Boxed: Chieh Huang

Hey everyone, just a quick announcement before we start the show. So A lot of you may know how much I miss seeing all of you at the live in-person shows that we do around the country during normal times. So I am really excited to finally announce our first how I built this virtual event. It's happening next month with Jay Shetty. Jay is a best selling author, former monk, and wellness coach, and if you're searching for purpose, peace, and clarity in your life, or you're struggling to find meaning and motivation at work, you will not want to miss this conversation. Please join us. It's happening on Thursday

March eleventh, and anybody around the world can take part. For more information and tickets, Head to NPR presents. Dot org. And I hope to see you there. I remember I was driving home from a meeting in New York, and one of the folks that quit his six figure paying job to join the dream and sit in my garage called and said

Dude, I refreshed the page over and over. It's not broken. We got zero orders today. This dropped down to zero two days in a row. And he was like, dude, I I risk my livelihood to do this. Are you sure this is still gonna work? From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements.

They built. I'm Guy Raz and on the show today. Now Chi Huang co-founded two companies. First in a New Jersey attic. The second in a New Jersey garage, and that one

Boxed? is now an online retailer that's been valued at more than six hundred million dollars. If you have a startup idea and you present it to someone you trust, there's a decent chance that person will ask you two key questions. What makes your idea different from what's out there and can you create a market for it? Now, these questions might seem obvious, but they actually got much more traction after a book came out in 2004 called The Blue Ocean Strategy. The premise is pretty simple. A good way to start a business is to come up with an idea that is significantly different or new.

and is relatively low cost to start. So instead of trying to compete with big players, try to find uncontested market space, a space you can completely own. Netflix is a great example of this. Obviously, it has more competition today, but when it started? It offered something completely different from the video rental shops, and it built a market for its product that didn't previously exist. Blue ocean strategy. Which brings us to today's story, because this is a story.

Precisely about the opposite strategy. or what's called the Red Ocean strategy, where you're essentially working to beat the competition with a different strategy. When Chae Huang and his partners launched Boxt in 2013, They entered a marketplace with some pretty massive players. Amazon, Walmart, Costco, Target, Kroger.

You name it. But Shay believed there was an opportunity to build a solid business right in the middle of that ocean of competition. And he based this hunch on two key insights. The first was that consumers would eventually start buy more things through their smartphones. And the second was that you could create an efficient, profitable e-commerce retailer by focusing on a narrow band of products. And so Boxed only sells the most commonly purchased items.

Things like paper towels and Oreo cookies and Lysol and Cheez-Its and Cheerios, you get the idea. And unlike Walmart, where a typical superstore carries a hundred and twenty thousand items. Boxed only sells about 2500 products. which allows the company to negotiate lower prices on those items. The idea for Box came from Che's previous venture.

It was a mobile gaming company called Astro Ape. And at the time, it was still early days for mobile gaming, but Che realized that mobile phones would increasingly come to dominate all parts of our lives. But Building a business, any business.

Wasn't in Chay's original plan. His immigrant parents wanted him to pursue a stable, safe, prestigious career. So Che, as you will hear, chose to become a lawyer, which of course didn't last long. Che was born in Taiwan in the early 1980s. His parents moved the family to the US when Che and his older sister were young.

And they settled. In Baltimore. I think it's just like Yeah. America could write a brochure.

To all immigrants, uh you know, even without writing it, it would say come to America, study. Kids become a doctor, you live in a McMansion. And life is good. Right? It's like That should that should be the brochure. I'm sure everyone read it. And and what what did your parents do, uh when you were a kid? What did they do for a living? I remember when we first came to the States because the language barrier was a very real thing for my parents

We had a really rough start to our stay In this country. Meaning that my dad uh didn't have steady employment in the beginning. And then my mom worked as a register clerk.

Or cashier at a at a Chinese takeout place. right next to Johns Hopkins University Hospital there. And my dad sold odds and ends on the weekend at local flea markets in and around Baltimore. And then my mom Found.

Her first white collar job. as an admin up in New Jersey. And so we lived apart for one or two years, I believe, where my mom lived up in Jersey and Every weekend she would come down here or we would go up there.

And then eventually you and your dad and sister move to New Jersey to all be together, presumably. Yeah. And what did your dad do? When when he moved to New Jersey. Uh so we moved to New Jersey, my dad actually started a sporting goods company. And so he was all always rather entrepreneurial.

And he started a sporting goods company selling like, you know, paddle balls and platform tennis rackets. In a rather niche sport. But You know, definitely I would say by the time I graduated high school. We were firmly in

The middle class. Which was a far departure from where we started off Life in Baltimore. So you grew up in Edison, New Jersey and um What kind of things were you into as a kid? Were you into into sports or into video games, were you outgoing? What how would you describe yourself as a kid?

Yeah, I would say uh decently outgoing. But a kid of the eighties and nineties, you know, Saturday morning cartoons. Yeah. Uh some of the X Men you know, NBA on NBC back in the day, you know, watching the Knicks versus the Bulls, uh going out to play basketball

rollerblading around the neighborhood. So that was basically my childhood in Edison, New Jersey. Was was it really important to your parents that you did well at school? Unbelievably so. You know, when you think about Immigrants that move to the States.

You know they only know what they know and that's If you get an education work hard, you should be able to move up this ladder. And so You know, uh I like I always like to joke, but i I'm only half joking when I say, you know, it's like

A B is like Basically an F. Uh and then if I get a C and just like see you later, don't come home. Uh so that was very true in our household and and they drove me pretty hard. I guess when it came time to go to college you

Went to Johns Hopkins. You got into Johns Hopkins. Yeah. I mean I mean it's a great school, but but particularly I guess sort of special b For your parents'cause your mom had worked at a A Chinese takeout restaurant right next to Johns Hopkins when she first came to the US.

Yeah, it was a bit of A homecoming for all of us because You know, I remember my mom One time she told me that you know, maybe your kids one day will will be able to

Go to this awesome school called the Johns Hopkins University. And that kinda stuck with me. It's one of those probably fleeting comments that parents don't ever remember saying later in life. But it stuck with me and and so when time came, That was the goal that I had.

So I remember when I told my dad I got in, it was one of the few moments And to this day, one of the few moments in my life that I've ever seen my dad emotional. And then you know my mom was super happy.

And my mom Yeah, didn't really lose it until I feel like we were in the dorm. And then you know, it was it was a it was a healthy cry that my mom kind of underwent. So Everything I I felt like all that hard work. And I even think for my parents, all that risk that they took

Moving to a new world. kinda paid off on that day. What was your plan when you got to college? Like what did you want to study and what do you think you would do with that? I didn't have a plan. My plan was to kind of realized this dream that my parents had.

A generation before they thought we could realize it, so my plan was to get into Hopkins. And once I got in I had no plan after that. And And I'm sorry for the people listening to this from Hopkins, like all the folks at Hopkins who don't have a plan, you end up uh

majoring in economics. Uh, and that's and that's what I that's what I did. And you know, at Hopkins, at least when I was there You had the school of engineering and the school of arts and sciences. But then everyone from the engineering school would call it the school of arts and crafts. And so I was an econ major in the school of arts and crafts at Hopkins. Right. You graduate in in two thousand three. with a an economics degree from Johns Hopkins, really great

degree in school and and so uh what did you Yeah. So I was At the career center.

which at that time was a little shack on on uh on campus. I remember walking in and looking for the room where there was some consulting firm that was holding a an info session. And then there was a few there was one uh lady that was standing at the door of this thing called the Jet Program. And I was like, What is a jet program? And she said, um You basically move out into Japan.

It's a cultural exchange and you get paid for it and you We put you in Japan in a public school and uh you really kind of teach them the language and the culture. You know, wanna learn more and I was like That sounds not so bad. And I remember sitting in on that info session instead. And ended up uh applying.

All right, so you get into this program and where do they send you in in Japan? The the funny thing is on that application. I think they do this to this day. They ask you Where do you want to go? And so like any newbie to Japan, you're just like

Oh number one. Tokyo. Number two. You know, uh Kyoto. Kyoto, exactly. Maybe Osaka, we'll throw in a Yokohama, you know, round out the top five. And then I'm sure the other end they're like ha ha ha ha ha ha ha ha ha and they send you to the countryside. So you know Your orientation

for the program. You're in downtown Shinjuku. You're in the middle of the Tokyo that you always dreamed of and you saw On TV. And then you're like Yeah, man, this is what I signed up for. This is gonna be a rockin' year. And then you get on this bullet train the next day.

