How Bebarang would fail

As I was cleaning up my “Bebarang folder” on my hardrive, I found this document I wrote this past summer and wanted to share it with everyone. Before going into NYC Seedstart, one of Guy Kawasaki’s videos inspired me to conduct a pre-mortem analysis on my startup: if my startup were to fail, why it would fail. For each potential failure points, I annotated how we were going to approach the problem and try to avoid it from happening. It’s funny how I never put “passion” in one of the categories… I didn’t know back then that would matter so much.

For the entrepreneurs, I thought it would be a good exercise to go through this process to understand what your “deep dark scary stuffs” are and how you could embrace it.

Sun Tzu has a famous saying in the book “The Art of War”:
“It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle.”

Bebarang Pre-Mortem Analysis (May 2011)

Lack of Customer Traction (why?)

·            The price point is too expensive

o   For avg. 2-3 months of item rental, the value of renting vs. purchasing it is not high enough. (For a $10 item, pay $6 to rent out 2 months?)

§  Price Plan page comment box

§  Email survey

§  Phone survey

§  Account cancellation survey

§  Olark – instant chat service

§  http://getsatisfaction.com/

·            We don’t have the right selection

o   There’s extreme demand to rent out popular – everyday wear items and less demand for premium designer items

§  Product Browse page “Tell us what you want”

§  Account cancellation survey

§  Olark

§  http://getsatisfaction.com/

o   We don’t have the right brands customers want

o   There’s too much brands and products to customers (paradox of choices + intimidation factor)

§  Not a concern at this point

·            Not Convenient

o   Takes too long to ship the product

• Bebarang is inefficient
• Focus on regional customers (NY only) to reduce shipping time & shipping cost
• Drop-shippers are inefficient and Bebarang has no control (think Zappos' issue)
• 3 strike policy à lower discount for products

o   Poor service calls

§  Follow up phone call satisfaction email

o   Poor email replies

§  Follow up email satisfaction email

o   Confusing returning process (printing labels, etc)

§  Follow up returning process satisfaction email

o   Poor web user interface, complex navigation

§  Olark

§  http://getsatisfaction.com/

o   No free trial?

§  14 day free trial – Risk Free

·            Not Clean

o   There are stains in the item

o   There are wrinkles in the item

o   There are bad odor/smell from the item

o   Regardless of the actual cleanliness, I think a big barrier is convincing moms that the clothes are clean enough. I would add in something along the lines of "Customers not confident in cleanliness"

§  Cleanliness page on the website – detailed process info, products used for cleaning

·            Mothers don't like to shop online

o   Have you looked at trends/sales figures for online shopping of baby clothes? Not sure if moms like to see/feel/touch clothes before buying

§  Update Mintel baby apparel industry market analysis report

§  Analyze online consumer behavior

·            Lack of service

o   There’s no buy-in option

§  Product browse page – “Tell us what we are missing!” comment box

§  Olark

§  http://getsatisfaction.com/

o   There’s no package deals

§  Same as above

o   We don’t have any accessories/additional products available other than clothing rental

§  Same as above

·            Too confusing

• Moms don't 'get it' or understand how to order. 
• “how it works” web page
• FAQ page – if we don’t have questions listed, ask us the question
• Stumped by the large number of choices
• Not a concern yet
• Uncomfortable committing to a package
• 14 day free trial

·            Doesn't align with mom's shopping habits/behaviors well

• Baby clothes shopping dominated by impulse buying (Bebarang requires a certain amount of 'pre-planning')
• 14 day free trial
• Special event clothes buying usually done last minute
• Don’t have a solution for this yet…
• Hassle to sign up and have to wait for first item
• 1-2 business day shipping guarantee – Operate the business with local region only

Not a Profitable Business (why?)

·            Cost to acquire customers is too high

o   Identify revenue per channel (i.e. tot. rev 30%/mommy blogs)

o   Identify unique visitor lead per channel (i.e. tot. visit 25%/facebook)

·            Inventory costs too much

o   Poor liquidation vs. drop-ship partnership (# of product) ratio

o   Poor # customers vs. brands/product ratio (cannot identify metric to measure when to order, how much to order)

o   Poor partnership cost structure (50% discount, 45 day term)

·            Logistics/operation costs too much

o   Cost of cleaning per item

§  Worker’s wage per item

§  Utility cost per item

§  Equipment lifetime value per item

o   Cost of shipping per item

§  Worker’s wage per item (pick & pack)

§  Shipping box cost per item

§  USPS shipping cost per item

·            Customer lifetime value is too small

o   Unable to retain repeating customers

o   The average revenue per customer is too low to sustain ourselves

o   The question is if you can get that customer value to increase by considering not only the individual but their friends and friends of friend. "Unable to generate/encourage word-of-mouth"

My thoughts on startup weekend

I think Startup Weekend is a great program that fosters startup communities all around the world. I’m excited to see that Google has now jumped on board to support this movement. The world needed a movement like this.

