New Phase of Growth by The CEO OF The/Studio March 23, 2015
The/Studio is entering a new phase of growth. We truly believe that we have the right solution to help make custom manufacturing simple for our customers. The goal of The/Studio is now clear. We want to become the largest platform in the world for the manufacturing of custom products. One of my top initiatives for 2015 is to secure investment for the company to help make this path easier.
I have a Chinese friend that is an investor and he recommended that before talking to investors it would be a good idea to get my story out in the Chinese business press. He told me to write a story about my life in English and to have my Executive Assistant translate it into Chinese. I wanted to post my story on our blog in case any of our customers or employees, vendors or partners of The/Studio are interested in learning more about me, The/Studio and our shared vision. Here is the story.
The/Studio/Joseph Heller Story
Joseph Heller started his journey as an entrepreneur when he was just 12 years old. He took advantage of his parents Costco membership by purchasing candy wholesale and selling it to his classmates at school. His first stab at innovation was when he started to ask his classmates to vote on which new candies they would like him to introduce to the market. However his career as a candy entrepreneur was abruptly ended when the principal of the school caught wind of the fact that he was undercutting the school cafeteria’s monopoly on candy sold at the school.
Joseph did well in school, but he was always more interested in being an entrepreneur than a student. A lot has changed in America since the late 80’s and early 90’s, but during that time even in California, Joseph was a sort of oddity. His father was a black and his mother was Jewish of white Ashkenazi descent. His father was a strict disciplinarian that only cared about education, and Joseph admitted that his upbringing was completely different than any of his peers.
In junior high school Joseph attended a mostly working class school that was riddled with gangs and drugs. He avoided this atmosphere by studying hard, and always immersing himself in business projects, or activities such as science fairs. His parents decided that they wanted him to go to high school in a safer environment, and sent him to an upper class private high school.
Here also Joseph found it difficult to relate to his classmates. How was a black Jewish teenager going to relate to at a mostly white and Catholic high school? Joseph wasn’t good at sports, his family had significantly less money than most of his classmates, so he really was a social misfit. Joseph was however quick to add that he doesn’t hold any resentment towards the environment or his classmates.
Of course it was difficult being a teenager in a high school where you could truly not relate to anyone. But I don’t blame anyone for my social isolation. People are naturally inclined towards people similar to them. This experience made me a dreamer. I couldn’t accept being an outcast. I had to dream of a life where I made the rules, and lived a life according to my rules. I worked really hard towards that dream, and at 34 I can say I’ve made a lot of progress in creating that world. My company has over 60 employees in four different countries, we have completely changed our industry, and I’ve traveled all over the world in pursuit of this dream.
Fitting in makes you complacent, and I’m happy that I never fit in.
Unable to truly participate socially with his peers in school, Joseph always fell back on what he was comfortable with, figuring out creative ways to make money and studying. Joseph became truly inspired when he met a classmate that introduced Joseph to the world of web design. His classmate was a recent immigrant from Argentina and also felt out of place, so he would spend all of his free time learning how to design websites.
As Joseph reminisced “this was the mid 1990’s and even some large corporations didn’t have websites. Designing websites as a teenager in the 90’s was truly cutting edge.” Joseph and his friend started their own web design business, and successfully built websites for dozens of companies.
Upon graduating from high school Joseph was accepted into the prestigious university; UC Berkeley. At Berkeley Joseph continued his pattern of studying hard, and being an entrepreneur. Joseph remembers buying a digital camera for $500 that was just one megapixel so that he could sell watches on Ebay. This was so early that half of the listings on Ebay at this time didn’t even have pictures.
During this time there were a lot of Internet startups originating from UC Berkeley and Stanford, and Joseph was able to convince an angel investment firm to invest $500,000 in an idea that Joseph had to help artisans and small businesses sell their product online.
Joseph opened a small office in Oakland, California and hired some of his fraternity brothers to join him as programmers. At this time it was very expensive for small businesses to develop websites, and small businesses didn’t even understand what the Internet was. Joseph’s idea was to create a platform to help small businesses and artisans easily sell their products online. Their biggest success was when one of their customers products was featured on the nationally televised Oprah Winfrey show. They literally received thousands of orders within a matter of a few weeks.
