Page 1

2016

RISING STARS

How to Build a Culture Your Team Will Love

Arkadium CEO

JESSICA ROVELLO

Her top goal: “creating joy” among her 100 employees.


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Stay, but move up.


Contents

“You read Dante’s Inferno—they’re standing next to Lucifer in the frozen lake.” —GEORGE ZIMMER, founder and former CEO of Men’s Wearhouse, expressing his view of the company’s executives who ousted him in 2013

PG.

108

PHOTOGRAPH BY JASON MADARA

JUNE 2016 - INC. - 7


•Best Workplaces BUILD

The 50 companies on our inaugural roster show you how to create a culture to find and keep the very best employees. —

83 • MADE

2016 Iconic Design Awards

THE QUIET MAN Noah Kraft from Doppler Labs makes earbuds that tune out the noise.

Features

32 •

LAUNCH

The New Change Agents

Meet the young founders who are taking on some of the world’s biggest challenges.

108 • INNOVATE

Founder’s Revenge

Once, George Zimmer had a startup called Men’s Wearhouse. He made it famous, and vice versa. Then he got pushed out, and founded two more startups. But he still wants the old one back. By Tom Foster —

— ON THE COVER JESSICA ROVELLO, CO-FOUNDER AND CEO OF ARKADIUM, PHOTOGRAPHED IN NEW YORK CITY BY MEREDITH JENKS

8 - INC. - JUNE 2016

CONTENTS

THIS PAGE: BRYAN DERBALLA. ON THE COVER: HAIR: TAKEO SUZUKI; MAKEUP: CLARISSA LUNA; STYLIST: COURTNEY RANISZEWSKI



The beautiful, smart, and practical winners of Inc.’s third annual design competition represent the best of this year’s entrepreneurmade products. By Abigail Baron and Kevin J. Ryan —


From business cards and flyers, to a real street address with one of our mailboxes, to expertly packed shipments, we’re here to help. Need to tell the world your story? No problem. theupsstore.com


16 Editor’s Letter It helps to be smart. And cool with paradox 18 The Inc. Life Kayak co-founder Paul English moonlights as an Uber driver (in his Tesla) 132 Founders Forum Bethenny Frankel, founder and CEO of Skinnygirl —

132

23 •

LAUNCH

— 24 Tip Sheet Corporate venture funding is on the rise. Should you take it? Plus: The Jargonator 26 Case Study The vast majority of state incentive subsidies go to big business. This is why 30 Inc. 5000 Insights Giving employees the tools to excel helped Two Maids & a Mop clean up 49 Thomas Goetz Small companies go fast. Big customers don’t. Learn to go two speeds at once —

51 •

BUILD

— 67 Tip Sheet The surprising benefits of unlimited vacation 70 Moneywise What you need to know about sustainable investing 72 Best Industries New products behind the booze industry’s staggering growth 74 Gary Vaynerchuk Why I put my employees ahead of my clients —

Departments

83 •

24 67

72

10 - INC. - JUNE 2016

105 •

INNOVATE

— 106 Tip Sheet New tech tools to monitor—and increase— your employees’ happiness 120 How We Did It The sustainability wonks behind coconut water brand Harmless Harvest spill their formula 124 Jason Fried Large enterprise clients are enticing, but they can upend your company —

CONTENTS

CLOCKWISE FROM TOP: AMY LOMBARD; POLLY BECKER; THOM ATKINSON/GALLERY STOCK; WILL ANDERSON

MADE

— 101 Jim Brett Figure out your company’s vision— and then write it down —


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TOP VIDEOS

I N C .C O M / L E A D

4 Habits of Exceptional Bosses Some leaders practice greatness every day, writes Inc.com columnist Bill Murphy Jr. You can too, if you follow their example

Inc.com

1

I N C .C O M / P L AY B O O K

Amy Cuddy Associate professor of business administration at Harvard Business School and author of Presence

“Almost everyone has felt like an impostor.”

THEY AVOID ASSUMPTIONS

Instead of taking things at face value, great leaders ask probing questions to gain clarity.

THEY’RE EMPATHETIC

Can you see the world through others’ eyes? Effective leaders hear—and understand— where their employees are coming from.

David Chang Chef and founder of the Momofuku restaurant group

3

— THEY CAN ACCEPT BLAME

Successful bosses own up to it when they’re at fault, and when their staff comes up short.

4 —

THEY HAVE A SENSE OF HUMOR

The best leaders know to laugh, even— and especially—at themselves.

“I justified me yelling because I cared so much about getting it right.”

INC.COM/PLAYBOOK

Tobias Lütke Co-founder and CEO of Shopify

“What better way to become an entrepreneur than by doing it on your own terms?”

“Certainty, even if it’s inaccurate, will move a segment of the population.” Tony Robbins, life coach and author of Money: Master the Game, on Donald Trump  inc.com/idealab

12 - INC. - JUNE 2016

CONTENTS

CLOCKWISE FROM TOP LEFT: PHILLIP TOLEDANO/TRUNK ARCHIVE; JOYZEL ACEVEDO; SCOTT FOREMAN; JOYZEL ACEVEDO; ILLUSTRATION: MICHAEL FRITH

2

I N C .C O M / O R I G I N - S T O R I E S


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TAKE ACTION AT SAVETHEINVENTOR.COM