Since the inception in 2007 Boulder, Colorado by Andrew Hyde, it has shown some promising companies. Launchrock, Zaarly, and Foodspotting to name few of my favorites.

However, I cannot help but to express my concern for this type of startup launch event organized to produce let’s-build-a-company-in-54-hours mentality.

For those who don’t know much about SW, this is how SW work. Innovators pitch their ideas for 60 seconds and attendees vote for the top ideas. Once top ideas are finalized, the chosen innovators are in an open market place to recruit developers and designers to help build their product for the next 2 days. At the end of the SW program, the chosen innovators present their final product to the judges and the winners are selected. Then you go home.

I worry about this model. There is no intellectual property protection for people who work together during Startup Weekend. Let’s say there is a guy called Vinklevos who came up with a really cool social networking idea and recruited 2 developers and designers. Together, they went through the Startup Weekend and finished the program with a decent product, but the developer decided to stop working for this idea after the program. Startup Weekend doesn’t provide much protection to help Vinklevos to protect his IP from the developers who decided to leave. They should help sign IP documents the moment they start the Weekend.

Another concern of mine is how you get to meet and work with people. Do great companies’ management team really get to meet and vouch for the next 3-5 years of their lives by getting to know each other under 54 hours? For the founders, building a company together is like marriage – the skill sets should balance each other and most importantly, they should get along together! Extremely well! This isn't a one night stand! You’re going to live, breathe, and work together for years!

I think Startup Weekend is great. But if Startup Weekend’s vision is to build quality startups coming out of the event, I challenge them to consider the consequences of a 54-hour speed dating, startup building community. It might be too near-sighted to really create an impactful community. 

Self Discovery

After I decided to no longer continue with Bebarang, I was lost. I was confused about what I cared, who I was, my values, and my passion. I didn't like the fact that I didn't have answers to these fundamental questions. Well, I had all the time in the world, so I decided to go into self-discovery mode. I’m taking some time to tour NYC museums, attend Carnegie Hall orchestras, and meet new people. These things have allowed me to have more self reflection time and think about what I'm doing with my life.

With the help of few of my friends, I started asking questions about myself. I meant to ask questions to myself to understand my values, my passion, and what I want to do in this world. It helped me to begin discovering who I am. Some of them are:

What am I naturally curious about?

I’m always curious about the process of a system. I always seek out for thorough understanding of why things work the way they work. I don’t settle for surface level knowledge and love to ask the question “why.”

I’m always curious about how I can be a better person. I enjoy self-development and seek for personal development. I follow many thought leaders to learn new perspectives on life and how I can avoid the mistakes others have made.

What would I like to change about the world?

I’d like to make the world smarter: smarter for people to have more opportunities to live a fulfilling life. I want to change about the world so that people can easily discover new ways to live a happier life.

As I thought more about myself and my entrepreneurial side kicking in, I decided to make a quick elevator pitch about me - Allen Kim.

Elevator Pitch

I am capable of challenging the status quo and bring up ideas that may be difficult to be brought up. I am capable of speaking my mind respectfully and not let others dictate my vision. I’m energized by tough challenges.

• My greatest strength is my achievement-oriented personality. I am eager to take action and see results. I am highly motivated and optimistic. At best, I ensure that my actions are focused rather than letting momentum take over.
• I’m a hustler. I know how to leverage my resources to get things done. I have great ability to analyze business strategy, customers, and competitors to understand where the business stands and how to move forward.
• I know what I stand for. My actions are rooted in a stable set of values. I am able to walk what I talk and portray sense of authenticity and character. 

Challenges I continue to improve

Keep learning – I encourage myself to push past my comfort zone and enter unfamiliar terrain. I like to challenge myself to seek out opportunities to cross-team, or even lateral moves that will allow me to exercise new skills. I don't want to believe I'm meant to be just an engineer.

