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SPEAKER_02: works. Plus, you'll be able to claim a special offer of $1,000 off Vanta. That's V-A-N-T-A dot com slash built. We were not your typical kind of founders.
I do think, especially for early stage investing, there is an element of pattern matching for
investors and I was a, you know, a mompreneur.
And what's funny though, is that being a mom actually made me uniquely qualified to start
this business.
But I would say my vehicle, a minivan, was the only minivan in the parking lots of Sand Hill
SPEAKER_01: Road. It was not easy.
Welcome to 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, how home arts and crafts projects grew into a multi-million
dollar business when Sandra Ohlin launched KiwiCo, now a top-selling subscription box for kids. Subscription boxes generate around $30 billion a year. That's globally. And by 2028, that number is expected to rise to around $73 billion. So not an insignificant amount of money. The challenge though is there is a lot of competition for those dollars. Back around 2010, when subscription boxes were starting to get attention, brands like
Birchbox, BarkBox, and Blue Apron were the darlings of venture capital.
The money fueled massive growth and massive expectations, which I should mention, were not always achieved.
SPEAKER_01: Birchbox for example, which did samples of personal care products, was valued at half
a billion dollars at its peak. But just 10 years on, it sold to a private equity group for just $45 million. BarkBox, which sells pet supplies, went public at a $1.6 billion valuation, but since 2020,
it's lost about 90% of its value. And Blue Apron, a meal kit brand, was valued at $1.9 billion, only to be bought out by
a private equity group for around $100 million in September of 2023. But one company that's managed to weather the storm in the subscription box world is
KiwiCo, and part of that has to do with what it makes and who its audience is. KiwiCo makes hands-on activities for kids around things like science and craft making. So for example, a kit that allows kids to make things like stomp rockets, or solar powered
cars, or crafts that use pipe cleaners and styrofoam balls and googly eyes. Sandra Ohlin founded KiwiCo back in 2011, and the idea came from, well, being a mom herself who wanted more tactile and educational toys for her own kids. Sandra was actually on this show briefly back in September 2020, in the thick of the pandemic,
when her supply could barely meet the demand. At the time, KiwiCo was inundated with orders from parents trying to keep their kids busy
at home. And today, KiwiCo is a leading subscription box for kids. Sandra grew up mostly in the Cincinnati area in the 1980s and 90s.
SPEAKER_02: Her parents immigrated to the US from Korea when she was a baby, so her dad could study for his PhD in physics. When we immigrated to the US, it was kind of the classic story of immigrating.
My parents didn't have a lot of money. My dad was going to grad school. My mom sold her wedding ring when she moved to the US.
She had gone to a top university in Korea.
She ended up being a seamstress for a bit when I was young. She ended up taking care of kids at our graduate student housing apartment.
So she had four kids come for a couple bucks a day. Essentially, she was doing childcare. And later on, she was the one who started her little family business.
When I was in high school, we actually sold troll dolls in the mall at a kiosk.
SPEAKER_01: So it was a fad at the time.
SPEAKER_02:
SPEAKER_01: And so she actually took that on too.
SPEAKER_02:
The whole kiosk was just troll dolls? Yeah. There are a lot of different kinds of troll dolls. There are little ones.
SPEAKER_02: There are bigger ones. They each had a theme. So a tennis troll doll might have a little tennis skirt and a tennis racket.
There was a Santa troll doll.
SPEAKER_01: I still, to this day on my Christmas tree, have a little Santa troll doll and a Mrs. Claus. So, was that...
It's a kiosk in the mall, so you got to pay some rent on it. But did they do okay selling?
SPEAKER_02: It's amazing because your dad is like this sort of prestigious chemist and got his PhD.
SPEAKER_02: And then you also have a troll doll side business. I love that. Yeah. I mean, it was a fad. So I think that was a little bit problematic. At some point, fads fade.
And so I remember when we had some excess inventory on the weekends, we would go to
SPEAKER_02: the flea market and we would sell the excess inventory there on the weekends.
SPEAKER_02: How long did that business last? It was just a year or two. And that was really your first experience in retail or in sales. It was one of my first experiences in retail. I had the good fortune of being able to name the business too.
