“If you want to build a ship, don’t drum up people together to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.” – Antione de Saint-Exupery
Newton’s ﬁrst law of motion dictates that an object stays at rest until acted upon by force. Even if that object is the best-designed product, it will never be successfully launched without exerting the right amount of force to get it in motion. That is what the building phase is all about—igniting the momentum necessary to launch a great product and a great company.
The most important factor in this phase is hustle. So many pieces need to fall in place, from press to design to distribution, and at the prelaunch stage getting support and funding can take a good deal of persuasion. This is a messy process for many founders, of ﬁts and starts, with daily challenges and many setbacks. Just think of how many of those the Embrace team had to overcome. Often the only way to succeed is with a great amount of audacity, energy, passion, and sheer hustle to rally all of the resources, people, and ﬁnancing required.
Many great products never progress beyond this stage because the social innovator was not able to build the necessary momentum. There are many lessons about how to persevere and tactics for generating momentum from founders who have been willing to work every connection and try every angle.
BEATING THE BURN RATE
The founders of Method had decided to take on the consumer goods behemoths not only before they had a product, but even before they had a name. They had agreed that it would somehow refer to cleaning being about the technique, not about brute force, but after quite a bit of time batting ideas around, they were still stumped. Then suddenly, while Eric was brushing his teeth, he yelled out “Method,” toothbrush still in his mouth.
Adam loved it, and it stuck.
So they had a concept and they had a name, but still no product. Their phenomenal success may make the fate of the company seem inevitable now, but they met with a great deal of skepticism, even though they had a good pitch right from the start. They had been inspired by natural brand pioneers like Aveda, which had created demand for natural products in the hair care market, and their elevator pitch was that they were “Aveda for the Home.” That was compelling enough to draw some attention from potential backers, but ultimately people just couldn’t believe these two guys with no experience at all in the cleaning products business could take on the big brands like Proctor and Gamble. The green market still seemed to have appeal only among do-gooders willing to put up with substandard products. As for their argument about setting them- selves apart with quality design, when it came to washing hands and doing dishes, they were told consumers only cared about function and price, not aesthetics.
They weren’t going to be able to raise any funding up front, so to create their ﬁrst line they relied on a great deal of borrowed expertise, convincing lawyers, accountants, and suppliers to work for equity rather than cash. Looking back on those days, Eric reﬂects, “The essential skill at this stage is to infect others with your vision and passion. Make your mission contagious so that others will take the risk to work with you for very little up-front.”
The ﬁrst major piece of hustling they pulled off was to line up a chemist to help them craft their formulas. Adam had been mixing up batches of cleaners in their apartment, experimenting with all natural ingredients. The place was full of beer pitchers labeled “DON’T DRINK.” Eventually he landed on some formulas that he was pretty happy with, but he realized he should bring in a professional.
Meanwhile Eric worked on branding and design, convincing a local graphic designer to create labels for them in return for equity As soon as the formulas were ready, they had labels printed and decided to go ahead with making some product. After six months of work they had a product line, but nowhere to sell. Now the real hustling began.
They started going door-to-door, calling on independently owned grocery stores, just showing up early in the morning and giving a 30-second pitch. The ﬁrst store that placed an order was Mollie Stone’s Market in Burlingham, California. For the next couple of months they drove around in Adam’s mom’s car to every independent grocery store in the San Francisco area. Before long Method was in 30 stores across the bay area. They hand-delivered the inventory to the stores.
They knew they needed to see the inventory selling if they wanted to stay in those stores and have any hope of selling to the chain stores, so they conducted a great deal of in-store market- ing, which also allowed them to gain ﬁrst-hand customer insights as well as learning the ins and outs of the grocery store business. Their efforts started to pay off in sales.
They were almost running out of the money they’d invested, though, and they needed to start to scale up soon by selling bigger orders to chains of stores if they had any hope of surviving. Now equipped with actual sales data showing proof of concept, they thought they’d be able to get meetings with bigger chains, but they wouldn’t be able to fulﬁll larger orders with their current operation. They’d have to scale up on inventory before getting those orders, and they needed to put a proper distribution system in place—they couldn’t sell to chains out of the back of a station wagon. But all of that would cost money they didn’t have.
