Monday, June 13, 2011
Interview with Jonathan Lehmann and James Chung, KarmaGoat
Story by Benjamin F. Kuo
Have you ever wondered what to do with that last generation iPhone you have in the closet, or those shoes you bought and never wore, or other unwanted items you might have--but didn't want to bother selling on Craiglist, because it just wasn't worth it for the money you would earn? Well, Los Angeles-based KarmaGoat (www.karmagoat.com) has figured out a way to help people get rid of those unwanted items they have--and provide those proceeds to charity. We spoke with Jonathan Lehmann, CEO and founder of the firm, along with James Chung, one of Jonathan's co-founders.
What exactly is KarmaGoat?
Jonathan Lehmann: KarmaGoat is a marketplace that is integrated with Facebook, where you buy and sell items and the proceeds go to charity. It's just like Craigslist, except the money goes to support causes. Our marketplace is organized like a used item marketplace, like Amazon or eBay, or Craiglist, in that a seller lists an item, picks a cause, and sets a price. The buyer pays KarmaGoat, and we forward the proceeds to the charity. We keep fifteen percent via fees to grow the marketplace.
Where did the idea come from?
Jonathan Lehmann: I'm originally from Paris. When I was moving to Los Angeles from Paris, I was sorting through my stuff, and I made three bags of things. There was a bag of things to keep, a bag to give to goodwill--mostly warm clothing--and, a third bag of stuff I no longer used or wanted, but I know a friend might want or potentially might enjoy. An example, was my iPod, which I had but no longer was using because I had a new iPhone, basketball sneakers I had but never really fit me. I'm not really one to sell those on Craigslist or eBay, and I'd rather just give them to someone else who would enjoy them. I thought it would be awesome to have a marketplace to donate your stuff, which you no longer wanted, had no personal value, but others would appreciate. That was the basic, preliminary insight into KarmaGoat.
When did you create the business?
Jonathan Lehmann: I was awarded the Larry Wolfen Entrepreneurial Spirit Award at UCLA, after getting amazing coaching from Matt Ridenour in our business plan development class. That allowed me to take a summer to develop the new idea, and transform it into a business. Exatly a year ago was the very beginning of KarmaGoat, where I was trying to come up with something that would work as a marketplace donating items. I developed the idea over the summer, articulated the vision, drew out the site, and then teamed up with other students at UCLA and started developing KarmaGoat.
Are people really willing to sell their stuff to benefit charities?
Jonathan Lehmann: The reception of the idea has been tremendous. It has been really amazing. We were invited in March to the Harvard Social Enterprise Conference to present. We had an amazing reception, met several nonprofits, including Heifer International. As you probably know, that is a big nonprofit that buys goats for families in Ethiopia and Uganda. That gift of livestock can help families out of extreme poverty. We also pitched at the finals of the Tech Coast Angels Fast Pitch, and got a very warm reception there. We’ve gotten lots of positive feedback from people who don't want to ship and item on eBay, might not want to deal with people on Craiglist, but when it's for charity, and they are doing it with friends, the incentives are different and they are interested.
The site looks to be very well executed, where did you get the technology expertise to pull off the site?
James Chung: My previous background is in software engineering. I spent six years in e-commerce, developing e-commerce platforms, and am pretty familiar with that. There were lots of people very intent on the execution of the product, really looking into the details of design and flow. We have a really good team that brought this site up.
Jonathan Lehmann: The way it happens, is UCLA Anderson has Applied Management Research (AMR), which is kind of you master's thesis, which gives you concrete experience before you graduate from business school. If you've shown entrepreneurial abilities, you're allowed to make it a business creation option. What we did with karmaGoat, is we made it our graduation project. We had a team of five MBA students working very hard on the product, and worked to hire a design shop, Ciplex, who helped us with the design, and the people on the did all sorts of things--from operational integration, to outlining the market strategy, to basically everything else.
UCLA Anderson really seems to be a hotbed of entrepreneurs nowadays - did you know going into the MBA program you'd be starting your own company?
Jonathan Lehmann: I used to practice corporate law in Paris and New York. But, I realized it wasn't for me. Entrepreneurship was my way. I started a handbag manufacturing company with my mom in Paris, prior to school. It was an amazing experience, and my first entrepreneurial experience. But, I soon realized working with my mother and with handbags was not ideal for me. However, I thought with everything I had learned, and my legal background, my recent entrepreneurial experience, I should acquire the tools to become the best entrepreneur I could be. That was my absolute, sole goal at Anderson. One of the first things I did at Anderson, was to recruit other who would want to come along and share the dream. That's how the team formed itself.
James Chung: Prior to Anderson, I worked for somewhat of a startup in the Bay Area, for six years. It was a really amazing experience. We started pretty small--it was a 20 to 30 person shop when I joined, and had a tremendous amount of growth through the years there. It was really exciting, but I missed out on the inception of the company, and wanted to have that experience. I've gotten that in spades here at KarmaGoat. Entrepreneurship, and trying to start something on my own was definitely one of the tracks I was pursuing at Anderson.
Did the experience at Anderson help you with starting the company?
Jonathan Lehmann: What is great about Anderson, is it has so many programs to help you streamline your ideas, come up with viable idea, and articulate the vision and asses the market, write out business plan, learn how to pitch, how to do a long investor pitch, how to do fast pitch, and learn effective, entrepreneurial specific networking. All of that is taught at UCLA by the more senior students and professors, a mix which provides an incredible education. If you look at the entrepreneurial community in our class, and compare it to where it was when we started school and where we are now, the difference is really dramatic.
Finally, what's next for KarmaGoat?
Jonathan Lehmann: There are three of us, James, and Jamie, our partner, and I, who are going full time with KarmaGoat after graduation, as well as my wife. What we are doing now, is we're making sure the product is as good as it can be, as useful as it can be for the user, and that the experience is simple and meaningful. Obviously, once we're comfortable with that, the big challenge is marketing KarmaGoat. Our initial strategy is to go and target KarmaGoat to university campuses. The reason is university campuses are already an existing marketplace, around a physical location. Transactions already are occurring, for furniture, fashion, and electronics. In addition, students are most likely early adopters, and care most of the time about giving to support causes. They might not have the deepest pockets or most items, but those who can have enthusiastically adopted KarmaGoat the university level.
What we've been doing for the past few weeks is we've started a marketing campaign at UCLA, which we've treated as our test market. Before we were up, we started a buzz marketing campaign at UCLA on the theme of goats. We had goat stickers, goat sily bands, goat message on Facebook, Facebook targeted ads with goat messages, all to get people asking what was up with goats, what is this thing with goats. The whole thing with goats is, it's the idea that you can buy a goat for a family, to help them out of extreme poverty. It's the symbol of stuff you can buy for people who need clean, drinkable water, school supplies, laptops, and so on. KarmaGoat is all about drawing this meaningful link from the stuff we have but don't need, like the iPod and sneakers, to the stuff people do need, like water, laptops, or shoes. The point of the buzz marketing was to raise awareness first about goats, very specifically, and second, the more general issue of stuff, and what it means to give away what you don't need, to provide the stuff that people do need. We found the goat is a great conversation starter. Now that we're launched, we're trying to close on that buzz marketing, saying by the way goal equals KarmaGoat, so list your items and buy items. Over the summer, we are going to regroup and look at the key metrics, in terms of the number of users we got, how much we spent on marketing, and how many transactions went right or wrong, and bottle it up and reproduce it in the fall across new campuses.
Thanks, and good luck!