ERIC SCHURENBERG JOHN DONNELLY CHIEF OPERATING OFFICER, DIGITAL MICHAEL MORELLO

PRESIDENT AND EDITOR IN CHIEF EDITOR

JAMES LEDBETTER

CHIEF REVENUE OFFICER

EXECUTIVE DIRECTOR, DIGITAL ALLISON FASS MANAGING EDITOR JANICE MALKOTSIS EXECUTIVE EDITORS JON FINE, KRIS FRIESWICK, LAURA LORBER SAN FRANCISCO BUREAU CHIEF JEFF BERCOVICI LOS ANGELES BUREAU CHIEF LINDSAY BLAKELY FEATURES EDITOR DIANA RANSOM SENIOR EDITORS MARIA ASPAN, DOUG CANTOR, VANNA LE, DANIELLE SACKS ASSOCIATE DIRECTOR, STRATEGY AND SOCIAL MEDIA STEPHANIE MEYERS EDITORS-AT-LARGE LEIGH BUCHANAN, TOM FOSTER, BILL SAPORITO, KIMBERLY WEISUL, DAVID WHITFORD SENIOR WRITERS CHRISTINE LAGORIO-CHAFKIN, ILAN MOCHARI, JEREMY QUITTNER SENIOR CONTRIBUTING WRITER BURT HELM STAFF WRITER WILL YAKOWICZ REPORTERS ZOË HENRY, KEVIN J. RYAN, TESS TOWNSEND CREATIVE DIRECTOR BLAKE TAYLOR PHOTOGRAPHY DIRECTOR TRAVIS RUSE ART DIRECTORS SARAH GARCEA, KRISTIN LENZ DESIGN MANAGER HOJOON JON DESIGNER MYUNG-HUN JIN DEPUTY PHOTO EDITOR ERNIE MONTEIRO ASSOCIATE PHOTO EDITOR SAMANTHA KELLY DIGITAL PRODUCTION MANAGER JOEL FROUDE DIGITAL PHOTO EDITOR MARGO DOONEY EXECUTIVE VIDEO PRODUCER DEVIN ROGERINO CONSULTANT TIM RICE WEB PRODUCERS ADAM JANOFSKY, THOMPSON WALL SOCIAL MEDIA PRODUCER VALERIE HEINMETS ASSISTANT EDITOR ANNA HENSEL ASSISTANT MANAGING EDITOR ABIGAIL BARON COPY CHIEF DAVID SUTTER COPY EDITOR PAM WARREN RESEARCH DIRECTOR MARLI GUZZETTA PRODUCTION MANAGER ANA ZAPATA BOARD OF ADVISERS ELIZABETH GORE, CHRIS HEIVLY, PHIL LIBIN, POONEH MOHAJER, DOUG TATUM, AMIR TEHRANI, NOAM WASSERMAN SENIOR CONTRIBUTING EDITOR NORM BRODSKY CONTRIBUTING EDITORS JOYZEL ACEVEDO, CAMERON ALBERT-DEITCH, ADAM BAER, JIM BRETT, COLLEEN DEBAISE, DONNA FENN, JASON FRIED, THOMAS GOETZ, JEFF HADEN, BERT JACOBS, GEOFFREY JAMES, PAUL KEEGAN, ANDREW KUPFER, SHEILA MARIKAR, HELAINE OLEN, BEN SCHOTT, ALINA TUGEND, GARY VAYNERCHUK, AMY WEBB, LIZ WELCH INTERNS HELENA BALL, ADELINE LULO SALES AND MARKETING

PUBLISHER, INTEGRATED SALES RICHARD RUSSEY ASSOCIATE PUBLISHER, NATIONAL CONFERENCE DIRECTOR LISA BENTLEY ASSOCIATE PUBLISHER, MARKETING JENNIFER HENKUS RESEARCH DIRECTOR REG UNGBERG ASSOCIATE RESEARCH DIRECTOR BEN O’HARA NEW YORK SALES DIRECTOR KERI HAMMER MIDWEST SALES DIRECTOR MEREDITH WISNIEWSKI: 708-929-8126 NEW YORK SENIOR ACCOUNT EXECUTIVES AMY CHRISTIANSEN, MEREDITH DELUCA, ALAN MOY: 212-389-5300 ACCOUNT MANAGERS VIVIENNE GILLMETT, CHRISTINE RIDENOUR DIGITAL CAMPAIGN MANAGER KIRK INOCENCIO DIGITAL ACCOUNT MANAGER MARIO GUARDADO SENIOR ADVISER IRVIN V. FALK ATLANTA JASON ALBAUM: 404-892-0760 DALLAS STEVEN G. TIERNEY: 972-625-6688 DETROIT ACCOUNT EXECUTIVE GEORGE WALTER: 248-709-0727 LOS ANGELES/SOUTHERN CALIFORNIA RICHARD L. TAW III: 310-341-2341 INTERNATIONAL JOHN DONNELLY: 212-389-5345 CLASSIFIEDS ANN MARIE JOHNSON: 727-507-7505 FRANCHISE AND MARKETPLACE TOM EMERSON: 212-655-5220 INC. LIVE

EXECUTIVE DIRECTOR, CONFERENCES AND EVENTS LYNN SHAFFER EXECUTIVE PRODUCER, CONFERENCES AND EVENTS TENNILLE M. ROBINSON EVENT PRODUCER, CONFERENCES AND EVENTS EMILI KAUFMAN EVENT MANAGER, CONFERENCES AND EVENTS SHANNON BYRD ASSISTANT EVENT PRODUCER MARIE VASALLO CONSULTANT BREANA MURPHY BUSINESS RESOURCES

