Who’s buying your product and how do you reach them when it’s sold through a wholesaler? How do customers find it if it is lost? How will they know if it is legitimate or counterfeit? Kait Margraf Stephens explains how Found addresses all of this and more. She shares her thoughts on pricing when there are no comparable products, hiring, and the challenges of being a founder.
Found with Kait Stephens
Eric: Can you tell us a little bit about Found and what it has to offer?
Kait: Sure. So, our vision at Found is to change the way that consumers engage with their products by connecting physical products to digital experiences. Now, what does that mean? The way that we think about the world is if you think about the way IOT has connected Wi-Fi enabled devices, we see a world where every item can have a unique identity and provide more value to the end owner of that item and also create a communication channel between those items and brands. So, we are powering this software that allows people to assign that unique identity to items. Some of the benefits include accessing product information, product authentication, warranty registration. There is value in the second-hand market. You can easily resell and upcycle your items. So kind of in summary, we are powering software to allow brands to create these unique digital experiences enabled by a product. I think one way that we are particularly excited to do so right now is with QR codes. And so basically a customer can just tap or scan their QR code on their product, assign their identity, and then actually that will join a virtual closet of everything that they owned.
Eric: You are essentially telling me that the coat that I love or bought whatever is going to actually have its own identity that I will be able to track or even sell downstream so people can prove I guess it’s provenance for an individual item or all items, I guess. Is that generally what you are saying?
Kait: Exactly. Let’s use your coat as an example. When you purchase that item you all just scan the QR code, then you will assign your identity to it. It will be added to your closet. You can then, if you decide to sell it or upcycle it in the future, transfer the identity of the product. So having that digital identity of the physical product connected to the individual provides a lot of benefits to consumers from a tracking purposes and as well as transparency so you could know exactly what materials are in that product, but then transfer that on for the second life.
Eric: I can see where this applies in the secondary market. I want to prove that the thing that I own, the artwork that I own, or whatever is actually valid. It is legitimate. It is not a counterfeit. That one makes perfect sense. Are there other applications as well that might be more prominent right now?
Kait: Yes. It really depends on the type of product. We think of our customer as really two-sided. So we are selling the brands, but ultimately this touches the brands and consumer. So we are thinking about the value that we provide to both of those customers. But let us talk about the end consumer first. Some of those key value propositions, one of them is for high-value items that are often counterfeited, checking the authenticity so you can scan and confirm that that is authentic regardless of where you purchased it. Sometimes there are concerns over purchases through Amazon, different wholesalers, Etc. So you can confirm authenticity and have that peace of mind.
Kait: Another benefit is a value transfer from the brand. In the same way that you would go to an e-commerce website and sign up with your email address to a discount on a purchase that you are providing your contact information to have a relationship with that brand you are getting a benefit of doing so. That discount transfer, that value transfer whether it is in the form of a discount off of a future purpose or some sort of rebate is another way, another incentive for registration. So from the consumers’ perspective, they are getting a product that they wanted at a discount or they are getting that value from the brand’s perspective. They can have now a direct relationship with that customer.
Kait: Another benefit is the ability to protect an item from wasps. So particularly for items that you could potentially lose, when you assign your identity to a product it is now connected to you. If you were to ever lose it, anyone that scan that tag could directly message you to get that item back. So that is kind of this item tracking feature. And then finally another benefit, and this really relates to high-value items often in the home. So think about appliances or furniture, the ability to track your warranties. So when you register your item in a very simple way, you can now track your warranty all in one place as a part of this virtual closet by just scanning the QR code.
Eric: Wow, really interesting. Now you say that you can track an item if it’s lost. It is not necessarily actively tracking, however. It requires the other person to actually scan the code, correct?
Kait: That is correct. You are providing that identity which is protected and controlled by you in terms of what any person could see outside of your registration of that item. But how it would work is that I left my jacket at Starbucks. Someone at Starbucks picks it up and they scan the tag. It would pop up “you found Kait’s jacket, leave a message to get it back to her”, and it would send me a text and email and an in-app message saying where the item was located and how I can get it back.
