1. 99designs
Matt Mickiewicz, 99designs Co-Founder—27 Years Old
- Mickiewicz’s business partner, Mark Harbottle, is 37
- Founded 2007
- Located in San Francisco and Melbourne
- Marketplace for crowdsourced graphic-design services
- 27 employees, with plans to double that number over the next year
- No official revenue released—“eight figures”
- 99designs is a hub for businesses to find graphic designers without having to do all the searching themselves
- Recent acquisition of Series A funding from venture capitalists Accel Partners—$35 million
- According to Matt, the United States is home to 74,000 graphic designers
- 99designs lists 100,000+ graphic designers
- 80% of the company’s business comes from word-of-mouth
- 77,000+ projects completed so far
Here, Mickiewicz shares his top three startup challenges -- and how he overcame them.Matt Mickiewicz started his first business at age 14, filling a need he had for a directory of web-development tools and resources to help him learn how to create the websites he built as a hobby. Within two weeks of launching the company, now called SitePoint Solutions Pty Ltd, the self-described computer nerd was featured by USA Today and the Washington Post. After the site’s users started holding informal design contests, it spun off a separate online marketplace for crowdsourced graphic design, launched in 2008. The new company, called 99designs, took off. It has $15 million in annual revenue and has hosted design contests for such high-profile clients as the South by Southwest (SXSW) music, interactive and film festival,
Esquire magazine and pay-TV provider Dish Network Corp. It was among the companies spotlighted on
Entrepreneur magazine’s annual "
100 Brilliant Ideas" list for 2010.
Challenge No. 1: Trusting our instincts to create a new brand and company around the idea of crowdsourced graphic design.
Why: Business owners were posting requests for design work along with monetary prizes on SitePoint.com, which was a site for educational resources for web developers. These postings turned into informal design contests, with artists uploading completed designs, and winners being paid for their work. My business partner, Mark Harbottle, and I felt strongly that creating a new brand would propel word-of-mouth and help us reach a wider audience of small-business owners, so we spun off a new site and called it 99designs.com.
Solution: After reading the book The 22 Immutable Laws of Branding by Al Reis, we were convinced that using the SitePoint brand for two different lines of business would be a big mistake. That's when we decided to launch 99designs as a marketplace to connect businesses with graphic designers. We couldn’t have SitePoint stand for web-developer education and design crowdsourcing for small-business owners at the same time. The easiest way to destroy a brand is to put its name on everything. By creating the spinoff, we had a brand with a singular identity and clear purpose. Small-business customers were no longer confused by everything happening on SitePoint and, thanks to the increasing customer referrals and word-of-mouth, our revenue started growing rapidly.
Challenge No. 2: Building out our infrastructure to scale quickly, without huge upfront investment.
Why: We had an inkling that we were onto something big with the idea of crowdsourcing graphic design, and we knew we had to be able to handle a high volume of traffic and data storage if 99designs took off. Dealing with extended outages, slow loading times or huge hosting and bandwidth bills -- an estimated cost of $20,000 per month -- would have been disastrous in our early days.
Solution: In late 2007, when we began building 99designs, I stumbled across Amazon Web Services, a collection of internet-based computing services from Amazon.com Inc. This service enabled us to gain access to servers, storage and bandwidth without having to incur the cost of leasing dedicated servers.
In 2007, Amazon Web Services was the only cloud-based hosting solution available. Today, tens of thousands of successful internet companies and retailers rely on Amazon Web Services. But back in 2007, it was a big risk. It took some convincing and a lot of additional effort. Documentation and management tools for Amazon Web Services were sparse. But it paid off big time. It allowed us to scale up smoothly to accommodate growth, while saving us a massive amount of money along the way.
Challenge No. 3: Deciding which features and user suggestions are the most important to work on.
Why: We have a very involved and passionate community of designers who are the backbone of our company. They love giving us feedback, but we needed a way to manage the influx of requests to decide what to prioritize.
Solution: From the very beginning, we installed the free version of UserVoice on 99designs, which allows our community to vote on the suggestions and ideas they think are the most important. We’ve implemented dozens of ideas, such as a $99 logo store, the ability to award multiple winners and upfront payment from customers, resulting in massive revenue increases to the business.
