A dozen entrepreneurs, a dozen success stories: proof that you don’t need a lot of money to make a go of it, but you do have to be smart about how you invest your energy.
Smoothie operatorsThe downside of mixing business with blood should be obvious – or at least it will be when you start getting late-night calls from Aunt Tillie asking about your schedule for an IPO. But hitting up relatives is how a lot of businesses get going. It’s what Kyle Campos and his older brother Aaron had to do.
In 2004 the brothers, both software engineers, quit their jobs in Santa Barbara and decamped to Buckeye, Ariz. After visiting relatives there earlier that year, Kyle had become convinced that the town was “filled with wide-open opportunities,” especially compared with the software biz. “The tech sector was getting hit hard,” says Aaron. “I didn’t have a good feeling.”
Aaron and Kyle, neither of whom had run a business before, began brainstorming about starting one together. Both had frequented a smoothie joint in Santa Barbara, and they fell in love with the idea of starting their own. They found an industry consultant online who helped them write a business plan. Then they hired an experienced designer. The Main Squeeze would be a 1,200-square-foot store with hardwood floors and stainless-steel tables. And it would cost more than the $130,000 they had saved.
That’s when they drew up a list of 40 friends and relatives they could solicit as investors. “We wanted it to seem like we were offering them an authentic business opportunity,” notes Kyle. For that they turned to CircleLending, a site that helps informal borrowers create formal lending deals. The siblings spent $99 to set up a loan agreement, choosing an attractive interest rate (9%), a repayment schedule they figured they could afford (either five or seven years) and a $1,000 minimum. Four folks each lent them $1,000, and another four each threw in $5,000. Last year the Campos brothers whipped up a profitable $210,000 in sales, and they’ve been paying their investors on schedule for close to two years. Says Kyle: “Not one has complained.”
On the surface Michael Vien’s move sounds ridiculously impulsive: He walked away from a mid-six-figure job in product development at Fidelity Investments to make games for kids. “I got strange looks from everyone,” admits Vien. And that was before he said he was intent on making board games – you know, the kind folks played before computer games.
Yet in a key way, the move was thoroughly calculated. By the time he left his job this past February to make Poppo Brands a full-time occupation, Vien had already designed the word games Poppo and Zotto and tested them on 500 children. He’d manufactured thousands in China and found free storage space in a friend’s warehouse. And he was signed up for the Toy Fair, the industry trade show, and had stashed away $200,000 – half from savings, half from friends – enough for nearly two years, according to his budget. All while working full time.
Vien, who had toiled at a desk for 14 years, came up with his idea on New Year’s Eve 2005 while playing a board game with his two kids. The next morning he grabbed 24 games from store shelves, then used the parts to make a prototype of a game that requires players to press a plastic “popper” to shake an eight-sided die covered with letters. Vien often worked from 10 p.m. to 2 a.m. writing a business plan and finding suppliers in China. He even took night shifts at toy stores so he could gauge consumer interest, see which packaging worked and figure out how much to charge. Six months into his part-time venture, he told HR he had something on the side. Another six months later, “I opened the escape hatch and out I went,” says Vien, who sold almost $50,000 in games within 90 days of leaving.
Sandy Ip is still a little stunned at what hard work it is to build a business. She sounds almost apologetic as she tallies up her first jewelry line’s sales: $45,000 in eight months. “Not great, I know,” she says. Then again, founding a jewelry firm was not what she expected to do or what was expected of her when she earned her M.B.A. “My parents are totally against this,” says the Hong Kong native. (She has yet to tell them about the $30,000 mortgage she took out on her apartment for seed money.)
Two years ago she started importing jewelry from an Asian factory run by a business-school friend and selling it at crafts shows. Sensing she could do more, she quit her job at a real estate investment firm in 2006 and abandoned the Wall Street career she seemed destined to have. “I wasn’t really happy,” she says. “I had done what my family wanted.”
But she knew zilch about the jewelry business. She began reading blogs and magazines, and she quizzed every sales rep she met. She soon realized that she wanted to design her own line, which took six months. Her factory-owning friend agreed to make samples. Ip used Google to track down every jewelry showroom in New York City, then called each. The few that returned her calls got photos; if they kept talking to her, she brought them sketches. Her persistence paid off when one eventually agreed to sell her work, and that break earned her the attention of Bloomingdales.com and Off Saks Fifth Avenue stores. (She also sells direct to consumers over her Web site, ippie.com.) “We’re moving ahead,” says Ip. “And I’m doing what makes me happy.”
Sandi Webster spent 15 years collecting the raw material she’d need to start a business. She just didn’t know it at the time. As director of marketing at American Express, Webster, along with colleague Peggy McHale, helped launch automatic bill payment in the late 1990s, a project that hooked them up with many of AmEx’s 128 business partners. “We had our tentacles in different companies,” Webster says. “And those people knew the quality of our work.”
That came in handy in December 2001 when both of them were laid off. Deciding that “we didn’t want to be employees anymore,” they cofounded Consultants 2 Go, providing marketing help to big and medium-size companies. After coughing up $1,000 apiece to upgrade their computers and buy quality printers, they got on their phones – not landlines, because of the expense. An attorney they knew let them sublet an office, accepting payment in the form of marketing wisdom. Webster pitched their services to the companies they had met through AmEx, tailoring her words to their needs. If she knew they focused on database marketing, she’d highlight her experience there. Need a brochure? She’d offer to send a sample of one she’d made. “It was an advantage that I knew what they did,” she says, “and even better if I knew what they needed.”