DIRECTOR OF OPERATIONS DARCY LEWIS EXECUTIVE EDITOR, CONTENT STRATEGIES SCOTT LEIBS DIRECTOR, BRANDED CONTENT PETE FRANCO ASSOCIATE DIRECTOR, INTEGRATED MARKETING KELSEY RODENBIKER SENIOR INTEGRATED MARKETING MANAGER MARY MOORE ASSOCIATE DIRECTOR, ACCOUNT MANAGEMENT BILLIE GIBSON SENIOR ACCOUNT MANAGERS JENNIFER BOBBIN, VANESSA BRAND ACCOUNT MANAGER SHERICE GOODWINE MARKETING AND RESEARCH COORDINATOR LAUREN ARRIOLA GROUP VICE PRESIDENT, MARKETING PATRICK HAINAULT EVENTS MARKETING DIRECTOR MARCIE ROSENSTOCK ASSOCIATE MARKETING MANAGER LINDA LAU ASSISTANT MARKETING MANAGER ALYSSA PARSONS PRODUCTION

GROUP DIRECTOR KATHLEEN O’LEARY DIRECTOR OF DIGITAL EDITORIAL OPERATIONS CARLY MIGLIORI ADVERTISING OPERATIONS MANAGER SUNG WOON KIL GROUP MANAGER JANE HAZEL FINANCE MANAGER BOB BRONZO ASSOCIATE MANAGER DAVE POWELL CONSUMER MARKETING

DIRECTOR ANNE MARIE O’KEEFE CIRCULATION OPERATIONS DIRECTOR DOUG SMITH SENIOR MANAGERS TYLER ADAMS, KATHRYN C. KMIOTEK MANAGER REBECCA SULLIVAN

14 - INC. - JUNE 2016

D I G I TA L D E V E L O P M E N T

GROUP DIRECTOR JASON TAGG DESIGN DIRECTOR HAEWON KYE SENIOR ART DIRECTOR JANET WAEGEL ART DIRECTOR ASHLEY O'BRION LEAD DEVELOPER JOHN GUARAGNO SENIOR DEVELOPERS AMINE BELKADI, SERGII USTIUZHANIN DEVELOPERS JAMES DYBISZ, NICK MANNING, ADAM NOONAN-KELLY D I G I TA L M E D I A A N D O P E R AT I O N S

GLOBAL HEAD STEVEN SUTHIANA DIRECTOR, DIGITAL CLIENT SERVICES AND REVENUE OPERATIONS JONELLE MARINO LASALA SENIOR MANAGER, DIGITAL REVENUE OPERATIONS SELIN SONMEZ ASSOCIATE DIGITAL CLIENT SERVICES MANAGERS MEAGHAN CURRAN, NINA RUBIO DIGITAL CLIENT SERVICES ASSOCIATES EVELYN ROMERO, TIFFANY TAM ASSOCIATE DIRECTOR, DIGITAL BUSINESS OPERATIONS AND ANALYTICS JAMES VAN SWERINGEN SENIOR ANALYST, BUSINESS DEVELOPMENT AND YIELD MANAGEMENT CHRIS CATTIE DIGITAL ANALYST JAMES DOOLIN III DIGITAL REVENUE OPERATIONS ASSOCIATE LAUREN HECHEL MANAGER, DIGITAL AD PRODUCTS DEVELOPMENT DAVID ROSENBAUM JUNIOR INTERACTIVE MEDIA DEVELOPER NATHAN BROADDUS ACCOUNTING

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34 EPA-ESTIMATED CITY MPG.1 TONS OF SAFETY FEATURES. ZERO WORRIES.

With impressive fuel economy, available Pre-Collision System2 with Pedestrian Detection3 and Lane Departure Alert4 with Steering Assist plus Electronic On-Demand All-Wheel Drive with intelligence, the versatile 2016 RAV4 Hybrid offers everything you need in a fleet vehicle. Learn more at fleet.toyota.com. Prototype shown with options. Production model may vary. 12016 EPA-estimated city/highway mileage. Actual mileage will vary. 2The Pre-Collision System is designed to help reduce the crash speed and damage in certain frontal collisions only. It is not a collision-avoidance system and is not a substitute for safe and attentive driving. System effectiveness depends on many factors, such as speed, driver input and road conditions. See your Owner’s Manual for further information. 3The Pedestrian Detection System is designed to detect the presence of a pedestrian ahead of the vehicle, to determine if impact with the pedestrian is imminent and to help reduce impact speed. It is not a collision-avoidance system and is not a substitute for safe and attentive driving. System effectiveness depends on many factors, such as speed, size and position of pedestrians, driver input and weather, light and road conditions. Please see your Owner’s Manual for further information. 4Lane Departure Alert is designed to read the lane markers under certain conditions, and provide visual and audible alerts when lane departure is detected. It is not a collision-avoidance system or a substitute for safe and attentive driving. Effectiveness depends on many factors. See Owner’s Manual for more information. ©2016 Toyota Motor Sales, U.S.A., Inc.