It goes further and further at a really rapid speed outside of Tokyo. And then you start going and you're like thirty minutes out, you're like, eh, not bad. You know, I can take a thirty minute ride to Tokyo and then once you're an hour out, you're like, Okay. What did I do? And then y they they drop you off where I got dropped off. It was you know I remember sitting or lying on a tatami in my apartment. Staring at the ceiling just

questioning my decisions in life'cause I was like, what happened? They're sending you out into the sticks for the most part, and I got sent out to the proper sticks in the middle of a rice paddy in Western Japan. So tell me about the the school that you were assigned to with the kids. That you talk. Yeah, so I was assigned to several schools. All within the same town. So this was a I would say a middle class town.

Public schools. About two hundred kids in enrollment. All following me around the neighborhood. Every chance they could get. Um

And so I was this like curiosity and I remember I had to go to the supermarket. later and later at night because you know, as soon as the kids would see me there, they would follow me and report back on like what I bought and what I like to eat, but um but that's what I did, uh for two years of my life. And How did you manage to just kind of navigate Japan?'Cause I'm assuming you didn't speak Japanese. I didn't.

And you know Probably most people saw me as native East Asian who just had really good English skills. And that's not who I was, you know, I kinda wanna say no, like I watched the Bulls growing up, you know? Bulls versus Nicks. Yeah X Men on Saturday morning, you know? Uh right. Um but

I would imagine if you polled all the people I interacted with. Probably at least fifty percent didn't see that side of me. being Asian American it's it's kind of a s insecurity that probably a lot of Asian Americans growing up have because You go back to Asia. Uh and people don't r exactly see you as a hundred percent Asian.

Yeah. You're here in the States and oftentimes You know, Asian Americans just aren't seen as pure American. And so that sense of belonging is something I know that many A Asian Americans struggle with in terms of Truly fitting in and where's home for Yeah.

Um Why you're in Japan. You end up I guess meeting the person who's eventually gonna become your wife who is your wife today. Yeah. Um who's a a teacher in Japan. H uh who's Japan Japanese, how did you how did you guys meet?

So we met when she transferred into the school I was teaching at. You know, by that time it was like the middle to end of my first year in Japan, so I was pretty comfortable and And so I was wearing like swept I look probably looked more like the gym teacher than anything else. I was wearing sweatpants and like and I remember I was like oh man, someone just transferred into school. I'm like, Oh, who's that? Like and why am I dressed like like a bum here, you know? And and luckily We hit it off and uh we began to to date.

Huh. So I guess you ended up spending like two years in in Japan and and and then I guess when you went back to the US you decide Uh to go to law school, right? Yeah, I I you know

As much as I joke about it, there is a checklist for most Children of immigrants. Uh it's just like number one, as we were joking about before, it's like uh you know, doctor, nope. You know, engineer, nope. And then last one was like Law school and I was like Yeah, I feel like I can do well in the L sat.

And took the LSAT and and and got into law school. And you spend Three years there and graduate. And you are a Freshly minted lawyer.

And where did you Where'd you go work? Oh my gosh. I mean oh seven was the year that I was a second year and you and you did your big summer internship, summer associateship. So I went to work at a a firm called Prosgower. They're like a big

uh sports law firm Um right in Times Square. And in oh seven it was like boom times. Like it boom times. I mean they rented I remember they've rented Madison Square Garden for us to play pickup basketball as a as an event. Wow. When you were a summer associate.

Um I mean it was like wild. But uh I graduated school And started the beginning of my professional life. September fifteenth. Two thousand and eight.

Probably. means nothing to a lot of folks, but to some folks they'll remember That was about twelve hours after Lehman Brothers collapse, who is also located in Times Square. Kicking off, you know, one of the worst recessions the country had ever seen.

Wow. And so here I was wearing My new suit that my mom bought me. New briefcase, new shoes, getting out of the subway. Looking up and just be like Time Square, I've made it. And then

out of the corner of my eyes seeing Thousands of people Flowing out of Lehman Brothers. With bankers' boxes just crying on the street. Lemon.

Yeah, literally About Nine to Twelve hours after Lehman Brothers filed for one of the largest bankruptcies in the history of humankind, uh started at a law firm, you know, one block away from them.

Well. Alright, so you start your career as a A lawyer and you discover presumably as anyone who knows a lawyer or has been a lawyer, that it's a grind. You get there and As an associate, you're just like in the trenches.

Yeah, I mean you're at your desk. And yeah, not seeing much daylight and remember saying thinking wow I I I make a decent amount of money now, but uh I don't have any time to spend it. Yeah. And I I feel like I I learned

Pretty early that I probably wasn't built for that long. Ten, fifteen, twenty year partnership run? Just wasn't for me. Alright, so you decide. I guess tears in.

You gotta figure something else out. Yeah, that's right. So I was at li I was like a a a junior corporate associate, which means I was a document jockey, basically. So it would be two AM at night You know, I would always stay an extra thirty minutes. I wouldn't bill the clients, but I would stay and just read and research the history of the businesses that we were working with and that we were representing, just to get a flavor of their story and how they made it. And I felt like It was big risk takers, but I didn't feel like anyone was was really like a bona fide genius, you know, of like, Oh man

That's something no human can do. Yeah, and so that gave me some hope that maybe I should try my hand at that. So what ideas did you start to think about? Oh man. Uh no one's ever asked me that question. So what ideas did I have in my head before uh

Probably the one that I felt like Maybe I was decently passionate about that I thought there was an opportunity in was fine chocolates. I've I've never told anyone that in my life, but

I just didn't know. I felt like as the middle class around the world started booming Perhaps there would be a big spending spree on These treats that are fine chocolates and that most middle class families can afford once in a while.

We're just looking for an opportunity somewhere. just an opportunity somewhere. I wish I could say, you know, I was really into it, but I wasn't. But around that time I remember purchasing the original iPhone. The iPhone two it was two G

A few friends from middle school and high school also bought the iPhone. And at that time uh was starting a s social gaming company building Facebook type games A K social Games.

And I thought it was a pretty good idea. Starting up. Yeah, that's right. So two friends of mine Ironically that I reconnected with uh via Facebook. Started up.

A social gaming studio After quitting their jobs cold turkey. And this is William Fong and Christopher Chung, right? Yep, so Chris Chung and and William Fong. And did they say hey, come work with us? Or did you say hey, can I work with you guys? In the beginning I think they were just too cheap to hire an attorney.

And so they they were just you know, we reconnect your like You know, if a friend was going through this, what would you tell them? And I'm like, dude, I'm not you know, uh what are you talking about, man? Like you guys need to call an attorney. And so I agreed to like just help them with some business stuff on the side. As they were starting up. And then as the game got to about launch time They

asked if I wanted to join full time And I did So William and Christopher were working on this project and asked you to kinda help them with some legal stuff.

In two thousand ten. This is like This is like the prehistoric stone age. Of Oh. Mobile gaming.

And this this company is called Astro Ape, right? That's right. Astro Ape. Studios. the name was actually from this random band name generator that if you keep clicking, you know, something cool comes up uh that you could buy the domain name in and and that's what came up. And first of all, what did your parents say when you're like, hey, I'm quitting my job at this Very prestigious law firm.

My gosh, I mean You gotta remember, these are the same parents that thought like I shouldn't come home if I got a C on my report card. So they couldn't have been prouder of me going to Hopkins and then going to law school and going to this big law firm. It was all that my mom I felt like could have ever hoped for and then to tell her I'm gonna quit cold turkey in the middle of the Great Recession to go and make video games with high school friends. You know, I I I feel like I I'm might as well have kind of torched the house that we I grew up in, you know? Like it was it like an absurd kind of uh a decision.

And at this point you were Just married or about to get married as well, right? That's right, that's right. Yeah. And so assuming I'm presumably your wife was super supportive, I mean pro probably that helped. So supportive.

Just so supportive. I I also think being kind of young and without kids, like That also helps uh quite a bit in in kind of your risk profile. And also I think the key was that a lot of entrepreneurs don't think about is your personal runway.

And so you talk you know, everyone talks about their company runway, how much money they're gonna raise, et cetera, but the early days. You're probably not paying yourself anything or if anything, just a very minimal salary. And so I had saved enough money from the law firm. To live

My current lifestyle at that time I didn't have to vacate my apartment. For a good twelve. So I felt like if I gave it a try and it didn't work out. At least I gave it a real try over twelve months and I would go With my tail between my legs back to the law firm. If they would have me.

