She Came Up With a Device to Keep Hotel Workers Safer. Warby Parker’s Co-Founder Weighs In on How to Take the Startup to the Next Level by Inc.com

“She Came Up With a Device to Keep Hotel Workers Safer. Warby Parker’s Co-Founder Weighs In on How to Take the Startup to the Next Level” | Written By: Leigh Buchanan / Inc.com

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Founders Project

She Came Up With a Device to Keep Hotel Workers Safer. Warby Parker’s Co-Founder Weighs In on How to Take the Startup to the Next Level

Yasmine Mustafa wants to make hotel workers safer with ROAR for Good. Warby Parker’s Neil Blumenthal offers some tips for growing her company while keeping her eye on her mission.

By Leigh BuchananEditor-at-large, Inc. magazine@LeighEBuchanan
Yasmine Mustafa (left) and Neil Blumenthal.
Courtesy companies

To mark its 40th anniversary, Inc. is matching 40 aspiring founders with 40 experienced mentors in the Founders Project. The most recent mentor-mentee pair each have a mission to improve lives: Neil Blumenthal, co-founder of Waby Parker and Yasmine Mustafa, founder of ROAR for Good.

Neil Blumenthal co-founded Warby Parker in 2010 with a dual purpose: bring down the cost of prescription eyewear for consumers, and outfit glasses to the billion people worldwide who lack access to them. The company, with a valuation of $1.75 billion, has distributed five million pairs through its Buy a Pair Give a Pair Program. Blumenthal credits that social mission for motivating both the leadership team and the company’s 1,800-plus employees. 

When Inc. asked Blumenthal to mentor a startup entrepreneur he had one requirement: that person must also be driven to use their business for a noble cause. He chose Yasmine Mustafa, whose family brought her to the U.S. from Kuwait as a refugee during the Persian Gulf War. In 2013 Mustafa launched ROAR for Good in Philadelphia. The company aims to protect women from violence with a wearable panic button that sets off an alarm and alerts preselected contacts to the user’s location so they can send help.

That first iteration of ROAR for Good was business-to-consumer. Then in 2018 the company pivoted to a business-to-business model, developing a system for deployment in hotels. Its new end users are housekeeping staff–mostly immigrants and women of color, many of whom don’t speak English. More than half of housekeepers have been sexually harassed or assaulted, often by guests, research shows. Mustafa, who for a decade worked low-paying hotel and restaurant jobs, recognized first-hand the severity of the problem.

Mustafa hopes to leverage legislation mandating panic buttons for housekeeping staffs that has bubbled up in cities like Chicago and Seattle. New Jersey, in June, became the first state to pass a panic button law. ROAR for Good, which has seven employees and has raised several million dollars, recently started selling. To improve the lives of tens of thousands of disadvantaged women she asked Blumenthal’s advice on sales and fundraising. 

Here are edited excerpts from their first conversation.

Blumenthal: Tell me a little bit about who your customers are.

Mustafa: General managers of hotels. We are also going after hotel management companies, which own hundreds or even thousands of properties. Getting to them provides us opportunities to scale. And then we are going after the brands themselves. It’s made fundraising harder. When investors ask me about the sales process I’ve been trying to think how to talk about it in a way that doesn’t sound convoluted. I feel like it turns some of them off.

Blumenthal: It probably does turn them off. The challenge of simplifying a process like a complicated sales process is one that many entrepreneurs face. You don’t want to lead with the nuances. Stick to the three-to-four core steps in the process, and then investors can ask questions if they have them. In general, when speaking to investors, always lead with the market opportunity, the problem you’re trying to solve, and your interest and enthusiasm in your solving this particular problem.

Have you found that there is a certain size hotel that the product resonates more with?

Mustafa: The smaller hotels like the Day’s Inns or Holiday Inns are much more budget-conscious. They have been pushing back on the price point, because they are usually franchises and their biggest motivation is to protect their bottom line. The ones that have been more receptive are luxury hotels, mid-level hotels, like the Kimptons, the Hiltons, and the Marriotts.

Blumenthal: Are there one to three selling points that resonate with those hotels?

Mustafa: The three main selling points are that we are the most reliable solution. We are the least expensive. And we are mission-driven. We built this from the ground-up using housekeepers’ direct input and feedback.

Blumenthal: Reliability, affordability, and mission are a pretty powerful combination. It might be worth zeroing in more on why you need this solution today to compel these guys to move quickly. They have tremendous brand risk if something bad happens that they could have prevented. They want to recruit and retain great talent and here is a way to keep your talent safe and secure and demonstrate to them that the management company cares. You are going to be compelled to do it anyway, so you might as well get credit for being a first mover.

Mustafa: It is very hard to sell preventative services to people. How do you get someone to buy your solution before something occurs instead of after? We’ve talked about the liability risk. We’ve talked about how since the #MeToo movement sexual harassment claims have increased by 50 percent and HR budgets are putting money aside for lawsuit payouts. Attracting talent is one we have definitely talked about. We also talk about the PR benefits–the fact that they can set their brand apart by being one of the first. But it’s hard to get that to resonate.

Blumenthal: I think it’s more PR risk than positive PR. If I’m in their shoes I don’t know that I want to see a press piece that says we are using this tool to help prevent our customers from doing something terrible to our staff. I can see a lot of people on the senior leadership team not wanting to talk about it publicly.

Mustafa: That’s a great point. I think it’s aligning the action of purchasing with their core values of safety or taking care of their people.

