I interview Ben Nussbaum, who recently won his college pitch competition – Bobcat Ventures at Bates College – for his second startup idea, a new physical retail concept for online brands called Floor. You may have seen pictures of pitch competition winners holding those big checks, and wondered… what are they going to do now? This episode will give you a glimpse into one college entrepreneur’s plans.
Links and Resources
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In this episode I interview Ben Nussbaum, who recently won his college pitch competition, Bobcat Ventures, at Bates College for his second startup idea – a new physical retail concept for online brands called Floor.
You may have seen pictures of pitch competition winners before holding those big checks and wondered, well, what are they going to do now? This episode will give you a glimpse into one college entrepreneur’s plans. I hope you enjoy the interview.
Don: Ben Nussbaum of Floor, welcome to The Funding Coach.
Ben: Thanks for having me here Don.
Don: So let’s start off with just a bit of background. Can you tell the audience a bit about yourself and how you came up with the idea for the company?
Ben: Sure. So a little background on myself. I’m currently a junior at Bates College in Lewiston Maine and I have been involved with the Bobcat Ventures program at Bates College, which is really a student run… All students involved competing to raise a little bit of seed money through the final competition every March. It’s an annual competition.
So leading up to that competition annually we have many students – this year we had 14 different teams. Every Saturday we would go through a different segment of the startup process. We would have someone talk about legal, or working through your ideas, what customers should I should I talk to, how many customers should I talk to. So that is really a two semester long process.
Last year I was actually working on something in the certified e-commerce space and it didn’t really working out. It went from more of a technical play to an insurance play. But just being involved in that process the whole time was definitely beneficial.
So this year I wanted to do something less technical, something that I thought I had more of a grasp on upfront. I have a general interest in the real estate market and I read a lot online and kind of see some of the trends that are going on. And I realized that there was a lot of literature on the death of traditional retail. I didn’t really believe that – I believe that there’s more of a transition taking place. And really just through a discovery process I ended up figuring out, or what I believed, you know, has some potential to say hey, you know, why don’t we target experience based retail for some apparel brands. Smaller footprint locations in downtown areas. And that’s really how the idea kind of developed. And that was really the end of 2017, and then I really, from there, have been working toward that final pitch competition in March.
Don: Got it.
Ben: Which was great.
Don: So you’ve gone through the process a couple of times now and you won this year as a junior. So congratulations on that!
Ben: Thank you. Thank you.
Don: Yeah! So now that you’ve gone from conceptualizing an opportunity in an area of interest to putting together a business model and a pitch and you’ve won, what do you think the next steps are to try to turn this idea into something that’s real?
Ben: Right. So what I learned from last year was, basically, I kind of had an idea and I was polishing it thinking about it and really talking it over with… the only person being myself. And I got it kind of down, I whittled down this idea that, all right, I believe this is exactly perfect. I pitched. I hadn’t even really spoken to many customers. I had talked to a few dealerships, you know, which was kind of my target market. And it really didn’t work out.
So this year I kind of threw that path out the window. And the first thing I did was, I went and I started talking to some retail apparel brands. That is what I believe to be my target market. And I said, you know, before I even… I didn’t even really know exactly what I wanted to pitch but I said, I’m going to go talk to some brands. Before the pitch I had talked to about 40-45 different retail apparel brands, and I got about 16 people or 16 brands to say: hey, this would be interesting but I don’t like this aspect of it. So that was really the single most valuable thing.
Moving forward I think that… I mean I’m not entirely sure but I think that’s my first step just to continue talking to my potential customer and see if I can figure something out a little more clearly.
Don: Got it. We’re recording this in late April. Are you going to be doing anything this summer to push the business forward?
Ben: Yes so… I have decided to extend this venture full time through the summer in a couple parts. I most likely will be joining joining LearnLaunch in Boston Mass, which is an education technology startup accelerator program and a coworking space. So, although that I’m not in the education technology market there is a coworking space of 40 plus different companies. So I’m planning on joining there, renting that space, getting involved in that atmosphere, and then doing this full time.
So like I said I think if I do commit to this full time, and I am planning on that, the first step is to talk to customers and really figure out what I’m trying to do.