Think solutions – Identifying problems is an important part of any job, but looking deep into the heart of a problem and coming up with a great solution is what I think separates the truly nimble from the rest.

Being compassionate – Through Bebarang experience, I’ve been able to understand the value of compassion among team members. This is something I really want to practice and exercise harder. In the end, people are what matters most.

Be accessible – I will make sure to be more accessible to others and make room for off-line discussions and spontaneous meetings.

Treat others, as you’d like to be treated – Couldn’t be more straightforward than this. I will practice to respect others’ privacy, give honest and compassionate feedback, and show flexibility and tolerance around limitation.

Having the opportunity to reflect on my life at this time of my life I think is really great. I helps me understand what I ought to strive for and what I want to do with my life in the future. I hope to continue going through this process to better understand my self to make smarter choices moving forward. 

Next Chapter

Today is a very tough day for me. Today, I officially decided to no longer pursue Bebarang.


I had series of very serious conversation with my partner Dave in the past few weeks regarding our future. We both jumped into Bebarang because we wanted to change the world. We both enjoyed the idea of collaborative consumption and solving a global problem (of kids growing out of clothes). The passion to build a company that no one has ever done before fueled our energy to move forward until this day.


As we moved forward with Bebarang, we faced key challenges. The time it will take to prove the business was going to take longer than our own financial situations could afford. More importantly, the very core of our business was around parents and babies. It was extremely challenging and difficult for us, as we did not feel the pain of our customers and were unable to relate directly to their problems. This was the hardest part for me to run Bebarang – not being able to solve my own problem.


I’ve been very persistent in my journey with Bebarang. At times, I had to rebuild the entire founding team and had to change the business model.


It couldn’t have been a more devastating and stressful few weeks. I remember the times when we printed hundreds of Bebarang flyers and taped it on NYC subways and apartments door to door bypassing the security guards. I remember the emotions running through me when our chief merchandiser told me that she was so happy working for Bebarang. 


It definitely wasn’t an easy task throwing in the towel for what we’ve built for the past year and a half. But when I found myself speaking the words ‘funding’ and ‘exit strategy’ more than ‘babies’ and ‘customers,’ I knew something was going wrong. I started this company to create value, not to gain monetary reward. For personal happiness and stability, I decided this was the best course of action moving forward.


What have I learned?
I wrote a blog post on things I’ve learned on a personal level on my previous post. There are few more things I wanted to add on the list.


Build something you care about
Being exposed in the startup world, I’ve seen many business opportunities that could be the next big thing. But with Bebarang, I realized solving your own problem is the best way to be passionate about your product and endure the long trough of sorrow.


Inventory sucks
Dealing with inventory sucks. All the necessary capital that is required to manage inventory and overhead sucks. Don’t get me wrong; we will always have physical stuff in our lives that technology can’t solve. There will always be room for disruption in physical goods. But there is a reason Netflix worked and Bebarang didn’t on a logistics perspective: margins. For example, it costs less than dollar to ship a Netflix DVD to and from a customer’s house while it costs over 10 dollars for ship an article of baby clothing. For a physical goods rental business, the economics have to make sense on a unit basis. If you add the cost to acquire customers and low rental utilization (due to seasonality) on top of that, this becomes a very difficult marketing, business operations problem.


If all possible in my next startup, I don’t want to manage inventory. The world already has too much stuff, let the market share it with one another, not you.


Build something early adopters will love
Don’t build a half-ass painkiller. Build an advil^3. If you don’t think your product is so good that people will change the way they normally do things and even willing to pay for it, don’t think it’s going to succeed.


What’s next?
I’m not sure what’s ahead of me.
I think I’ll be taking some time off the next few weeks to go travel, read books, and reflect on my career path to reenergize. Before the next chapter of my life begins, whatever that might be, I want to be fully prepared and ready to give my 100%.


I’m interested in working for another startup, be an analyst in the VC world to help other startups, or go back to school and pickup programming. I don’t know which path I should take. (If you have any thoughts or suggestions, please email me at allenkim77@gmail.com)


Putting something you thought of dearly to sleep is no easy task. But I've learned a lot from this experience. It made me grow tremendously. 


Whatever I do next, I'll not make the same mistake twice. 


Life goes on. 

What I learned from past 3 months in NYC

Today is a special day for me.