Right. So you knew you could maybe maybe do that. Okay. And when you told like people who didn't quite know what you were doing, which was which would have been most people in 2010. Hey, we're yeah, we're making mobile games. What how would you describe what what you guys were doing? It's so hard because no one really even had a

iPhone back then, you know? And so it was like Telling them that they should buy a nine hundred dollar phone just to be able to play a game you guys were trying to make. It was like an ups it was just so weird. You know, people just you know didn't really get it. I think the closest thing That would

Resonate with folks was that You know, hey, there's all these games on Facebook. But you know, these phones that we have are gonna get more and more powerful. So you can probably play those similar Connected. games on your mobile phone one day.

And we think that day is now. This is like the era of Farmville and and Stuff like that. Yeah, Farmville, Mafia Wars. Uh, for all those folks that played those games, yeah, th that was the era. Yeah. And and and by the way

Um William and Chris did like Did they did they have to raise money? I mean, how are they financing this business? So I think they put in each like I think the buy in, if I remember right, was about thirteen grand. Not much. And not much because you know, buying a powerful IMAC that you can kind of build off of, you know, it's like a few grand right off the top. Yeah. And so I remember

You know, it's like lawn chairs in his mom's basement. And then we graduated to the attic. This in New Jersey. In Jersey, yeah, in Jersey, right where in the town where I grew up, so It's kinda like You know, you're at this big law firm, life was on a great trajectory and suddenly you find yourself

having to take your sh shoes off as you go into your friend's mom's house, uh so that you can go into the attic and build a video game. It's like oh gosh, like I feel like my w my life has been twisted in reverse. And the concept, by the way, was to it was to build one game initially. The idea was to build one game. Release it. Become millionaires and then retire.

Release it on like the i the app store on a on the iPhone. Yeah, at that time, uh, you know, it was both the app store and also you you just released it on iTunes. The app store had just launched. So y a lot of people you just threw your app onto iTunes. And what was the concept of the game? So here's the ultimate irony. The game was called Office Heroes. And so it was this tongue in cheek build and decorate game.

So you basically you do menial tasks like you click on check email and then you come back in two hours and you collect your money from that. Or you you make coffee and and in fifteen minutes you come back and so instead of like growing crops like you would in Farmville, you would do menial kind of like office tasks. And then you can buy like uh you know, instead of Starbucks coffee, you'd buy five bucks coffee. And so it's a real tongue in cheek. about like kind of working in an office. And how did you guys managed to build that? I mean was it didn't it cost money to to build that or or no? Luckily at the time, you know, it was so nascent that just using open source software

you could do it and The story with us was that Will was an excellent coder. Chris. he was in finance at the time when he quit, but he actually had a really good knack for art. And so he would make the most beautiful spreadsheets in the firm, he said. And so

He actually visually design the whole game and all the assets single handedly. So Will was programming, he was like coding this thing. Chris was designing it. He was kind of saying, Okay, let's let's you know put a window there, like a a sleek desk here. And it sounds like you were kind of doing the the business Side of things.

Yeah. That's right. And what were you trying to do? I mean Presumably the strategy wasn't to just throw it up on iTunes and and then the App Store and just hope for the best. Like you had to Get the word out or you had to

Drum up excitement. Like what were you doing to kinda lay the groundwork? Oh God, you you give me too much credit or you give us too much credit because that's exactly what the plan was. We're gonna throw it up there and and people all around the world were gonna play it, you know? So we we drum up some interests from friends and family, try to get a few But beyond that, it was it was just Hopes and dreams, basically.

I mean, I'm thinking if I went to to Johns Hopkins with you and then I knew you and I knew you went to this law firm and you and I I ran into you in New York and you're and I was like, Hey What's going on, Jay? And you're like, Yeah, we're making this um mobile game uh where you like you're you're in an office like an office simulator where you like open up emails and I just I quit my job as a firm, I'd be like Oh, that's awesome. But in my mind I'd be thinking, This guy's nuts. He's totally nuts. This is the stupidest idea I've ever heard in my life.

I literally ran into my sophomore college suite mate on the streets of New York and told him that story and and you could tell in his eyes it was like cool story, bro. Like he definitely got fired from the law firm. You know, it's a bad recession, but come on, just own it. Get back on your feet. What are you doing? You're you're like a grown man making video games. Like, office simulator? Wha who would play that? So That's what I'm thinking. How by the way, how long did it take you guys to to build this game?

About uh little less than eight months. Alright, so Eight months in the You guys launched this game. In in in what? In two thousand eleven or two thousand ten?

Two thousand and ten. How much did the game cost, by the way? It was free. It was one of those f it was one of the earlier freemium games where you you basically Downloaded the game for free, but if you wanted to buy s more points or buy the special desk, you'd pay like three ninety nine or four ninety nine or ninety nine cents. So it was one of the first f one of the early freemium games. So basically by buying virtual products. Exactly, virtual currency is what we sold. And you know, y could you imagine trying to explain at Thanksgiving or a family gathering back in twenty ten that you sell virtual currency on a smartphone? Like that you can't use in real life. Yeah, exactly. And so people thought like, Oh you cash it out, right? You could always cash it out and you're like, No, it's not a casino. Like

Yeah, it was it was difficult to explain. And Do people find out about it? So that's the thing, man. Like The games business is hard. We found out. We put it up on the app store.

And we're like, here we go, book that vacation to a warm tropical space and It just got lost in the ether, so I remember all the co founders said that their parents were playing the game. Or the parents told them that they were playing the game, including my parents. And uh I was like, Yeah, that's impossible because only three people registered as daily active users. And so someone's parents are lying to us, so it was not a pretty sight in the beginning and and After a few weeks of that, I felt like

You know, it's probably Time to grovel back to the law firm or somewhere. Because this ain't gonna work out. When we come back in just a moment. How what started to look like a failure.

Was saved at the last minute. By an unexpected endorsement? on one of the world's most prominent platforms. Stay with us, I'm Guy Raz, and you're listening to how I built this. from NPR.

Welcome back to How I Built This from NPR. I'm Guy Raz. So It's two thousand ten, and Chay and his co founders have just released their first game. Office heroes. And almost nobody is playing it. And then

One day. They notice something weird with their server like It suddenly Overtaxed. So I remember uh getting a call from one of our co founders and saying, You gotta come to my house now, like we're in trouble. And I race over there and I'm like, What's going on?

And he's like dude, someone's someone's hacking us. Like Th like the useless patterns are all over the place and I was like Oh my gosh, like On top of no one playing the game, we just got hacked. Like this is what a terrible what a terrible company and

We all sat down and thought about it and I was like That doesn't make sense, man. We don't hold credit card numbers. And we have three people playing our game, so even if we did, they would make away with my credit card and yours and yours, and none of our parents, you know? So you th you thought, hey, someone's hacking into this thing because our server's like overheating. Yeah. That's exactly right. And so we sat down and said

Check what they're doing. Like are they actually going through the levels like And Will actually said it Actually it looks like People are playing the game. Like they're not just pinging it or trying to DDoS it. They're like

They're actually playing the game. And I was like What? And then We got a call from

one of the kind of launch firms that we eventured to help us with the with the launch and We found out that We were on the front page. Of iTunes All over the world.

How did that happen? They evaluated the game. probably like the story of us just being a few country bumpkins in Jersey in a in an attic trying to build for this new platform they were launching. And like the fact that we're building a social game which was wildly popular on Facebook at the time, but not so popular on iTunes yet. And featured it. And there we were.

all of a sudden people start flocking to it and were people buying stuff? People were buying stuff. So We were making money. But not a ton of money. Um because you know, we were brand new to this game. Uh and so the theories of

How do you get this core loop of kind of user behavior going. We weren't privy to it at the time, so so we made a ton of mistakes on retention and other things. And so Yeah, we made some money from it, but not Angry Birds type money. And Apple takes like twenty percent anyway. That's right, yeah. Yeah, they take a cut anyway.

All right, but you start to make money and I guess it presumably becomes clear that you gotta make more games. That's right. And it also becomes abundantly clear that W we need to raise money because the bank account is almost at zero. And so we weren't taking salary money was coming in but not t to the level where we needed it. So We thought we had to go

Kiss the ring somewhere and raise money for this thing. And did you? We did. I I you know We were total noobs to this. Remember, like Central Jersey where we grew up is not Sand Hill Road. So we didn't know any venture capitalists. I didn't know much about venture capital. So

I just Googled um Best Silicon Valley Law firm. 'Cause someone could help us there. Um And a few names come up and I got a on a call with One

Attorney. And You know, and I I remember asking him like w what makes him qualified to be our attorney'cause you know, I've come from a law firm where Yeah. I thought lawyers always had to pitch for for work. Yeah. And I remember to this day he said I don't know who you are.

But I don't think you know how this works. I I choose who I want to represent and I don't think this is gonna be a good idea. And it was a short curt call and I remember looking at One of our first uh employees in J Sing Wow, that was not good.