Don: So that’s the next stage is to go put yourself in a coworking space, surrounding yourself with entrepreneurs who are maybe not doing things exactly what you’re doing, but at least they’re all in the startup mode. So have you thought about, well, the fact that you are probably going to go back to school, or have you contemplated doing that dropping out thing… And I don’t know whether your parents are listening to this and whether they want to hear this for the first time on a podcast.
Ben: No, I’ll be 100 percent going back to school. I got one year left at Bates. But I have a lot of time to dedicate to this. And I think beyond this, you know, the singular adventure, it’s just an interesting process. I’ve never really gone through it to this extent before. Not to mention Bates College is obviously within Maine. And there’s a lot of support within Maine. So heading down like I’ve been doing the last two years to Portland, you know, once a week to talk to some people or kind of just keep keeping tabs over the phone is completely doable.
Don: Great. So how much did you win and what are you going to be doing with that funding in order to move this idea forward?
Ben: I won first prize which was $9,000, which is I think is a sizable start. So like I said I think in my mind really what I’m looking to do is, if I can take some tentative… some customers, some retail apparel brands that are interested in what I’m pitching to them and see if I can get some tentative signatures or people to really commit to me, then I can pass that along to additional funding sources or additional interesting partners and say: listen not only do I have someone who’s interested, but they’ve put pen to paper. Or they have committed that if this door does open they will rent x amount of square feet – something like that. I think if I can use this money to convert some tentative interest into like a signed lease agreement or even like a tentative sign lease agreement I think that would be most valuable. But obviously I’m still looking for guidance on that whole process.
Don: Can you just elaborate a little bit on your revenue model – how the business is going to make money.
Ben: So in simple, our revenue model is: we rent a retail location in a highly foot traffic downtown area – a smaller space, so we rent two thousand square feet of retail in downtown Portland. We pay, you know, whatever we pay and then we sublet out all the different table and wall space and the sum of those individual rents is more than what we pay for the larger location and we kind of pocket that difference.
Don: And so since commercial real estate is central to how you’re going to be making money, how many commercial real estate people have you been talking to? Because I heard you talk about connecting with a bunch of brands who would be customers, but what about the other side, the commercial real estate folks?
Ben: Right. So the commercial real estate folks… I don’t think are really as an integral part of this. Because really what I’m doing is renting a single storefront location and it could be… That person could rent to a myriad of different tenants. So I’m really coming in, working with them to do a build out around the experience, but I’m managing the store on a day to day basis with customer service with sales representatives, with any tech or, you know, point of sales, software that I bring in there. So as far as the commercial real estate sector I don’t really think that’s that integral but again I’m looking for places that are downtown highly for traffic thousand to 2,500 square feet. So you know it’s really just finding the logistics around that. And then obviously if I can you know work to deal with some of these people or kind of see how that plays out.
Don: I’m going to poke a little bit at that assumption because it just so happens that my wife and I are friends with one of the biggest commercial real estate people in Maine. And I want to talk about the problem that you’re solving. You’ve certainly identified a problem which is the retail apocalypse that’s happening right now with lots and lots of retail locations closing down. That actually is a pretty big pain point, I would imagine, for people in commercial real estate.
Ben: Let me just jump in here not to cut you off. The problem is not that commercial real estate is transitioning or commercial real estate is dying and I’m really trying to help, you know, commercial real estate tenants or retail tenants kind of rework around that.
The real issue and the real problem is that there are thousands now of pure play online apparel retailers that are born. So it’s a myriad of people working on different products saying hey I’m starting a a small T-shirt company, or I have a larger company, but I sell unique men’s wear or shoes or fragrances or anything like that. And the problem is that these brands can’t really get exposure online. First of all they have high fit and feel attributes that really can’t be replicated online. So if I’m a new upstart apparel brand trying to differentiate my shirts through textile I can’t replicate that online. Taking a picture of a shirt doesn’t accurately represent my product. And additionally beyond that if I open a shopify store or if I do some other things to really gain exposure online – Facebook marketing, Instagram marketing, whatever it is – getting that exposure is difficult.
So what I’m offering to solve that pain point of these brands trying to gain exposure to new customers or just generally to customers. Opening that, like I said, highly foot trafficked area built around experience and having one of these brands instead of fight over eyeballs online or on Facebook they can really rent out space from me and everybody who’s walking around in downtown Portland can come in and kind of experience that brand firsthand. And that online apparel brand, what I’m offering them is a simple month to month expansion fee into retail.