It’s been exactly 3 months since I flew to NYC with Hung to further pursue Bebarang through NYC SeedStart program.  This past month, I’ve been able to reflect on my journey with Bebarang and how much I’ve grown on a personal level.

This past 3 months was one of the most physically, emotionally, and financially challenging times of my life. Starting up a company is HARD and not knowing where the company will be next month or even next week can be extremely devastating at times. No one is there to tell you what the right answer is and you continuously make mistakes to learn how to take the right step forward. Things never go the way you want it to be and there are always some random roadblocks you never anticipated happening at the worst time possible. 

But through this experience, I learned how to overcome difficult situations and became mentally tougher. The lessons learned and experience gained by living on the edge of life was absolutely invaluable. Recently someone asked me “Allen, if you knew it would be this hard to run a business, would you do it again?” I thought about that question for a moment and I answered, “Yeah, I think I would.”

I dedicate this post to recollect my thoughts and express the valuable lessons and experience I’ve gained. This post will specifically target things I learned on a personal level. In the near future, I wish to express lessons I’ve learned on a business level. 

The importance of empathy

Entrepreneurs go through perhaps one of the most stressful and fragile time of their lives. There’s always a constant fear your company will never make it through and all the hard work you put in will never see it’s full potential – on top of the fact that you don’t know how you’re going to earn salary to survive.

Even at the toughest times of my life, I felt others had harder problems than mine. I always made my door open to listen to others’ difficulties and be sincere to help them the best way I could. Just from 3 months in SeedStart, I made lifelong friendships with some of the most brilliant and kind people. Furthermore, through empathy Bebarang serendipitously recruited one of the most talented and passionate chief technical officers. The friendship we built was so strong, he rejected the offer to have his company acquired by a large firm with a six-figure salary and decided to join us. 

I certainly never expected anything in return by showing empathy. But I surely witnessed what came back. I am grateful and happy I was able to be there to support my friends through their toughest times. What goes around somehow comes around.

Being passionate

It’s important to maintain the same level of enthusiasm and passion across the team. When shit hits the fan, it’s your team who are responsible for getting the company out of it. Yet it’s really hard to keep every members of the company at high productivity and energy level when the future of the company is so unclear. At times, I was lost and didn’t know what to do. Rather than constantly fearing the worst-case scenario, I decided to embrace fear and face them directly.

I decided to analyze exactly what Bebarang ‘enemies’ are with my team and how we can defeat our enemies in order to make Bebarang prevail. Few examples that were on our enemy list were: lifetime value of the customer and the item, acquisition cost of each customer, revenue per customer, and our competitors. 

Knowing what fight we were fighting made each Bebarang team member a soldier prepared for battle. The level of unity and passion ignited to a new level. We know who we are fighting and how to fight it. Regardless of who wins, we are embracing the fact that it’s going to be a glorious battle. We’re ready to put up a fight.  

How to keep my head down

Simply put, there’s so much shit entrepreneurs have to do. Set the direction of the company, construct business models, test them through customer interaction, go out the building to ask customers questions, create financial analysis, assess market opportunities, brainstorm features and functionalities, execute them, set up investor meetings, deal with team problems, constantly improve pitches, the list goes on forever. 

By immersing myself into the entrepreneurial life, I was able to greatly improve my ability to prioritize what’s important and what’s urgent. With a never-ending list of to-do’s I’m learning how to maximize my time spent every hour and minute. Sometimes important tasks aren’t necessarily urgent, but making the time to do important things first helps you manage your life better. 

How to keep my head up

I probably would have gone through depression and insanity if I didn’t take the time to take a break and reflect on my life – seriously. So on weekends, I would walk across Manhattan city or the Queensboro Bridge to have some quite time and think about life. ‘What’s going to happen with my life?’ ‘What’s the worst thing that can happen to me right now and how bad is it?’ ‘What does Bebarang need right now?’ 

These reflection times helped me focus on the right things. Suddenly things didn’t look so bad after all.  Things could have been worse and I’m happy it’s not that bad. I was always fired up on Mondays. 

First who – then what

Jim Collin’s Good to Great was a very powerful book to me. One of many great lessons I learned from the book is the importance of team. People are NOT your most important asset. The RIGHT people are your most important asset. No company sustained themselves to be great through one-man show. I made sure I had the right people on the bus at the right seats and wrong people off the bus to figure out where to drive it. The journey I went through to make this happen was extremely difficult. But I fully believed in the words of Good to Great and acted upon it. I made some mistakes at first by doing a poor job negotiating and upsetting people.  But I didn’t make the same mistake twice. 