Eric: Now this is going to be a bit of a side track for a moment. But a lot of what you are mentioning here was actually part of the promise of cryptocurrency and the idea that someone could track an item from beginning to end, basically from cradle to grave. Is there any linkage there? Is that something you are considering or you are just being totally agnostic to it?
Kait: Yeah, good question. We’ve definitely thought about blockchain in the applications to our business as it relates to the end and tracking both providing transparency and then we are really focused on bringing that information to the end consumer. At this time, we don’t think blockchain is necessary for our product. Of course we are always considering it and thinking about the applications and how it could be relevant to us. At this time, we just don’t think that it is necessary to make our product effective.
Eric: So, where did the idea come from? This one is really interesting. I am curious. Was there a problem you are trying to solve? Was there an issue that you faced that made you think, “Wow, I lost my coat. Or is this painting legitimate?” Where did this come from?
Kait: Two-fold, actually. The initial idea actually came from me losing an item. I actually lost my wedding band, which was a pretty traumatic experience. I had this aha moment where I was like, “If my item had a digital identity, this would be a completely different situation.” Because what I realized is that there was no way even if someone found my wedding band that they would know it belongs to me or how to get back to me. So I became obsessed with this idea of a digital identity and applying that to products for that first use case of returning lost items. I actually launched this company with my co-founder Zach while we were at business school. We basically launched this consumer-facing product where these sticker tags could assign an identity to products and you can get them back if lost. So have launched that people have gotten things back all over the world. I honestly loved all the learnings from that product. That was kind of the initial inception of the idea.
Kait: Stepping back into my background, I came from the investing side and spent a lot of time specifically in retail and thinking about the future of retail. In my experience investing in retail, I became obsessed with the concept of omni-channel and the different ways that consumers engage with products and experiencing products whether that is on social media, in-store, online. There are so many different mediums to discover a product and a brand. But what I saw from the brand’s perspective is that they didn’t have a consistent way of having a one-to-one direct relationship with their customers and that the different channels created varying frictions for the brands. So basically there is this massive problem when brands sell through wholesale. Any sort of a third-party retailer, I think about Amazon, department stores, anything that isn’t their direct consumer line, which is frankly the vast majority of brands are selling through wholesale and most of their businesses through wholesale despite the fact that we are much more aware of a couple of the very popular direct consumer brands.
Kait: And so when these brands sell through wholesale, they have no idea who their end customer is. What that means is like, say I purchased a jacket from a specific brand. If I bought that brand’s jacket from a department store, that brand does not know who I am at all. So I realized that there was this huge problem on the brand side as well. And so kind of marrying up those two issues, this unique identity provides a portal for brands to connect to their customers and for customers it provide a benefit to them to return lost items, to have transparency on their products, to give their product a second life. We kind of saw these problems on both ends and that is when we really decided to build this business that is really like we are a B2B business selling to brands to have these unique identities incorporated in their products.
Eric: Well, it sounds like you are boiling the ocean in here somewhat, but it is an obvious marriage the way that you talk about it. Certainly it seems like you are B2B, but it also sounds like your B2B2C as well. Am I on point there?
Kait: Yes, we are B2B2C. That is absolutely correct.
Eric: Okay. Talk to me for a moment about privacy concerns if any. You say that the consumer ends up identifying or doesn’t identify any personal information. You provide a conduit for one entity to contact another. How do you maintain that level of privacy?
Kait: Sure. Great question. Our policy is that the consumer is in control. That means that that consumer has the ability to permission whether or not any of their data is shared, whether it is with the brands or with someone else. The consumers are in control. Critically important is that we are following all data privacy guidelines rules to the utmost extent. And as you mentioned, even with the lost and found capability, the consumers’ information is not exposed. That is all an anonymous to the finder. We just provide that portal for them to be connected.