But later he came back and said, You know what? I grew up not far from you guys. And I like the fact that you guys are pretty naive and you know, maybe maybe we can make something out of this, so You know.

I'll I'll take a flyer on this and we'll help you guys out. Alright, so you guys uh Raise some money. How much money d did you raise? Well, almost nothing in the beginning. We thought like we hit another bump because As we hit uh

the road as this attorney kind of connected us with like big and prominent Silicon Valley venture capitalists, the first meeting we had you know, I remember this day, like we showed up at the meeting And we had breakfast. And at the end of breakfast, he closed his notebook and said, You need to immediately go back to your guys' day jobs. You're not business people. This is a side project.

This is not gonna work out well for you guys. Yeah, Wow is right. But this is after you like pitched What you'd been doing. And and at this point, do you remember like What what kind of numbers were you showing at like were you able to say, Hey, look, we we're we're banking like half a million dollars in revenue.

Yeah, so hundreds of thousands of people playing it. And Probably are. It just how naive we were, uh was probably showing that we truly were first time entrepreneurs, had no idea, quote unquote, how the game is played. And just had like dumb luck of making this game at the right time and

And that was the hard advice that we got. And I remember It was silent in the cab ride back and I remember telling everyone in the cab like well I don't think that went well. And uh and You know, Now I laugh about it, but at that time people were like

Yeah. This ain't isn't gonna be easy. But we eventually raised money. Because And this is connecting the dots all together. So

We uh got a message, ironically, on Facebook. From one of the largest gaming social gaming companies in Japan where social gaming had already taken off uh on mobile. They said their CEO was in town. They wanted to Growth

Their US presence. Could you meet her next week? And and how do they even know that about you guys? 'Cause they saw us on the front page of the iTunes. Okay. And so

So a week later We go into the meeting. CEO's there. Flanked by probably ten to twelve It's a big giant.

Conference table. Me, Will and Chris. And all these Bankers are staring right back at us. And were they all from Japan?

They're all from Japan. And it was about as frosty of a meeting you c as you can ever imagine. And as a throwaway I said you know what? I don't know. Why not go for it? Let's shoot our shot here.

I speak a little Japanese. And the CEO's like, Oh, really? Tell me about it. Where did you learn? I was like, I lived in Japan, and she said, Where did you live? And I was like, Oh man, I'm gonna embarrass myself. I lived in the backwaters. Um So I told her

Where I lived, which was Nigata Japan. And Her eyes lit up. Because she said. I grew up in Yigata.

And we just hit it off after that. Like I knew I knew the seven eleven that she went to when she was growing up in middle school and going to high school. Like We just hit it off and less than a month later they wired us our first ever investment. How much do they invest? Eight hundred thousand dollars. Wow.

So that was that's real money. I mean you you guys could really start to ramp up and and I guess at at that point you you guys actually got an office. You leave the attic and you got an office in New York and and hired a few people. And then what did you guys do? I mean did you Like to start making more and more games. Uh just like the first one? That's right. And you basically have the engine of the game and how a lot of games make money efficiently is they basically just reskin them. and so instead of doing menial tasks at your laptop, you can now bake bread in your mini In your mini bakery for dessert heroes. And it's but it's the same it's the same backend. That's right. Like all the

The coding in the back end is exactly the same. Exactly the same. You're just skinning new art, new dialogue between the characters. Wow. And that's it. And you just and you just keep pumping them out. Wow. Business become profitable. It didn't become profitable, but we actually weren't burning that much money because all you know purely digital businesses, anytime someone makes a purchase, your gross margin on that is gigantic. Right. And so we weren't burning that much money, but we also didn't raise that much money, so we ended up having to go out and hit the road to try to raise a real series A investment round. And

Did you raise that money? We did not, as we were Patrolling the mean streets of Palo Alto looking for a series A. Uh we got a call from Zinga. And their corp dev team saying, Hey, we heard you're in town raising money and I was like, Wow, uh you know, news travels fast in this industry.

Can you stop by the office and And we did and They eventually made an offer for the company. To acquire you. To acquire us, yep.

And Zinga was this was like They were the biggest At that time. They like kinda owned gaming on Facebook and Right? I mean Farmville and

And all those games are just huge. Oh yeah. And just not only in games were they huge, but within Silicon Valley it was seen as a game changer because here's a company growing at Ginormous growth rates. making like, you know, huge gross margin selling virtual currency.

Basically just printing money. And so they were on top of the world at that time. So they basically said we want to acquire you, wanna want to buy you and you guys looking at this offer and thinking.

This is more money than we've ever seen in our lives, yes. Yeah, it's funny because you know, we were kind of enjoying what we were doing. We had raised money You know, we're out of the doldrums of the attic. And so we're like, you know, I don't know if it's time to sell the company, but um I remember sitting there and they slide a piece of paper across the table. And then you read it, you're like, H time to sell the company. Yeah, that's good.

What the acquisition amount was for? Yeah, it wasn't deep into eight figures, but it was definitely double digit millions. Uh a a mix of cash and stock. Right, which you guys then split and I'm sure some of the people you hired got some equity. So everybody walked away with with with a little bit of money in their pocket. Oh my gosh. You gotta think like Growing up

Let's just call it like growing up earlier in childhood, being poor. And Seeing that number Y you're like you're almost like

I feel like I wanted to be in the shower fully clothed crying out of happiness. Yeah. You know, like it's just like I had made it. And presumably it was not enough money to to mean that you would never have to work again, but it was it was certainly enough money that would enable you to take risks and start something new or certainly maybe buy a house or or stuff like that. That's right. And I to this day I find it I found it so hilarious driving around my neighborhood after that had happened because you don't like Chris's childhood house had new siding. There's a new like Honda C R V in front. And I was like, Oh my gosh, you know.

Upward mobility, man. You know? Yeah. You know, it it was just hilarious of like normal people living in the burbs that that kind of made some money and this is what happens. You buy new siding for your house. Um all right, so you guys so so you're acquired. Esther Ape is acquired by Zinga and and the three of you stay on and and and you're basically

still running the office, right? And and was it markedly different from how it was Before. It was in the sense that you didn't have to worry about keeping the lights on. Right. And it was like probably the most joyful experience of my professional life. you know, in those first months after we were acquired because it was all the fun of making games with people you liked. And we were isolated in New York.

It was it was great. So What happened? I mean, it sounds pretty great and you know, it's like this is the beginning of the dot com two point oh boom that we're still in the midst of. I mean, with all that money coming in, the ping pong tables, whe whatever you had there. And you had shares and steady you know

Income. Why did you decide to leave? So the first few months were wonderful and then, you know, as they were getting closer to IPO, one of the questions that analysts had and everyone had was, Well, what about mobile? Mobile seems like it's gonna be a big thing. Yeah. And so we suddenly, you know, we graduated from Will's mom's attic to the basement of Zinga where we were like the mobile's gonna be big, folks.

And then suddenly They were like Mobile, didn't we buy a few folks at mobile and The eye of Sauron came firmly on us. And we were getting pulled in different directions. We merged our studio with other studios and It just felt

more and more like A day job versus kind of the The fun kind of times that we had previously. It was meetings, it was like more sort of strategic control from above because i i it sounds like in the beginning they were kinda leaving you alone, but once it became clear that mobile was gonna be the future corporate headquarters folks were like, Oh, we better like

get our fingers into this thing. Yeah, and we better we better get our money's worth. Was there a point I mean was there a point where you knew you were gonna leave? Yeah. I I think so. I th like just tongue in cheek, like we had a um a game graveyard that uh all the awesome games that we wanted to make, but the home office didn't allow us to make, there became this massive wall. called the game graveyard in an office. And then the home office HR heard about it, made us take it down, and I think at that day I was like, Oh gosh, I think that's I I don't know. I I feel like

There goes all the fun. So probably that was the day that I came to the epiphany. That's probably time. And so presumably you're you're now I mean you you'd started this business with your childhood friends with Chris and and and Will. Were you guys talking about what to do next? Um we were not at that time. We just felt like everyone probably needed a little bit of a break. And at that time, games had evolved quite a bit so that our skill set in making the games that we used to make were not well suited for where games were going.

And so I wasn't gonna stay in games and neither were many of the folks that we worked with. Yeah. But you know, in the in the time that we did have coffee together and thought about what's next, uh we just felt like We got the thesis right, right? Mobile was gonna be big and we rode that wave. So if we have all this knowledge about mobile, How can we go after a bigger opportunity than just social games? And so it was from those discussions that we thought, commerce, man, commerce. People are gonna use these phones to buy things in the future. And that is way bigger of an opportunity than just virtual currency. So as we came back together, we just began building a mobile commerce engine. So you can check out, you can buy things. We didn't know what we were gonna sell. Uh at that time, but we just started building the bones of a commerce stack.