SPEAKER_01: And so I ended up naming the little kiosk Wonderland. And it was my first foray into children's products in a way.
I mean, I love it.
You can really build a business out of anything.
SPEAKER_02: When you eventually decided to go to college, you went to study chemical engineering, just
like basically like your dad, I think. Yeah. I had always really enjoyed science and math.
And when I got to college, I was specifically interested in engineering fields that were a bit broader. So I dug into mechanical engineering and dug into chemical engineering because I thought
SPEAKER_01: that that would give me more options kind of coming out of school and figuring out what I wanted to do. You went to Case Western Reserve and graduate with a degree in chemical engineering.
SPEAKER_01: And you were in Cleveland, but you went back to Cincinnati and worked at Proctor & Gamble
right out of school. Did you think at the time your intention, like did you imagine pursuing a career in
SPEAKER_02:
at a place like P&G maybe becoming a lifer?
I went to P&G really thinking that one, the job that I was going to be doing was going
to be very interesting. So I was a products research engineer. And essentially what you're doing is you're helping to develop new products. And then you're working with marketing and brand.
SPEAKER_01: And then you're working with the customer. So you're creating products for those customers by really understanding more intimately kind
of what the needs and what the desires are.
So I guess also at the time, it's not clear to me whether you were dating the person who become your husband or you were already married. But I guess around sort of 1999, he was a medical student and he got a residency in
SPEAKER_01:
San Francisco. Were you guys married at the time or not?
SPEAKER_01:
Not quite yet. Yeah, just got married. That's correct.
SPEAKER_02: Oh, wow. So you got married relatively young. I mean, compared to some of your peers. Fortunately it worked out. Yeah. And you met your husband in college. I met my husband at Case and yeah, he matched for his residency in the Bay Area. And so we ended up moving to the West Coast and it was the first time that I had been
to the West Coast. And it was an interesting experience going from Procter & Gamble then to the Bay Area where is the height of the first dot com boom. So lots going on, lots of small companies starting.
And so I ended up securing a job at a small startup.
SPEAKER_02: So going from Procter & Gamble to the small startup was a very different experience. I remember asking, I was going to a conference and I was asking, how do I get business cards?
They basically gave me some card stock and a printer, right?
SPEAKER_02: And pointed to it and they're like, there you go.
SPEAKER_01: You get to design your business cards and print them out.
So pretty different from being at P&G. And by the way, what did they do? They did online content management. All right. So we're, and I know I'm going to fast forward just for a moment here, but I know that over the next several years, you were exposed to like a ton of different experiences because
I think you went to work at another startup. You applied to business school and went there.
You got your MBA at Harvard. And then you moved out West to work for PayPal and then eBay.
And all the while, I mean, you were sort of working your way up to sort of more and more senior positions. So I guess by around 2008, 2009, you became the head of the fashion business at eBay.
SPEAKER_02: That's right. And so what did that mean?
You were in charter.
Like what did you specifically do there? Yeah, it was about a $2 billion business and I was the general manager for the fashion
business. So basically figuring out kind of the path and the strategy forward, what were we going
to do to grow this business? And then I ended up hiring out the team and figuring out the different types of programmatic
SPEAKER_01:
initiatives that we were going to pursue in order to grow that business.
All right.
SPEAKER_02: So you're at eBay and I guess also around that time or during that time you became a mom. So I had my first child when I was at PayPal and then I had my second child when I was
at eBay. And at that time, actually, as I was thinking about leaving and had one of my classmates
from business school who was in venture capital reached out and said they had an idea around
a fashion related startup.
And given my background in fashion at eBay, it could be a really, really great opportunity for me to come on board, be a founding CEO and pursue this nugget of an idea that they had. So as I left eBay, I actually looked at that pretty seriously.
Ended up looking at pulling together a founding team, pitching that business and then ultimately
decided not to do it.
But I think what that gave me is once I did actually start to make the decision to pursue
KiwiCo as a business, I had this under my belt, this experience in basically pitching
SPEAKER_02: a startup in order to try to secure capital. And so that was actually a really valuable experience. Tell me a little bit more about the idea for that startup. The idea behind the startup was basically to get feedback on your clothing, on your
outfits, on your style. And so you would upload photos and then kind of get feedback.