Blumenthal: It makes sense in an internal communication context. It just might be difficult for hotels to communicate it externally. How much have you raised to date?

Mustafa: From crowdfunding it was $313,000. In terms of equity investments we raised $1.72 million in 2016. We actually took out a loan from an investor and we just re-capped and converted that into equity. So we’re comfortably into seven digits. One of the hiccups in fundraising has been that when we pivoted last year to B-to-B I decided to just recap because the original direction was related to where we ended up, and I wanted to be sure my original investors were not completely left out. Now I am experiencing a little bit of pushback when I talk to new investors on why I didn’t start a new company.

Blumenthal: Has your existing investor given any indication why they won’t invest more?

Mustafa: They like the new direction more than the old one. But they had already doubled their normal investment threshold. So I feel like I’m in a weak position when I talk to new investors. Because they ask have any of our existing investors come in? And I have to explain that our biggest investor has hit their threshold.

Blumenthal: I saw a little bit of that with my wife’s business, when she transitioned from Cricket’s Circle [an online baby registry] to Rockets of Awesome [a children’s clothing brand]. It is wild, right? You do the right thing, especially for those early investors. But, you don’t get credit from new investors who you think would take it as a sign of integrity. And, you don’t get enough credit from existing investors who still have a chance to make money.

Where are you on fundraising now?

Mustafa: I’m in the process of raising $900,000 to get us to a bigger Series A round next year. A convertible note with a 20% discount. I actually started a couple of months ago and then stopped because I kept hearing that we were too early. Then we started again. So that $900,000 is for getting us to where we can start to scale by the end of this year and focus on growth next year, when we want to do thousands of hotels.

Blumenthal: And $900,000 you think gets you 12 months?

Mustafa: Fifteen months. I would like to raise even more. I’m starting a little bit lower and I would like to be over-subscribed if possible. I would love to get to $1.5 million.

Blumenthal: I haven’t really seen people go out to raise $900,000. I think people gravitate toward more round numbers. I wonder if there is an advantage to going for $1 million or $1.5 million. Or if you perceive having a challenge it might be worth scaling it back to $750,000.

Have you found certain funds are more receptive than others? I think of some
consumer facing ones like First Round Capital, Lerer Hippeau Ventures, or Forerunner Ventures.  

Mustafa: I talked to Josh Kopelman at First Round and he said he feels like the market is too small.

Blumenthal: Tech investors like Josh care about three things. They want to see that there is a big market. That this is a thoughtful solution to a real problem. And that this is the best team to tackle this problem. So Josh’s comments that maybe the market’s not big enough are pretty revealing. Maybe you should be focusing less on pure tech investors.

Mustafa: I’ve found that the woman-minority-led funds are very conservative. They say come back when you have traction. I’m trying to get connected to XFactor Ventures and Serena Williams’ fund, which I feel would be great fits for us. Then there are the double-bottom-line funds. I am talking to Kapor Capital right now. And I just got introduced to Village Global, which I’m excited about because Bill Gates owns 45% of Four Seasons. I like anything that has direct alignment with the industry.

Blumenthal: Regarding the double-bottom-line investors: you should look at the certified B Corps companies on the website for B Labs and see who are their investors. That might lead you to some good prospects.

Mustafa: That’s a great idea. We are B Corp certified. The segment I’m really excited about is property tech. Real estate. Their investment funds often include hotel management groups.

Blumenthal: Property tech, I think, is super interesting. There are a lot of those funds here in the city. I could look into them and share that with you. Also, more and more of these large real-estate companies themselves are creating small venture groups. Like Simon, the big mall owner. I would look at big landlords and see if they have something like that or if they are investing in other venture funds.

Mustafa: Unfortunately I don’t know anybody in that world. It’s been a lot of asking people for intros and waiting to hear back. I wish I could press fast forward on it all.

Blumenthal: Yeah, it’s always a hurry-up-and-wait scenario. If you’d like to send me your deck I would be happy to give you some feedback.

Mustafa: Fantastic. I will definitely do that.

I’m more excited than ever about what we’re doing. I feel like I have found my true calling. We have solved a lot of the challenges we had in B-to-C in terms of having a scalable business model, having a bigger impact on more people, and shifting the financial burden from low-income women to businesses. Fundraising is my least favorite part of it.

Blumenthal: Of course, you don’t want to be fundraising. You want to be building a business. You’re a fighter and a do-gooder. I’m walking away inspired.

[Editor’s note: Shortly after this conversation took place Mustafa landed ROAR for Good’s first contract with a Marriott hotel, with the potential for 73 more in that chain. As a result her biggest investors, whom Mustafa told Blumenthal had exceeded their investment threshold and couldn’t come in, surprised her by deciding to lead the new round. The Marriott deal requires Mustafa to scale quickly, so she increased her target raise from $900,000 to $1.2 million–something Blumenthal had suggested. The round is 70% subscribed, and Mustafa expects it to close at the end of September.] 

Published on: Sep 30, 2019


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“She Came Up With a Device to Keep Hotel Workers Safer. Warby Parker’s Co-Founder Weighs In on How to Take the Startup to the Next Level” | Written By: Leigh Buchanan / Inc.com
September 30, 2019 at 05:06PM
VIEW ARTICLE ON Inc.com >> https://www.inc.com/leigh-buchanan/warby-parker-neil-blumenthal-roar-for-good-founders-project.html

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