To find consultants to work for them, the pair called folks they knew through AmEx. Even now the majority of the company’s 40 consultants are former colleagues. “A lot of our friends were on the mommy track or had elderly parents to care for,” says Webster. “They wanted the flexibility.” There are still more she’d like to bring on. Webster stays in touch with them, finding a reason to call every couple of months. If an e-mail bounces back or the phone number doesn’t work, she tracks them down through mutual friends. “My contacts don’t grow old,” she says, “and I make sure they never die.”
Even though the company reached $1 million in sales last year, the founders have yet to make a full-time hire. Webster thinks the time to bring in an employee may come soon. When that day does arrive, she says, “I probably know somebody.”
You can get some start-ups moving with hardly any money. But Michael Mischer has been racing against high fixed costs from Day One. In 2004 he opened a store to sell chocolates he makes, and that 1,700-square-foot space, Michael Mischer Chocolates, came with an unavoidable rental price tag of $2,800 a month. That gave him 2,800 reasons to keep the rest of his expenses as low as possible. “I was very confident I could get this going with what I had,” he says.
Mischer spent $75,000 to remake the former office space. About half went into electrical and plumbing systems, both of which had to be installed by professionals to meet local codes. Mischer did as much dirty work as he could, saving $2,000, for instance, by yanking out old carpeting. Fortunately for his budget, Mischer prefers “the lean look” in store design. Rather than shelling out for fancy glass cases, he displays his sweets on white plates. The one exception: He spent $12,000 on a showcase for gelato.
He’s stayed stingy with his operating budget. He has yet to hire a full-time employee, although he’s got three part-timers to mind the counter. He prefers to be in the back, where he makes the chocolates using machinery that is mostly left over from an earlier bakery venture. That business didn’t last, but things look good for the former pastry chef’s latest venture. It has annual revenue of about $250,000 and is already profitable.
The Muralidhar brothers had hardly been coasting in their careers. After earning an M.B.A. at the Wharton School, Sanjay worked in corporate finance, eventually becoming vice president of finance at iVillage. Arun, who holds a Ph.D. in economics from MIT, has served as head of research at the World Bank and as head of currency research at J.P. Morgan. But they saw a business of their own as the way to achieve wealth. “I came to the U.S. with $15 in my pocket,” says Arun. “I watched what successful people do.”
After iVillage went public in 1999, Sanjay decided it was time to make the move. “We always thought working together would be fun,” says Sanjay. “But it had to be exactly the right thing.” Sanjay had an idea – an online marketplace where users could trade options on tickets for sporting events – but no sports contacts. “Nobody wanted to hear about it,” he says.
It happened that Arun, by then at a hedge fund, was sending him portions of a book he was writing about investing pension funds. Sanjay gave him the feedback only a sibling can. “He said, `Instead of forcing me to read 300 pages of your junk, why don’t you give me something practical?’ ” recalls Arun. Soon, with a $100,000 investment from Arun, Sanjay found programmers to build asset-allocation software based on Arun’s research. The company they formed, Mcube Investment Technologies, had a prototype within a year and a launch two years later. Arun used his contacts to rustle up pension manager customers – who can afford the $250,000 license fee. Last year, with revenue reaching $1.5 million, he joined full time as chairman. Sanjay, who is CEO, projects revenue of $3 million this year and their first profit.
Katya Tsaioun saw her perfect business perfectly clearly, but to the investors she approached, it might as well have been a mirage. Banks pointed out that as a scientist, she had never run a business. Venture capitalists assured her that the drug-testing company she wanted to start would never grow fast enough. “There was a lot of skepticism,” she recalls.
But Tsaioun saw an opportunity in pre-clinical testing on new drugs for big pharmaceutical companies. It was work she had spent a decade doing, including at her most recent job, where the entire R&D team had been laid off after a drug flopped. In what she considered a stroke of luck, at the same time she found used equipment for sale – for $200,000. With that she could open shop.
Brainstorming with her husband Doug Bates, Tsaioun tried to figure out how to sell her concept. After all, she had no prototype to show investors, no sketches. The novel strategy that Bates and Tsaioun came up with to bankroll her venture was this: Have funders – mainly relatives and her husband’s friends – buy the equipment and then sell it back to her over the next five years. On top of principal payments, she offered them 15% interest and assured them that if her company went kaput, they could recoup more than half of their investment by reselling the equipment. “The downside was not bad for them,” she says. Not that they’ve had reason to think about reselling the equipment. With revenue hovering around $1 million, Tsaioun’s company, Apredica, is expected to turn a profit this year.
Not every business kicks off with a breakthrough idea. Or any idea at all. This one grew out of a bond shared by three friends: Kelly Berger, Laura Ching and Ed Han. “We were always hanging out, always bantering over ideas,” recalls Han, who brought them together. He’d met Ching at business school, Berger at the start-up he worked for after graduating in 2000.
Soon the three were meeting once a week. “We really got along great,” says Han. “We thought, ‘Why not work with people you like?’ ” Plus, their skills were complementary. Han would handle operations; Berger, technology; and Ching, with her eye for design, would head marketing. So they began exploring ideas. One notion, a social-networking site for college alumni, fizzled, but it taught them that they didn’t want a business that would consume a lot of money and require outside help. “We didn’t want pressure from investors,” says Han. “We wanted a place where we could work together for 30 years.”
That place began to take shape in 2003, when Han’s wife got pregnant. Searching online for birth announcements, he couldn’t find any modern designs. In 2004 the threesome pooled their combined savings of $10,000 to launch Tiny Prints (tinyprints.com), where customers personalize cards that go for about $2 apiece. They quickly expanded to other occasions and, in mid-2005, stopped working out of their homes and began renting office space. Two years later, the company’s revenue has surpassed $10 million. Oh, and the three still like one another. “Day to day, we try to stay out of each other’s business,” says Ching. “And when we make joint decisions, like about pricing, we make sure the company doesn’t get in the way of our friendship.”
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