While surfing the web I stumbled upon a very curious story that, despite its peculiarities, or perhaps because of them, has a lot to teach us about startuppers.
We must go back to the late 90s, when Stanford Magazine published an article by one of its former students, Robert L. Strauss, who in the eighties, in defiance of his MBA in General Management and MA in International Economics, saw the birth, and shortly after the death, of what he considered to be the idea of the century.
Here’s the story. While working in Bangkok, Strauss came across a truly unusual gadget completely by chance. A Thai, with a good sense of humor, had recovered a few expired condoms from a warehouse, wrapped them in small plastic bags and attached them to keyrings. And he didn’t stop there. The most brilliant idea of this unknown gentleman was in thinking up the claim: “in case of emergency break glass.”
Struck by this fun find, Strauss didn’t need to think twice, but went straight ahead with self-financing to produce those keychains on a large scale. With this idea he was convinced he would explode onto the market, earning astronomical amounts in a short time.
Ever heard the phrase no pain, no gain?
Between the various stacks of paperwork necessary for the start of the company, the technical PC updates needed to properly follow the business, and the purchase of raw materials, including expired condoms, Strauss quickly found himself more than $10,000 lighter. But, you know, an initial investment is necessary to ensure that you start with a bang. Too bad there was no bang. It must be said that Strauss has had to face several challenges.
– first shipping of the gadgets failed due to the lack of documents to go through customs;
– first consignment was unusable: Due to the change in air pressure during the flight from Thailand, lubricant leaked out of the packaging, which then got smeared on everything;
– after placing the keychains on the market, sellers pointed out to Strauss that buyers would have preferred to have condoms that were actually usable (come one, Strauss, you could have thought of that on your own!);
– after finding, with great effort, a supplier for the next 10,000 new condoms, insurance that covered him, adhesive labels, instruction booklets and everything that the law expected for the trade of similar gadgets, our hero had to spend long and fruitless hours trying to put it all together.
And after all that effort? The poor Strauss had to raise the white flag and surrender. After a seemingly good start in sales, customers who had seemed interested in large orders of keychains vanished into thin air, leaving only debts.
As funny as this story may sound, it has a lot to teach.
The only market study that Strauss conducted before the “launch” of his product was asking his mother what she thought. Which is not exactly what you would expect from a Stanford economics graduate…
Not to mention that, even if the product itself had its own charm, it should have been better thought out. Did Strauss really need the shopkeepers to tell him that a new condom is preferable to an expired one?
What about the decision to entrust an entire business, and what was more expecting a huge and immediate gain, to only one item?
And finally: what profits did he expect to get from a product distributed at an almost negligible price? How many would he have had to sell in order to obtain a real income? Even at twice the starting price, and considering the costs of maintenance, it would have taken years to recover the initial investment.
To sum up, in the words of Strauss, “the only thing I couldn’t stop calculating was exactly how big an idiot I was”.
Ten thousand dollars down the drain then? No. In fact, the lesson learned by Strauss is one that no book and no teacher could ever teach him. Let’s just say that, seen from the perspective of an investment in himself, it really has done a great deal for his future.
For the record, currently Strauss not only writes articles for various publications, but as he tells us on his linkedin profile, “has extensive experience helping distressed international development projects get back on track”. Want to bet that he gained this skill thanks to his keychains?