WELCOME

THE WELL-ADJUSTED ENTREPRENEUR—AND OTHER PARADOXES COTT FITZGERALD SAID the sign of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time. That’s also a pretty good description of a well-adjusted entrepreneur. For starters, you have to be numerate enough to run a business but also willfully blind to a 95 percent failure rate. You must be passionate about your vision but ready to pivot if the business needs it. That paradox was a key theme in a recent live interview between me and Steve Blank, Stanford professor and co-founder of the Lean Startup movement, which holds that a business idea is not a blueprint but merely a hypothesis to be tested in the marketplace. Blank asked our audience of founders how many saw themselves as visionaries. Almost all did. “Most of

you are hallucinating,” replied Blank. “No founder’s vision survives first contact with customers.” Or, he might have added, sustained contact with a growing work force. Year after year, our Inc. 5000 honorees tell us that attracting and retaining talent is the No. 1 restraint on their companies’ growth. To help with that challenge, I’m proud to introduce our inaugural Best Workplaces list, which starts on page 51. Like all serious business challenges, creating a workplace that people want to join (and never leave) is part art, part science. Our list, assembled in partnership with Quantum Workplace of Omaha, focused on the science part. The 50 great workplaces we recognized all share three quantifiable traits: a clear commitment to employees’ financial security; transparent setting and tracking of workers’ goals; and a sincere effort to elicit and reward innovation. Deciding what to build atop that foundation is where the art comes in. For example, this month’s cover subject, Jessica Rovello of 97-employee game developer Arkadium, deploys what she calls Joy Teams to unify and motivate a work force

16 - INC. - JUNE 2016

split between Russia and the U.S. Sunlit offices, company outings, and upbeat meetings are part of the formula, but so is commitment. Rovello takes joy seriously enough to have relocated 50 of her staffers from Crimea to Russia once that erstwhile Ukrainian territory became a geopolitical football. Something other than joy inspires George Zimmer, the founder and former public face of Men’s Wearhouse. Kicked out of the company in 2013, he is angling for a way to take back what he launched. Turn to page 108 for Tom Foster’s fascinating profile of a founder who is most definitely not cool with another one of those entrepreneurial paradoxes— namely, to grow your company, you sometimes have to let go.

EDITOR’S LETTER


RIGHT NOW, YOUR BUSINESS CAN GO IN A MILLION DIFFERENT DIRECTIONS. AND ONE OF THEM IS RIGHT.

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NIGHT SHIFT

Uber driver Paul English with a passenger in Arlington, Massachusetts, while pausing for a moment to map out his route.

18 - INC. - JUNE MONTH 2016 2016


RIDE ON

AN UBER-SUCCESSFUL FOUNDER If you see Kayak co-founder Paul English behind the wheel of his Tesla, donâ&#x20AC;&#x2122;t get too friendly. He may be working Photographs by JESSE BURKE

THE INC. LIFE


“I wanted to know what it felt like to get rated.” —PAUL ENGLISH, co-founder, Kayak and Lola

L

 FARING WELL From top: English at the wheel of his Tesla between pickups; the extra tech that powers his rides; a departing passenger—who English hopes won’t ding his stellar rating.

20 - INC. - JUNE 2016

AST YEAR, PAUL ENGLISH, a co-founder of the travel booking site Kayak— which Priceline bought for $1.8 billion in 2012—looked at his calendar. Ninety percent of his meetings and outings, he realized, were with people in tech or nonprofits. He wanted to broaden his circle. So he started driving for Uber. In his Tesla Model S. On Halloween. After hosting a costume party. “I went out driving from midnight to 2 a.m.,” English says. “People thought it was kind of hilarious that someone dressed up like a vampire was driving a Tesla.” It’s a gig English still does a few hours a week in and around his hometown of Boston. “If anyone asks what I do for a living, I usually say I’m an engineer, and then I ask what they do,” English says. “It’s more interesting to hear about other people.” English doesn’t soup up his ride with bottled water or candy. But he keeps a notebook and writes down a sentence about every rider. One of his more memorable passengers was a 13-year-old girl from China, who was visiting high schools in Boston. She hoped that attending one would make it easier to get into the Massachusetts Institute of Technology—where English is a part-time instructor at the business school. He mentioned that to her. “She kind of didn’t believe me,” he says. “She said, ‘Why are you driving a car if you teach at MIT?’ I told her I have many lives.” Ubering has helped English understand how service-economy professionals are rated. His newest startup, Lola, which has raised $19.7 million and, as of this writing, is nearing its launch, will have travel agents create itineraries for consumers, who will rate their experience from one to five. At presstime, English’s Uber rating was a sterling 4.97. “Being a competitive person,” English says, “I wonder: Who didn’t give me five stars? What did I do wrong?” Which is exactly why he set up Lola that way. “I want my agents to be competitive,” he says. “Having ratings allows you to say, ‘I want to get better.’” English has a new hobby in mind. “There’s a bar right next to my office. We’ve talked about my helping out behind the bar on Mondays as a barback,” he muses. “It would be a cool way to get to know new people.” And be blessedly free of worrying about his rating while he does it. —SHEILA MARIKAR

THE INC. LIFE


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Learning to slow down for big customers PG.49

Start. Scale. Thrive.

SHOULD YOU TAKE CORPORATE VENTURE FUNDING? PG.24

“Discomfort breeds innovation.” —JESSICA O. MATTHEWS, co-founder and CEO of Uncharted Play, maker of the Soccket soccer ball, which harnesses kinetic energy to power an LED light, and a 30 Under 30 honoree

32

PG.

•••• PHOTOGRAPH BY BRYAN DERBALLA

JUNE 2016 - INC. - 23


TIP SHEET FUNDING

Should Big Customers Be Your Big Investors? Corporate venture funding is on the rise. These founders explain how they made the choice to take corporate investment—or not WHEN GETABLE FOUNDER Tim Hyer raised outside capital last year, he ended up getting a chunk from a source he never pitched: his bigcompany customers. “I was blown away,” says Hyer of the industry interest when he casually mentioned Getable was raising its Series A round. Ultimately, 20 percent of the $5 million Hyer raised in 2015 came from construction companies and others that were using Getable’s online platform for heavy-equipment rental. The number of big companies putting money into startups is reaching new highs. Research firm CB Insights counts 321 companies that did some form of venture investing in 2015, up 16 percent over 2014 and more than double 2011 levels. JetBlue, Campbell Soup, and Sesame Street producer Sesame Workshop have launched new funds this year, joining longtime corporate investors like Google and Qualcomm. And while VC funding in general has slowed down in early 2016, corporations have continued to pour into deals. They participated in 26 percent of all funding rounds in the U.S. in the first quarter of 2016, up from 24 percent for all of last year.

