DAVID REIFF, CO-FOUNDER, UBREAKIFIX: With the opening of our first store, we realized, man, we’re onto something here. This is going to be big.
BEN FEDERMAN, FOUNDER, 1SALEADAY.COM: . and lower the following day’s deal to below our cost, people start talking about it, the word spread. Everybody started realizing these guys really have competitive pricing. PETER SMATHERS CARTER, COFOUNDER, : I think the youthful group brings an energy, brings a creativity. That’s not necessarily absent in other age groups, but it’s definitely more present in ours.
TOM HUDSON, ANCHOR, NIGHTLY BUSINESS REPORT: In this program, we’ll look at how that energy and creativity are making their mark on business, and a new breed of young entrepreneurs.
HUDSON: The combination of determination and innovation is helping several young entreprenerus turn great ideas into successful businesses. They are changing and shaping the business landscape with new ideas and different ways to execute them. Tonight we introduce you to some young business owners who follow their dreams and achieve their goals, even in these challenging economic times. And we’ll talk to one of the country’s top experts in entrepreneurial innovation about what it takes to make it. We begin with a business that started completely by accident to fix accidents.
JUSTIN WETHERILL, CO-FOUNDER, UBREAKIFIX: I bumped into a girl. She made me drop my phone while I was walking to a restaurant. I picked it up, and it was smashed. Didn’t really know what to do with it, went online, found out I had to go to the Apple (NASDAQ: AAPL) store. Went to the Apple (NASDAQ: AAPL) store and then found out that they wanted $199 to replace my phone that I bought for $199.
HUDSON: So Justin Wetherill put his tech-savvy skills and curiosity to work, and decided to fix it himself. At first he failed, but on his second attempt, and with the help of his friend, David Reiff, he successfully fixed his iPhone.
WETHERILL: It was at that point I realized that there was probably a lot of people in the same situation that I was.
HUDSON: With that, UBREAKIFIX was born. The first office was Justin’s living room in this house. The 21-year olds started taking repair orders on eBay (NASDAQ: EBAY) and Craigslist. Justin and David made $80 for each phone repair, and they were fixing up to eight phones a day. That’s when they knew they’d found their niche.
REIFF: We started realizing, you know, over time, as we got more and more customers, especially with the opening of our first store, we realized, man, we’re onto something here. This is going to be big.
WETHERILL: Here we have an idea with, you know, healthy margin that was scalable. It’s just – everything was working in our favor.
HUDSON: The pair took that momentum and opened their first brick-and-mortar store in Orlando in August, 2009. Unlike their online venture, customers could have their phones repaired in just a matter of minutes. Still, some were surprised by what they saw.
WETHERILL: There was a gentleman who came in with his wife, and he said, “I didn’t expect to see a bunch of kids working here,” and she was like, “Well, who’d you expect to see fixing your phone?”
HUDSON: Most of the employees are young, and the atmosphere is casual. That’s part of the UBREAKIFIX strategy.
REIFF: We’re not driven as much by profits as we are by the people, both the customers that we serve and the employees that are under us. We try and keep that the focus of the business, which really, you know, makes it, I think, a comfortable environment for people to be in.
HUDSON : Still, the young company is making money – good money. UBREAKIFIX made $6 million last year, up from about a half a million dollars in 2009. The company now has 18 stores, from Florida to California, and there are plans for expansion.
WETHERILL: We’re looking to grow exponentially here over the next couple years. I see a UBREAKIFIX store or multiple UBREAKIFIX stores in every major city in the United States, hopefully within the next two or three years.
REIFF: We plan to take this as far as we can, and really see where it goes. I think we’ve really just barely scratched the surface of where we can go with this thing.
HUDSON: As we just saw, persistence and creativity and ingenuity – all some of the essential traits that entrepreneurs need – I recently sat down with Dr. Carl Schramm. He’s president and CEO of The Kauffman Foundation, a private non-profit foundation, dedicated to promoting entrepreneurship and improving education.
Now I began by asking him what young entrepreneurs need to succeed.
CARL SCHRAMM, CEO, THE KAUFFMAN FOUNDATION: The idea has to be good. That’s the real trick. Would you bank your life, first, and then some savings and other people’s money on it? So that’s the first thing. The second thing is we don’t know the answer to this question of “Are entrepreneurs born or are entrepreneurs trained?”, and we have to remind ourselves that the 500 fastest growing firms in the United States are started by people when they’re 40 years old – very important.
