Lumi Co-Founder Jesse Genet shares her №1 strategy for acquiring early customers: Do not ‘fake it ‘till you make it’
If you’ve shopped online for leggings at Outdoor Voices, sheets from Parachute, socks from Bombas, a swimsuit from Summersalt, sunscreen from Supergoop, or even a mattress at Casper, Jesse Genet had a hand in getting it delivered to your door.
She’s the co-founder of Lumi, a Los Angeles based startup that helps e-commerce brands source all of the packaging they need — custom boxes, tape, tissue paper, stickers, envelopes and more — to bring their online brands into the physical world.
Lumi, which raised a $9 million Series A round in February 2018, is a favorite of New York, Los Angeles and San Francisco’s buzziest startups — touting an enviable list of clients.
“I worked on those accounts myself,” Genet says. “The operations teams of those companies had my cell phone number, I was in their office myself pitching them and talking to them and understanding their problems.”
“Building trust is like climbing a ladder,” she explains. “You’re building individual rungs of trust as you go. One customer that really likes you becomes a reference for the next one.”
Here’s how Genet built the business with her co-founder Stephan Ango, and won over those early customers step by step.
Launching a company by chance
Lumi was founded in 2015, but Genet and Ango have been working together since 2009, when they met while studying industrial design at the ArtCenter College of Design in Los Angeles.
In school, Genet had been toying with creating a sunlight activated fabric dye as a pet project, and would bounce ideas off of Ango. The project turned into a business serendipitously.
“It was a really interesting, changing time on the Internet,” Genet remembers. “In 2009, our second year of school, this new website popped up that Stephan learned about on a forum he followed, this geeky Internet forum called YayHooray, and it was Kickstarter. Kickstarter was literally months old. It was a homepage with blocks on it, and people were raising $500 for putting on a concert with their friends.”
Stephan suggested putting Genet’s fabric dye on Kickstarter, just to see what might happen. The campaign raised $13,000 — which may be small by today’s standards — but was an unusual amount of traction on the then nascent platform.
And, $13,000 was the exact same amount of money that Genet was paying in tuition each semester to attend design school — an irony she now credits with her decision to become an entrepreneur.
“It kind of struck me at the time, as I was going into student debt, that we did a campaign that took 60 days and we raised the same amount of money that a term in school was costing me,” she says. “It was a turning point, realizing that we could go out in the world and make money instead of just spending it.”
Genet and Ango built the fabric dye idea into a company called Inkodye, funding the business with lines of credit at a local bank, and a subsequent campaign on Kickstarter. They didn’t take any venture capital, and sold the product to retailers and craft stores. It was a traditional, successful business.
“It gave us a really firm understanding of how to run a business, how to hire people, and things like that,” Genet says.
But, after five years of running Inkodye, Genet and Ango began to realize they may have reached a plateau of how big the business could be.
Their feelings were cemented in 2014, when Genet appeared on Shark Tank to pitch her fabric dye product. Although she didn’t leave the show with a deal, feedback from investors like Mark Cuban and Lori Greiner helped her decide to walk away from Inkodye altogether, and work on something new.
“I was out there pitching them, having a conversation for almost 90 minutes,” she says. “It’s actually a very long conversation. I remember talking with Lori and Mark Cuban, and I’m pitching this fabric dye like it’s going to change the world, as if it’s the biggest thing I could imagine, and they challenged that. They kind of said, ‘Isn’t there something bigger you want to do?’”
“I took that to heart,” Genet continues. “I went home, and I thought about it more deeply. In business, sometimes you’re desperate to want something to continue, but at the end of the day, there are good ideas and bad ideas. And you shouldn’t want something to continue if it isn’t going to work in a bigger way. Fabric dye was a good business, but it wasn’t going to be a good, bigger, business than it was.”
It was an early lesson in making tough decisions, protecting time and resources for only the most promising paths.
“It’s really hard as an entrepreneur to know when to call it,” Genet says, “to know when to call it on a product line, on a certain business model, or plan. Moving on and shifting gears. That was a really good lesson I learned, spurred by Shark Tank.”
Ango and Genet began thinking of new problems to solve. Immediately, they discussed the biggest pain point they experienced building Inkodye: Packaging.
“The packaging part of our business was harder than the product. Figuring out the product, which we invented from scratch, was easier than figuring out the packaging,” she remembers. “We were just these people running a business, and we had to source packaging, we had to find stickers, we had to find out how to do retail packaging which had to be really specific, and there were all of these complicated guidelines around packaging. It was just so hard.”
Within a few months after filming Shark Tank, Genet and Ango had a new goal: Transforming how brands packaged and sold their products.
Pivoting to a platform
Ango and Genet formed the new company, Lumi, and began honing their thesis of what the business would do. Instead of selling a single product, like fabric dye, they set out to build a software platform, constructed for exponential scale. The pair were accepted into Y Combinator for Lumi in January of 2015, and used the time in the program to explore ideas.