How did you then begin to start to think about selling like bulk items? Like you know, household. So It was basically calling upon our childhood, so we thought mobile commerce was gonna be big.

But what are the things that what are the challenges that we can actually so I like to think about kind of opportunities as a a mix of What are big kind of wild themes that the world will live out to the next five, ten, fifteen years. And how do you marry that to an actual problem someone has, you know, of day to day and so

You know, that wild theme was mobile commerce And then we ended up figuring out that wait a minute, like we all live in the city And I hated buying toilet paper downstairs at the bodega. For like three dollars a roll.

When I knew it was like ten dollars for a giant pack. At a warehouse club. And so you know, shopping at the price club back in the day all the time with my parents. I was like, Man

Can I buy this bulk stuff online and in twenty thirteen the answer was no. And that was our epiphany all growing up in the burbs. We knew that was what we needed to do. So you're thinking, hey People who live in cities like us.

They don't go to price club or Sam's Club or whatever, Costco. Because they don't have cars. They don't drive out of the city. So let's bring

Bulk warehouse. To them. Yeah, that's right. And We felt like there's probably millions of folks out there that had a similar problem like us where, you know, you grew up knowing to stock up to save.

But didn't have the time. the means or the patience to do it, uh in their adult lives and and that was who we wanted to cater to. Hm. But then how do you like w what do you guys start to do. I mean, uh did you because this is not a m mobile game that requires like

uh thirteen thousand dollars from each of you to to launch. I mean this is a big enterprise, right? And you guys now have a a couple of million each from from the sale, presumably. But that's not enough to start a company of of this scale. And so So w like what do you do? And by the way, I I should mention at at this point I think you brought in another partner, uh, Jared Yeaman. Yep, Jared Eamon.

Sh and and so it's a four of you. And you decide you're gonna launch it. So what did you What was the first step in in kind of setting this thing up? Yeah, we um luckily after kind of exiting Zinga and where we had a decent outcome.

We had A few investors that were willing to fund us no matter what the idea was. Because you had a successful exit. Exactly. So they said, you know, we didn't invest in your first company, but hey, it looks like it ended up okay. you learned a lot. I wanna be on the second ride. And so basically

Half of our What I call blind checks. Right. It's like people putting, you know, fifty, hundred thousand dollar checks to help you kind of Get this thing up and running. That's right, so have at it. There was one investor though who actually said

This is the dumbest idea I've ever heard, meaning that if you had told me nothing, I would have written a blind check to you. But I have a fiduciary duty to my LPs, my limited partners. And after you telling me this stupid idea, I can't in good conscience invest in you. Why do they think it was a stupid idea? I think they just thought I mean there was like the the question of, okay, this sounds awfully like web van and I barely use my phone to buy anything and the last thing I'm gonna buy on my phone is Die Coke. Not just one Diet Coke, but like two cases of Diet Coke. Exactly. Already thin margins. How are you gonna make shipping work? And one of the other quotes was You guys are

But moving atoms around the country is not your thing. Right. And that is a different game. And that that quote stuck with me to this day. That person actually ended up investing, but just warned us that that was what we were signing up for. All right, so you guys did a seed round and I I guess you raised like a little over a million dollars. That's right. And It so initially it was gonna be a mobile app.

Which is one thing, right?'Cause'cause you guys had proven that you could d develop The technology, so building a mobile app seemed plausible, but first of all, what were you gonna sell? How did you decide what you were gonna sell? So we thought we can get away with just selling two hundred items. The fastest moving items. And so I personally picked all two hundred items. And ha and what did you what did you base that on? Like did you do market research? To the extent possible, you know, just like some market research, but good old store walks as we call them in an industry and just walking other people's aisles and seeing what's on what's on the end cap, what items are being promoted. Right. And then also just talking to people in the stores, it's like, Hey, I saw you picked up that can. Do you like it? You know, why why did you pick that up? So what were those two hundred it like some of those two hundred items?

Oh like uh laundry detergent pods, toilet paper, paper towels. We had some Distinct mistakes like protein powder in our first two hundred items, Sriracha sauce. Certainly a lot of hits. But certainly a lot of duds as well when I look back. Alright, so the idea was you're gonna focus on tuner products.

But to make this attractive to to consumers It had to be I Decent price.

And you had to have a lot of it, so How did you even begin to approach Who did you approach? Did you like go to Coca-Cola and say, hey, we want to buy a lot of Coca-Cola? Or did you go to like Proctor and Gamble and say we want to buy a bunch of Tide. Or did you go to distributors like The cause that just seems overwhelming to even navigate.

You know We did that, and you can imagine writing a cold email to someone at a big CPG firm saying I started a business in my garage. Yeah. I'd like to do business with you and we're willing to buy ten units. You know, like I don't even think it gets read. It automatically probably gets flagged before it even makes it to a human's inbox. And you know, to this day If you ask some of the old timers or the early employees of Boxed. They'll tell you that was the most unreal thing that they thought we could never get across was to

Form a company in a garage and end up getting the largest CPGs companies of the world excited about us enough to frankly sell us their product and to partner with us. And was your headquarters in Edison, New Jersey? Yeah, it w it it was in Edison, New Jersey, right back where I grew up. Because we We knew we didn't have that much money to start a proper warehouse facility and I knew we were gonna make a ton of mistakes.

And so Let's just keep overhead low. So we got a windowless Conference room in New York City if we needed to have people there and then most of us worked out of my garage in Edison, New Jersey.

And did you just order a bunch of that stuff? And and like just like Stuck it in your garage. Totally. Like however we can get it. So calling random distributors

If there was a hot item that no one had Or no one wanted to sell us, like just going into a store and buying it off the shelf and then reselling it, you know, whatever we could do, because people did not want to do business with us uh we were in a garage. I mean uh looking back, I don't know if I would have done business with us. People didn't want to do business with you business with you because you were in a garage or because Because it doesn't make sense to me. I mean why why wouldn't uh you know, somebody want to do business with you selling their products? Yeah, it's really strange. I used to have these day these moments where I'm like I d what am I missing? Why am I pitch people to sell us things?

Shouldn't it be the opposite? And when you're starting out in this industry, you have to understand that it's it's it's run by Bohemids feeding other Bohemids. Um and so the supply chain That how they're bonus. They're not incentivized to really sell each to people. It just doesn't move the needle for them and it's not worth their time. And who had the power at this point early on? I mean, was it distributors that you were dealing with that had the power? Was it middlemen that you were dealing with?

Everyone but us had the power. Even the the UPS lady that picked up our boxes, if she didn't come by that day or didn't want to pick it up, she had more power than us. None of the orders would go out the door. So you had a garage in New Jersey. You got the app. And You're just waiting for orders and every time an order comes in.

Somebody in that garage just packs it up. And ships it out. That's exactly right. As crazy as it sounds, that was how we started. We started to form rules around it, like you weren't allowed to seal the box. Unless someone double checked it.

And then we realize, oh man, like We need software to be able to scan the items to make sure that we pick the right items. And then we were like, Wait, where are the potato chips? I thought they were next to the kitchen table yesterday and who moved them. And so we started to build a real inventory management system as well, based upon kind of my house. By the way

The name boxed. I'm assuming like a big chunk of that million dollars you seed money raised had to go pay for that domain name. Oh, that that brings up such a great memory, so The first thought. of the company was to buy stuff dot com S T U F F And you would think it's the magazine that owns it. Yeah.

But it's not I haven't checked recently, but as of a few years ago is still for sale. So we reached out And you know, they were like, It's yours for two million bucks and I was like, Yeah. We so we ended up uh uh saying, Well, you know, guess that's not gonna work out. Um So we also had on our list boxed dot com. And we found out, you know, it's one it was one of like the few five letter names, domain names that meant something that wasn't owned by these hyper professional traders. And so it was a guy in the UK That had squatted on it since like the mid nineties.

probably bought it for ninety nine cents back in the day and did nothing with it. And so We'll buy this? Domaine, would you want to sell it? And he's like

I forgot it was like two hundred grand and we're like We'll give you thirty. And he's like No way. And we said come on. He sat on it for so many years.

We'll write you a check immediately. Come on, how many percent return is that, you know? And he wrote back and said Thirty-five and you pay all the escrow and closing fees and we're like done. We're in Fox.com was born. What was the first what was the first breakthrough you had? What was the product?

The first sale that we ever made was bounty paper towels and tide pods, and we shipped an item to Queens, and on the inside of the box Everyone that was working in my garage at the time signed it. And we wrote a handwritten note to that.