Eric: Perfect. Are you international as well? Because I know there are some different requirements in Europe. I know California has some interesting laws. Are you just in the US presently? Are you planning on expanding and so forth?
Kait: Our lost-and-found capability has already expanded borders. We are focused primarily on the US right now, but we are compliant with GDPR and California restrictions as well. So we have compliance across borders.
Eric: Now you said you founded this in business school. How long have you been up and running?
Kait: We started kind of that initial consumer tag business in 2019. And then this past summer really launched the B2B2C side of the business. So we have been up and running kind of the past six months on this side of the business. We just closed our precede funding round at the end of December of last year of 2020. So we are kind of off to the races now.
Eric: You are now in the stage of pre-seed funding, or I should say you’ve accomplished that. What are you looking for in the way of an investor, or how have you funded the project thus far? How do you anticipate funding the project over the long term? I should put it that way.
Kait: Sure. From the investor side, we were looking for partners that really believed in our vision and are going to be there to support us. So what we cared about from a quality perspective is, are they on the same pages? Are they going to be good support systems? Do they have unique insights that could be beneficial to us in the future? Can they offer resources, whether it is customer introductions outside of your traditional financial resources? So one of our larger investors has experience in the warranty market, which is strategically valuable to our business. That became like a strategic value. As it relates to funding going forward, I think we will likely be raising a seed round in about another year looking to build the company and grow additional customer traction as this kind of key milestones leading up to that funding.
Eric: Shifting gears for a moment, I wanted to talk to you more about the operational entrepreneurial side of things. Was that the biggest surprise when you went from sort of the consumer space over to B2B or more to B2B, or were there other surprises along the path that have really caught you off guard?
Kait: I would say every day is a learning experience. There are surprises every day. I think probably the biggest surprise, even though this is what everyone tells you, is just how hard everything is because especially as a first-time founder, you are kind of making your playbook as you go. So every next step becomes this, “How do I do this?” And you are teaching yourself. You are constantly learning. Information customer feedback is iterative process. There are absolutely surprises there. I would say that our pivot was definitely an inflection point because understanding the sales process to brands and basically I am in addition to the fundraiser and it running the business, I am also a full-time salesperson. So learning sales and how hard it is has been a big surprise. And actually one of my favorite new skills is just I have been talking to friends and family that are in sales and just getting tips. It becomes more intuitive. But when you first start out, it has been this massive learning curve.
Eric: Tell me who your ideal customer is. If you had a room full of 20 people or 20 potential customers and they were all vastly different, which one would you want to approach first?
Kait: Our ideal customer has a portion of their business through wholesale, meaning they are not a pure direct to consumer brand. They feel that pain point of having a portion of their customers effectively unknown to them. So from a brand perspective, that is the makeup of the channel. Additionally, we are targeting brands that sell higher value items and then another good quality of the product is some sort of post purchase care. The reason that matters is the higher value item is a higher consideration purchase to the end consumer, which they care more about more likely to register and engage with our product and care about protecting it, that high post purchase care. Part of our vision for our product is that we are creating this communication channel via the physical product. And what that will allow brands to do in the future and honestly in the near future is a customer can scan their product and be directed to customer service. That customer service rep know exactly which product they have, exactly who they have, when they purchased it, so that customer service and that two-way communication just becomes so much better and tailored as opposed to like needing to look through your email for your code and then contact customer service like that is all already pre-engaged because you have registered this product.
Eric: What vehicles are you presently using to identify those customers? Obviously, you know what hey should look like. How do you go out and find them?
