Facing Failure
A little over three years ago, I submitted the following in my application to the Ross School of Business:
I am launching a company called BetterHope, which is an ecommerce website for socially and environmentally responsible clothing. Currently, I am iterating on my business plan, building a supply network, and searching for a technical co-founder. An MBA from Ross would help me expand critical skills for growing BetterHope, develop as a leader and build a network of like-minded innovators.
A year later in 2013, I started graduate school in the Erb Institute for Global Sustainable Enterprise, a dual masters program between the School of Natural Resources and Environment and the Ross School of Business at the University of Michigan. I quickly rolled up my sleeves to set forth on my mission to launch BetterHope. I applied to business competitions, start-up grant funding, and mentoring sessions, all as a way to grow and move forward with my idea for BetterHope. I refined my product focus from “ethical clothing,” which through customer discovery came across as an ambiguous, academic term, to “clothing made with dignity,” which represented what conscientious consumers wanted to achieve with their purchases.
Another year later in 2014, I launched the BetterHope website. I was exhilarated!!! I had spent four years dreaming and creating the steps to make this idea a reality. Now, I finally transitioned from “working on a startup idea” to “running a startup.” A seemingly small turn of phrase that felt incredibly powerful given all that I had dedicated to this idea!
Initially, it was structured as an online magazine where I posted outfits “made with dignity.” Each item in the outfit was linked to a retailer, and I would receive a small commission for the sale. After reviewing the analytics and interviewing site visitors, I learned that many visitors felt limited by the magazine structure, and they wanted more of a traditional ecommerce experience. I quickly worked with my developer to pivot the website experience to accommodate a more traditional ecommerce interface just in time for the 2014 holiday shopping season.
Now, another year later, when people ask me how BetterHope is going, I typically share one of three responses:
The furthest from the truth: “Oh… you know, it takes so much time to run a start-up that I’ve decided to put it on pause until I graduate.”
Accurate, but not vulnerable: “I realized that in order to grow the business, I need to capture more of the value chain and hold inventory, which is quite capital intensive. I would need to seek out angel or venture financing, but I’m not investable as a student.”
Even more accurate, but still not so vulnerable: “I realized that margins are very thin in online retail, and I’m not detail-oriented enough to make the business model work.”
In the world of social grace, these are the easy answers for why BetterHope failed. But if I’m truly honest with myself, I’d say the failure has far more to do with fear and disappointment. Here are the five realizations that held me back and helped me decide to call it quits with my first start-up:
1. I was hurt that my friends and seemingly biggest supporters didn’t actually use BetterHope.
As a student in the Erb Institute for Global Sustainable Enterprise, I am so fortunate to be surrounded by peers who are passionate about changing the world for the better. At every stage of launching BetterHope, I received advice and encouragement from this community. Further, it’s the type of community to bring our own plates and cutlery to potlucks in order to reduce waste and schedule rideshares to events in order to reduce carbon emissions. I very much saw this community as target users for BetterHope.
As a result, I was easily hurt upon hearing that a friend had bought new clothes from the mall or online, rather than BetterHope. Specifically, I remember an occasion where a friend had mentioned that she really needed a new pair of jeans. I suggested that she look at the options on BetterHope. She enthusiastically agreed, but a couple weeks later she showed off a pair of jeans that she bought from the mall. I knew it was irrational to expect that all of my friends buy their clothes from BetterHope, but I started to wonder if I couldn't convince those closest to me to care about the social and environmental impact of their clothing purchases, then how could I influence strangers to change?
2. I received a lot of site visitors, but very few actually bought anything.
Nearly every business competition panel of judges gave the following feedback: “Everyone will say that they want to buy ethical clothing, but no one will actually buy it because it’s more expensive.” I ardently disagreed with this point. Yes, there is clothing that is made ethically that is extraordinarily expensive. Ethica is a perfect example of a site that curates these clothes.
