuter says that perhaps their chances of getting funding would have increased.

Spotted even featured on a crowd funding website – Startkapital Online – to try to raise money from investors. The aim was to raise a minimum of €25,000 by mid-March this year. The crowdfunding terms state that if the minimum specified amount is not reached by a certain date, then any initial money pledged is made void. The Spotted team only managed to raise €11,000 and therefore the application was cancelled.

Although Spotted did succeed in attracting the interest of entrepreneur Candace Johnson, who wanted to invest as part of a group, the team was unable to find a suitable interested second party.

The team also needed additional help onIT development to turn their idea into a working product that could be sold to customers and presented to potential investors. For instance, the app required a database to help connect users. But the team did not have the money to hire the experts needed to develop this.

Mr Bruce says that the apps market is a competitive one and with a multitude of products available, it is very difficult to stand out from crowd.

Even though their entrepreneurship journey has come to an end, the idea for their app is not dead. Mr Bruce is convinced that it is only a matter of time before there is a better way of interacting at trade fairs. The team hopes that event and trade fair organisers will take up their idea.

Start-ups can founder because of personality clashes, but Mr Reuter says that this was not the case with Spotted. The team was “fantastic”, he says, which makes it even more of a shame that the venture did not succeed.

Reflecting on their entrepreneurship journey, the four have amassed a network of contacts and gained experience that will be invaluable in their future careers.

Mr Hertler and Mr Bruce now work for Adtelligence, a digital marketing optimisation company, and would not have met its co-founder, Michael Altendorf, were it not for Spotted. They met through the entrepreneurship club at Mannheim Business School, where Mr Altendorf was a guest speaker. He even provided ideas for the team in their preparation for the business plan competition and kept in contact with them.

The Spotted team has learnt several valuable lessons from the venture, says Mr Bruce. Would-be entrepreneurs should never underestimate the time and effort it takes to secure investment, he says, be realistic in what they are trying to achieve and always have a plan B.

 

Fundraising in the Philippines takes off

 

Interested in funding handmade “bambike” bamboo bicycles, or supporting scholarships for children from economically disadvantaged families? These were two of the five projects Justin Garrido chose to feature in the beta version of his crowdfunding platform targeting social schemes in the Philippines.

Mr Garrido co-founded the crowdfunding website Social Project PH in 2012 with his Melbourne Business School MBA classmate, Julia Sevilla. He wanted to raise funds and offer marketing and brand management services to social enterprises in the region.

The co-founders had a slow start with website difficulties and a typhoon causing disruption. A year on, however, they are implementing the business plan that won the Melbourne University Entrepreneurs’ Challenge in 2012.

Of the five projects on the beta launch in May 2013, two secured funding for some of the milestones stipulated on the start-up’s website.

The Ayala Foundation, which provides scholarships for underprivileged youth, raised more than $2,400 which allowed it to send four children to school. And the Solar Energy Foundation raised more than $1,200 so that it was able to sell discounted solar lanterns to a rural community an hour from Manila where residents have no mains electricity supply.

Social Project Ph, received 5 per cent of the profits raised by these two projects. As for the other three projects, which failed to secure funding – including the bambikes – Mr Garrido is pragmatic, taking lessons from the experience.

“Their milestones may have been too high and/or they weren’t as strong in social media marketing,” he says. “I also think although we had interesting projects for the pilot, five may have been a lot to start with.”

Social Project PH is now developing partnerships with an ecommerce website that features social enterprises in the Philippines and online media groups to gain more exposure. Mr Garrido is also planning to tie in with offline fundraising events.

“One insight we learnt is that many [fundraisers] for causes in the Philippines typically occur in offline events such as concerts, runs and black-tie dinners,” he explains.

Developing an online presence and online tools is another primary objective for Mr Garrido. “One key to a successful crowdfunding campaign is strong social media marketing as well as a strong story, something non-profits are typically weaker at, so we are exploring a student social good ambassador programme [that will connect] college students to our project partners [to help with social media marketing],” he says. In return, the students will receive mentorship opportunities.

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