Big-company investors rarely offer huge sums but can give you advantages that traditional venture investors can’t, says Evangelos Simoudis, a traditional VC who advises corporations on how to invest in, incubate, or acquire startups. For one, they are often customers of the startups they fund, or have some other type of actual or potential business relationship. That means industry expertise, proprietary technology, and access to networks that can juice your firm’s growth. Such backing is also a credibility boost. For Getable, it’s “proving to be much more valuable than just getting money,” says Hyer. And corporate investors may be nicer. Kathy Leake, co-founder, CEO, and chairwoman of Qualia, which has gotten more than $16 million in venture funding, says her Verizon Ventures investors are “less aggressive” than typical VCs, in part because they don’t have limited partners to satisfy. So, should you take the money?

Weigh these benefits and pitfalls when deciding. Define what you want from a bigcompany investor. Some corporate investors will drop the money and run. Others want to be intimately

The Jargonator Swatting the buzzwords of business By BEN SCHOTT

24 - INC. - JUNE 2016



 THE PENDULUM EFFECT / • noun. “When, after years of being unhappy in your career, you finally snap, and you want to run as far away as you can from your pain.” The trick is to avoid the pit. Source: Forbes

PEAK CURTAINS / • noun. Ikea’s chief sustainability officer said, “We have probably hit peak stuff. We talk about peak oil. I’d say we’ve hit peak red meat, peak sugar … peak home furnishings.” People who flog flat-pack knickknacks shouldn’t throw shade. Source: The Guardian

SPREAD: HENRIK SORENSEN/GETTY; POLLY BECKER (3)

••••


investors and knows that, “in our next round, we need smart money that is going to help us see where to move.” As corporate venture groups reached out to her, she interviewed founders of their portfolio companies, and took one corporate investor off the list when founders said it was too hands-off. Consider potential conflicts. Hyer decided early on that Getable would take money from customers (contractors) but not suppliers (equipment manufacturers or dealers), because he didn’t want to appear biased toward any one brand. Carefully weigh the benefits of a corporate investor against the potential hit to your credibility with customers.

 GIANT IN THE ROOM Beware of potential conflicts when taking investment from a large customer.

involved, perhaps even join your board. Once you decide what you want, interview portfolio companies to gauge how well you match. Aimee Kandrac, co-founder of care coordination platform WhatFriendsDo, has raised money from several angel

D.E.A.L. / • noun. An acronym for a new strategy to counter ad-blocking: Detect ad-block software; explain the value of ads; ask for a change in behavior; lift restrictions or limit user access. How about: Delete; eliminate; ax; liquidate? Source: IAB

Don’t give up too much control. Vyopta, which monitors and analyzes video and communications data on enterprise networks, rejected a sizable investment from a large customer a couple of years ago. Co-founder Alfredo Ramirez was worried that the customer—which asked for a board seat—might influence acquisitions or other opportunities involving its competitors. Now that Ramirez has funding from a traditional VC, he is more open to a corporate investor as long as it takes a minority position and doesn’t want a board seat. “We’re in a better position to negotiate,” he says. —ALIX STUART

 CALENDARIZATION / • noun. When “central bankers and their shills … goose asset prices in the fourth quarter so investors will get a pretty statement in January.” Conversely, many spend February setting exceptions as low as possible prior to Valentine’s Day. Source: Market Oracle

WHAT DO CORPORATE INVESTORS WANT?

Tech giant Salesforce is one of the most active corporate investors of the past few years, with more than 150 companies passing through its portfolio. Matt Garratt, VP of Salesforce Ventures, works with a team of four others to scour the startup landscape. He explains which companies catch his investor eye. What does Salesforce Ventures require from companies it invests in? Most companies we invest in have products that are built on our platform and are typically at the Series A, B, or C funding stage. We occasionally invest earlier or later, depending on the strategic value of the company. We primarily invest in firms that are already in our ecosystem, mainly via our AppExchange program. Occasionally, we look for companies with a talented founder and team who we believe will build successful businesses in the enterprise cloud space and provide a valuable solution to a broad set of our customers. You generally require that companies already have an institutional investor on board. Why? We complement institutional investors. For example, we typically don’t take board seats, so we look to institutional investors to fulfill that for our portfolio companies. On the flip side, we offer portfolio companies things an institutional investor can’t, like firsthand industry experience, access to executives, a product road map, and more. What helps a company rise to the top? A company’s product needs to be broadly strategic to our customer base, rather than fulfill a niche use case. We require a Salesforce executive sponsor for every investment. If the sponsor believes your company will have a strategic, unique, and broad use case, your firm will likely rise above the rest.

 BAKUGAI / • noun. A Japanese term for lavish spending sprees by Chinese tourists—literally, “explosive buying.” Just don’t use this word while shopping in Tokyo’s duty-free airport shops. Source: South China Morning Post

LAUNCH


C A S E S T U DY

PERCENTAGE OF DOLLARS TO LARGE COMPANIES TO SMALL COMPANIES

Do Incentive Programs Ignore Small Business?

