Startup CEOs agree: Don’t do it like Uber Special

Posted Jun 21, 2017 by Les Horvitz
Corporations may give generously to charities to burnish their reputations, but only as long their profits aren’t at risk. But three startups are proving that philanthropy can be good business too.
Uber is unveiling a series of steps aimed at restoring confidence in the  ridesharing giant
Uber is unveiling a series of steps aimed at restoring confidence in the ridesharing giant
Speaking recently at Brooklyn’s annual Northside Festival , business leaders of Waze, Boxed and Hotwire explained why giving back to their employees and communities is turning out to be a good business model. All three companies are relatively new so their leaders had to overcome a familiar challenge: how do you make a brand into a household name and find a profitable niche in the marketplace?
Jackson Jeyanayagam , Boxed’s CMO, says that his company faced an especially daunting task. Founded just four years ago, Boxed describes itself as “an American online and mobile membership-free wholesale retailer selling bulk items via the Boxed app or the website.” Well, how does that differ from what Amazon does? It’s a question Jeyanayagam hears a lot. “We don’t compete with Amazon,” he says. “We coexist with it, We bootstrap off them.” Boxed, he explains, is intended for consumers who tend to buy products in bulk from COSTCO and Sam’s Club, but “dislike the experience and hate having to listen to screaming kids.” Boxed will deliver the same products in large quantity “without the crowds and the screaming kids.” Boxed, which raised $100 million in financing last year, is targeting customers 25-44, hoping to change their purchasing habits from buying one item at a time to buying in bulk.
But it’s Boxed’s generous policies that Jeyanayagam emphasizes: “We believe in equality, giving back to the community and employees,” he says. The company contributes to employees’ college educations, even to their weddings. (The company now has 200 employees.) “We refund taxes on women’s hygienic products in states where they’re taxed because it was the right thing to do.” He says that there was no push back from the board. “No one was worried about the bottom line.” Instead of “doing things for marketing reasons,” Boxed believes in ‘authenticity,’ As former digital head for the scandal-ridden fast food company, Chipotle, he knows from experience what happens when a company’s customers no longer think of it as authentic.
Julie Mossler, head of Brand & Global Marketing for the Israeli startup Waze, can relate. Like Boxed, Waze was launched in 2013; it was designed as “a community based traffic and navigation app,” which relies on its users to modify and update the data it feeds to drivers who want to find the most expeditious way to get from here to there. (The company was subsequently acquired by Google.) Waze has its work cut out for it: only 13 countries (including the U.S. and much of Western Europe as well as Israel) have a complete base map, meaning that in many countries it isn’t easy to figure out how to plot the best route when you don’t know where the routes are in the first place. That’s where volunteers come in; roads and landmarks that were previously terra incognita – at least on existing maps – are continuously being entered into the company’s database. As the company has expanded – it now boasts 80 million users – it has become available in more languages. “In India, we were only available in Hindi,” Mossler says, citing one example, so Indians speaking Kannada, a regional language, got together on their own time, to put together a Kannada language version of the app. “When you’re consumer-based, you don’t do it for company, you do it for consumers,” Mosler says. “If you do it for marketing alone it doesn’t have a lasting benefit.” But who are its consumers? Ironically, the company doesn’t know. Customers obtain the app through app stores on Apple or Android phones. They make themselves known by their input.
For Barbara Bates, CEO of Hotwire PR, public relations is no substitute for — there’s that word again — authenticity. When Bates speaks about PR she knows what she’s talking about; she founded a PR company, Eastwick Communications, which was bought by Hotwire. "This is not a situation where I am coming in to fix anything; it’s actually the opposite," Bates [url= t=_blank]declared when she was tapped to helm Hotwire in 2016. "We are already on track for this to be our best year ever, and we have lots of great momentum throughout all regions."
Uber is a good example of a company that purported to be authentic, but as recent developments demonstrate, it failed to put its customers’ needs first. “They had amazing PR firms,” Bates says, “but they never listened to a word they said.” What Uber’s scandal-tarnished leaders didn’t realize was that they had a business problem on their hands, not a publicity problem. Bates describes their problem as ‘a giant oozing sore.’ “Uber doesn’t trust their employees to be brand advocates.”
She didn’t need to rely on news reports to know that the company was troubled; all she had to do was to listen to the complaints of Uber drivers. (Uber’s board came to the same conclusion, forcing its founder Travis Kalanick to step down on Wednesday.) Contrast Uber with another new brand which has successfully integrated authenticity into its brand: Warby Parker, which sells fashionable and inexpensive eyeglasses and sunglasses. “They took an approach that wasn’t super risky and executed their strategy really well,” says Bates. Now seven years old, the company has built its brand by emphasizing philanthropy: donating glasses to VisionSpring, a charity that trains people in low-income communities around the world to conduct eye exams and set up businesses selling glasses for a few dollars each.
“Some big brands overthink their strategy,” Jeyanayagam says, and because they do, they don’t come across as as authentic. “Instead of ‘let’s trust our guts,’ we know something’s there – let’s go with it,’” he says, they spend huge sums of money hiring experts and polling focus groups. “Big brands are so conservative whereas startups are much closer to the user.” In his view, its half art, half science “Too many companies spend the whole time with spreadsheets.” And they’re often too preoccupied with digital marketing. “Ecommerce is soulless.”
Hotwire’s Bates agrees: “If you have no budget you’re testing things all the time. If you have a $10 million ad campaign, too many people are committed to it to step back.” Although startups are often strapped for funds, they have an advantage in that they can move faster and have a better understanding of their potential market. Waze, for instance, was up against a major competitor whose budget they couldn’t hope to match. So they went to television stations paying $15,000 a month to run the competitor’s traffic reports and made an offer to them: as soon as your contract is up, try our app for free! The strategy paid off: scores of TV stations are still running Waze’s traffic reports and they’re still not paying for it. The company makes its money from ad revenues.
But how can a company remain authentic, as these CEO’s define it, in an era where politics is such an obsessive national preoccupation? Businesses are finding it increasingly difficult to stay neutral. Sometimes it can’t be done: Bates observes that because many tech companies hire a large number of immigrants who are in the U.S. on H1B visas, their employees are inevitably impacted by federal immigration policies. Boxed, for its part, prefers to avoid sensitive issues as much as possible. “We have employees and factories in red states so we try not to say anything (contentious), but we do have an interest in immigrants and education policy.” The solution? “Let’s focus on issues that are important to our values.”
“We’re inevitably pulled into border issues because of the nature of product,” Mossler admits. Nonetheless, users of Waze “often just want to enjoy driving in their cars and not think about politics.”