Summary

I can’t imagine finding a workplace that’s capable of offering me even a tenth of this much learning in 3 months. This wasn’t just a great experience to build successful companies, but truly a valuable experience for me to learn and grow to be a better person. Bebarang is still an early stage company with large inventory needs. But, if I could go back in time and do this all over again, I would. The knowledge and experience I gained outweighs the daily $2.50 falafel lunch or 2 people sleeping in 1 bedroom with no AC during the hottest days of summer. Grinding it through the trenches made me a stronger person that’s capable of delivering higher challenges and difficulties. I’d recommend this to anyone who’s up for the task. 

Questions for you...


Are you an entrepreneur? A soon-to-be entrepreneur? Or just interested in self improvement? What have YOU learned this summer? Please share with us.

Make Meaning

Beethoven once said “What I have in my heart must come out; that is the reason why I compose.” As a first time entrepreneur, there are things I’d like to share with the world to share my experience. The purpose of this blog is to help me internalize new knowledge and principles and share it with the rest of the world to provoke conversations and feedback. From this journey, I hope to improve my communication skills (especially since English is my second language. J) and learn know insights from readers. This blog will touch upon various subjects. Things I learn from my entrepreneurial endeavors, books I read, interactions I have with people, and things I just think about.

I decided to go down the entrepreneurial path at an early stage of my life. Perhaps it’s because I discovered what truly drives me each and every day: making an impactful real difference is helluva fun thing to do.

From this career, I'm learning a lot, meeting new people, and understanding people around me better than I did before. I became passionate about learning new knowledge to see the world with different perspectives and established the willingness to change my behavioral habits to become a better person.

Co-Creation

Today I’m going to talk about what I learned from the book “The Power of Co-Creation” by Venkat Ramaswamy.

As my first venture, one of the many I anticipate to come in my career, I decided to set foot on baby clothes. An industry I had absolutely no knowledge or interest of knowing before. But with a lot of support and encouragement from friends and personal excitement to do something that has never been done before, I decided to take on full force and try to win it. To become more knowledgeable about parents than parents themselves.

In order to accomplish this, I realized I need various channels of information flow that will provide me with parenting. This led me to realize the value of engaging with customers for communication and interaction is essential for lowering risks and costs for Bebarang and increasing individuals' value.

In the past, when enterprises emphasize customer engagement, they neglected to pay attention on HOW they engaged with people. As a result, it was largely passive in the process of value creation. Individuals do not get to decide what they are to share with the enterprise, but instead answer the questions asked of them at the focus group – a one-way push communication.

In order to become truly a co-creative enterprise, Ramaswamy argues organizations need to use the experience of individuals as the starting point, rather than its own products and services. If an organization desires to draw innovative ideas from customers or employees, developing compelling experiences with individuals is essential.

Ramaswamy points out co-creation is a paradigm of value creation. It is about meaningful engagement of individuals, personally and collectively, through engagement platforms enabled by transparency, access, dialogue, and reflexivity, to mutually expand value, while enhancing risk-reward relationships and fostering transformational change.

There are numerous ways the enterprise can design the platform for customer engagement.

• Designing of new offerings (Nike+ service/application for runners)
• Involving customer in the design (NikeID)
• Marketing process (Doritos Superbowl Commercial)
• Ideating with customers (MyStarbucksIdea – Customers actually giving inputs to new product mix, services, etc)

At Bebarang, we are focused on achieving the following three things to be a co-creative enterprise

• Learn how to create meaningful and rewarding experience for parents using Bebarang
• Co-creation to be both the means and the end, in a continuous cycle
• Engage individuals as active co-creators in defining and delivering value

These efforts are currently being translated into creating a better website that listens to customer's voice, fostering social communities that benefit our customers' online experience, and shaping a better service overall for parents.

Now here’s a little exercise I’d like to share with all my facebook friends regarding co-creation.

What are some ways you can think of for Bebarang to be more co-creative in engaging with parents? Anything from Facebook fan page engagement to Bebarang community forum, we are all open for suggestions. I would love to hear what you have to say! If we like the suggestion, we will actually incorporate it in our business value creation process!

You can email me at allen@bebarang.com, message me, leave a wall post, call me @ 734-972-6601, or want to talk to me in person to share your thoughts – I’ll cover the tab. ;)