I would keep this box if I were you and we will buy it back in the years to come. Alright, so So you guys are s kind of well into it. Six months to a year really was to

More than prove the concept. We're gonna go and raise real money. And this is a Cash heavy proposition. That's right. And the added pressure was that this time was different in that we did take friends and family money in our seed round. So our first company we did not. It's not that we didn't ask, we just didn't get any. And this time around it's really interesting.

their second time around if you have a win in your first one Exactly. And it feels almost like an obligation. You have to And the question becomes, why didn't you take why wouldn't you take my investment? You're shutting me out. And so I remember telling folks that we're gonna need a lot of capital and there's a significant chance this will not. work out like our first one. And so you have to treat this like a donation.

Which is a lot of pressure. Lot of pressure. Lot of pressure. And I remember one of the things that really shook my confidence early on was that I was driving home from a meeting in New York

And one of the folks that quit his six figure paying job to join the dream and sit in my garage Dude, I refresh the page. Over and over It's not broken.

We got zero orders today. So we were getting like two or three orders a day. Maybe as high as five to six, and then this drop down to zero two days in a row. And he was like, Dude, I I risk my livelihood to do this. Are you sure this is still gonna work? So getting no orders, having this person who quit their six figure job asking you if it's gonna work out and having friends and family invest it in you and you're smoking through their money.

It's like where do we go with this? When we come back in just a moment. How Che and his partners hit their stride. With a little help.

From Hoda and Kathy Lee. Stay with us, I'm Guy Roz, and you're listening to How I Built This from NPR. Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's the spring of 2014. Boxt is about a year old, and it's barely pulling in any money. But then Chain's co-founders get a really big and unexpected break.

Every company, every person I firmly believe has a spark and not everyone takes advantage of it. Yeah. And our spark, at least early on, was A producer for the Today Show was a customer. And love the product. or a contributor to the today show loved it. and emailed us through this PR firm that we had hired and said, Do you mind dropping off items so I can talk about it onto today's show with Kathy Lee and Hoda tomorrow. No, I don't mind doing that. Yeah, I'm like who has ever said no to this? Yeah, I really mind. That's a pain in my butt. Yeah no way.

Um so we end up going to Thirty Rock and Dropping off these items and what'd you drop off? You know all like the Beautiful like laundry detergent, bounty paper towels. You know, serial. Just like our our our better sellers. Yep. And

А реме сидін there. And watching the live hit. And then There's a bit of latency'cause you have to build a basket, so The average box order has almost ten items for the order. So it's not like you're checking in and out within thirty seconds. Right. And so after about half an hour or

The order started to come in at a speed we had never seen before. Wow. And this just because Ca it was Kathy Lee and Hoda who were talking about it? Cath and Lee and Hoda were like Wait. Mobile app? don't have to wait online and they literally said, This is genius. Wow. Genius.

That's the third hour of the Today Show back then. I mean that's like that's when they were like drinking Chardonnay. That's why I'm like wine at the third hour of today's show, let's keep it up. So you know Kathy Leonhoda, if you're listening to this, uh we owe you one. Uh let me know the address to send wine to, but uh but we owe you one. All right, so they talk about it, and that's a game changer. All of a sudden You start to see orders just start to

To pour in? Pour in it's like It was so cliche, but just looking at the order log, we used to refresh it just to oh, we got one. But we just stop refreshing it because it just kept coming in and we're all like

Uh oh. Like what are we gonna do now? And so it just We ended up undrilling my garage door. So it was just a net as a garage door. Like pallets were being dropped on my front driveway. This is a residential neighborhood in New Jersey. And eventually because we're like, Oh my gosh like it's gonna start raining. So we ended up getting a uh a container. So like a pod container. And we put extra merchandise in there.

Higher neighbors, hired friends. Weren't your neighbors annoyed with all that stuff in front of your house? I bet to this day s some of my neighbors have no idea what we're doing and I bet they thought I was selling drugs. Like for sure. Cause there was just like these young kids showing up at cars, unloading boxes, and it was like What are they up to down there? But luckily We grew out of my house. And we were out before the cops were called.

And and eventually to a warehouse. You venture to our first warehouse. And um This was a physical job. I mean you weren't just like doing inventory and and then having meetings and talking, you know, to

potential investors like you were Lifting. Boxes. Two throughout the day. Yeah. And so

It was physical work, but I really enjoyed it. I felt like you know, unlike a purely digital business, you're getting your hands physic. you're like packing these boxes, you see the fruit of your of your labor every day as it goes on a truck. Now, years later, I was thinking now I look back, I'm like, wait, We were selling pink virtual cows for four ninety nine online. Amazing business. What were we thinking, you know? But uh but it is still gratifying to see all the orders go out every day, even to this day. Here here's something that I'm curious about. When you launched

From the beginning. This was gonna be a warehouse. Stor. Right. Without a membership.

All warehouse stores pretty much. deal. You pay fifty bucks a year for Costco or whatever and they didn't go in and you get You can buy the stuff. You guys deliberately decided Not to make this about membership.

It was available to anybody. But I wonder why you decided to do that because from what I understand, that's really how Costco makes their money. That's right. So for two main reasons. One is that

There were a lot of folks that we understood that would otherwise shop at a warehouse club, but just didn't want to pay. They didn't feel like from a principal perspective, they want to pay to be able to shop somewhere. And so if we can capture that audience, we could probably build a pretty big company just doing that. And then also the traditional model of how warehouse clubs work. doesn't really work online because it never really contemplated the variable cost being the main cost driver. So traditionally it's called the 10102 model. So 10% cost, you get your 10% margin on your goods, you break even all of that, and you make your two percent operating profit just off the membership. Yeah. But now

Because Based upon how much you buy it costs a different amount of money to serve that customer. Right. You can't make it ten ten two. It probably is like You know, fifteen, ten to. And so it starts to really fall off the rails. So so from a business model perspective, we did think

purely offsetting costs with a membership, unless you are at gigantic scale and you knew for a fact with years of data how much your costs truly are to serve each customer, hard to offset. But I wonder, did were people still asking you? Hey, you know, Che, how are you going to offer Better prices than Costco or Sam's Club. Was that I mean when people asked you that, were you saying well that's not what the what it it's not just about better prices, it's about convenience, or were you saying, Well here's how we're gonna offer better prices.

It was a little bit of both, and so we had to be sharp on prices, so we knew we couldn't be like wildly priced compared to similar items online. But at the same time, we wanted to target customers that value that convenience. and also valued the fact that they didn't have to pay a membership fee to get into the door. And so initially very coastal. Folks just like us who didn't have a car anymore to get to a warehouse club. But now increasingly what you find is a big part of our audience is now suburban and rural. If you're in the city, you might not have a car. If you're in the suburbs, you might not have the time. Or if you're out in the middle of uh the country, you you might not have the patience to drive

ninety minutes to your local warehouse club just to save ten bucks. Because you you might burn a good amount of that in gas and you have to stand online and pay a membership fee, so so those three things are really what we hit upon. I guess one of the ways you also were differentiating what you were doing was writing handwritten notes in the boxes where where it would say, Hey, I guess people write like Hey, thank you so much for ordering from us. Hope you like you know, hope you have a good laundry day ahead of you, or something like that. Like just these little notes that people write. Um And was the idea that people would get this, open it up, see the note, and then You would

Basically have a loyal customer for life. That's right. So you know, the genesis of handwritten notes was that I remember we had this old laser printer that were printing these invoices. And it would take something like ten seconds for each invoice to print. And I remember looking at one of the

folks in my garage and saying, you know, instead of standing there, why don't you just write a note or something to this customer? You're just waiting for paper to print. And so from that day on We just wrote a little clever note to every customer. You know, of course, with Covid, uh we've had to pause that for safety reasons and for streamlining the process, but we fully intend, once we can safely do so, to bring that back. I read that um and I don't know if this is apocryphal or not. That when you guys were writing handwritten notes in the early days Apparently.

One of your Employees h hand wrote a note to somebody who ordered Four forty pack. boxes of Trojan condoms wrote a note to this person saying quote. Everyone loves an optimist.

Is that true? Did somebody really write that note to somebody who ordered forty Boxes of condoms? That is absolutely true. Uh and uh and it was And unfortunately the customer did write in saying, Hey dude, this is kinda creepy, that's not cool'cause we generally don't we give guidance on what they can write, but we don't check every note.

