2012-01-24

Co.Exist

Sustainability Doesn't Make Money Without A Solid Business Plan

Coming up with a new product that benefits the environment and meets the highest design standards can seem to hold the potential for a successful new business. But without strategic entrepreneurial choices, good ideas and great products can end up stuck in neutral even when they appear about to succeed.

It was a clear, cool morning in Cupertino, California. Designer and green entrepreneur Ken Eskenazi felt he was about to make the leap. It was October 2008, and this was the third time he’d been summoned to Apple headquarters. For any designer, Apple is the brass ring. It is a corporation that has made its name on selling consumer products known for their design, and they seemed quite interested in Rapioli, Eskenazi’s breakthrough recyclable packing system, which promised to completely eliminate packing waste and do so in style.

A sales contract with such an ideal client would be a lifeline for Eskenazi’s foundering business and it seemed imminent. Sitting patiently in Apple’s anteroom, the struggle felt worth it. All of the questions had been answered. With the Rapioli on his lap, Eskenazi indulged in a little bit of fantasy about how the meeting might go. “I was about to break through at the highest level,” says Eskenazi. Alas, it was not to happen. Apple passed and Eskenazi was back to struggling to stay in business.

Eskenazi had started with a good idea. He had figured out how to keep thousands of tons of shipping materials in service, and out of dumps, with style. Each 9" x 12" x 4" clear clamshell-styled Rapioli represents the equivalent of 33 water bottles diverted from landfill. A cutting edge graphic and product designer, his previous clients had included movie studios and production companies. For more than a decade, he had been working for some of Hollywood’s major players, who sought his help as a creative director with branding, advertising, packaging, and product design.

These Hollywood clients had sought to be more resource efficient and project a sustainable image by using products that were at least somewhat recyclable. Their corporate commissions inspired Eskenazi to find fully functional, low-cost, reusable materials for shipping and packaging in the endless loop of B2B product delivery. That’s how he came up with the Rapioli reusable packing system. It was innovative, handsome, affordable, and appealing for high-profile clients. Uber-agency CAA sent laptops to African children in the protective recyclable pouches that he developed. It seemed that he had really hit on something useful and desirable.

But the story of building a business out of the Rapioli, by contrast, has not been easy. In 2003, Eskenazi and his then business partner won an EPA-sponsored sustainable design competition, but R&D was painfully slow. The recognition felt good, but didn’t lend them much momentum. They then pretty much forgot about the project and focused on growing their branding consulting business, which they had moved from New York to California. In early 2005, Eskenazi got a phone call from the California Conservation Corps. People there had seen his prototype on an EPA website, and asked Eskenazi to apply for one of their grants. Encouraged, Eskenazi hired a grant writer. Unfortunately, they didn’t get the grant, which went to larger, more established companies.

Meanwhile, the online retail business was booming for Amazon and others, creating more packaging waste than ever before. The environmental problem seemed urgent and growing to Eskenazi and his partner but they stayed focused on their core consulting business. Two years later, the California Conservation Corps asked him to apply, again. This time, using the work they had done on the last grant, Eskenazi completed the application himself and won. Suddenly, he had $250,000 to fully develop the Rapioli concept, create prototypes and move forward. Rapioli 2.0 was born, and after some work with an industrial design firm, the product was soon in its third iteration.

Toyota, already committed to a zero-waste mission, signed an agreement to test the product for shipping parts. A small-scale trial was successful but didn’t lead to any business. Soon after, Eskenazi’s contact at Toyota left the industry. Nevertheless, by 2008, Eskenazi had devoted himself full time to his new company, Innovation to Industry, and its mission of getting the Rapioli commercialized. He searched for capital, pitching dozens of venture capitalists, and spending the better part of a year unsuccessfully courting one angel investor.

Three years after that meeting with Apple, no deal has been struck, and Eskenazi has since heard that Apple, as they often seem to do, was exploring ways to create their own version of reusable packaging in-house. Rapioli has no other major clients and no significant capitalization. Eskenazi has continued to bootstrap it, achieving some successes such as refining his product with a local Los Angeles manufacturer and negotiating to launch custom pilots of his latest prototype with a dental supply company and a consumer electronics company. In addition, this past summer Rapioli was awarded two patents. So there’s reason to hope for success to come, but the hard fact is that after eight years, Eskenazi has an improved yet unsold product and not the sustainable business he’d hoped to have built by now.

Eskenazi’s story is not all that unusual; in fact, it is typical enough to illustrate a few classic issues facing green entrepreneurs. First, he largely walked this path alone. Staying alone often limits the resources a company has to grow. Partners and employees can bring more energy, more connections, and more capacity to the business. Sometimes entrepreneurs are reluctant to give up equity, but owning 100% of a shoestring business is not nearly as lucrative as owning a quarter of one that has the resources and capacity to grow in the marketplace. If a business of one is starved for revenue and concerned about adding to its overhead, recruiting even part-time sales help on a commission-only basis could make a huge difference in its ongoing viability. In addition, the pressure of having to earn money outside the business in order to pay personal bills means that effectively the solo entrepreneur’s entire startup team consists of one distracted less-than-full-time worker.

This income quandary leads straight to another key issue: the challenges of raising money for a startup. One helpful fundraising strategy is leveraging monies so that potential funders on the sidelines are poised to commit once they see other money on the table. In the case of Rapioli, the $250,000 grant was a lifeline for developing the product but the founder did not use it effectively to leverage additional investment that could have expanded Rapioli’s capacity to grow more expeditiously. Although it may be hard to acknowledge, sometimes it’s not just bad luck when the fundraising goes poorly for months on end; it may be that the pitch itself (the business model presented or the pitch delivery) is fatally flawed.

Finally, it can be exasperating to get turned down again and again by prospective clients or customers, but an entrepreneur should never abandon a valuable relationship. To his credit, Eskenazi had developed relationships with two of the world’s greatest companies, Apple and Toyota. Those relationships have tremendous value. Even without a deal in place, there’s an opportunity for repeated feedback from industry leaders on your product and your pitch. One never knows when you finally develop something they want. But be careful not to put all your eggs in one basket. If you only know one person inside a company, your entire relationship with that company is tied to that one person’s fate. Develop a strategic web of relationships that will be resilient to the inevitable changes in organizational structure that every company seems to endure in today’s rapidly evolving business environment; that will ensure that your relationship with the company will endure.

For budding green entrepreneurs, building a business isn’t just about intelligence and creativity. It takes entrepreneurial skills and tough choices about how to proceed with limited resources. As is the case with too many other green entrepreneurs, Ken Eskenazi’s good idea has not yet become a great business. He may well have created something that could become a major breakthrough in sustainability, but he has not yet found a sustainable market or business model.

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