2. Dropbox
Drew Houston and Arash Ferdowski, Dropbox Founders, 28 and 25 Years Old
- Founded 2007
- Located in San Francisco
- 50 employees
- No official revenue released
- Lets users access and share files from nearly anywhere using a file sync cloud
- 3 months in, landed $7.2 million in funding from venture capitalists and individual investors
- The how-to video posted on Digg boosted beta waitlisting from 5,000 to 75,000 people in a few hours
- Available in English, Spanish, French, German and Japanese
- 25 million users
- 1 million files saved every 5 minutes
- Plans up to 100 GB of storage
At a Boston bus station in early 2007, Drew Houston opened his laptop to finish some work while waiting for his bus. As he turned on his computer, he froze. "I could see my USB drive sitting on my desk at home, which meant I couldn't work," the 28-year-old says. "I sulked for 15 minutes and then, like any self-respecting engineer, I started writing some code. I had no idea what it would eventually become."
What it became was the foundation for Dropbox, a free cloud-based file-syncing service that allows users to access and share their digital files, photos, and videos from almost any mobile device or computer. Today, Dropbox boasts more than 25 million registered users who save over a million files every five minutes. But that didn't happen overnight.
By June of 2007, Houston had teamed up with fellow MIT computer science student Arash Ferdowsi to start the company. The two hit the ground running. Though Houston had recently graduated, Ferdowsi dropped out of school his last semester to fully commit to the project. The pair worked tirelessly for three months in a cramped office in Cambridge, waking up everyday at noon and working till dawn the next day.
"I think we started like most of these tech companies begin. Just a couple of guys in their boxers coding in a dark room," Houston says. "We just kept our heads down and built."
By September, the team moved Dropbox to San Francisco. The company llanded a total of $7.2 million in funding from Sequoia Capital, Accel Partners, Y Combinator, and a handful of individual investors, which Houston says was an important milestone for the team. But it wasn't until an instructional video on how to use Dropbox went viral on Digg that he realized the potential of the start-up.
"At the time, Dropbox was closed. After the video went viral, our beta waiting list went from 5,000 people to 75,000 in a few hours. We got a bunch of press and it was clear that we were working on something that people were interested in," Houston says.
Today, Houston and Ferdowsi have 50 employees. The company does little advertising, but instead uses a referral program that gives users free space for sending new customers to the site.
Though the founders won't reveal specific numbers, Dropbox's revenue comes from their premium plans. The service is free for up to 2 GB, of storage, but users can purchase 50 GB of space for $9.99 per month or 100 GB for $19.99 per month.
Users include individuals, small businesses, event-organizers, and even large companies like Red Bull. With half of their users living overseas, the company just launched the service in four more languages: Spanish, French, German, and Japanese.
3. Instagram
Kevin Systrom and Mike Krieger, Instagram Founders—25 and 27 Years Old
- Founded 2009
- Located in San Francisco—Twitter’s old office, to be exact
- 4 employees (yes, 4)
- No official revenue released
- Allows photo editing in an app, along with location sharing
- After it launched in the App Store at midnight on October 6, 2010, Instagram had 10,000 users in just a few hours
- Now 7+ million users
- 150+ million photos uploaded in the first 9 months
- 1.3 million photos per day
- 15 photos per second
- Flickr didn’t even reach 100 million photos until nearly 2 years after launch
- 16 options for photo editing
- $7 million funding from Benchmark Capital
- Plans for revenue: paid extra filters, exclusive accounts, advertising
Kevin Systrom (CEO, co-founder)
Kevin graduated from Stanford University in 2006 with a BS in Management Science & Engineering. He got his first taste of the startup world when he was an intern at Odeo that later became Twitter. He spent two years at Google - the first of which was working on Gmail, Google Reader, and other products and the latter where he worked on the Corporate Development team. Kevin has always had a passion for social products that enable people to communicate more easily, and combined with his passion for photography Instagram is a natural fit.
Mike Krieger (co-founder)
Mike also graduated from Stanford University where he studied Symbolic Systems with a focus in Human-Computer Interaction. During his undergrad, he interned at Microsoft's PowerPoint team as a PM and at Foxmarks (now Xmarks) as a software developer. He wrote his Master's thesis on how user interfaces can better support collaboration on a large scale. After graduating, he worked at Meebo for a year and a half as a user experience designer and as a front-end engineer before joining the Instagram team doing design & development.