And so and so we just felt like man, this person, like I feel like it's never been truer. It's like do they deserve to be fired or do they deserve to be promoted? Um but you know, and so we ended up Keeping'em and and they're they're still here in the facility that I'm uh I'm sitting at right now. And you still I mean I know you're not doing it You continue this

thing of of writing personal notes to every customer. To this day. Totally. Um It it's it seems like it's totally not scalable. But you know, welcome to the story of most startups and and especially box, like neither was starting in our garage. But if you really feel like it's important.

you'll make room for it. And now with engineer standards and automated facilities We know down to the second how much it It actually costs us to write a handwritten note. But it's worth it. It's worth it to differentiate and to have that one on one connection with the customer. I mean it's amazing to me that that you're still doing that, writing handwritten notes in every box and and have proved that it is scalable. I mean I'cause I'm just thinking, like just my holiday cards that I sent out this year, just writing like a quick little Hope to see in twenty twenty one, like that took me it felt like I don't know.

Two weeks? Definitely the packers around the country all have their own kind of tips and tricks. Some pre write them or they'll draw things or they'll they'll get people from the office like, Hey, could you help me with this stack of cards? And so it depends on the packer, but they're all handwritten. They're not it's not an auto pen machine. Some people think it's an auto pen machine. It's not. We still make it happen. In in I guess in year one. Um, from what I've read. You guys brought in about forty thousand bucks in sales.

Does that sound about right? Yeah. That sounds exactly right. Twenty fourteen is when You're on the Today Show. in in mid twenty fourteen, which which really kinda you know fast track sales.

So you guys kind of start to hit a stride and In twenty fourteen you enter the fresh Grocery. space with a product called Express. That's right. Because up until that point you were only selling dry goods like granola and crackers and things like that. And and was the thought there like this is you know, kind of another way to expand our business.'Cause this was a this was a pivot from just

Big box bulk items, right? I mean this you were going into things like bananas and avocados. Yeah, so the thought was that when we asked our customers, okay, two hundred items, certainly not enough. Like they were saying, Well, I need to buy more, you don't have this brand or you don't have that category. Right. And one of the leading categories was fresh foods. It's like you know. Yeah, I'll buy all the dry goods from you, but I still have to venture into a store to buy fresh foods and

That's a sometimes when I'm there, then I'll buy the center store items anyway. So that was something we began building all the way back then and have still been honing over time to get the economics right. What I'm I'm curious about in even in twenty fourteen. as Amazon and you know, today it's even more of a Ten thousand pound grill, I'd say.

But in 2014 it already was. You must have known in in your mind that there's no way you could out compete a a business that was on its way to becoming a trillion dollar company. Um But that in order to kind of

Make your business succeed, you had to find the right Niche. Space for you guys to operate in. Was that kind of part of your mindset? I mean, were you thinking, look, we're just never we're not gonna compete with Amazon.

When it comes to selling everything. You know. I think for us like we're not fully hubris and We're not out here on a mission to say we gotta be these folks or or crush them for us to succeed. The bad part

of the business we operate is that it is hyper competitive. With The good part is that The items we sell

Every single Person. In a developed Country. uses our products on a daily basis.

And so the market is just absolutely gigantic, and so. We're still on this growth path. generating like a good amount of revenue, but uh But we're not even close to saturating the market. And so I think that is the silver lining. I guess in around twenty fifteen

one of the the places where you saw an opportunity to kind of differentiate yourself in addition to the things you were doing,'cause I obviously you don't get a handwritten note from Amazon when you order something. was um To really focus on

Very specific. Products like Toilet paper, paper towels, trash bags, plates, party cups under your own label. Like an in house label like Costco has Kirkland and you know, and and was it Safeway that has the president's choice, or I can't remember who who does that. Yeah but um You decided to start your own

Label called Prince and Spring. That's right. So Part of the philosophy of the company early on was that We tried to curtail SKUs assortment because it made for an easier and smoother shopping experience and so You didn't have this kind of paralysis by analysis. And so people would come through the app and hunt and peck and just build this suddenly build a basket of many items to make the unit economics work.

Um another reason was that by Not Caring everything. you could really concentrate your buying power so that Yes, we were not buying as much as Amazon.

would be with these big CPG companies, but the items we carry, we do a good amount of turnover in. In the beginning though It started off out of necessity because Back in twenty fifteen, some b some of the big brands still didn't want to work with us. So I remember Telling the team, like'cause the team was despondent, it's like we still have a few hold outs that will not sell anything to us.

I was like guys. Elon Musk is out there talking about sending human beings to Mars and we're sitting here sulking over the fact that we can't make a CPG product. It's like I'm pretty sure someone will make one with our label. And that was that was the day that Princeton Originally Prince in Green, now Prince in Spring.

By the way, n named after the streets in New York. Yeah. We had uh one of our first offices was on the corner of Princeton Green and Soho and As you follow the trademark. The attorneys Didn't even file it. They said we're gonna save you the thousand dollars an hour we charge and reject us for you and they're and we're like, What? You don't even want our money?

Like just finally, what's wrong with you? And they were like Yeah, pretty sure there's already a P and G out there. Fine, fine. And so the real sharp New Yorkers are like Prince and Spring are parallel. They never intersect, and I was like That's right. Uh but it was the closest coordinates to our office at that time.

Alright, so Prince so through Princeton Spring you like Make now. everything from coffee to to olive oil and nuts and and a bunch of stuff. And so that's your label. That's like right? Yeah.

And Presumably your margins are much higher on your In house brand. That's right. So the margins are really good, but also more importantly, it builds a lot of loyalty. So over half of our repeat customers have a Prince and Spring item in their cart.

And if you buy a Prince of Spring item, over eighty percent will buy another one in their ensuing shop. But I mean what's the sort of Prevent you from saying h you know, or I don't know. Why wouldn't you just Just become a Prince and Spring Company. I still think there are items out there.

That truly you just Because of patents and because of the brand equity or other items that you just can't live without. Yeah, like Heinz Ketchup. Heinz catch up. Uh some of the laundry detergents. Even some of the toilet paper people just swear by their toilet paper. So from what I understand, like by by the end of twenty sixteen, you guys is like three years in.

you guys are doing a hundred million in revenue, which is incredibly impressive. You'd raised at that point like Hundred and thirty million dollars. Yep. Did you ever have doubts about whether this thing would work. Oh yeah, I mean

From the early days of zero two straight days of zero orders. That so self doubt. You know, not much it doesn't get any worse than that, you know. And every time Or in the early days where you basically got Not laughed at, but essentially laughed at at at meetings with big CPG companies or big other kind of distribution companies. Self doubt and y you just learn to have thick skin as an entrepreneur.

And luckily This is not our first time at the rodeo, this is our second company. And that thick skin was developed over the course of now two companies versus us trying to to do this in s as if it was startup one point oh. What how how big of a game changer was it for you guys, b both good and bad, when Amazon purchased Whole Foods? in twenty seventeen. The thing that

the whole foods deal did for us is that it put this industry on the map. At that moment Everyone who didn't pay attention to this. Mm-hmm. Because for all

you could say about Amazon and you know, how they do it and how they compete. If they're getting into an industry. It's a little bit different now, but at that time That company was not buying

ten billion dollar plus companies. They'll do a big buy like Zappos, four billion. Yeah. So a giant sum like that. Exactly. So it was a wake up call to everyone in the inch in the industry and then also everyone outside of the industry as well, that something with online grocery is so important that Amazon will do the biggest deal they've ever done to buy their first brick and mortar chain. I that had immense kind of ramifications for us in our conversations with everyone. Which meant what, people all of a sudden start to pay attention. In other words, did you notice a market difference?

When you talk to people in the industry all of a sudden they started to pay attention and listen to what you guys were saying. Yeah, online for them suddenly became not just again almost like how we were relegated to the basement at Zinga in our early days. Yeah. You know, they're like Oh my gosh, digital. What are we doing in digital? Bring those folks here. And you know, they really start to staff

the hungry potential A players at all these companies to really go after the opportunity. Were there companies that started to go after you guys to say, hey, interested in being acquired? Absolutely. So You know, there's not many companies even today that are independent. That have f their own fulfillment centers that ship Food around the country.

So that has never really been a a not a problem for us, but like there's always you know Conversation swirling. As you I mean, sort of a as you kind of continue to to grow and to raise money.

There's an inherent challenge with the business you're in, which is the margins are really you have to c be competitive, the margins on the products have to be really thin. Like you you can't you can't increase the price that you're buying things for by too much, right?'Cause otherwise you're gonna lose business. Plus you're dealing with shipping. So it's very, very hard. And from what I understand

you guys are not yet profitable. But do you see a path to profitability? Yeah, definitely. We're not that far off and it really is one of the stories of Uh, you know, everyone jokes about it in the industry. It's like we'll make it up with scale. Yeah. And with us we're doing it every day. So you're starting to see it because again, it's just like

The more items you buy From box or any e commerce company. the more effectively you can price the items because all those different different items in that box. quote unquote share that shipping cost, which is the biggest cost in e commerce. And so

If you ship one item, of course it p it's pretty hurtful. But if you're shipping ten items per order Man, suddenly like you can make money Oreo cookies online. One of the things I read that that you guys do is uh which I think is super cool Is you take a foto of every box.