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BACK TO THE INTERVIEW
Don: Now I understand the business. I’ve got my bootstrapping entrepreneur funding brain on right now, because as I think about you trying to get this launched, your primary cost is going to be the commercial real estate. And the primary determinant of whether or not you’re making a profit is a combination of being able to secure both effective and affordable real estate as well as the ability to attract the brands. So as I’m looking at your business and the funding required, if you can find a commercial real estate owner or a renter that sees your vision and understands a lot about the pain points in the commercial real estate market specifically with regards to retail, I think you may be able to find some creative sources of funding, both on the equity side because they really understand that marketplace, but perhaps also on a business partner side that they’ll be able to cut you a deal early on to help you get launched. Because if you’re successful then you’re going to be solving a problem for them over the long term.
Ben: I agree. Yeah I agree. I mean I haven’t really thought about that but obviously that would be ideal on many fronts.
Don: Well that’s part of my job is to try to help you think about some other sources of funding, particularly on the the operating side. Because a lot of entrepreneurs end up succeeding because they have figured out cleverly how to find a bunch of people who all have problems. And when you put it all together in a clever deal, that’s where you can really make a lot of money.
Let’s turn a little bit to the equity side. I looked at your profile on LinkedIn and it looks like you’ve been an analyst for the LearnLaunch accelerator. So sounds like you’re getting up to speed by being there on the equity side of the process. Have there been any specific questions that have come up in the process that I might be able to be helpful to you on at this point?
Ben: Yeah. What I kind of commented on earlier was I think my first next step is to talk to customers and see if I can get some, you know, turn some tentative agreements into more signed agreements or something of that sort. Is that what I should be doing or should I be going a different angle or really how should I be going about this?
Don: I absolutely think that is critical, because having customers validate that it’s an idea that they not only think is a good idea but they’re actually willing to spend money on – that’s what investors really want to see. Again I’m going to come back to the the real estate side of things. I think this summer I’d encourage you to look at real estate tech startups to understand what the landscape looks like there. Because, again, there may be some investors who are familiar with commercial real estate and comfortable with the space who may actually be prospective investors in your company in the future, rather than perhaps the more traditional tech oriented investors.
Obviously though because you are a retail play there are other kinds of investors who are comfortable investing in retail plays. And I’m guessing that you’ve done a little bit of research on that. Have you gone looking in Crunchbase yet?
Ben: I have. So I’m actually in New York City right now and I had identified four different companies that were doing very similar to what I’ve been doing. So there is a Y Combinator backed company named Bulletin that does essential when I’m pitching for women’s only brands. There’s Beta which does essentially this for tech products. And then I actually checked out Bonobos and Warby Parker who are in men’s apparel and eyeglasswear respectively kind of doing this inventory free model. I wasn’t really sure, I’d never been to one of their stores. So these four different locations yesterday actually I went and I went around I went to all the different stores, these four stores. I met with the managers at each and I kind of just was you know being as nosey as possible trying to figure out you know watching some customers in the stores and really trying to look at, not only what other people are doing, but how could I better them. Or am I going down the wrong path. But it was really just an inquisitive process so that was yesterday.
And yeah I do plan to hopefully… You know I’m always on Crunchbase or on some of the news trying to pull together… And I have people who will send me some things every once in a while: hey you should check out this you should check out this… But that’s just part of the process.
Don: So I think what you’re doing, that is a good step towards making potential investors comfortable with the fact that you’ve got a good idea. You’ve done research, there are comparables – that’s also good. Trying to be better than them – that’s also good. I think the final step is also potentially looking at the investors in these online consumer brands that you’re going to be helping to see whether or not there are any prospective investors in those kind of companies who will see that your alternative is going to be helping them.
One other thing that I think you had mentioned perhaps in an e-mail in the prep for this podcast, that some of the brands that you’ve been talking to have said they were thinking about this as a part of their overall marketing spend. Can you elaborate on that just a little bit?
Ben: That was the most interesting thing I had come across through this whole process. I was at a Maine trade show about a month and a half ago and I spoke to Flowfold which I don’t know if you’re familiar with Flowfold…
Don: I am.