People could tell you what they thought of it. They could give you suggestions on how to accessorize it, etc.
And so it was a very kind of social fashion, getting advice and styling type of app with
SPEAKER_01: the thought that you could hopefully monetize off of those suggestions down the road.
And meanwhile, you're no longer at this point at eBay and your kids are obviously still
pretty young at the time. And I guess you start to realize that not only do you want to spend more time with them,
SPEAKER_02: but you want to start doing more things with them at home, like projects, like arts and crafts and things like that. Yeah. The reason behind that is because I wanted them to basically exercise their creativity
and feel like they could kind of be makers.
And I think part of it came from the fact that when I was growing up, my mom, she had
a few kids who she took care of. And then for me, this is a very distinct memory just kind of throughout my childhood.
My mom is she would kind of set up these different projects for us. So we would, okay, this dates me, but way back when my, you know, McDonald's used to
have styrofoam containers. So we would make like purses out of those.
We would do a bunch of origami.
We would make potato prints and we would take food scraps and make, you know, sweet potato plants or onion plants.
So I remember these really fond memories of making and creating with my mom.
SPEAKER_01: She was kind of a MacGyver of sorts too. So I wanted this experience with my kids and for my kids.
SPEAKER_02: Your mom looked after kids when you were growing up like, like a sort of informal daycare?
SPEAKER_01: Yeah, kind of like a childcare drop off situation. But she put a lot into it. Yeah. You just you know, you just triggered a memory of mine, which is when I was a kid, one of the coolest things my mom did was she would make these like televisions.
We have a cardboard box and we cut two holes in the top corners and then we would insert paper towel tubes in them and paste. I don't know how we did it. Maybe we pasted like paper on the paper towel tubes and we would draw scenes on different
SPEAKER_02: and then you roll it at the top and you know, it would just slide and you have another image
and it was it was like magic. Yeah, I mean, absolutely. I think I mean, look at what you do now. Right. Yeah, I just have really great memories of that.
I really wanted my kids to have exposure to kind of that that hands on making I wanted
them to feel kind of empowered to be able to create.
And I started pulling together different materials and different ideas. And I found that I was taking quite a bit of time. And so I was like, okay, I need to amortize my time.
SPEAKER_02: I started to invite my friends, their kids over for play dates, and they would make and create with my kids. What were you making with them? Yeah, I mean, there were simple projects, we were creating different like Halloween
luminaries.
So basically using glue and tissue, and then figuring out how the that kind of it interacted once you actually put a tea light in this in this jar, that type of thing. We were doing a lot of kind of, you know, experimentation and chemistry, kind of traditional oobleck. So the whole cornstarch and water concoction, made that many times. Yeah, I mean, it's a little messy, but it's so much fun.
And also just kind of setting up kind of trays with salt, vinegar, oil, and see what happens
SPEAKER_02: when you mix different things baking soda.
Yeah. And then one mom, I remember during one of these play dates came over, was like, Sandra,
SPEAKER_01: you should start a business around this. And so then I started to think, maybe there's something here. When we come back in just a moment, Sandra tests her idea in front of two very demanding audiences, a home garage full of kids, and an office full of investors.
Stay with us. I'm Guy Raz and you're listening to How I Built This.
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SPEAKER_00: built. MasterClass.com slash built. Offer terms apply.
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SPEAKER_02: It's around 2010, and Sandra's crafts projects for kids are getting so popular that she's thinking of turning them into a business. I talked it over with my husband because certainly if I was going to pursue this as a potential
business there would be implications for our family, for our income.
And then I started to ask kind of trusted advisors, friends. And so I started to get feedback around it and it seemed like there was a there there. And then I would do focus groups in my living room.
And it was really important to me that I didn't do focus groups just like close friends, but
SPEAKER_02: really try to bring in friends of friends, people who I didn't know to get feedback. And was it just you initially?
It was me initially and then ended up bringing on board a co-founder who was a bit more technical,
had been in product management. And then I also brought on a technical co-founder, somebody who had been actually a founder of
SPEAKER_01: PayPal, was the first engineer at YouTube.
And so at first there were kind of the three of us.