Kait: Great question. I am very actively involved in the different virtual summits as it relates to relevant topic areas, whether that is kind of retail or CPG. And I am always looking for brands that are kind of innovative, like thinking forward in the space, have a focus on sustainability and transparency because that is something that we could offer them. So identifying brands through those types of environments. Also, leveraging advisors. We have a couple of pretty amazing advisors that have deep experience and relationships in both the fashion and broader retail space that have been extremely helpful in helping us identify potential target brands that could be a good fit for us. And then finally, we are integrating with Shopify, which they power e-commerce for brands. What Shopify will allow us to do is quickly integrate with brands to make this a simple and easy process to add our QR codes to their products. So Shopify becomes a channel for us and of brands that sell on Shopify that might also have these other channels that they sell through. So that has been a channel to find customers. And then speaking to customers themselves when we learn more about them and see that there is a thick, we are like, “Okay, what other brands kind of fit the similar makeup?”, and then identify those as well. So kind of those look-alike customers.
Eric: Got it. So you are mentioning that Shopify is going to become a channel for you or has become a channel for you. Are there other vehicles or other similar vehicles that you are planning on using or are presently using as a sales channel?
Kait: So additional sales channels, I mean, just your basic Google AdWords will be producing content marketing which helps identify high-quality leads of brands that would be looking for this type of product. It is pretty new, so there is an explanation there. But content around kind of QR codes like using that for authenticity, using that for the circular economy, that would be content marketing that could be a valuable channel for us. The real channel given like our B2B2C nature is really a direct sales force. We basically have this top-down approach where we have identified a bunch of brands based on different profiles. And then there is just an outreach process via an email campaign and setting up meetings and pitches. Our sales channel as we grow will be a direct sales force.
Eric: How do you set the price for a product that doesn’t already exist in the market? I am really curious how you have come up about with a pricing model that is sustainable and one that is tolerable for your end customers.
Kait: Eric, this is one of the hardest things that I am doing right now and it is real-time relevant because I am hopping on a customer call right after this discussion. The short answer is that we are still experimenting, and it is constantly discussing with customers trying to understand what and how they perceive the value. We want to be a value-based pricing structure, but pricing is really hard. The way that we are currently thinking about it is basically aligning our success to that of the brand. So tying payment or the bulk of the payment to the use of the codes and the engagement of the codes. That is how we really see this being scalable and also mutually beneficial to our customers. Pricing is something that we are testing constantly and learning a ton about, but it is really challenging.
Eric: I could see 50 different approaches for this and probably 49 of them are just all over the place and not necessarily the right ones. I have always been curious how entrepreneurs come up with pricing, and your environment seems particularly challenging to me.
Kait: Yeah, it is a challenge. I mean, I would say one other thing that we have done is given it is a new product, it is tough to really be like, “Okay, we will get competitors.” But we do look at what brands are paying for, like what other services whether it is in the marketing domain or kind of like your typical SAS product to their brand would be incorporating, what our brands use to paying, how do we think our value aligns or is different than that, and then that at least provide some order of magnitude for us to price the product in a way that probably fits. And that being said that the other challenge of pricing is that depending on the type of brand that we are talking to, that is a really different pricing conversation. So an enterprise customer has extremely different pricing than a bunch of the brands that we are talking to on Shopify. So that too becomes an entirely different framing of pricing.
Eric: Do your retail customers particularly look at you as a cost center or as a means to increase their revenue?
Kait: Definitely a means to increase their revenue. We see ourselves as helping them drive brand loyalty with their customers. So ultimately what they are buying from us is the ability to get direct access to their customers that they otherwise would not have access to. These are super high value customers because they have already purchased their product, but that brand currently is no way of speaking to them. And so now, in getting access to this information, they can help drive a loyal long-term relationship with their customers. That is definitely the way that we see it, and we don’t want to be positioned as a cost center.
Eric: Got it. Nobody wants to be a cost center because those are always challenging to sell by far. I could go on down the pricing rat hole for a long, long time and pick your brain on this in great detail. And I suspect that if I talk to you again in three months, you would have something completely new to tell me.
Kait: That is probably correct.