“We were talking about really broad things,” Genet says. They had a few key theories: “Businesses have a hard time buying custom things, the people who start creative businesses don’t know that much about manufacturing packaging, and people waste a ton of time managing custom manufactured packaging.”
Narrowing in on what Lumi would specifically do to alleviate those pain points, and how its business model would operate, took nearly two years, Genet says. And those two years weren’t easy.
“As a founder, everytime you’re working on the thing right in front of you, you want to believe with every fiber of your being that it is the right thing,” she explains. “You never want to feel like, ‘Yes, I got up and worked today, and had a bunch of other people work today on a thing, and it was the wrong thing. You never want to think that.”
“But what I’ve learned is that the process is painful, and there isn’t a way around that. If you don’t want it to be painful, you’re just going to get it wrong,” Genet says.
From the experience of structuring and restructuring Lumi’s model, Genet learned two simple but crucial lessons: “You need to keep listening to your customer, and you need to keep taking risks,” she says. “Both of those things are really hard in practice. They’re really easy to say, but they’re really hard in practice. Listening to your customer is hard because your customers aren’t very articulate. When you’re trying to change a market, customers don’t tell you what to do, they just tell you what their problems are. You have to figure out the good part, they just tell you the bad part.”
“And for taking risks, this is really hard as an organization, especially after you’ve had some elements of success. It’s human nature to want to keep optimizing [for that success], but the reality is that you really need to keep taking new risks as you grow the company. Otherwise, you just optimize a smaller and smaller business.”
The consequences for ignoring customer feedback, eschewing risks and plowing ahead with the vision you initially believed correct are bad news, she adds: “That’s where businesses go off on a tangent. They obsess about the thing they started out doing, and even when the market shows them it doesn’t matter enough, they just keep doubling down.”
By 2017, Lumi had reached a clear problem statement. “In the age of e-commerce, brands are acutely suffering from not knowing how to manage their packaging supply chain,” Genet says.
To solve that problem, Lumi would catalog the entire packaging supply chain — a vast network of factories, machines, manufacturers and middlemen — and bring it all online, offering a simple, digital dashboard for brands to manage orders from over 20,000 packaging suppliers in the U.S. and Asia.
Landing the first big clients
In the earliest stages of a B2B company, the founder also needs to be the №1 salesman, Genet says. That’s because convincing other companies to put their fate in your hands is all about trust.
“Any company that is spending a significant amount on a B2B service really needs to trust that you have it covered,” she explains. “Which is actually risky. The concept of switching any amount of spending in a B2B service over to a company of 10 people, that’s risky, even if you have the best product in the world. So as a founder you have to de-risk it by being reliable, and personally involved.”
Although Genet didn’t come from a traditional MBA background, and her skills lay more comfortably in design and product, she made sales — and personal relationships with customers — her top priority.
“In B2B, it really is true that to the extent the founder resists getting involved in early stages, it really slows things down,” she says. “You’re the most articulate person about why you’re starting that thing, and why it’s better than the status quo. Especially when the business is small and you’re onboarding those key customers, and your team is only 10 people.”
Genet’s top strategy to acquire early customers is straightforward: Be honest.
“People say ‘fake it until you make it,’ but it doesn’t work with early customers. You really can’t fake anything. They have to know exactly what they’re getting into,” she says. “If you’re really a 10 person company, you can’t pretend to be a 50 person company or 100 person company. They’re going to find out. And if you’ve blown their trust that way, it’s sort of foolish.”
Instead, frame your size and scrappy team as a strength.
“You level with them about what you are and what you aren’t,” Genet advises. “You say, ‘Hey, yes, we’re a 10 person company. But with you as our first customer, we’re going to go above and beyond for you. You’re a faceless thing to other suppliers, but to us, you’re the most important account, so we’re going to treat you that way.’”
And then, roll out the red carpet for those first customers, delivering service above and beyond expectations. It’s a practice she learned from Paul Graham and Y Combinator’s mantra: Do things that don’t scale.
“Startups get so obsessed with scaling that they try to build a system for everything. But when you get your first customer, they don’t want to feel like they’re part of a system, or that you’re putting them through 10 steps,” she says. “You should tailor your approach just to them, and make them feel special. Don’t try to over-systemitize when you’re trying to get your first fragile accounts.”
As Lumi’s success proves, those early efforts will be rewarded. Today, with businesses relying on Lumi to source millions of pieces of packaging at a time, Genet still experiences the same emotions onboarding new clients as she did in the company’s early years.
“It’s very exciting and also nerve wracking,” Genet says with a smile. “That feeling has not changed for me. Whether it’s our first customer or our hundredth customer, it never gets old for me.”