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TO SMALL COMPANIES

MISSOURI THE MISSOURI WORKS PROGRAM 2013–2014 

89

PERCENT OF DOLLARS AWARDED TO LARGE COMPANIES

D

ESPITE THE FACT THAT small business is the engine of the U.S. economy, big business is still scoring the vast majority of the nation’s economic development incentives— whether in the form of tax credits for job training or creation, or subsidies for capital projects. There are more than 250 major economic incentive programs that dole out an estimated $12 billion in subsidies to businesses of all sizes annually. But small-business advocacy group Good Jobs First found that, in the 14 states it surveyed, big businesses get 80 to 96 percent of the total funds available. Why? Politics. Local and state pols, who authorize the programs, like to trumpet the number of jobs they helped create, says Chris Bouchard, state director for the Missouri Small Business and Technology Development Centers, in Columbia, Missouri. “If you can bring a lot of jobs to a community, it looks really good,” he says. So program administrators will offer subsidies to Amazon to bring a distribution center and 600 jobs to town, but not to a local stationer who might add two or three jobs in a storefront. Unrelated to politics is the fact that founders are often too busy to apply for subsidies and incentives, and startups often don’t have the profit to qualify for tax breaks. Greg LeRoy, executive director of Good Jobs First, says all the money used on incentives should be redirected to projects that benefit all companies, like infrastructure to boost the customer base, or to fund low-cost credit, which many founders say they need most. —JEREMY QUITTNER

PERCENTAGE OF DEALS AWARDED TO LARGE COMPANIES

69

PERCENT OF SUBSIDY DEALS TO LARGE COMPANIES  TOTAL FUNDS

$47.5M FUNDS TO LARGE COMPANIES

$42.3M FUNDS TO SMALL COMPANIES

$5.2M

ONE FOUNDER’S FRUSTRATION — Missouri Works overwhelmingly favors large businesses, according to Good Jobs First. In the past year alone, it’s approved multimillion-dollar subsidies for large companies including Kraft Heinz, Pepsi, Russell Stover Candies, and the recently public Square, which opened a new office in St. Louis with plans to add 246 workers. That riles bookstore owner Jarek Steele, of Left Bank Books. The store, which has been a St. Louis institution since 1969, has 14 employees and about $2 million in revenue. He’s convinced that there’s no point in applying for any subsidies, because the state programs are clearly biased toward large businesses. “I can’t imagine a scenario under which we would be in competition for something like that,” he says.

HOW OTHER STATES PERFORMED

FLORIDA 89% 77%

INDIANA 87% 67%

KANSAS 95% 81%


NORTH CAROLINA THE ONE NORTH CAROLINA FUND 2008–2013 

95

PERCENT OF DOLLARS AWARDED TO LARGE COMPANIES

93

PERCENT OF SUBSIDY DEALS TO LARGE COMPANIES  TOTAL FUNDS

WISCONSIN

THE INDUSTRIAL DEVELOPMENT AGENCIES (NEW YORK CITY ONLY) 2014 

THE ECONOMIC DEVELOPMENT TAX CREDIT 2010–2014 

80

80

39

55

PERCENT OF DOLLARS AWARDED TO LARGE COMPANIES

PERCENT OF DOLLARS AWARDED TO LARGE COMPANIES

$26.4M FUNDS TO LARGE COMPANIES

$25.1M FUNDS TO SMALL COMPANIES

$1.3M

PERCENT OF SUBSIDY DEALS TO LARGE COMPANIES 

PERCENT OF SUBSIDY DEALS TO LARGE COMPANIES 

A BRIDGE TOO FAR — The One North Carolina Fund is set up to allow the state to “respond quickly to competitive job-creation projects.” Yet it clearly favors big businesses, apportioning 93 percent of subsidy deals to them. One reason may be the program’s conditions. To qualify, businesses must create 20 to 40 jobs, depending on location. And, in addition to paying the average prevailing wage or more, businesses must provide employee health insurance and pay at least 50 percent of all premium costs. Such complexities at the state level led Mark Gorges, the president and co-founder of RyderRacks, to seek assistance from a privately run nonprofit subsidy program in Wilmington to build out a $1 million manufacturing facility. Even there, he was out of luck, as he was told Wilmington requires the creation of at least 75 jobs and an investment of $5 million in local projects to qualify for the subsidies.

LOUISIANA 94% 79%

NEW YORK

TOTAL FUNDS

TOTAL FUNDS

$132.2M

$82.5M

FUNDS TO LARGE COMPANIES

FUNDS TO LARGE COMPANIES

$105.8M

$66M

FUNDS TO SMALL COMPANIES

FUNDS TO SMALL COMPANIES

$26.4M

$16.5M

NEEDS-BASED, NOT SIZE-BASED — Now dubbed the Business Development Tax Credit, one of the state’s biggest development tax subsidies does a good job looping in small businesses. One way it achieves this is evaluating the projects it subsidizes through tax abatements on the basis of specific regional needs, and without a minimum threshold for either job creation or investment, says Steven Michels, a spokesman for the Wisconsin Economic Development Corporation. In 2013, the state provided another important subsidy to small businesses, by virtually eliminating its corporate tax for all manufacturers and agricultural producers.

MOVING THE NEEDLE — New York City has a great track record for small business. The majority of its deals, though not dollars, go to small businesses. That’s intentional, says Anthony Hogrebe of the New York City Economic Development Corporation, which oversees the program. “The EDC and the city administration are making sure we are targeting our resources toward the types of businesses that have the greatest challenges and the potential, with some help, for the greatest growth,” he says. For fiscal year 2016, eight of the program’s 11 awards went to small businesses with fewer than 100 employees.