Billion-dollar Facebook deal or not, Instagram founders Kevin Systrom and Mike Krieger keep it simple when it comes to the little things. You may know them for making your smartphone photos look better (or just hipster-er) with the touch of a filter button, but we're calling these Stanford buddies out for their love of old-school razors and classy cocktail books.
And while they may have mentioned another favorite publication, it's okay—they know the importance of a good Red Wing boot. "If I say that the fashion of our company has evolved at all in the last two years, it would be the shoes," Mike says. "We've really stepped up on the shoe game." Redeemed.
4. AdParlor
Hussein Fazal and Kristaps Ronka, AdParlor Founders—29 and 24 Years Old
- Founded 2008
- Located in Toronto, Canada
- 15 employees
- No official revenue released—“tens of millions”
- After Facebook’s 2007 API, the pair began designing apps for fun
- Along the way, they noticed Facebook didn’t have any solid ad networks
- Ronka dropped out of school as the pair began coding and started AdParlor
- One of fewer than 100 companies with access to Facebook’s ad API
- Over 100,000 ads daily on Facebook
- Over 500 million impressions
When Facebook launched its API in 2007, allowing developers to build games and applications for the social medium, Kristaps Ronka and Hussein Fazal "just started building things for fun." For instance, they built a treasure hunter app and an app to share documents with friends.
At the time, Fazal was a software developer for Bell Canada and Ronka was an intern. "We started talking about how to make money off the applications," says Fazal. "And that's when we realized there weren't any good Facebook Ad networks. Ronka came up with the idea of building an ad network for applications—not just for Facebook, but for MySpace and a few other sites as well. So, says Ronka, "we just started coding in our free time."
After months of that, Fazal decided to create a legitimate business. He quit his job and started AdParlor. And when Ronka finished his internship, he told his mother that he was going to leave school while he worked on the business. "His mother didn't like me for a while," jokes Fazal. Ronka dropped one course after another and never finished school. "We were working out of our respective basements," says Fazal.
The Canadian government has a program, CIX Candadian Technology Accelerator, which pays for technology start-ups to work out of the Plug and Play Tech Center in Sunnyvale, California, as a way of making contacts and building businesses. Fazal was able to take advantage of the program and spent eight months living in Palo Alto, California, networking and building the AdParlor.
Fazal and Ronka knew all about coding and nothing about advertising. After they built the network they were faced with a conundrum: they didn't have any major advertising for the apps in the network; and advertisers who wanted to use the network were not finding enough apps in the network. "To get initial clients we would scroll through the Facebook app directory and message app publishers that we were a new ad network and did they want to join," says Fazal. They did a lot of cold emailing and cold calling. And they used the apps they had initially built for fun to test the ad network. Essentially they were their own clients.
Today, AdParlor is one of less than 100 companies that has access to the Facebook Ads API. It is the exclusive manager of Groupon's entire Facebook Ad spend as well as managing the Facebook Ad spends for Ubisoft, SEGA, Playfirst, Casual Collective, Cie Games, and many others. Because of the competitive nature of their business they were unwilling to disclose revenue figures but it is in the "tens of millions," says Fazal.
5. Foodspotting
Alexa Andrzejewski, Soraya Darabi, and Ted Grubb, Foodspotting Founders—27, 27, and 29 Years Old
- Founded 2009
- Located in San Francisco and New York City
- 10 employees
- No official revenue released
- An iPhone app allowing people to search for food by dish, not cuisine, while seeing photographs of the meals and getting the locations of the restaurants serving it
- Grubb was a programmer, but knew nothing about app development—so he learned in order to create Foodspotting
- He programmed the prototype app in a tent in the wilderness!
- In the beginning, Foodspotting was 1 of just 6 location-based apps in the iTunes App Store
- $3 million in angel funding after highly successful run at Start-up Weekend in SF
- 600,000+ foods now “spotted” on the app
- 101,615+ follows on Twitter
- Partnering with The Travel Channel and Zagat
Alexa Andrzejewski returned to San Francisco from a vacation to Japan with an idea: a field guide to global food. To learn about bootstrapping her book project, she joined Women 2.0 and started aggressively networking, talking about her plan to catalog restaurant dishes. Tech start-up veteran programmer Ted Grubb met her at a happy hour at Adaptive Path, where Andrzejewski was a consultant, and advised she steer her 20th-Century project into the smartphone era.