SPEAKER_02: And this is, I mean, what was the pitch to them? Like how did you describe what you wanted to do at that point? So essentially what we wanted to do is we wanted to design and deliver hands-on projects
SPEAKER_01: to kids through a direct-to-consumer kind of e-commerce experience.
Before we sort of dive deep into the beginnings of how you were going to make this work, tell
SPEAKER_02: me about the name. Was Kiwi just like the fruit, like you like Kiwi?
Actually it's the animal, not the fruit. I really liked the idea of an animal. And so the original name was Kiwi Crate.
My husband and I had gone to New Zealand actually before we had kids, but we had brought back
a stuffed kiwi bird, which my kids had adopted and kind of went on adventures with them.
And I think there was something attractive also about the idea of alliteration with the
SPEAKER_01:
crate too. And so we landed on Kiwi Crate.
And this was around the time, I mean, 2011, when you had subscription boxes starting to
really not necessarily take off, but Birchbox, which was one of the earlier ones I think
launched in 2010.
SPEAKER_02: And were you looking at things like Birchbox and thinking, this is going to be huge, this model is going to be huge? I mean, we certainly looked at Birchbox once we settled in on a model ourselves, but really we were trying to start with kind of the customer need along with what it was that we were delivering first. And so we really liked the idea of these boxes kind of being centered around different themes.
So with materials and inspiration, so if you want to learn about colors, there's two or three hands-on activities about colors. If you want to learn about farms, there's two or three.
Or if you want to learn about birds, there's two or three of these projects. And then the other part of it is that we're thinking about it as a program.
Part of what we do is incredibly kind of fun and delightful, but part of it is about learning too. And so the idea of subscription, the idea of something coming every month and having
SPEAKER_01: a child's name on it really worked well for us. All right.
SPEAKER_02: So now, I mean, you have this pretty experienced founding team.
SPEAKER_01: And by the way, were your co-founders also women?
One woman and one male. So strong team, but we're definitely working on something, not counterintuitive, but sort of certainly different, right?
Especially where you were, because you were based in Silicon Valley where everybody was starting apps and social media networks.
SPEAKER_02: And here you were trying to create a consumer products company that was like a hard good. I think we were pretty fortunate at the time that e-commerce companies were getting funded. And to your point, there were subscription e-commerce companies that were getting funded at the time. So we were able to get our foot in the door. I think we also had a network too. I think the experience that we collectively had at PayPal, eBay, one of the co-founders had been at Yahoo before, we had a network. So we're really, really lucky in that we were able to at least secure meetings with potential
investors. And we knew that it was important to get some capital because it was a pretty capital intensive
business, because we were dealing with a physical product and we knew we had to buy the inventory upfront and then ship out to customers.
But it was not easy. We had a lot of meetings and we were not your typical kind of founders.
I do think, especially for early stage investing, there is an element of pattern matching for
investors and there is a little bit of a lens where I was a, you know, a mompreneur.
And what's funny though, is that being a mom actually made me uniquely qualified to run
and to start this business. But I would say my vehicle, a minivan, was the only minivan in the parking lots of Sandhill
SPEAKER_02: Road. And so it was hard. I mean, I think we did, I don't know, somewhere between 30 to 40 different meetings with different folks. And even though they could see it or they would ask their wives what they thought of the concept, we weren't necessarily kind of securing the funding until we got to some
folks who did actually see the potential and the promise around the idea.
But we were kind of through a lot of kind of pounding the pavement, we were able to
SPEAKER_01: secure our seed round of financing, and we closed that in the summer of 2011.
SPEAKER_02: Let's talk about the idea itself. How did you come up with what those early boxes were going to be, for example?
So we did a ton of kind of testing with kids.
And so we started off, 2011 was spent mostly in my garage.
SPEAKER_02: And so we would have kids kind of descend on the garage, and we would put different
projects and different materials in front of them. We would see what would work for them. I mean, it ranged from materials not working because maybe clay was not malleable enough for small hands to projects just being too complicated. And so we learned a ton through iteration. And then we landed on kind of the first three crates or the first three boxes that we wanted
SPEAKER_01:
to send out. And then we started to source against those. Tell me specifically what you were thinking of. I mean, you would give kids clay or, you know, glue and construction paper, but that wasn't
SPEAKER_02: what the box would be. I have to assume the box would have instructions on creating a specific project, right? That was the idea. Right. So we would provide materials and we would provide the instructions. So the very first crate that we sent out was centered around color.