So the question is – those people were clearly not born to the job. They sort of grew into it. Someplace in their life, they said, I can do this, better, faster, cheaper. Here’s a great idea. If somebody has the idea to start a business, can they get good counsel, good advice and a good road map that’s practical right then when they need it?
And the third thing is they have to have money. But the good news it’s that’s not quite so important as it used to be. Many companies can be started much cheaper than used to be.
HUDSON: Many entrepreneurs may start with that third item. Is that a mistake?
SCHRAMM: It’s a terrible mistake. And the third point being money, to start to focus your business around money first is a terrible mistake.
I think this is a mistake that happens in many business school competitions, because, essentially, the writing of a business plan takes as its target a conversation with a venture capitalist. So you either have a successful idea or don’t, whether or not a venture capitalist or an imaginary venture capitalist would put money behind the company.
Money is, in many ways, the least important of the three ingredients. The three ingredients are a great idea and a driven entrepreneur who has skills enough to pull the idea into production and into scale. That’s the critical question. And the money’s fungible. Money will chase a good idea, and money will chase a entrepreneur who can – has a convincing story that he or she can make this happen.
So to start at money is the wrong place.
HUDSON: In some instances, it may end with money. What are the characteristics of success?
SCHRAMM: I think the characteristics are growth, and I’d invite people to think about even the concept of what starting a new business is quite differently.
HUDSON: If many of the fastest growing startups are begun by entrepreneurs who are in their 40s, what role does failure have with young entrepreneurs?
SCHRAMM: I think, you know, there’s an old saying you don’t learn anything except from failure. You don’t learn anything from success. And if we look at these people who start businesses when they’re 40, what do we see?
We’ve seen people who’ve worked in multiple companies — think about this. You know, when I left college, it was typical that a person would work in five occupations, five jobs – they’d have five employers before they retired.
Now a kid who leaves college will probably have eight employers before he is or she is 30 years old. Now what’s happening in there? Well, these youngsters have different jobs in different industries, in different sized firms. Some will be established firms, some will be startups. So when they get to be 30, they are much smarter people. They’ve learned a great deal.
By the time they’re 40, they will probably have and if we look at those 40-year-old starters, the successful starters, it’s very common to see three failures before the fourth one hits. So entrepreneurship is, in a sense, its own school.
And it’s – and it’s one of the great attributes in the United States. We don’t hold it against somebody if they start a business and it fails. They start another business and it fails. I’ve heard venture capitalists say, you know, I really don’t back people if they haven’t had a couple failures under their belt, because they didn’t learn anything. And we watch that again and again.
Some people have a very successful start on their first business – right now I could name names – their second business, third business, may be lackluster. Some of them have crashed and burned. What they did the first time was increase almost like it was an accident. But I think what it says is they didn’t learn anything from it.
HUDSON: Dr. Carl Schramm with The Kauffman Foundation, thank you so much.
SCHRAMM: My pleasure.
ALICIA MORGA, COFOUNDER and CEO, REFLETA.COM: It is, at the end of the day, all about the money.
HUDSON: Still ahead, advice on ways for entrepreneurs to get funding, from someone who’s been on both sides of the purse strings.
It’s been said that America is the land of opportunity, one where dreams are made. It seems these days many immigrants are making their business dreams come true in the United States.
A recent report from the Partnership for a New American Economy found that more than 40 percent of Fortune 500 companies were founded by immigrants or their children. Many of the biggest U.S. brands – Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), AT&T (NYSE: T), eBay (NASDAQ: EBAY), General Electric (NYSE: GE), IBM and McDonald’s owe their origin to a founder who was an immigrant or the child of an immigrant.
One businessman in Chicago is trying to make his way to that list. Diane Eastabrook has his story.
AKSH GUPTA, FOUNDER/CEO, TIME2PLAYTENNIS.COM: This is what I imagine.
DIANE EASTABROOK, PBS REPORTER: Inside this 4th floor condominium, a fledgling business empire is blossoming.
GUPTA: The idea is over here. We’re going to have a feature that says other products.
EASTABROOK: Twenty-seven-year-old Indian immigrant Aksh Gupta and his business partners are tweaking their year-and-a-half-old Internet company, time2playtennis.com.
The site sells unused court time at local tennis clubs and lessons to consumers. Gupta wants to expand into tennis equipment sales and other services.
GUPTA: For consumers, it’s a great way to buy, compare and shop.
EASTABROOK: Gupta echoes the sentiment of many immigrants when he says he is living the American dream.