The idea soon morphed into a photo-sharing location-aware app that amplified a phenomenon they'd already observed happening: "people love to photograph their food, and share their great meals with friends," Andrzejewski says. "So we put a name on that phenomenon: Foodspotting."
When he couldn’t find Andrzejewski a qualified technical co-founder, Grubb decided to learn iPhone programming himself, and he created a prototype Foodspotting app while in a decidedly un-2.0 setting: a tent in the wilderness. The duo took top honors at San Francisco's Start-up Weekend, added New York media darling Soraya Darabi—a former social media manager for The New York Times and current digital strategist for ABC News—to their founder roster, and scored $3 million in angel funding.
Darabi joined the team last June, and hasn't looked back. "I know that I'm working more than—or as much as—I have in other jobs, but it doesn't feel like work, and that's the huge emotional difference for me," she says.
Foodspotting, an iPhone application and website that allows users to post and discover nearby mouth-watering restaurant dish recommendations through photographs, launched at last year’s South by Southwest interactive festival, and has been on the forefront of the local, mobile, social app space since. With more than 600,000 foods "spotted," it's an international hit, with global "super spotters" staging "eat-ups" in hundreds of cities globally. Currently, it's developing partnerships with companies, such as The Travel Channel and Zagat, which uses Foodspotting photos on its website and has compiled guides—and created a badge users can earn—for Foodspotting. The site's prospects for revenue are fairly open, though these partnerships—as well as the possibility of pointing users toward recommended or sponsored content—play a role.
The prospects of success didn't always look so savory. When it debuted in the iTunes app store, Foodspotting was one of just six apps in the location-based category. "The space has heated up a ton since last July—today it's a crowded space, actually—but back when we were raising money it was new to everybody," Andrzejewski says.
Despite initial investor skepticism, and nine months of bootstrapping, the trio was able to raise $3 million in funding from BlueRun Ventures. That's allowed the company to expand to ten employees: two in New York City, and eight in an open-air-café-inspired office in San Francisco's SoMa neighborhood. To stay connected bi-coastally, Skype and SocialCast are open constantly on everyone's computers. "It's our ambient communication, and our daily journal. Skype is definitely our virtual office," Andrzejewski, who is based in San Francisco, says. "And just as many funny things happen on Skype as in the office."
6. Onswipe
Jason Baptiste and Andres Barreto, Onswipe Founders, 25 and 24 Years Old
- Founded 2010
- Located in New York City
- 12 employees
- No official revenue released
- Provides mobile website optimization for all levels of publishers
- Content becomes interactive, customizable, “app-like”
- Received over $6 million in funding from companies like Spark Capital and Lightbank before platform launched
- Invented a WordPress plug-in specially for the iPad
- Now, a deal with WP has Onswipe running 18.6 million blogs for iPad
- Barreto is also a founder of Grooveshark and PulsoSocial—“TechCrunch for Latin America”
Jason Baptiste is nothing if not confident. "We're sitting between two huge shifts," he told the audience at TechStars's Demo Day on April 11. "The shift in the media industry from print to digital, and the shift in the entire computing industry from point-and-click to touch-enabled devices. We get a chance to change everything. We get a chance to rewrite all the rules. And in order to do this we are not raising a Series A, we're raising a Series Awesome. Because I can tell you that Onswipe will own this market."
Baptiste and his co-founder, Andres Barreto, who is a founder of Grooveshark, had just completed TechStars's first three-month mentoring program in New York City. At Demo Day, they were seeking additional funding for their company, Onswipe, which allows publishers of all sizes to make their content look "beautiful and app-like" on tablet devices such as iPad. On June 3, less than two months after Demo Day, the two did indeed raise their "Series Awesome." Spark Capital, which had already invested $1 million in the company, led a $5 million round and was joined by Lightbank and a handful of other investors. All this before Baptiste and Barreto had even launched their platform.
The partners started their company last summer in Miami. Barreto, a serial entrepreneur originally from Columbia, was running PulsoSocial, the "TechCrunch of Latin America," says Baptiste, who had just singed a deal with Portfolio to write a book on entrepreneurship and was contributing to the blog OnStartups. "We thought a lot of people were reading our stuff," says Baptiste. "So we said 'let's see if we can make it look really good.'"