Yet part of my mission with BetterHope was to demonstrate that consumers can have a wardrobe of clothing made with dignity that wouldn’t break the bank. Many ethical clothing producers know that price is a critical to win in the market. As such, many brands on BetterHope priced their clothes close to what a similar product might be at Gap, Banana Republic, J Crew, etc.
At its height, I was receiving 1,500 monthly site visitors to BetterHope, but I was only receiving 20-30 purchases per month. Given the economics of digital marketing, I could not sustain my marketing spend unless I could boost the conversion rate. Whether because of prices or some other factor, I realized that the competition judges may have been right. People will say they care, but they probably won’t follow through with a purchase.
3. I wish that I had a true co-founder with whom I could more collaboratively grow BetterHope.
In my Ross application essay, I stated that I wanted to find a technical co-founder. Upon starting at Ross, I received advice that I didn’t necessarily need a co-founder, and that I might actually be able to move faster without a co-founder. Early on, I found this to be good advice because I could move on my own timeline and make decisions more quickly.
Over time, I hired an amazing contractor to do my web development, along with one person to help with content development and another to help with social media. I had hoped that these individuals would be intrinsically motivated to shape and create their roles. I idealized that they would run with this opportunity and make decisions on behalf of BetterHope for themselves. Instead, I realized that these individuals, for no fault of their own, saw me as the founder and decision maker. As such, they constantly asked for my permission or approval to move forward with their ideas. I didn’t want to be in this authoritative position. I wholeheartedly believe that the best outcomes result from non-hierarchical, collaborative processes, and I felt as if I was inadvertently forced in a position to slow down ideas, rather than stimulate them.
4. I struggled to inspire people passionate about ethical clothing to join the BetterHope team.
Goethe has a quote that I love: “The moment one commits oneself, then providence moves too. All sorts of things occur to help one that would never otherwise have occurred.” This quote rings particularly true with a start-up. The more you talk about the start-up, the more connections and opportunities related to that start-up begin to come your way.
With BetterHope, I received countless connections to individuals interested and/or involved in the clothing industry. Particularly on a large university campus, it was inevitable that I would meet students would were similarly passionate about human rights and social justice in the supply chain. Yet few of these individuals actually took me up on the offer to join BetterHope.
5. I didn’t want my career to be limited to the fashion industry.
As great as these opportunities and connections were, I realized that I rarely received connections or ideas related to public health or food systems or interdisciplinary collaboration -- other topics that I am equally passionate about. Being in business school, I became attuned to the “bucket” into which I was being placed. It seemed that “entrepreneur” was the primary bucket, but overtime, it started to seem as if “fashion industry” was the second bucket into which I was being categorized. I abhorred this categorization because I wanted to change the industry, rather than being intermingled in it. I wanted my bucket to be “social justice” or “social innovation.”
Now it is much clearer why BetterHope failed. I was enamoured by the long-term vision of how BetterHope could transform the clothing industry to provide dignity and living wage jobs to women around the world. Yet I did not have enough passion in the day-to-day work or the reliance to withstand the setbacks along the way. But it wasn’t easy learning this lesson.
Last February, I was a finalist in the Michigan Business Challenge Social Impact Track Finals, a business competition for University of Michigan student start-ups with a social impact focus with a grand prize of $15,000. I felt very confident about my odds of winning the competition because BetterHope was generating revenue, unlike the rest of the competition. I ended up placing second, which quickly eviscerated my confidence and allowed all of my doubts and misgivings to bubble up.
For the next couple weeks, I continued to spin various ideas for how I might salvage my growth plans for BetterHope. But I also had some time to give my misgivings some credence. Had I tried hard enough? Perhaps I could talk to some angel investors for funding? Maybe BetterHope wasn’t supposed to be the end game of my graduate career? Many of these questions still swirl in my mind, but I also know that I have learned a lot both about myself and about running a start-up, and for now, that is more than enough.
-- Marianna Kerppola operates at the nexus of business + creativity + social impact. She is a proud Finn and uses any excuse to include an anecdote about Finland in her conversations. When not launching a new idea, she is most likely found in a kitchen creating large feasts for friends.