NEVADA 96% 79%

NEW MEXICO 93% 70%

PENNSYLVANIA 89% 74%

VERMONT 83% 63%

VIRGINIA 91% 75%

SOURCE: GOOD JOBS FIRST (2015): “SHORTCHANGING SMALL BUSINESS: HOW BIG BUSINESSES DOMINATE STATE ECONOMIC DEVELOPMENT INCENTIVES”

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Create Ads That Are Built To Perform: Six Tips from a Digital Marketing Guru Digital advertising represents a quantum leap from its pre-internet predecessors, and it continues to evolve. For far less than the cost of a traditional ad campaign you can reach exponentially more viewers – anytime, anywhere – and be highly specific about your target demographics. Digital advertising is flexible, easy to adapt, and, best of all, conversions can move instantly from informational to transactional: with just one click customers can make a purchase or hire a service. But, according to Chris Innes, the chief monetization officer at SteelHouse, a datadriven advertising software company, too many companies focus solely on the ad itself, rather than on the bigger picture. “A lot of companies, small and large, are just spending money in the advertising space blindly,” he says. “They’ve been force-fed an attribution model by an ad-tech vendor, and a lot of times their campaigns don’t meet their performance goals.” By mastering the who, what, and why of your online ad campaign before launching, you will save yourself hours of aggravation down the road. Instead of throwing your advertising dollars into the internet abyss, spend your time converting, selling, and getting key takeaways for future campaigns.

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INC. 5000 INSIGHTS

Giving Employees the Tools to Excel Helps This Company Clean Up RON HOLT GOT INTO residential cleaning in the

early 2000s, when he saw a surge in demand that the mom-and-pop shops dominating the industry couldn’t meet. The result was Two Maids & a Mop, his Birmingham, Alabama, startup. By making some decisions that were expensive at first—but which bore long-term fruit—this three-time Inc. 5000 honoree brought in $4.7 million in revenue in 2014. Holt explains how his company has thrived. —SHEILA MARIKAR Photograph by WES FRAZER

— DOING THE RIGHT THING IS SMART BUSINESS

When Holt created Two Maids & a Mop, he was inexperienced in business building. He visited five noncompeting cleaning businesses to learn their secrets. He found that the majority of homecleaning companies employed independent contractors. It would have been cheaper for him to hire cleaners this way too. But since owners can’t require independent contractors to perform tasks in a specific manner, “I just couldn’t envision any scenario that would allow me to control an employee’s action by using that model,” Holt says. So, he decided to make all staffers W-2 employees. He also learned that cleaning companies often make their workers pay for damage they cause—and many of them hide it as a result. Holt chose instead to let customers and staff know that the company, not the cleaner, will pick up the tab for damage. “I never wanted my employees to break something and not tell me,” he says. He believes these policies have boosted his brand’s value and enabled the decisions he subsequently made that helped grow revenue. TAKEAWAY Competing on integrity can be as important as competing on price.

— IT PAYS TO GIVE EMPLOYEES A REASON TO BE GREAT

Holt started Two Maids & a Mop in April 2003. One year later, he

30 - INC. - JUNE 2016

had almost burned through his initial capital and was worried about making payroll. The morale of his cleaners was low and turnover was high. Holt had been paying them hourly rates, with most starting at minimum wage. His attempts to motivate his 12-person staff using a corporate style of management weren’t working. “I wanted a way to get our employees to care without being a police sergeant,” he says. In May 2004, he came up with a pay-for-performance plan— cleaners would be compensated on the basis of how customers rated them on a scale from one to 10. A 10 gets an employee a better wage—above the industry average, says Holt. “A one is pretty close to minimum wage.” He had to raise prices, but rewarding employees for doing the best job possible led to higher customer satisfaction and buoyed the business. “We were never really that much different from anyone else,” Holt says. “Now, when we talk about the pay-for-performance plan, we’re different. A lot of people hire us because of our plan.” TAKEAWAY Customers will pay more for higher quality. Give employees an incentive to provide it.

— KEEP IT CONSISTENT AT SCALE

While customer satisfaction increased with the pay-forperformance plan, there were still discrepancies from one cleaning to the next. “There would be

CLEAN SWEEP individuals who would go above and beyond with good intention, and someone else would come in and clean the normal way, and all of a sudden, the previous cleaning had become the standard,” Holt says. Cleaning quality also declined in the afternoon, likely because of tired staffers. In 2008, Holt enlisted the help of Debbie Sardone, a Texas-based cleaning consultant. She spent a month observing the company’s cleaners. With her, Two Maids & a Mop developed a 100-page, room-by-room guide on cleaning a home. Staffers are required to follow the formula (something that couldn’t be required if they were independent contractors), which has resulted in a more consistent quality of service. “We’re not perfect,” Holt says, “but now it doesn’t matter if you clean at 3 p.m. or 8 a.m., because the recipe tells you what to do.”

Industry peers helped Ron Holt learn the cleaning business. Going his own way helped him build one of the nation’s fastest-growing private companies.

TAKEAWAY Successful scaling requires giving your employees the tools and knowledge they need to excel.

JOBS ADDED*

No. 782 571% $4.7M 2003 215 176

2015 INC. 5000 RANK

3-YEAR GROWTH RATE*

2014 REVENUE

FOUNDED

EMPLOYEES

*From 2011 through 2014.