And so what we included in this crate was first kind of a frame or a mat for a picture
along with contact paper and a bunch of different kind of pieces and colors of squares of tissue paper. And so they were able to make creations and then put that up against the light and see
how the tissue paper squares actually interacted with each other in terms of color mixing.
Another project that we had was a little tote bag.
So a canvas tote bag. You would take the tissue paper squares and actually wet them and dye your tote bag.
And again, what you do is you'd have this amazing creation as well as a lesson in color
mixing too, because we knew the consumer or the parent would not necessarily buy into
the idea of here's a pot of yellow paint and here's a pot of red paint.
SPEAKER_01: And then you mix those to make orange because that was a typical way of learning color mixing.
We had to go at it with a unique angle. And so initially, you didn't, I mean, you weren't, in order to put these boxes together, you didn't have to go to like overseas factories to pre-cut anything. You could just go to like Michael's and get, I mean, not literally, you could just go somewhere
SPEAKER_02: like that or go to a wholesaler in the US and just get the supplies you needed.
And then you could just fill the boxes yourselves. Dr. Tana Leibovina That's exactly right. In the beginning, we knew that we did not have the volume to be able to go out to suppliers.
And so we were literally sourcing each individual item and sourcing that domestically to start.
And again, that was a challenge for us because you could not put something together where somebody could look at it and be like, oh, I could just go to a Michael's to pick that up. So we needed to make sure that we were providing kind of that unique lens, additional content
SPEAKER_01:
and giving something that the people would be willing to buy.
All right, so you get some funding by, you know, by the fall of 2011.
SPEAKER_02:
And when were you planning to launch? We launched in October of 2011.
It started right off the bat as a subscription product.
We were launching, essentially saying that you get a new experience and new box every
month. And we were gearing it for kids ages kind of three to seven, initially. So we had kind of a lineup of boxes ready to go. But at the time, the way that our model actually worked is that everybody was getting the same
box in a given month. So it was important for us to kind of order up, try to deplete that inventory in that month and then order up again, because we needed to have a certain amount of scale and
SPEAKER_02: volume in order to make the economics of the box actually work.
SPEAKER_01:
And obviously, we were trying to make sure that we were getting rid of inventory as well. As you kind of began the process to launch, how did you I mean, how did you kind of spread
SPEAKER_02:
the word? Did you just initially tell your friends to go on and order it? Or how did you get how'd you do it? So before we launched, we actually tried to start to build up an email base of people who might be interested. So we had gone out to the Maker Faire in San Mateo.
And the Maker Faire attracts a lot of people.
So I think tens of thousands of people. And these are all people who are interested in engineering and making and creating. And so we had a booth there.
And then we would get their email addresses.
So we did that. We went to arts and wine festivals. We were like in downtown Palo Alto, collecting email addresses as well.
And those were, I would say, some of the key ways.
And then we started doing some online advertising. But in the beginning, it really did not work that well, because people weren't looking
SPEAKER_01:
SPEAKER_01: for kids subscription boxes, or even necessarily science projects online at that point.
SPEAKER_02: So as you kind of launched the company in your first year, I have to imagine it was slow going. It was slow, but we saw some decent traction in the very beginning, actually. And so after we launched, our Q4 numbers came back pretty good, kind of relative to what we thought. And what ended up happening is that we had a number of potential investors reach out to us. And we decided to do a preemptive Series A raise.
And it was debated at the time, like, should we do this? Or should we wait and potentially try to go for a higher valuation? And I remember that one of our executives who had gone to Stanford Business School,
she was basically like, hey, one of the lessons that I learned in one of my cases in business school was when dinner is served, you eat. And so we ended up saying, okay, we have the opportunity to raise this capital right
SPEAKER_01: now, we should go ahead and do it. And so we went ahead and we raised that Series A, and that was for $5 million. Which is great, obviously.