GUPTA: I vividly remember my auntie telling me the night we came, the first thing she said was, this is your chance to start your life new, and this is the land of opportunity.
EASTABROOK: Gupta grew up in India, where his father owned an electronics company. In 2003, at the age of 19, he came to America with his parents and younger brother. The family settled in St. Louis, where Gupta’s uncle owns a medical supply company.
After graduating from college in Chicago, Gupta began working for his uncle, but he knew he wanted to be his own boss.
GUPTA: I knew, like during college, that I would never be working for somebody for the rest of my life. I would be working for myself. I just never knew that it would come so soon.
EASTABROOK: American business was built on the dreams of immigrants. And, today, large cities still pulse with their entrepreneurial spirit. In Chicago, you’ll find Vietnamese noodle shops and bakeries, Mexican tamale stands and East Asian bazaars.
EASTABROOK: In the past, immigrants often opened businesses because they didn’t have the skills or education to get jobs some place else. In a sense, they became entrepreneurs out of necessity.
EASTABROOK: But today’s young immigrants are often better educated, so they see entrepreneurship as an opportunity, says Raman Chadha of DePaul University’s Coleman Entrepreneurship program.
RAMAN CHADHA, EXECUTIVE DIRECTOR, COLEMAN ENTREPRENEURSHIP CENTER: They have the ability now to perhaps take a little bit more of a risk than their parents could have. And so, therefore, they tend to be a little bit more strategic and thoughtful as they pursue a business, as opposed to doing it just out of necessity for an income.
EASTABROOK: Gupta thinks being relatively new to this country helps him be bolder and less fearful of failure.
GUPTA: You don’t know many people who are going to say, oh, you’ve failed. You have new friends. They want to support you. You can be a little more daring. I think that’s what – you’re not – I’m never thinking once about failure.
EASTABROOK: That attitude has helped Gupta take on many challenges, while expanding time2playtennis, he’s also launching a companion site for other activities, called playoccasion.com, and he’s attending graduate school. Gupta says, in many ways, being an immigrant has helped him juggle so much at once.
GUPTA : It makes you drive harder. It makes you work harder, because you want to get your life in order again.
EASTABROOK : Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.
HUDSON: Our next young entrepreneur went about growing his business in an unusual way. He purposely lost money. Yes, he lost it. Here to explain why he did it, and where his business stands today, is Ben Federman, CEO of 1saleaday.com.
BEN FEDERMAN, FOUNDER, 1SALEADAY.COM: 1saleaday.com is a daily deal website. We offer one item for a 24-hour time period. We have multiple categories, such as family, jewelry – we have a watch deal, a main section – which really could be anything and everything – and a – and a wireless deal. One thing they all have in common is everything is offered generally around 90 percent off retail price.
Once I launched the company, I realized, it’s not just about having a great idea. And I did always believe in what we were doing, and I knew it would succeed. But it took some time before, you know, I realized that, you know, it’s not easy to bring traffic to the site and have customers.
So after about six months to a year, we decided – one day it just kind of hit me, it just kind of lit up like a light bulb, and I said, “Tomorrow we’re going to lose money – intentionally.” Nobody can compete with you if you’re willing to lose money.
I lowered the following day’s deal to below our cost, and sure enough, people started talking about it. The word spread. Everybody started realizing, these guys really have competitive pricing.
Well, the way I figure it is, well, it was instead of paying money to the conventional advertising methods with Google (NASDAQ: GOOG) or Yahoo (NASDAQ: YHOO), I’ll invest in my customers. And in return, they’ll spread the word for me. So they were kind of the folks we marketed to and with.
And then – and, sure enough, it did work. And everybody ended up happy. We ended up with a huge clientele and a customer base, and they ended up with great deals. Now in the last two years, we’ve actually been turning a profit.
And with that, it wasn’t because we raised our prices. It was simply because we’ve grown to certain points, where we’re able to buy instead of 200-300 units to sell of each specific item, we now can buy 10,000 or 20,000 units.
And, of course, with that you get a much better deal. I try to stay simple and just kind of focus on what I – what I’ve – what I’ve been focusing on for the last four or five years, which is just continuously building the company, offering those great deals to the customers, not getting caught up in myself and, most importantly, for myself, personally, I’ve committed to contribute 50 percent of my earnings to charity.
And I have done so, thank God, till now, and I will continue to do so. That’s personally something that I feel is extremely important, to give back to the community. And it’s also a social responsibility.