They started by creating a simple WordPress plug-in for the iPad called Pad Press. "We had a developer in Mexico who didn't even have an iPad, so we'd do a Skype video chat and hold our iPad up for him and say 'this is how it's working or not working,'" recalls Baptiste. "We thought, let's do the thing that people say we can't do, which is to do a flip board within the browser."
In the fall, at the eleventh hour, Baptiste and Barreto decided to apply to TechStars's first New York City-based program. They were accepted and, shortly thereafter, landed their first million in investment from Spark.
From there, it's been a whirlwind. Baptiste and Barreto recently signed on 18-year-old wiz-kid Mark Bao as CTO and co-founder. Bao, who just finished his freshman year at Bentley College, created his first app in the fifth grade. The partners cut a deal with WordPress to power 18.6 million blogs on iPad. And on June 20, Onswipe officially launched with its first major media partners: Hearst's Marie Claire and The Washington Post Company's Slate, among others. All content looks and feels app-like ad and is interactive and customizable.
Use of the publishing platform is free; Onswipe makes money by sharing ad revenue with publishers. The company also brings advertisers to the table; partnerships with American Express and Sprint are already in place.
"Things are moving way faster than I would have ever thought," says Baptiste. "I think revenue is going to be way more than I could ever imagine."
7. Grasshopper
Siamak Taghaddos and David Hauser, Grasshopper Founders—Both 29 Years Old
- Founded 2003
- Located in Needham, Mass.
- 50 employees
- No official revenue released
- A voicemail/call routing system using its own phone number
- Began with existing software, but developed their own proprietary software
- Plans for all sizes of business: $9.95 to $199.00 per month
- Grasshopper Group founded in 2010: will produce many products for entrepreneurs
- May 2010: Created and circulated petition for National Entrepreneurs Day
- President Obama one-upped them and made National Entrepreneur Week in November
- Growth of 1,983% in 2007
- Growth of just 5% during the worst part of the recession
- However, Grasshopper is due to grow 20% on top of 2010’s revenue, with more than $15 million
Siamak Taghaddos and David Hauser met as undergrads at Babson College while both were managing businesses they started in high school. One of their biggest challenges was how to answer work calls while in class. "If a customer wanted to place an order for a product, the only number I could give them was my house line," says Taghaddos. "I had my mom picking it up, and you could hear my sisters yelling in the background."
In 2002 Taghaddos wrote a business plan for a telecom company that would act as a virtual phone system for small businesses. It won Babson's 2003 Business Plan Competition and caught the attention of Hauser, who had been thinking about starting the same kind of business. The two teamed up that year to launch GotVMail, which gave customers a toll-free or local number to use for incoming calls. The calls were picked up by the GotVMail system, which played a customized greeting then routed the call to the appropriate person or sent it to voicemail.
Hauser, now CTO, and Taghaddos, CEO, estimated they would need $1.5 million to start. "We were $1.25 million short," says Taghaddos. They had a quarter million from their previous businesses and Taghaddos's father, who became the seed investor. "When you have a quarter million for something that requires $1.5 million," says Taghaddos, "you have to be very creative with hiring, working with vendors and investing in software."
The pair initially just repackaged existing telecom software; they have since created their own proprietary software. In 2009 the Needham, Massachusetts, company was rebranded as Grasshopper. "We were spending money on 60-second radio spots and half the time was used just spelling the company's name," recalls Taghaddos. In 2010 they formed Grasshopper Group, which will provide multiple products aimed at entrepreneurs.
Last May, Taghaddos and Hauser circulated a petition to create a National Entrepreneurs Day in the United States. Taghaddos says it wasn't just a novel idea, but the start of a movement to support entrepreneurs. Six months later, President Obama declared a week in November as National Entrepreneurship Week; the last day of the week is National Entrepreneurs Day.
Although Grasshopper's growth slowed from astronomical—1,983 percent in 2007—to 5 percent during the worst of the recession, the company is on track this year to grow 20 percent over 2010; revenues are more than $15 million. Next up? "We want to expand globally," says Taghaddos. "By 2015, we want to be a global phone company for entrepreneurs. We want to be their dial tone."