But I think still, as you mentioned, the business was growing slowly at this point, maybe even
SPEAKER_02: too slowly. And from what I've gathered, I know it was early days, but you guys were worried that
things weren't moving quickly enough, right? Yeah. So I think again, we were getting some traction. But when you kind of took a look at it from the lens of what we were hoping for, kind
of our aspirations, as well as the fact that we had taken venture financing and their expectations
SPEAKER_02: on certain milestones and growth, we just weren't there.
We had hit on some product market fit, but not to the level that we really needed to
make this a really standout, viable, healthy growing business.
And so we knew that we either needed to pivot hard into something new or add on other areas
SPEAKER_01: of business in order to get the business to where we wanted it to be. When we come back in just a moment, how Sandra repositions the business and why it's hard
selling to kids because the real customers are their parents. Stay with us. I'm Guy Raz and you're listening to How I Built This. Shopify has already taken the cash register online, helping millions sell billions around the world. But did you know that Shopify can do the same thing at your retail store?
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Check out eligibility and terms at Discover.com slash cashbackdebit. Discover Bank. Member FDIC. Hey, welcome back to How I Built This. I'm Guy Raz. It's around 2014, and Sandra hasn't quite figured out the right market fit for her kiwi
SPEAKER_02: crates. So, with money running out, she makes a risky decision to expand.
In May 2014, we decided to launch three new lines.
We launched two lines for older kids, Tinker Crate and Doodle Crate, centered around science and engineering and around art and design, and then a line for younger kids, so kind
of preschool age with QualiCrate, and then we made KiwiCrate all about early elementary
school age kids.
And the idea was, okay, if things were to work out, we would double down on one of those lines. Come holiday of 2014, so we launched in October of 2014, all three lines, they started to sell out. So we were scrambling, we were sourcing domestically, and a team that was set up for one line, all
of a sudden it was stretched across now four lines. But we ended up in a place kind of a, we had a good problem at that point, which is, okay,
SPEAKER_01:
we knew we wanted to double down on all three lines.
Yeah, I read that sort of by summer, maybe of 2014, you were down a couple more months
SPEAKER_02: of runway before the money would run out. Yeah, so it when we launched the three new lines, so kind of that October timeframe, we weren't in completely dire straits, because we knew with the holidays, since we are a
pre-day seasonal business, we would see an influx of cash. But we're counting, we're really counting on that. And the other thing that was going on is we had decided to fundraise, like we needed capital.
And so I was out on the road, I would say 75, 80% of the time, trying to close an extension
SPEAKER_02: to our Series A. And that was a pretty tough time to be raising that money.
SPEAKER_02: And then fortunately, we were able to close the extension to the Series A in January of
2015. So we tacked on a limit of $2 million. So we're really fortunate, the subscriptions that we saw acquired over those first three
SPEAKER_02:
months across those lines was 10x what we had seen for KiwiCrate originally.
And also kind of to put this in perspective, in 2015, after we made the shift, and we launched
these three additional lines, we ended up shipping out our one millionth crate.
SPEAKER_01: But then over the next four years, we shipped out more than 20 million crates. So this ended up working out really well for us.
So what what happened in you know, when you launched those, how did you launch those products?
SPEAKER_02: What was the way that you reached people where, you know, you actually started to sell these boxes out? Yeah, I mean, at that point, again, we were lucky in that we had a community of folks
who knew about KiwiCrate at the time. What was interesting about that particular launch is that it really paved the path for us to get to a place of being profitable. So if you look at that launch at the end of 2014, and you look at our first month of profitability
in 2016, there's kind of this direct line from that. So that happened. And then come to find out, right, that we were able to make our unit economics work
better. So the majority of US households have more than one child.
And because now we had an expanded offering, we saw a number of shipments going out with more than one crate. And we positioned shipping as free for the consumer, but obviously shipping is not free
to us. And so the fact that we were able to then amortize shipping by sending out multiple
SPEAKER_01: crates to a given household was really important and ended up really helping us out from a profitability standpoint, too.
At that point, right, how did you find a place to make all this? I mean, did you have them made in Asia?
Because obviously, we've done a lot of consumer products on the show. And if you're going to make a solo stove, you find a factory in China, or if you're going to make apparel, and there are factories that do these things.