As a young person – I’m 28 years old. I just turned 28 and one of the bigger challenges as a young CEO is maintaining the rapid growth. You know, before you know it, you’re going from a company that had one or two employees to 95 employees. So you really have to set things up properly, and you have to have some sort of chain of command, you – I would call it.
It’s important to have a good structure with – and everybody – for everybody to know exactly what their job is. When you have one or two people running the company, especially when one of them is the CEO, you kind of multitask.
You do everything yourself. But once you get to a certain point, you really need to start explaining to your employees what they’re – to your employees what their job is specifically and what you expect from them as opposed to saying, you know, hey, come on board and we’ll do everything together.
HUDSON : Ben Federman was recently highlighted as one of “Entrepreneur” magazine’s young millionaires of 2011.
HUDSON: Once you have established your product or business, you’ll need to get the word out. This can be done in a multitude of ways. As Anna Olson shows us, some young businesspeople in our nation’s capital came up with an unusual way to expand their reach.
ANNA OLSON : What do this butcher shop, gourmet ketchup line and woven belt company have in common?
PETER SMATHERS CARTER, SMATHERS & BRANSON: Card wallets, coaster sets.
OLSON : They’re all run by people under age 30, and they’re all part of a new movement aimed at getting customers to buy products from young entrepreneurs.
Matthew Segal, who runs a non-profit called Our Time started Buy Young earlier this summer.
MATTHEW SEGAL, PRESIDENT, OUR TIME: This is about getting young Americans to support the young businesses, the underdog, to help them grow and continue to create jobs. It’s truly our response to the economic crisis facing young Americans.
OLSON : So far, about 50 businesses are taking part in the effort. Once they sign up, companies are featured on the Our Time website, which offers 30 to 60 percent discounts on merchandise.
One of the buy-in businesses is Smathers & Branson, which makes these needlepoint belts.
CARTER: There’s a lot of time and thought, like goes into the quality, to the actual stitching, to the design.
So our collegiate line is down here.
OLSON: Peter Smathers Carter cofounded the company with his college roommate, after both of them received needlepoint belts from their girlfriends. Now, seven years later, their products are in 700 high- end boutiques and department stores.
Carter says Buy Young is helping spread the word to new customers.
CARTER: This year number of people they have on their emailing list was incredible exposure for us. And we had – we had some great orders coming in online from that.
OLSON : In fact, Our Time says companies are seeing as many as 200 additional sales per day, as thousands visit the Buy Young site.
Segal says people like what they’re seeing, and thinks the movement could result in more cost-conscious consumers.
Many of these products, like clothing made out of recycled content, or non-toxic nail polish, are designed with health and social issues in mind.
SEGAL: I think this will be a values-based buying movement, and I think it will be a true form and platform for economic empowerment for this generation.
OLSON: And customers can expect to see many more young entrepreneurs on the site soon. Our Time says it plans to add hundreds of new companies to its roster in the coming months. Anna Olson, NIGHTLY BUSINESS REPORT, Washington.
HUDSON: All entrepreneurs, young, old and in between, need money to transform a great idea into a successful business. But how do you get it? I recently spoke with Alicia Morga, the founder and CEO of refleta.com. She’s also a former venture capitalist turned entrepreneur. So I asked her the best way for young businesspeople to meet venture capitalists.
MORGA: I think one of the best ways is to begin networking. And the way you do that is you go to conferences that are about entrepreneurship or conferences in your industry, and start talking to people. And another good way is actually through your school or university. A lot of universities have entrepreneurship programs and they invite VCs to come in and participate. And that’s a great way to also get to know them.
HUDSON: What does a venture capitalist expect to hear from a young entrepreneur that has just a kernel of an idea, or maybe a little bit more?
MORGA: I think they expect to hear more than just a kernel of an idea. VCs will constantly sort of put out lots of different steps that they want to see people – or obstacles they want to see people overcome before they’re interested in actually investing in them. So you can’t just have an idea. You have to have done something to execute on it. And I think that’s what VCs really are looking for.
HUDSON: Do you want a business plan ready to go and ready to put in front of a venture capitalist?
MORGA: Yes, there’s different schools of thoughts about that. So some people say they want a business plan, a thorough one, because that means the entrepreneur has really thought through all the issues.
But a lot of businesses in Silicon Valley, they actually get funded just on a pitch deck. So it might be a PowerPoint presentation of 20 slides that actually really lay out what the problem is and how you’re going to solve it.