That's packed and then you email it to the person. who ordered it so they can see their box. It's like when you go to the airport and you travel internationally and they ask you to verify your suitcases. You you can take a picture of people's box before it's shipped out so they know that it's it's right. Yeah, that's right. So it's the boxed uh selfie cam. So on your order confirmation it says your boxed took a selfie. And customers love it. Um and also it's for you to verify that we packed everything well. Uh and it's on its way to you.

But the most important thing from there was that The same folks that built that camera system for us. now build the robotics that we use to automate our newest fulfillment centers. So our newest fulfillment centers are 100% automated. by our own hardware these days. The roots were in that camera project. Entirely robotic.

Yeah, entirely robotic. So you still need uh human beings to physically pick the items and pack the items, but you see these robotic self driving carts roaming around the fulfillment center now in our newest ones. I know you've got about five hundred employees. Right. And you've got three fulfillment centers in the US, I think, right? That's right. How do you and about five hundred employees total.

How do you prevent your employees from being freaked out that these their previous jobs are being done by robots? It is really hard. We had to call multiple all hands. in the facilities as we were rolling these robots out and testing them. It doesn't take a a genius to see what the robot is doing and what they're kinda doing and saying, Wait a minute

Where's my future here? And so What we committed for everyone here is that you weren't gonna lose your job solely because of automation. You will have to be retrained. You will have to learn how to operate, how to service these state of the art machines and work alongside of them, but you weren't gonna lose your job solely because of that, because as a company grows, We'll have more volume.

And we can use that volume. to leverage these robotics as well as you So y you always have a place here and and you see folks in our fulfillment centers, some without a college degree or without a high school diploma, servicing really advanced kind of robots. And we retrained them to to to be able to have that on their resume and and on their life skills.

Um, something we haven't talked about is the company culture. And I and I wanna ask you about a an incredibly generous and just mind blowing thing that you offer and I'm just I'm trying to figure out how you do this and if you Y I guess in in twenty fifteen you you announced it to employees that you would pay the college tuition of every full time employees Children.

Do you still offer that? We still offer it, so there's still even this next semester, there's multiple folks a a part of that program and They're getting put through college. Well how does that work? I mean if if somebody's like yeah, my kids college is forty eight thousand dollars a year. You guys pay that? We

We make you fala Fafsa. And so depending on your need, you're gonna get it subsidized already, uh, and it's tuition only. And so it becomes a lot more palatable. uh once you kind of narrow down the actual cost, but it's certainly helpful for the parents that are sending them to college and That and the other programs who run in the fulfillment centers.

It's solely born to tie it all together. Back to My family's Kind of. Evolution.

in the early days when we were rather poor and so luckily we don't pay anyone minimum wage here. But certainly, you know Working and having Hourly.

It makes for sometimes uh not the easiest of of livelihoods, so Education was my way. Oh, was our family's way out of that? And I hope We can help a few folks here. Uh along that path.

W do you know w what the average amount you guys are Subsidizing people who are are taking up on this offer to Help pay for college? Yeah, it's between five to ten thousand dollars is the is the average amount. For a semester. Well.

So some employees are getting like a ten thousand dollar subsidy a year to help you. Yeah. Yeah.

So A lot of these things that are seemingly Unscalable. Uh they are if you really You don't

want them to be. So for example, the college program isn't even the most used Program it boxed. The most used program at Box are are For example, our five hundred dollar emergency fund. You offer everybody five hundred bucks just

To have an emergency fund. If you have an emergency Someone in your family's sick? You have a car repair. And you just need

Something to tide you over. And no one should declare b have to declare bankruptcy or Not pay bills because they got a flat tire. Especially if you work at Boxed. And

You would think that it's just like what are we doing? Like how much money does that cost? But um It's all depositing in this piggy bank of trust. that we recently were able to to break it open and and draw down in this era of Covid. And

I remember sitting In one of our fulfillment centers. thinking is anyone gonna show up for work next week?'Cause this thing is getting real bad. And It really is the honor of a lifetime.

Such a crazy time. And to see these folks Just show up. For work.

To do their job. getting this stuff to folks who are immunocompromised and who just can't or do not want to get to a store. And it's the most humbling. thing I've ever experienced in my life. I mean, you have people at fulfillment centers who have to fulfill those boxes, so you probably

Could not shut down. At any point. Exactly. How how have you kept your employees safe? So we do a variety of things between social distancing, masks in the warehouse.

air filtration, even down to like hey no more overlapping shifts so Uh between every shift, instead of p having people mingle in the parking lot, we'll have some downtime where everyone can leave the property and the next shift can come on without hundreds of people in a parking lot mingling. Yeah. All those things and The most important thing though. is to say something and truly believe in it.

Енсотрувати з пандемік. It has been our mission to have at least one C staff member. on site at a facility to say hey I say it's safe. I'm gonna be here.

Exactly. We're here. When Covid Kind of began like

uh when the reality of it began earlier in in twenty twenty. People like were scrambling. For you know, as you do for toilet. I don't know why people get toilet paper, but they do

But were people like friends and stuff calling you and like, dude, Jay Can you get me some Lysol wipes?'Cause you guys sell tons of Lysol wipes and like Lysol. Oh my gosh. I I mean high school friends I hadn't talked to in like ten years, fifteen years, like, Hey, is this still your number? Like I'm like, Can you give me Lysal wipes, please? Back in March April.

I like to say I became the most popular person from my high school about like twenty years too late. Uh because here we are, you know, sitting on Tons of toilet paper around the country and And yeah, so luckily we were able to kind of help some friends and family out. But uh But overall.

the year is going to end as a very positive one. For us. Looking ahead now, I think your your last sur um fundraising round was series D back in twenty eighteen, is that right? Mm-hmm. Yeah, that's right.

Boxed at six hundred million dollars. Um there is going to be a point. and there may have been already to acquire you, but there there may be a point where the offer's too good to refuse. I mean you've got some i really interesting partnerships with like Letal, you know, Century Twenty One, different companies that you have exclusive partnerships with, but I wonder I mean

In a world where Amazon is the Ten thousand pound gorilla. Can you imagine? I mean are uh would you be okay down the road at at it being acquired? I would do whatever is in the best interest of

Our team. At some point in time Your motivation as a founder of the company no longer becomes no longer is you and your financial outcome. But it's making sure all these folks that bet on you and this vision have a great result. And

If that's what we have to do to provide everyone with a great result, then so be it. If it's a public outcome and that's the way we maximize everyone's time here. Um then we're gonna go down that path. So That's kinda how I think about life at my job these days.

When you think about the journey you've had so far. Where box is headed? And um The considerable success you've had. How much of that do you do you attribute to your hard work and intelligence and how much do you think is about luck and

chance and privilege and other things. I feel like I hope People. That

are out there that look at the story of boxing and learn more about us. End up just like Me back at two thirty AM in a law firm. Reading the stories of some of these businesses that we were helping. And realize that yes, it's a lot of hard work.

But it was a lot of timing and a lot of luck. And The reality is you can you probably have an outsize effect on just one out of the three. And so that's not just humility speaking, that is the absolute truth. And I feel very fortunate because again I only had

Something to do with one out of the three of those those factors. That's Chi Huang. Co founder and CEO A boxed. And remember when Che told us about the very first box they shipped, the one with the bounty paper towels and the Tide Pods? Where they asked the customer to keep the box because one day it might be a kind of a collector's item?

Uh you know, we wrote we wrote him an email years later and we're like, Did you keep the box? We we're serious, we will buy it back. And he was like I didn't keep that box, what are you talking about? I recycled that thing and there was space in my studio apartment in New York for the box? Yeah. You kidding me? Like fair enough, fair enough. Hey, thanks so much for listening to the show this week. If you are not a subscriber, please do subscribe to the podcast wherever you get your podcasts. If you want to write to us, our email address is hibt at npr.org. If you want to follow us on Twitter, we're at how I built this or me at guy and my Instagram. is at guy.ros. This episode was produced by JC Howard with music composed by Ramteen Arablui. Thanks also to Liz Metzger, Farah Safari, Gareth Gales, Julia Carney, Neva Grant.

Rogers. Our intern is Janet Wu Jung Lee. I'm Guy Raz and you've been listening. to how I built this. This

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