8. Freshii
Matthew Corrin, Freshii Founder—29 Years Old
- Founded 2005, with seed money from his parents
- Based in Chicago, with locations around the world—first location in Toronto
- 50+ locations in 4 countries—United States, Canada, Austria, and UAE
- 500+ employees
- No official revenue released—est. $50 million
- Custom fresh food—salads, soups, wraps, bowls—made affordable
- A calorie, fat, sodium, cholesterol and protein counter tallies each online order’s total by ingredient
- Aim to open 700 more stores—½ corporate, ½ franchise—in the next 5 years
- To open a franchise: $30,000 up-front, 6% royalty, 3% advertising fees
- Typical start-up fee: $250,000
- Corrin had never worked in food service or retail before opening
Matthew Corrin's aha moment came one afternoon six years ago in a Midtown Manhattan deli. He was 23. He was hungry. And he was sick of eating in greasy delis like this particular one.
"I thought the service, the branding, and the food was lackluster," he recalls. "I wanted a better alternative."
Corrin, 29, moved back home to Canada and, with seed money from his parents, opened the first Freshii location in Toronto. Freshii's concept is straightforward: custom-made healthy food at an affordable price. Ordering is a four-step process in which customers choose a wrap, soup, salad, or bowl, then create their dish with hundreds of healthy options.
"We want to eliminate the excuse that people don't eat well because there's nothing convenient or they can't afford to," says Corrin. "I have no interest in dealing with burger or pizza or donut concepts." Freshii's online menu tallies the amount of calories, fat, cholesterol, sodium, and protein each time an ingredient is added to an order.
Before launching Freshii, Corrin had limited business experience; a graduate of The University of Western Ontario, he moved to New York after college to take an internship at The Late Show with David Letterman. Later, he worked in public relations for Oscar de la Renta.
"The first day I opened Freshii was the first day I ever worked in the restaurant or retail business," he says. "Arguably, that's probably not the smartest thing to do, but isn't that the entrepreneurial spirit to just jump in and figure it out on the fly?"
So far, it seems, Corrin has indeed figured it out. Since launching in 2005, Freshii has grown to over 50 locations in four countries, including Canada, the United Arab Emirates, Austria, and the United States. Corrin directly oversees about 20 employees in the company's Chicago headquarters, and estimates there are nearly 500 Freshii employees worldwide.
The company has maintained an aggressive franchise model to grow the business internationally. Franchise partners pay an up-front $30,000 fee, a six percent royalty, and three percent advertising fees. A typical start-up cost for franchise owners, according to Corrin, is about $250,000. Though the company does not disclose official revenues, Corrin says the company expects to generate about $50 million in system-wide sales this year. But that's just the beginning. Corrin plans to open 700 stores—half franchise, half corporate-owned—within the next five years.
9. Birchbox
Hayley Barna and Katia Beauchamp, Birchbox Founders—27 and 28 Years Old
- Founded 2010
- Located in New York City
- 25 employees
- Projected revenue for 2011: $7 million
- $10 per month for a shipment of 4-5 samples of beauty/cosmetic products to customers’ doors
- At launch, Birchbox already had 660 members by word-of-mouth!
- A beta test e-mail was sent to 40 friends in March 2010—and resulted in a waiting list of about 3,000
- Currently about 45,000 members
- Just 1 month after launch, $1.4 million seed
- Accel Partners and First Round invested
- Cosmetic giant Benefit was the first to join the project
What if everyone had a friend who was a beauty editor—someone to sort through the gazillion products and tell you not just what’s best, but what's best for you and how to use it?
That was the inspiration for Birchbox.com, a company that sends four to five deluxe, curated samples to members, who pay $10 per month and can, of course, buy full-size version of any products they like. Subscriptions and product sales will earn the company over $7 million in revenue this year.
"I was overwhelmed by the Sephora experience," says co-founder Hayley Barna, 27. "If you're not someone who pays attention to beauty, it's just overwhelming." Barna, by the way, really did have a pal who was a beauty editor–something her Harvard Business School friend and Birchbox co-founder, Katia Beauchamp, envied.
