Jul 28, 2010
JetPens.com is the leading online retailer of Japanese pens, pencils, and stationery. Started in 2004 with an initial investment of $9,000 from its three founders, the company managed to achieve profitability after two years, without any additional financing. Because they never had to sell any equity to outside investors, the three founding partners have retained autonomy over the business and its profits and have shaped the organization to fit their personal goals.
The company caters to pen fanatics and offers an unparalleled selection of styles and colors. Since characters in Asian alphabets are much more complex than the English alphabet, the writing instruments available in Asia are much more precise than those in the US. With over 5000 SKUs, JetPens.com imports its products from Asia and sells them internationally from its base in the San Francisco Bay Area.
MITER editor Mark Chew interviewed JetPens.com co-founder Adrian Mak discussing the thought process that allowed Adrian to succeed as entrepreneur.
MITER: How did you know that entrepreneurship was for you?
AM: I have been interested in business since I was young. In college, I thought I wanted to work at a large company. My original plan was to work for a few years, then go back for an MBA and eventually become a business executive. I even took the GMAT right after graduation, anticipating that I’d apply to business school before my score expired.
Before starting JetPens, I had two work experiences – an internship at a tech company and a full-time role at a Fortune 500 retailer. Those two experiences helped me to realize that I probably wouldn’t be successful in a large corporate environment, since I didn’t want to deal with office politics and bureaucracy.
I figured I would probably have to do something on my own or work in a much smaller company, so I decided to try starting my own company.
MITER: Once you realized you wanted to become an entrepreneur, how did you envision your company?
AM: I didn’t have a very specific vision for a company. Initially, I was interested in high tech/high growth entrepreneurship since that’s what I’d been exposed to as an undergrad. During the year when I did my masters in Management Science and Engineering, I realized that tech entrepreneurship involves a high failure rate and lots of pressure. I wanted to do something that would increase the probability of success, and I also didn’t particularly want to answer to investors. So I started brainstorming other ideas with my business partners who did not have technical backgrounds.
MITER: It’s somewhat unusual to first form a team, then figure out a business. How did that process work?
AM: The three of us met in school and became really good friends. Our work styles are very complementary, and we were all interested in entrepreneurship, so we decided we wanted to work together on something. We met regularly to brainstorm business ideas, as well as to discuss general business topics. Through this process, we got to see that our values were generally aligned and the idea for JetPens came out of this process.
MITER: How committed were you and your founding partners early in the process?
AM: We definitely wanted to work together, but we had some issues with whether people would work on the business full-time. We were also open to bringing in other partners, but ultimately decided not to.
While we were still in school, we tested out our initial idea. If you’re willing to sacrifice the time, I would highly recommend starting while in school, because the cost of failure is a lot lower. Also, you get to see if it’s viable so you’ll know whether to continue full-time or look for a more traditional job once you graduate. Once we graduated, I still had to do some contracting work to pay my bills, but we had already proven the business was viable and we were fully committed.
MITER: Of all the possibilities, why pens?
AM: We brainstormed a bunch of bad ideas, and when the idea of a specific type of pen from Japan came up, we realized there wasn’t a source selling them online. We saw from online forums that people were looking for them and realized that online retail fit our skill set well. We also saw that we could try it out in a way that wouldn’t be very capital-intensive. To start out, we spent about $5000 on merchandise, launched a cheap pilot to prove the business model, and got good results.
We all appreciated the freedom of working free from outside influence, and we wanted to have ownership over the business outcome, even if the business was small. We also wanted to do something where the failure rate wasn’t nine out of ten, and we were willing to trade off the best-case return for more certainty.
MITER: What did you do about competition early on?
AM: Early on, we didn’t think about competition because no one else had done it up to that point. We saw it as a niche market, and we focused on what we were doing.
MITER: So in at the beginning, you focused instead on proving the business model and bringing up the business?
AM: Although some people perceive entrepreneurship as risky, we tried to create a scenario to minimize risk. We did things in a non-capital-intensive way. We avoided outside investors so we could keep control. We did a lot of things to save money in the beginning; for example, we didn’t spend any money on advertising early on because we had more time than money. We spent a lot of time doing online social marketing and search optimization.
MITER: How else did your limited budget affect your strategy in the beginning?
AM: A lot of our decision-making was driven by our lack of financial resources. Back in 2004, good retail IT was beyond our budget, so we did it ourselves with open source software. It didn’t make sense to outsource warehousing either at our initial scale, so we kept all our merchandise in my living room, which was also our first office. Actually, I’d say all these decisions were made because we had no money, but we had a lot of desire.
As for our marketing strategy in 2004, Facebook was just getting started and Twitter didn’t exist. Blogs and forums were really useful in our early days. This helped us with search engine rankings and driving traffic to the website. We directed a lot of our effort towards blogs and forums, and we still do.
Now we also run giveaways on our Facebook page. Word-of-mouth is big, but not everything; influential bloggers are also really important. We do some paid ads to complement this strategy, and we’ve had mild success with traditional print media.
MITER: Now that you’ve been profitable for four years, how do you envision the next five to ten years?
AM: We don’t really have a very specific vision for where things will go. We’re just trying to organically grow the business. We’re adding product categories that are relevant and trying to grow it as far as it will go.
MITER: What advice would you give aspiring entrepreneurs, especially those who are still in school?
AM: If you are young and don’t have a lot of obligations, just go for it. When you come up with your business plan, it doesn’t have to be really elaborate. Just work out the core economics of your business and then work from there.
I made a 1-page spreadsheet to figure out how much money I needed to live on, and how many units we would have to sell to reach that number. It turned out that the number was within reason, and this spreadsheet was half our business plan.
MITER: What would you say to aspiring entrepreneurs who are trying to figure out their motivations and values?
AM: With the benefit of hindsight, I’d highly recommend understanding psychologically why you want to be an entrepreneur, because there are several good reasons. Do you primarily want to gain financial freedom, to make a big impact, to become a billionaire, or to create your ideal work environment? You want to gear your business decisions to reflect this, and good decisions should flow out of your core psychological desire – especially the type and size of market you decide to pursue, decisions about raising money and setting your company’s level of aggressiveness.
I think one great thing about entrepreneurship in a capitalistic society is that small business owners have a greater financial upside, compared to employees in traditional work environments. Even if you own a few car washes or a few hamburger joints, you can potentially do a lot better financially than VPs at many companies. I would recommend spending some time to define what success really means to you. Do you want to be in the Fortune magazine? Do you want to hit 30 million users? Or do you want to do something that has a higher probability of success?
I’m very happy with JetPens. I get to work with people that I admire and trust, and I get to run a business the way I want to, which is a lot of fun.
For more, see http://www.jetpens.com