However, despite some successes, they eventually ran out of money and they were unable to secure additional funding. Joseph reminisced “the truth is that we created the first Etsy. We were helping small businesses and artisans sell their products 6 years before Etsy was even in business. However, at the time I was only 19 years old and I didn’t have the business experience to make the company successful.”
After the company failed, Joseph returned to school, and selling things on Ebay. He was inspired by an economics class that he took, that focused on the rise of Asia, specifically China. Joseph, didn’t want to work for a large corporation just out of college, so he decided that he would go to China for one year to teach English.
After Joseph’s one year English teaching stint was over, Joseph decided to work together with a factory that sold embroidered designs and patches. Joseph started The/Studio and built a website, and started making phone calls to potential customers during the night time to correspond with the day time in the US. Eventually Joseph established the business to the point that he hired one Chinese staff who worked during the day to communicate with factories, and he recruited two of his fraternity brothers from the US to work at night to do sales to the US.
As Joseph explained “I rented a small one bedroom loft. The downstairs living room acted as a production office during the day, and at night we were a three person call center. I slept upstairs in my bedroom during the daytime.” Joseph explained that he had a lot of fun during this time. At just 25 years old, Joseph was negotiating with factories, and partying with his friends in China on the weekend. However, he wasn’t sure if he could truly make a sustainable business out of embroidered patches.
Business grew quickly and Joseph started to hire more Chinese staff, they moved into a real office, and he recruited his brother and other friends from the US to come work at The/Studio. Later Joseph even expanded to the Philippines, and opened a call center and design center in the Philippines.
Looking back at it Joseph describes the experience;
“When you are young and you don’t know anything, there is a sort of beauty to your audacity. I came to China and without speaking the language or even knowing the culture, I started a business. I didn’t know anything about the Philippines, but I read an article that a lot of call centers were moving to the Philippines. I met some people in the Philippines online, I paid for them to come to China for a few weeks, and then I decided to open a call center in the Philippines. I made this decision without even going to the Philippines. I didn’t do any due diligence, or research. I just opened an office in the Philippines.
In the US, I was culturally different than all of my classmates, so I was very used to accepting people of different cultures, and figuring out how to work with them. I had no problem going to China and the Philippines, with literally no money or experience and figuring out how to work with them. When I reflect back on this, its definitely a little bit crazy, but I’m proud that I had the audacity and grit to just do it. I hope I never lose that. I never want to be too scared to take a risk worth taking.”
Joseph was truly enjoying the experience until he was jolted into reality in 2010. In 2010 Joseph nearly went bankrupt. He attributes it to trying to expand too quickly, not focusing on the business (he was always trying to come up with new ideas to truly make it big), and hiring the wrong people.
As Joseph explained “This was by far the most depressing time of my life. I had over 30 employees, and each time I walked in the office, I had to look confident and happy, but I knew that I was literally losing thousands of dollars each day. I looked at my bank account and I realized that we only had 3 months left of operating capital. I had to make a decision to either close the business immediately, and pay all of the company’s outstanding debt and salaries, or be faced with the specter that if the company didn’t quickly turn things around, I would literally not even have enough cash to pay our staff or suppliers.”
Joseph couldn’t give up. He focused on firing the underperformers in the company. He worked day and night on solving problems. Everyone thought Joseph would fail, and some people even took pleasure in his misery.
But Joseph triumphed. The company turned around, and three months later was actually making a reasonable profit. Joseph decided it was important to hire a real manager that was older than him, and settled on an American named Greg McCurley who had worked in a similar industry as an executive manager. Greg did a good job of helping to organize the company, especially the Manila operation.
As Joseph described “Greg was the first real manager that I worked with. I had literally never really worked in any other company other than my own, so I really didn’t understand how to manage a business or people.” Slowly The/Studio’s business began to crawl back. However, Joseph admits that in 2010, 2011 and 2012, he was still focused on finding the next big business. As Joseph said “I didn’t want my business legacy to be making patches.”
Sometime in 2013 Joseph remembers reflecting on life and business. The/Studio was making enough money so that he could comfortably support himself, but he wasn’t satisfied with the direction things were going in. He felt that he was always stressed out, and he felt that he was a prisoner to his company. He had been producing patches for over 7 years now, and every other business venture he attempted didn’t work.