HUDSON: As you’re sitting across the table from a VC, now that you’re an entrepreneur, is it appropriate to just come out and ask for the funding?
MORGA: I wouldn’t do that, because I don’t think that’s actually just, A, a good negotiating tactic.
HUDSON: You had sat across from a number of entrepreneurs when you were an associate with a venture capital firm. Now that you’re on the other side of the table, what do you wish you would have done differently?
MORGA: I really wish I had been more empathetic towards entrepreneurs, and at least gone out of my way to acknowledge the effort that’s required to even just get there and be in front of a VC and have a meeting. It’s really – it’s a tough thing to do, just to even get there.
And then once you’re in the meeting and you’re an entrepreneur, it’s like holding your baby up in the middle of a store and having everybody yell insults at it. It’s not easy. And so I really do wish I had been more empathetic towards entrepreneurs.
HUDSON: For an entrepreneur, what kind of steps should they go through on judging the possibility of a venture capitalist, or whether or not they’re appropriate for their view of a company?
MORGA: You have to spend some time with them and actually build relationships, spend time working on that relationship, before you accept investment, which can be hard. You know, when entrepreneurs need money, they need it right away.
But if you take a little time to, you know, go do something together, to figure out how this person operates outside of that VC firm or that conference room where you’ve been pitching, you’ll have a better sense of the individual and whether or not that’s going to work for you.
HUDSON: You spent a few years on the venture capital side as an associate, listening to pitches, poking holes in some business plans and perhaps growing more empathetic than when you began that career. How has that changed the way you’ve approached investors now as an entrepreneur?
MORGA: Yes. One of the things that I’m very careful to do when I’m meeting with VCs is to get to the point quickly. So they’re busy people, and they’re seeing a lot of people in a short amount of time. And they want you to get to the point.
HUDSON: Is this essentially the elevator pitch?
MORGA: Probably a little bit more than the elevator pitch, because you have – you know, usually when you go to meet with a VC, you get about 45 minutes. But you really want your presentation to be done in 15 minutes, and have the rest of the time to talk and for them to ask any questions that might occur to them.
HUDSON: As you sat, as a source for funding for entrepreneurs, what common mistakes did you encounter from entrepreneurs as a venture capitalist?
MORGA: I think the number one mistake was my previous point about getting to the point. They would come in, and they would spend forever talking about the market and how they were going to dominate the market, and then never really even talk about what portion of the market was theirs.
They would pick the biggest market, and then they would spend a long time – a long time before they actually said, OK, this is what we’re building, and this is the problem we’re solving, and this is how we’re going to make you money. You know, and failing to get to how you’re going to get a return for the VC, I think, is a problem as well.
HUDSON: Alicia Morga, the co-founder and CEO of refleta.com, and a former venture capital associate. Thank you, Alicia.
MORGA: Thank you.
HUDSON: Good idea? Check. Funding? Check. Well, the next part is actually building your business. Here with some advice for young entrepreneurs is journalist Jane Porter.
JANE PORTER, JOURNALIST: Starting your own business is tough enough. But when you’re young, you’ve got lack of experience working against you.
Focus on building your credibility and your age won’t matter. First off, make sure your business has a laser focus. You might be tempted to offer a handful of products or services, but finding a niche in the market will set your business apart.
You want to be the best in the industry at what you do, rather than good at a range of things. Once you’re specialized, build your credibility online. It’s cheap, easy and very effective. Make sure your website is professional-looking. Start a blog and use social media sites like Facebook to generate interest.
But don’t underestimate how relevant it is to meet people in person. Reach out to industry leaders, meet them for coffee or network with them at events. That face time is extremely important.
After securing your first clients, remember, these people will be recommending your business, so treat them like gold. Tempting as it may be to make lofty promises to your clients, you always want to underpromise and overdeliver. Forget about your age. Just focus on what you do best.
I’m Jane Porter.
HUDSON: To learn more about young entrepreneurs, be sure to visit our website, nbronpbs.org. You can get to know some innovative young businesspeople making their way to financial success. We’re also on Twitter.
Be sure to follow us @bizrpt, or my personal feed @HudsonNBR, to comment on young entrepreneur programs and take part in the online conversation. Of course, friend us as well at Facebook @bizrpt.
That is NIGHTLY BUSINESS REPORT for this Monday, September 5th. I’m Tom Hudson. Thanks for joining us, and we hope to see you right back here tomorrow.