Eric: Yeah, and I might call you back in three months, so just watch out for my emails. You’ve talked about advisors. It sounds like you’ve got a whole sort of support staff behind you. Can you go into a little bit more as to how you identify the advisers or did they come to you? Is this through school? Was this some other vehicle that you found these mentors, and what sort of advice that they had given you thus far?
Kait: Sure. So the way that Zack and I thought about advisors, and I can’t stress enough how valuable they have been, it is a way to really build your team early on with incredibly smart and accomplished people. But the way that we thought about our advisors is, what are the skill sets that we are currently missing, and how do we help fill those gaps? One of the early advisors that we brought on was a woman. Her name is Kathy Barnes. She is incredibly accomplished on the marketing front, on both the agency and the brand side. And what we realized is that when we are selling to brands, we are often talking and selling to the marketing department, and neither Zack nor I have marketing experience. So her early insights about how to characterize this to marketers, what language they see pricing in, how they will equate that to other metrics. She has been extremely valuable tactically in that regard, but from an advice perspective, she is also been this amazing coach and sounding board as we together have gone through these different roller coaster rides of a company.
Kait: Another area that we were looking to fill was brand relationship. So you talked about channels or how we have gotten introductions to brands. Another one of our advisors, her name is Alexandra Wilson. She is the co-founder of Gilt Groupe and Glam Squad. She is extremely connected and successful entrepreneur in the brand space. Actually, her role as founder of Gilt Groupe, she was actually onboarding the brands, the early brands on to that platform. So, she has been extremely helpful in helping us understand the different brand landscape, how these retail brands like to think about positioning and the product as well as making a lot of strategic introductions to brands themselves.
Eric: You mentioned these folks that have deep relationships. This leads me to the next question of let’s assume for a moment that sales pick up dramatically, that funding increases, that the light bulb goes off for the rest of the world and they see the value that found is now offering and the potential that it is going to have in the future. Where do you first start to invest that inside the company?
Kait: So three places. The first one I will mention is because I am literally hiring for this role right now is design. We are providing this semi-customized experience so that it is branded from each brand that we work with from an onboarding experience when the consumer scans the tag. So that is a lot of design work. We have been working with a one contract designer, but we just are feeling the pain of, “I need to slow down on the sales side because we can’t support some of the app customization just from the branding perspective”. So design is the first resource that we would be hiring. The second is software engineering to help us continue to build this product and have the different integrations. I mentioned Shopify. That is on our roadmap. We are working on it. We are not there yet. So, software engineering and then sales. I need to duplicate myself, and I can have someone that is helping bring in the lead so that I am not doing every aspect of the funnel. I could be doing more of the pitching and closing. So design engineering and a sales rep would be our definite first tires.
Eric: The moment I find someone who can replicate you, I promise I will call. I have yet to see that one. And to be honest with you, I don’t know if I want to. Let’s turn the question around the other way. Let’s assume for a moment that you hit a cold spot, that things slow down a bit, that people are not necessarily getting what you are selling. What resources do you pull out and where?
Kait: Luckily, we are extremely lean right now. My co-founder and I are the only full-time employees, and everyone else are contractors. So we have the ability to be pretty flexible in monitoring hours. And frankly, whether it is different contractors that are working with us on the sales side or the engineering side, we are super tight with those hours to begin with. It is kind of on a weekly basis how we are monitoring them. So I think that if we don’t know what product we are selling, we would definitely tighten up sales immediately and stop on the product side, re-evaluate what we are building, cut our own funding as well, and focus on getting back out talking to customers and thinking about what was the value that we saw, is there an opportunity to pivot in a way that we think that there will be more value. So I would definitely want to pull back on engineering resources because if we are not going to be building that product anymore, that would definitely be a waste of money. So pull those back. Luckily, given its kind of contract resources, we have the flexibility to do that in a pretty quick way.
Eric: I noticed you have a background in finance. You mentioned that you are definitely developing your sales skills. What are the skills do you think you want to really focus on and why?