Ben: For people who are listening who aren’t familiar… So Flowfold pretty much came to me… They said listen: I’m in L.L. Bean. I’m in EMS. I’m in REI. And I’m in some big box retailers. They do 90 plus percent of my sales, as pretty much similar brands, it would be the same the same model. Right? I have 150 other retailers who account for single digit sale numbers. They said there’s no way you could come to me, and it doesn’t matter what you say where you are and pitch yourself and have me interested where you’re just another smaller retailer. He said you know I do sell in 150 smaller retailers but I don’t really care that much. That’s not where I put my customer service, that’s not where I put my team. He said: but if I break it down as a sales cost analysis it doesn’t matter what you say. But if you come to me and you pitch this as an advertising play, where I’m not really looking to sell product to compete with L.L. Bean which is an impossible task. But rather you can tell me that I can get my product downtown in Portland on the seaport and for five hundred dollars a month I can have a thousand new customers touch and discover my product. And he said now I’m not doing the sales cost breakdown but I’m pulling that rent check out of my advertising budget. And he said if you come to me with something like that I would be interested. So that was the first… I’d never thought about that. That was the first time I ever heard something like that. And I think that is interesting and might have some validity that. I need to explore that further.
Don: So I’d like you to encourage you to pursue that because venture funding of marketing oriented companies is a significant chunk. A lot of it is focused on the digital side, but figuring out how you can be complementary to some of the leading digital marketing tools so that any data that you’re collecting feeds automatically into those systems…
And again you’re part of the marketing spend and integrated and it’s very easy for the entrepreneurs to add you to that and analyze the impact of that. Seems like that’s also going to be an extremely important part of the process. Have you talked to any either digital marketing tech companies or traditional marketing advertising agencies to see what they think?
Ben: I have not. That was really.. That conversation with Flowfold was the only time I heard that, but I went back, actually backtracked and took a different path. I was looking at some of the research looking at the dollars going in and out of advertising, marketing. And I know that pitching this I believe as an advertising play would be more appealing to both VCs and brands than as a sales cost play cause then I’m really just like another retailer. I might be so much better than just another retailer. But I believe that I’d be grouped with them. So if we’re looking at more like an advertising play if we can give back standard advertising metrics saying this is how many people saw your product, this is how many people in interacted, this is how many people asked questions about your product – that would be interesting. But to answer your question directly I have not gone down that specific path.
Don: OK. Hopefully now I’ve come up with a bunch more work for you to do this summer to help move this venture forward. It does sound like the nine thousand dollars will be helpful to move your business forward and hopefully get to the launch. Or, maybe come to the decision that, no, this isn’t really the right thing to launch. You’re at that stage where you’re still in the discovery mode and… I do want to say it’s OK if you decide that this is not going to work. It sounds intriguing to me but as I think you recognize there’s a lot more work to go. So is there anything else that I can be helpful on?
Ben: I do have one final question. Kind of talking about my next step I should go talk to customers try and turn some of these you know really just interested clients into an agreement. What I was thinking upfront to really help kind of define what I’m pitching to these brands is to get some store renderings done to really offer, hey, not only will this look like the store but this is the specific space that can be offered, this is how the build out works. Kind of help them envision their product in there. And spending money kind of on those design renderings. Would that be something that is beneficial or don’t go down that path?
Don: Let’s see. I think you need to go back to some of the brands and ask the general question: what are the things that I would need to do, to be able to show you, to make you comfortable that this is in fact something you’re ready to spend money on. I think if you ask that as a general question rather than the specific question I think you’ll get better feedback. Because you’re not priming them to say: oh yeah, that would be great! Because maybe that is great but that’s actually not the most important thing for them to be able to get to “Yes.” Does that make sense?
Ben: Right. I understand that.
Don: But if a bunch of them do say yes then absolutely I think that could be a very good use of funds. Not only to get the brands to the point that they’re going to write you that letter, but also to help convince potential funders that you actually do understand the merchandising part of retail. Because ultimately you need to be really really good at merchandising these products and give the brands the flexibility to show them in the best possible way for their advertising dollars to be effective.
Ben: Right. All right well that was awesome Don that was hugely helpful.
Don: Well I look forward to keeping track of your success and definitely feel free to keep in touch by e-mail as you move the business forward.
Don: All right. Bye bye now.
Ben: Thank you.