He came to the realization that he either needed to sell the company, or become focused 100% on only The/Studio. He realized that starting other businesses while concentrating on The/Studio half time was draining him, and it was unfair to the company and to the managers in the company.
Joseph made a decision. He wouldn’t concentrate on the profitability of the company anymore. He would only concentrate on being happy, building a great team, doing amazing work, and focusing all of that energy on only The/Studio. Despite all of the setbacks, and failures, The/Studio had still managed to become the largest supplier of custom embroidered patches in the United States, had offices and staff in China, the Philippines and the US, and the company was still having double digit growth year over year.
Joseph turned this into a vision that The/Studio would be the largest supplier of custom manufactured products in the world. Joseph spent the second half of 2013 reorganizing the business again. Instead of focusing on profit he wanted to focus on staff, processes, and the product.
2014 is when all of these efforts really started to come to fruition. Joseph explained “It was amazing how the company transformed. I started hiring really good people, that I loved working with. Customers started praising us on how they loved our company and product.” Joseph felt the true turnaround came when he found a team of programmers in Romania.
The/Studio launched The/Studio Factory Cloud in August of 2014. The/Studio Factory Cloud is a CRM and ERP system that manages the entire The/Studio business from marketing, to customer service, sales, design, production and shipping. Joseph loves the The/Studio Factory Cloud because, “It’s the only tool that would allow me to realize my dream of making The/Studio a platform for manufacturing custom products. Every week we learn from our staff and customers and making changes to The/Studio Factory Cloud. ”
Joseph is confident that The/Studio is already the leader in custom manufactured products, because there really isn’t any competition. There are sites such as Zazzle and Café Press, however, they are basically just printing companies. There are of course other companies that make custom products, but the market is just fragmented with very small competitors that don’t understand technology.
Joseph believes that small scale custom manufacturing is the wave of the future. He believes that technology and other macro trends are working in his favor. Joseph points to three trends that he believes will assist The/Studio. The first is the fact that technology and China have driven the cost down of manufacturing. Japanese, American and German embroidery machines, used to dominate the market, and these machines cost over $100,000. Similar Chinese made machines can now be produced for $18,000 and if you purchase a used machine the price can be as low as $7,000. Similar trends are also occurring in the US with printing technology. Now even small screen printers have tools that used to cost hundreds of thousands of dollars. Custom manufacturing is constantly becoming more economical.
This has created another trend which is that factories are now much smaller. As Joseph describes, 20 years ago almost all of the factories in China were owned by large Taiwanese or Hong Kong business interests. However, the workers of these factories learned the skills of production, and with lower barriers to entry, these huge factories with thousands of workers are now being replaced with much more nimble and smaller workshops with between 20 to 30 workers. Again this trend is also replicating itself in the US and other countries.
Lastly, Joseph believes that customization is the waive of the future. Before the industrial revolution everything was customized. It was only during the industrial revolution that products were mass manufactured. However, the Internet and other manufacturing technologies has allowed for manufacturing to start returning to its customized roots. Even brands such as Nike and Walmart are now doing small runs of only a few hundred or thousand pieces for very specific markets or categories of customers.
However, Joseph has learned from producing custom patches that custom manufacturing is extremely complicated. If a small business currently wants to order 200 custom caps for their store the process is too arduous. If you go on Alibaba the international trading platform 95% of factories won’t respond to you if you say you want to order 200 pieces. Even if you find a factory the back and forth and time that you will exhaust trying to get this done is just not worth it.
The/Studio’s goal is to become the world’s foremost destination to produce custom products. If someone wants to produce a custom product, we want them to think about The/Studio. Joseph feels that he has the team and experience to make this vision a reality. As Joseph describes “I know how difficult custom manufacturing is. We currently manufacture 2,000 separate orders each month, and over 400,000 pieces. The only solution to this is technology, and I believe that I can offer a solution that helps our customers save time and money, and also opens up markets to the factories that we work with.”
In 2015, Joseph plans to grow sales by over 40% from 3.8 million dollars to over 5 million dollars. In 2016 his goal is to increase sales to over 12 million dollars. He will do this by focusing on launching 24 new products in 2015 and launching 72 new products in 2016. The goal is to continually refine the process and make it easier by enhancing The/Studio’s backend technology, and by offering his customers a one stop shop for manufacturing custom products.
The ultimate goal is to take the company public and become the world’s backbone of custom manufacturing.