Birchbox launched in September 2010, with 660 members, recruited through word of mouth. An initial e-mail to 40 friends for a beta test in March 2010 generated a waiting list of some 3,000, Beauchamp says. Today, at less than a year old, Birchbox has approximately 45,000 members and 25 employees. Their first hire: Barna's beauty editor friend, who oversees Birchbox's content, which includes a beauty trends blog.
The company has some serious people betting on it. In October, a month after its launch, Birchbox closed a $1.4 million seed round. Investors included First Round and Accel Partners. And then there's the support of some of the beauty industry's biggest players, who hand over free samples to Birchbox in exchange for data about customer purchasing behavior.
How did the pair engineer that? Beauchamp, who had worked at Estee Lauder in college, realized that free samples are the beauty world's equivalent of a dish of pennies near the cash register: Nice, but not making the companies any money, because they don't translate into sales.
So in December 2009, when Barna and Beauchamp had just finished tossing around company ideas (one rejected idea: leggings for men), Beauchamp fired off a three-sentence e-mail to ten top beauty CEOs. She didn’t know them personally; she says one her favorite games is guessing e-mail addresses. Subject line: "Reimagining beauty retail online." She got immediate responses from the CEO of Gurwitch Products, which distributes Laura Mercier, and the CEO of Benefit Cosmetics. Within days, Benefit became the first company to sign on.
Scrounging samples for mock up boxes to present to potential partners, Barna and Beauchamp got the first of many signs their idea was a good one. "Hayley's sister-in-law reached out from under her sink and pulled out a gallon plastic bag filled with samples," says Beauchamp with a laugh. "It was a case in point: People are just throwing away samples. You can’t just give them samples. You have to give them context."
10. Solben
Daniel Gomez Iniguez, Solben Co-Founder—20 Years Old
- Founded 2009
- Located in Monterrey, Mexico
- 15 employees
- Revenue for 2010: $1 million
- Projected Revenue for 2011: $3 million
- An alternative energy project begun for a high school senior project
- Sells technology for making biodiesel out of algae and plants, as opposed to cooking oil or animal fats
- 2010 GSEA Global Social Impact Award Winner
- 1st Place Entrepreneur Award 2010 in the Mexican Stock Exchange
In order to get his high school diploma in 2008, Daniel Gomez Iniguez was required to complete a research project. He had no intention of creating a multi-million dollar alternative energy company. At the time, Mexican newspapers were writing often about biodiesel, the alternative fuel produced from vegetable oils and animal fats. But there wasn't a Mexican company that had technology to produce biodiesel. So Gomez, who planned to do his research in chemistry, became very interested in how he could make biodiesel himself.
"I started searching the Internet," recalls Gomez. "It seemed real easy to make [biodiesel] at your home." Gomez went to the local university, Tecnologico de Monterrey, and found a Ph.D. who taught the course on biodiesel production. He began attending the class (not for credit), and he joined an informal biodiesel club. "Instead of going mostly to high school, I started going mostly to the university," Gomez recalls.
He learned enough to start making biodiesel from used cooking oil at restaurants, and compared it to making biodiesel from animal fats (the subject of his research project), to learn the process. He still didn't plan to start a business. Spending time at the university as well as going to biodiesel conferences throughout Mexico, though, Gomez met other people who could make the project into something much bigger.
Gomez and his three partners—Guillermo Colunga, Antonio Lopez, and Mauricio Pareja, who each had expertise in a different area of biodiesel production—started a not-for-profit foundation in early 2009 to develop biodiesel production technology. And when it brought in more than $150,000 in sales from another university, in Tabasco, Mexico, in the first two months, they invested the money to start a for-profit business. Today, Solben—which is a made-up name that combines the Spanish words for "solutions" and "biodiesel"—sells technology for biodiesel production from nonfood products like algae and Jatropha, a plant. (The company doesn't want to promote competition with sugar or corn biodiesel—or interfere with food industry jobs.) Solben also offers products and services to help customers with the biodiesel production process, including oil plantation seeds, seed-hulling machines, training, and quality testing. The company's government, private-company and university customers are in Mexico.
Solben's sales were more than $1 million in 2010 and the partners predict $3 million in sales this year. It is expanding into Central America, the United States, and India. Gomez, who was runner-up last year for the Global Student Entrepreneur of the Year Award and won the Global Impact Award, is also on track to finish his undergraduate degree in chemical engineering from Tecnologico de Monterrey in 2012.