So they decided to pursue angel investments from anyone they could convince to believe in them, which turned out to be friends and family. They look back at this friends and family round as a great help not only ﬁnancially, but in terms of motivation. “Many entrepreneurs struggle with the decision to take money from close friends and loved ones,” Eric says. “The reality is that you don’t have much of a choice. Before you’ve proven your idea, the only thing people can bet on is you, and, inevitably, the only people willing to do that are your friends and family. Of course, the upside to taking money from the people you care about most is that it puts lots of pressure on your back. You go from not wanting to let yourself down to not wanting to let your family down. It forces you to do everything you can to avoid sitting down at Christmas dinner saying, ‘Sorry, Grandma, I lost that $10 thousand you loaned me.’ ”
After a small friends and family round of funding, they were able to hit their next big milestone by selling to the Ralph’s chain in Southern California and QFC in Seattle. They had grown from being in 30 stores to 200, and they were making fairly good money, but they were burning through cash at a much faster rate than it was coming in. This is one of the most difﬁcult challenges to manage: getting your cost of sales low enough and your volume of sales high enough to assure a proﬁt. They now desperately needed more cash, so they decided to pursue venture capital. But not one ﬁrm wanted to back them.
Now they began wracking up serious credit card debt, eventually putting $100,000 on their cards. And if the stress of the debt wasn’t bad enough, Eric’s girlfriend dumped him. But that wasn’t the worst of things: they spent many nights waking up in a cold sweat, fretting about how to pay back the money not only on their cards, but that they had borrowed from their friends and family. Their vendors began putting them on credit holds, which was going to force them to freeze production. They decided to scramble to ﬁnd a bridge investment.
Things were so desperate that when they got into a car accident, they considered it a stroke of luck. They had just $16 left in the bank at the time, and the insurance payout allowed them to cover rent and food for a few months.
Then they managed to secure a bridge loan from a major gambling company in Las Vegas, and that gave them a leg up in ﬁnally securing their ﬁrst bit of venture capital.
They now made some headway by getting into some regional chains, but they continued to burn through cash. Just a month after they’d found themselves ﬂush with cash they were back to the cash- strapped life. They had to raise more capital. They lined up another series of pitches to potential investors, and landed their ﬁrst really sizeable check, from a pair of venture capitalist brothers, for $500,000. They considered that a huge milestone, which warranted a proper celebration, and when they went out for a big celebration dinner, their credit card was declined. Fortunately they knew the owner and got off with an IOU.
The venture ﬁrm had promised them another $500,000 if they could get into 800 stores within 90 days. That meant expanding 400 percent in that time, a near-impossible task. But they went into hustle overdrive and cleared everything but sales pitching off their plates, competing furiously with each other to see how many sales they could rack up. Miraculously they hit their target in the nick of time.
They couldn’t get off the burn-rate treadmill, and they knew it was time to swing for the fences by landing a national chain store account. There was only one national chain on their list: the one that stood for the style and worked with such high-end designers as Todd Oldham and Michael Graves to bring style to the mass market at affordable prices. They had tried to get into Target for some time to no avail, and then ﬁnally a friend of a friend, who had an unrelated meeting with the head buyer at Target, agreed to let them tag along to the meeting and make a quick pitch for Method at the end.
They had their dream meeting, and they were feeling conﬁdent, but as they describe the outcome, “Our chances, were less than those of a snowball in hell. At least, that’s how Target’s divisional head put it after a cursory look at our presentation materials. He said our product was ordinary and our brand wouldn’t have broad appeal. After weeks psyching ourselves up, we couldn’t believe our ears. The buyer seemed annoyed with us for wasting his time.”
They had stepped up to the plate and had struck out big time. Lots of founders would have been demoralized, and they were for a time, but they rallied. They had pulled off some amazing hustling, but they were about to manage a truly extraordinary feat. They decided they had to heed the response of the Target buyer and come up with a more stunning product, and that would come from a truly breakout design. One of their design heroes was Karim Rashid, one of the most respected product designers in the world, whose work is in the collections of a number of museums. He was very interested in design democracy, bringing top design to mass-production products. Adam and Eric had been following his career for a while and had gone to see a few talks he had given. Now they decided to reach out to him.
Eric just sent him an email one day, appealing to Rashid’s concern about design democracy. He wrote: “Karim, we want to reinvent an icon that sits on the current top of every sink in America, and we want you to do it.” Karim thought it was an intriguing proposition. He’d never designed a product that you could buy for $3. So, to Adam and Eric’s surprise, he accepted the offer.
Enlisting star power like that isn’t cheap, though, and with their cash reserves so tight, they had to get Karim to agree to special terms. They negotiated a deal with him for a mix of cash up front and stock. Now they had a star name behind their product, and suddenly they were more attractive.
When a friend of Eric’s offered to get them a meeting with the head of marketing at Target, they jumped at the opportunity. They’d be making an end run around the head buyer, but they ﬁgured if you can’t get in through the front door, sometimes you have to climb through the window. As soon as the head of marketing heard Karim was on board, the meeting was booked. Target had been drooling over Karim for a while. Target did not want Method. Target wanted Karim, and Method was along for the ride.
