Why Did Your Business Succeed?

On the latest 21 Hats Podcast episode, our entrepreneurs talk about their most important decisions.

Good morning!

Here are today’s highlights:

  • A bunch of startups are ready to help your office go hybrid.

  • California is helping businesses buy their own buildings.

  • The next big entrepreneurial opportunities are likely to be about climate change.

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THE 21 HATS PODCAST

Episode 67: Why Did Your Business Succeed? This week, we talk about how much of success is making the right decisions. How much is being in the right place at the right time? And how much is just luck? “I think that's the thing nobody wants to talk about,” Paul Downs tells us, “because it implies that there's a lot to success that is out of the control of the entrepreneur, and we're much more attracted as human beings to stories of people who have agency and are like, ‘Oh, there's a problem. I did this, and I won.’ That's what we like to hear.” So yeah, there’s always luck involved. But there are always forks in the road, and someone has to decide which way to go. This week we hear how a few of those decisions played out.

STARTUPS

The next entrepreneurial revolution is likely to be all about climate change: “Electric vehicles are only the tip of the iceberg. A recent PwC report found that climate tech investment increased from $418 million per year in 2013 to $16.3 billion in 2019, growing at five times the venture capital market rate over the last seven years. Heating and cooling systems, agriculture, raw materials, and manufacturing are all overdue for reinvention as we strive for a greener future, creating the promise of even more innovation on the horizon. The climate will also reshape residential and office construction, insurance, finance, and agriculture, in regard to where and how food is produced.”

  • “Massive climate migrations have only just begun; tens or hundreds of millions of people will need to be resettled. Will we offer them shantytowns, or will we help them become settlers building a new, better world?”

  • “Experience teaches us that the best opportunities come when businesses solve urgent problems for their customers. What could be more urgent than this?” READ MORE

Seth Goldman goes from Honest Tea to Beyond Meat to Eat the Change: “Goldman made an early bet on organic beverages with  Honest Tea in the late 1990s. Just over a decade later he sold Honest to Coca-Cola. Shortly after, he became executive chairman at Beyond Meat, where he got in early on the plant-based movement. His next big idea is mushroom jerky.  Goldman's latest effort is Eat the Change, a brand for sustainable foods that Goldman set up with Spike Mendelsohn, the Washington, DC-area chef and his business partner. Their mushroom jerky comes in flavors like habanero BBQ and maple mustard, where maple is a vegan stand-in for honey. It's meant to sell alongside meat-based jerkies.”

  • “It launched in March and already sells in about 1,000 stores in the U.S., including Whole Foods and regional chains like Stop and Shop.”

  • “‘We're not a mushroom company,’ Goldman said. ‘Our positioning is really much more around nutrient-dense, planet-friendly food.’” READ MORE

Boston is seeing a surge in shoe startups: “Many were founded by entrepreneurs who worked for, or consulted to, big local brands like Reebok and New Balance. And while there have been challenges getting access to merchandise over the past year because of the pandemic — especially as countries like Italy and China saw cycles of shutdowns and reopenings, and logistics became less reliable — many of these companies found ways to keep growing.”

  • “Reebok veterans Marcus Wilson and Michael Schaeffer launched the Nobullbrand in 2015; the company now has 100 employees, and Wilson said he expects that number to double in 2021”

  • “Wilson said that when the company stopped doing promotional events and closed its three retail locations amid the COVID-19 lockdowns, ‘if anything, our profitability went up. We grew rapidly last year, and are growing even faster now.’”

  • “M.Gemi, founded in 2014, is among the oldest of this new wave of shoe startups. It sells men’s and women’s leather shoes, hand-crafted in Italy.” READ MORE

A wave of startups is helping offices go hybrid: “Envoy Desks lets employees book desks for when they go into their company’s workplace, in a bet that assigned cubicles and five days a week in the office are a thing of the past. Envoy is part of a wave of start-ups trying to capitalize on America’s shift toward hybrid work. Companies are selling more flexible office layouts, new video-calling software and tools for digital connectivity within teams — and trying to make the case that their offerings will bridge the gaps between an in-person and remote workforce.”

  • “Tandem’s desktop program, which costs $10 a month for each user, shows what teammates are working on so colleagues know if they are available for a spontaneous video call within the app.”

  • “Owl Labs, a start-up founded in 2017, ... makes a 360-degree video camera, microphone and speaker that sits in the middle of a conference table and automatically zooms in on the person who is speaking.”

  • “Kumospace, a video-calling start-up, structures calls so that users enter a virtual room. They then navigate the room using arrow keys and can talk to people when they are close to them.” READ MORE

REOPENING

Sweetgreen, which bet big on selling desk salads to office workers, says those workers are coming back: “With more than 30 locations in Manhattan and many customers who order salads digitally, Sweetgreen has had insight into the movements of its customers, even if they are not yet fully back to eating at their desks again. The company has seen neighborhoods ‘start to really light up, like the Upper East Side and Upper West Side,’ Mr. Neman said. ‘The true Midtown office has been the slowest to return. So we have a store in Rock Center, Bryant Park, those sorts of areas which have definitely been the slowest.’”