Kait: A really important part of being the CEO of a start-up is building your team and hiring and managing. I am on a daily basis, like learning how to better incentivize and motivate whether they are part-time or full-time members of our team. So managing as a skill set I think is critically important. And then hiring, how to be a really excellent hirer of people of good talent. That is a skill set that I am definitely working on developing as we bring new people onto the team. It is super important to us that we are bringing on fliers because this will help bring in smart people around us and talented people, especially in the skill sets that we don’t respectively have can help propel our company forward. So being able to identify and attract really great talent as part of this broader role in hiring is a skill set that I am definitely constantly looking to develop.
Eric: Let’s take the conversation back to the very beginning. What advice would you give yourself back on the day that you first came up with the idea?
Kait: I would tell myself that it is going to be a long journey, but remember to have persistence and keep looking back at everything that you have learned. I have learned so much each day. The days are like dark years, but it takes a certain amount of grit to keep going because there are so many ups and downs. So I would just remind myself that it is going to be a difficult journey, but it is incredibly rewarding. When I look back at what is different from my previous roles, which by all means were incredible jobs to have and incredible companies to work for, but I feel like I am working for something that I believe in so much deeper and I am so much more passionate about. So the day-to-day in terms of how amusing, a fuller version of my skill set in myself is so incredibly rewarding, which I think helps dampen some of the downs. Like when you remind yourself, look at what you just learned to do or like look at the customer that you just pitch to, like your own product. It’s just been such a cool and rewarding experience in that regard that sometimes I would tell myself to be more reflective and think about where I’ve come because it is very easy in that moment to get bogged down by whatever is stressing you out or frustrating you at that point in time.
Eric: Is that what you would share with another entrepreneur and sort of at the day one, or entrepreneurs at day 50 or day 100 or whatever? What advice would you give them, or is that essentially the same thing that you think they need to focus on?
Kait: I think any entrepreneur needs to have a ton of grit, and I think that that is just a qualification of this life because it is just challenging. I think that you need to have that kind of mental and emotional desire to do this enough to put up with the ups and downs because it is certainly not stable the way that a traditional job would be. That is the advice like you want people to go in eyes wide open. So I think that that is absolutely what I would tell any entrepreneur to expect.
Eric: I almost always end with this exact same question, and it is not necessarily about the roadmap. But what is next for Found and what is next for you? Where do you want the company to go in the next five years, and how do you see accomplishing that?
Kait: We see a world where every item could have a unique identity. I know that that goal is ambitious, but I think that there is this really unique moment in time right now where everyone is using a smartphone. Consumers know how to scan a QR code because they have been forced to do so because of COVID. So there is this like really unique moment in time to work on a product that I think has this real opportunity to truly touch every item. And so that is where I would like us to go, and that is where I think that we can go. To get that flywheel started, there are some really hard sales conversations in the beginning to get those early brands on board. But what I have learned in this industry is that brands definitely follow one another, so that becomes a flywheel effect just by in the sales process. So that is kind of like starting with the brands. As part of our vision, we also want to give consumers the ability. Like when you register an item, it enters your virtual closet, this place to track everything that you own. We want to give consumers the ability to add other items that are not even participating brand. So then that becomes a pull strategy for us to really start to grow this network effect of building brands on our business. I could see us in five years, like we are in thousands of brands. It is a ubiquitous solution and people just know you can just tap your product for information, for registration, for reward to upcycle the product. That is where I really see us going.
Eric: Kait, this has been fascinating and especially because of my familiarity of some of the things that you are trying to do, I can see where this is going. I wish you incredible success and don’t forget the little people along the way, namely the guy who invited you to a podcast. So thank you so much for everything.
Kait: Eric, it has been wonderful chatting with you. Thank you so much.
Eric: Please go out and land the next customer. I really hope that that’s what happens. Thank you.
Kait: Thank you. I appreciate that. I am headed to a customer meeting now.