SPEAKER_02: But I can't imagine there – I mean, there are that many factories that were making what
you were looking to be – what you were looking for them to make.
Jennifer Liddell, Ph.D. So it was definitely an evolution. In the very beginning, we were sourcing everything domestically. We actually had decided to run our operations internally.
SPEAKER_01:
So the first two offices that we had were office and warehouse connected to one another
SPEAKER_02: because we wanted to be very nimble. We wanted to learn. Chris Willis, Ph.D. So you had people doing all the fulfillment on site? Jennifer Liddell, Ph.D. Yeah. And so we were learning a lot as we were going.
And so we would source domestically, we would kit internally, and then we would take those
kind of components and then put them into bigger boxes in order to ship out.
So imagine if we had a set of pipe cleaners, those pipe cleaners would have to go into
a package, and then that package of pipe cleaners would be combined with a set of beads and some glue or whatever else and then be put into a bigger crate. So all that happened internally at first. And then as we started to scale, we were able to source individual materials and components increasingly overseas. And then we got to a point where we were able to source everything overseas and then also kit everything overseas. So what ended up getting boated over was the crate itself. So the box is what ended up getting boated over.
SPEAKER_01:
So you can also imagine kind of the evolution of our warehouse too. A lot of bits and pieces to something that looked a lot more organized. Chris Willis, Ph.D. Yeah. So I mean, as the...
SPEAKER_02: And this is really a turning point for the business. I mean, this really, I guess, would lead you guys to start to hit profitability around
2016. Jennifer Liddell, Ph.D. That's right. It really was a very, very important inflection point for the business. And we had always been a disciplined kind of organization.
And so the fact that we were able to hit on something that actually resonated with the
market and then to be able to raise that amount of capital, we were on a road where we basically
SPEAKER_02: ended up in a position where we didn't have to raise any more money.
And so I think for a company like ours, it's pretty unusual to have only raised a little
SPEAKER_01: bit over $10 million in equity financing. But we got to a place where we could be self-sustaining. Chris Willis, Ph.D. Yeah. So the company continued to grow. And it's interesting because you're not marketing to children because they're not your customers.
I mean, they're not buying your products. It's their parents, grandparents, or family members gifting products or whatever.
So I have to assume that when things are marketed to kids, it's just like, here's a toy or here's
cereal or whatever it might be. But I think with a product like this, there has to be an implied value add.
It's not just like buy this thing and you have a cool shirt.
It's like buy this thing and your kid will be smarter.
SPEAKER_02: Was that kind of the underlying message in the marketing campaigns? I think we tested a lot of different types of marketing messages, but most of what we were trying to get across is this idea of a new discovery or a new adventure, a new experience. And I think, you know, as parents, we're trying to make sure that our kids are kind of ready for the future.
So let's say that they were playing with a rocket in a crate about space.
So they're launching this rocket. And then what we would do is we would overlay an illustration of kind of an astronaut on top of it.
Right. Or we would have a crate where a kid would be creating a xylophone and learning about sound and how is it that sound waves are traveling and that type of thing.
And so we would showcase the kid kind of playing the xylophone. But then around that, we would create kind of an illustration of them being a sound engineer. Right. And so kind of like really conveying the idea of,
SPEAKER_01:
this is opening up your kids imagination and possibilities and who knows what they can do down the road. I'm curious, did parents respond to that? I mean, I always my instinct is just to think, yeah, they do. But then there's all this data around, you know, sort of, I don't know, companies that are buy one, give one away to somebody poor or, you know, have these sort of transparency standards.
And ultimately, all the data shows consumers don't care. They just want a good price, ultimately, on a consumer product.
Did you have like feedback from your campaigns that parents were responding to this idea that their kids could get smarter or could get, you know, could be inspired to, I don't know, to do more creative things or, or did that not really matter?
SPEAKER_02:
Yeah, I mean, I think parents do care.
And I think that the best evidence of that is through how the company has done.
You know, we've, we've shipped out over 50 million crates at this point, because that message actually does resonate.
SPEAKER_02:
Yeah, you know, there's another kind of anecdote that I would say about about parents these days, like, I think that they really want their kids to grow up to be productive citizens, and they worry about the state of the world.