  • “‘You’re starting to see these really nice increases as people are slowly returning to the office,’ Mr. Neman said. He said he planned to watch for a similar bump after July Fourth, though Labor Day ‘is going to be a very big moment.’” READ MORE

COMMERCIAL REAL ESTATE

A new bill passed and signed in California will help businesses buy their own locations: “The benefits for small businesses are significant, supporters of the bill, AB 464, have said: Small businesses that own their own buildings no longer have to worry about rent increases or that their premises will be sold out from under them. The loans would likely be low and possibly deferred interest, according to John Elberling, president of Todco, a local housing nonprofit sponsored the bill through its state advocacy arm. There are no set terms under which jurisdictions must offer the financing, Elberling told me. ‘We foresee that each locality would do a program customized for the circumstances of that particular city and town,’ he said.”

  • “Per the bill’s terms, businesses must have an average annual revenue of $15 million or less and have fewer than 100 employees to be eligible for a loan.”

  • “The U.S. Small Business Administration currently offers similar financing to businesses with a gross annual income of less than $5 million annually.” READ MORE

HUMAN RESOURCES

The pandemic has pushed a lot of people into early retirement, which is another reason there’s a labor shortage: “In the 15 months since the pandemic began, about 2.5 million Americans have retired, Mr. Daco said. That’s about twice the number who retired in 2019, which means there are essentially 1.2 million fewer people in the workforce over the age of 55 than would otherwise be expected.”

  • “Early retirements not only reflect the pandemic’s economic impact but may also hold back the recovery, because retired workers tend to spend more cautiously.”

  • “They will also be drawing on Social Security sooner rather than paying into the program and bolstering its long-term viability.” READ MORE

The U.S. is on track to regain all of the jobs lost during the pandemic in seven months: “The job-growth trend sharply improved in June, when the country added 850,000 payrolls. That follows a gain of 583,000 jobs in May and marks the strongest one-month jump since August. It was also the sixth straight month of job gains. Maintaining the June pace would bring total payrolls back to their pre-pandemic peak by February 2022, according to Insider calculations. Using the three-month average for payroll growth delays a complete recovery to June 2022.”

  • “The bipartisan Congressional Budget Office said on Thursday that the labor market should return to its pre-crisis payroll count by the middle of 2022. The office's forecast was revised to account for Democrats' $1.9 trillion stimulus plan, a faster reopening, and surge in consumer spending.”

  • “While experts expect the shortage to fade into the fall, the imbalance between worker supply and business demand could keep wages climbing at the fastest rate in decades.” READ MORE

Lower wage workers are getting the biggest raises: “New jobs at restaurants, hotels, stores, salons and similar in-person roles accounted for about half of all payroll gains in June, according to the Labor Department. And workers in those industries are seeing larger raises than other employees.”

  • “Average hourly wages for retail workers were up 8.6 percent in June from February 2020, before the pandemic took hold in the U.S. Wages for restaurants and other hospitality workers were up 7.9 percent. Both gains are above both overall wage growth, at 6.6 percent  in that period, and inflation.”

  • “The average hourly wage in the hospitality sector was $18.23 an hour in June, and $21.92 in the retail sector, versus $30.40 for private-sector workers overall, according to Labor Department data.” READ MORE

LOGISTICS

Container ship prices are skyrocketing as supply-chain issues persist: “The average price world-wide to ship a 40-foot container has more than quadrupled from a year ago, to $8,399 as of July 1, according to a global pricing index by London-based Drewry Shipping Consultants Ltd. The measure has surged 53.5 percent since the first week of May. Listed prices to ship from China to major ports in Europe and the U.S. West Coast are closer to $12,000 a container, by Drewry’s measure, and some companies say they are being charged $20,000 for last-minute agreements to get goods onto outbound vessels.”

  • “‘Global trade right now is the hottest restaurant in town,’ said Brian Bourke, chief growth officer at Seko Logistics, an Itasca, Ill.-based freight forwarder that handles large volumes of trans-Pacific shipments. ‘If you want to get a reservation, you need to plan it out two months in advance. Everyone’s trying to grab any spot they can and they’re all spoken for.’” READ MORE

FINANCE

More than 100,000 restaurants applied for relief funds. Many more were turned away: “More than 370,000 business owners applied for more than $75 billion in funding, nearly three times what the program had available. Around 105,000 businesses were approved for grants, which averaged just over $272,000. ‘For a hundred thousand restaurants, the R.R.F. has made their future clear and stable, but for the more than 200,000 operators shut out of funding, receiving this letter today only heightens their fear and anger,’ said Sean Kennedy, a spokesman for the National Restaurant Association. ‘We need Congress to act.’”

  • “Linda Novak, the owner of the Starlight, a cocktail and jazz bar in New Orleans, applied just hours after the program opened and received an approval notice on May 21 for a grant of around $300,000. She was told that the money would be in her bank account within a week.”

  • But it never arrived. In early June, she called customer service hotlines for her bank and the Small Business Administration. She eventually learned from her bank, Hancock Whitney, that it had rejected the deposit because it was improperly coded as being for a savings account.”

  • “Last week, Ms. Novak got an email from the S.B.A. that said the money she was counting on would not be paid because of the lawsuits challenging the program’s prioritization rules.”  READ MORE