This was the Hail-Mary pass for Method. Their model would either succeed or fail with this meeting, and they were going all in. The pressure was enormous, and Rashid’s bowling pin-shaped bottle arrived just before the meeting. Eric would be the one to make the presentation, and he ﬁlled it with soap on the way.
Increasing the tension, who did he see when he walked into the meeting? The head buyer, who was glaring at him. As Eric gave his presentation, the head buyer cast a cloud over the room. No one gave any signals about how the pitch was going, and Eric thought he was bombing. Finally he unveiled the new bottle, and as the head buyer picked it up and squeezed a stream of soap, he exclaimed, “Oh my God! Even I would use this!” The next thing Eric knew they had a deal for Target to test the product line in 100 stores in the Chicago and San Francisco areas. If they hit the sales target, they would get their coveted national distribution.
The only problem now was that the product needed to be on the shelves in three months. As Eric and Adam talked, their excitement turned to dread. The bottle they’d shown in the meeting was just a prototype, and even if it was put into production that moment, it didn’t seem possible they could make that deadline. They had to hustle big time yet again.
Adam jumped on the redeye to Chicago to meet with their head of production. The two begged and cajoled and called in favors all around Chicago. If somebody wouldn’t return their call, they would show up in person to plead the case. Remarkably, they were able to meet the deadline.
By August 2002, Method was on the shelves in Target’s test markets, and the initial consumer response was encouraging. Customers were writing in praise of the product and asking if the company could make an all-natural shampoo or laundry detergent. But at the same time, problems were starting to emerge in the stores. For one thing, customers were picking up and opening the bottles to smell the liquid and to try to ﬁgure out how the unusual bottle worked, which was making a mess on the shelves. Sales began to fall.
So the guys hit the stores, cleaning up the mess, handing out coupons, and schmoozing managers. They even resorted to buying the product off the shelves in some stores and giving it away in the parking lots to try to lure customers. None of their efforts reversed the drop in sales, though, and they missed their sales target. That seemed the end. But as is the case in some many stories of successful startups, they were about to get a remarkable lucky break.
A new buyer took over the category at Target and she liked the Method products. She had reviewed the numbers and believed the sales target had been set too high. She had also determined that Method was bringing in a more premium customer to the stores and was driving greater overall proﬁtability. So Method was going national after all. That was the break that ﬁnally got them out of their burn-rate dilemma and they were off the treadmill and running.
Every founder has to be willing to be a salesperson, and pitching of one kind or another takes up a great deal of time. This is especially true in the early days, but the job of selling the vision is never done. And the work can’t just be farmed out. In story after story of successful launches, the ﬁne line between success and failure comes down to that one last pitch, an apparently hare-brained idea, and the leveraging of any and all personal connections. And the founder generally has no idea when that lucky break will come.
Founders must not be hesitant to mobilize friends and family, and though some people are understandably reluctant to borrow money from this network—which is by no means necessary—in many cases it provides the basis for gaining traction. But money is only one means of driving momentum: founders must also leverage the resources of people’s time and passion. I have never met a successful entrepreneur who is not a hustler.
Hustle will look different depending on the industry, product, market, and context, but it boils down to selling a vision of the future, inviting people into that vision, and making them feel an integral contributor to it.
1. Sell the Vision
The vision for your organization may take a while to come fully into focus, and the pitching process can be a vital part of bringing clarity. People are sure to share all kinds of responses, including utter skepticism. They’re likely to give you a host of reasons that you should abandon the effort. But they will likely also share some great ideas for efforts to try and changes to make in your plan.
Selling your vision takes both a great deal of resilience and a great deal of passion. A key factor in getting buy-in is persuasively making the case for how your product or service will improve people’s lives and will introduce a superior model. This is one way in which being innovative provides an edge: key potential supporters want to know that they can help to make substantial change happen. The bolder your ambition, and the more convincing your vision, the more enthusiastically people from your own family to those you cold call to the major funding organizations will come onboard.
Key Question: How will the world be different if we are successful?
2. Invite Co-Creators
The social innovator cannot bring her vision to life alone, she must invite co-creators into the process. Contributions from others with the necessary expertise or connections, often given voluntarily or for no cash up front and some portion of equity in the future, are often the key factors in getting through the gauntlet of the building phase. Founders must be constantly thinking about how others might assist them and be willing to reach out to whoever it is they think can solve the problems they’re facing. Even the most improbable of requests may be agreed to, especially if the founder is able to help others to achieve their own goals. Aspiring social innovators should never underestimate how many people would like to be a part of solving the problems.
Key Question: How will others beneﬁt from helping you make your vision into a reality?