There are a lot of things that, that we're grappling with.
And even when you ask kids, because we have done this, we say to kids, like, what are you worried about?
And they realize there are a lot of challenges to right there, like, ah, like global warming or gender inequality, you know, oceanic conservation.
I mean, these are kids are like 78910, we asked them.
And so what you can do at this point is really like, try to get them to think like innovators to encourage kids to think about the possibilities and feel like they can actually make a difference that they have agency and the ability to create change.
SPEAKER_01:
Yeah, so let's talk about kids and technology, right?
Essentially, what you offer is analog, which I love, I love that it's tactile.
It, you know, requires kids to use their hands to build something, whether it's like a solar powered robot or a pencil sharpener or, you know, desk lamp.
They have to build it.
It's but the battle between like, like, as a parent myself, as you know, I'm a parent and our listeners know, the battle to get my kids to do tactile things is, is challenging, because I'm fighting against digital things.
And that's, that's no joke. I mean, I wonder whether you see any kind of challenge, you know, you see you're seeing the challenges with respect to what you offer and what kids want.
SPEAKER_02:
In general, I think like we have a bar when it comes to the experiences that we design, the expectation is that it is incredibly fun, so that when the crate arrives at the doorstep or in the mailbox every month, it's something that a child really wants to tear into.
And that is a really high bar, especially given everything else that they could engage in.
And in fact, there was a study where they had kids actually try to do something digitally first and then replicate that in the physical world.
And they had a really hard time doing it. But the kids who started with the physical world first and then take it digitally, they were able to actually do it. So there's absolutely something about the materiality.
And hopefully we're able to maintain a kid's kind of interest by making sure that the experiences that we provide are really fun and delightful.
SPEAKER_01: So that is a challenge that we have, but it's a challenge that we've been grappling with for a while now.
And we're kind of up for that.
How do you imagine the sort of the future of KiwiCo?
I mean, you've now been in business for over a decade and you obviously have done well.
SPEAKER_02: I mean, is this a in the future publicly traded company? Is it acquired by a bigger company?
What do you think? I think when I'm posed that question, I think more about kind of wanting to become a household brand.
I really admire companies like a Lego, for example, and what they've been able to do with the brick.
And there are so many different ways in which they're serving kids and families. And so I kind of think about it from that perspective. Like, I feel like, of course, I take my fiduciary responsibility very seriously.
SPEAKER_01: I want a great exit for everybody involved. But the thing that I want to focus on most is building that brand.
When you think, Sandra, about the journey that you've taken, starting this company in 2011 and where we are now, 12 years later, how much of the success of the brand do you attribute to the work and the strategy?
And how much do you think just has to do with the luck of, I don't know, the industry, the timing?
SPEAKER_02:
Like, what do you think?
Yeah, certainly when I think about the cards that I've been dealt, I consider myself to be very, very lucky in many ways.
But I also think that sometimes luck implies a level of like passivity or kind of chance.
And I'm a big believer in the notion of making things happen versus things happening to me.
You can be really active in creating your luck and that luck kind of creates opportunities.
SPEAKER_01: And then there's a ton of hard work that actually goes into chasing down those opportunities. So I would say a combination of both. That's Sandra Olen, founder and CEO of KiwiCo. By the way, while their crates are mostly designed for kids, they do have some activities for teens and even adults.
You can make your own ukulele, an articulated desk lamp, an electric pencil sharpener, and one that sounds especially promising, your own vortex lab.
Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. As always, it's free. This episode was produced by Kerry Thompson with music composed by Ramtin Arablui. It was edited by Neva Grant with research help from Carla Estevez. Our audio engineers were Robert Rodriguez and Josephine Nioni. Our production staff also includes Casey Herman, Alex Chung, Chris Messini, Carla Estevez, J.C. Howard, Sam Paulson, John Isabella, Catherine Seifer and Malia Agudelo.
I'm Guy Raz and you've been listening to How I Built This. If you like how I built this, you can listen early and ad free right now by joining Wondery Plus in the Wondery app or on Apple podcasts. Prime members can listen ad free on Amazon music.
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