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Making Hospitals Safer COLLEEN COSTELLO, 25 VITAL VIO TROY, NEW YORK

 In 2011, when Colleen Costello was a biomedical engineering student at Rensselaer Polytechnic Institute, her grandmother was admitted to the hospital for a simple fall. While there, she developed a MRSA infection and ended up being in the hospital for more than a week. “We weren’t getting a lot of answers, and when I don’t have answers, I like to find them,” says Costello. She had been exploring ways to prevent health care–related infections, which affect one in 25 hospital patients daily. The solution: a kind of light that disinfects indoor spaces by attacking molecules specific to bacteria, mold, yeast, and fungi. She recruited her friend James Peterson, a mechanical engineering student also at RPI, for help with the light’s design, and together they launched Vital Vio in 2012, their senior year. (Peterson is no longer with the company.) Unlike the UV lights commonly used in hospitals, Vital Vio’s lights can be used continuously, because they cause no harm to humans. Today, Vital Vio lights are in major medical centers across the country. —D.F.  FUNDING RAISED $2.6 MILLION • EMPLOYEES 10

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THE

RISING STARS30 UNDER 30

This year’s crop of young founders is tackling the world’s biggest problems– one incredibly brilliant idea at a time

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start companies that confront problems unique to their generation. But Inc.’s 30 Under 30 inductees for 2016 are tackling problems that have vexed society for generations, such as nefarious stock trading, hospitalborne illnesses, medication nonadherence, and reliance on nonrenewable energy sources. These young founders are taking on the planet’s biggest challenges one innovative, elegantly creative solution at a time. They’re setting out to change our world for the better, and not one of them doubts his or her ability to make it happen. They hail from cities large and small, have combined revenue of more than $77 million, have collectively raised more than $444 million in funding, and are shaking things up in health care, consumer products, financial services, food, transportation, energy, and more. You might not know their names now, but you will soon. In the following pages, you’ll glimpse the better future they’re helping create. —Donna Fenn

PHOTOGRAPHS BY BRYAN DERBALLA

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Bringing Light to Darkness ANNA STORK, 30 LUMINAID CHICAGO

 While many people were horrified by the 2010 Haitian earthquake, only a few acted—and Anna Stork was one of them. With a double major in engineering and studio art from Dartmouth, and in the middle of pursuing a master’s in architecture at Columbia University, she was an accomplished prototyper (she built her own telescope from scratch in high school). So she teamed up with classmate Andrea Sreshta, and they scraped together recycled materials and electrical components to hand-prototype a light that doesn’t need an external source of electricity. Called LuminAid, it’s a floatable, solarpowered LED lantern that inflates like a balloon and collapses to become thinner than a deck of cards. To mountain climbers, it is a handy piece of cool gear. To first responders and victims of natural disasters, it’s a lifesaver. Stork won’t reveal how many lanterns have been sold via the company’s retail channel, but since launching in 2011, LuminAid has distributed, through nonprofits and NGOs, more than 60,000 lanterns for disaster relief. —CHRISTINE LAGORIO-CHAFKIN

 2015 REVENUE $2.6 MILLION EMPLOYEES 5

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Snaring Tricky Traders DAVID WIDERHORN, 28 NEURENSIC CHICAGO

 A self-described tech nerd, David Widerhorn says he was 12 when he started his first business, which provided research on computer hardware. He’d always been fascinated by the world of finance, and as markets grew more automated, he says he became obsessed with high-frequency trading because of its technical sophistication. In 2013, Widerhorn had a eureka moment when a futures trader named Michael Coscia became the first person convicted of “spoofing,” a form of market manipulation that, if done with intent to defraud, is illegal under the Dodd-Frank banking law. “It was a wakeup call for the industry,” Widerhorn says. It also inspired him to turn his obsession into a business. Widerhorn and his four co-founders set to work building Neurensic, a company that uses machine intelligence to interpret individual trading activity to ensure that high-frequency traders don’t break banking laws. Their core product went live in 2014. —JEREMY QUITTNER

 2015 REVENUE $250,000 FUNDING RAISED $6 MILLION EMPLOYEES 45

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Helping You Take Your Medicine TJ PARKER, 30 PILLPACK MANCHESTER, NEW HAMPSHIRE

 As a teenager working in his parents’ pharmacy, TJ Parker saw the frustration of patients who took multiple medications. Their refills ran out at different times, and many couldn’t remember which pills to take when. Parker tried to help by writing clearer instructions in Sharpie on the patients’ little orange bottles, but he knew there had to be a better way. After getting a degree in pharmacy, Parker teamed with Elliot Cohen, whom he met at MIT’s Hacking Medicine event series, and they launched online pharmacy PillPack in 2014. The company’s customers never see a hard-to-open bottle. Instead, their pills come in easy-to-tear packets, each containing a proper single dosage, clearly labeled with the time that packet of meds should be taken. PillPack also coordinates refills on behalf of its customers (a free service) and provides online and phone support. —KIMBERLY WEISUL  FUNDING RAISED $63 MILLION EMPLOYEES 200

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Helping Developers Create ARMON DADGAR, 25 MITCHELL HASHIMOTO, 26 HASHICORP SAN FRANCISCO

 Mitchell Hashimoto (left) taught himself programming at age 12. Armon Dadgar started college when he was 16. The two met in the University of Washington’s computer science department in 2008. Dadgar was working on a project he found frustratingly tedious—porting a general scientific cloud platform onto a 2007 Windows phone. He was about to quit when the grad student overseeing the work assigned Hashimoto to work with him. Hashimoto took on the more routine aspects of the project while Dadgar brainstormed general solutions to broader problems. This contrast between the pair—Dadgar, the big-picture risk taker; Hashimoto, the detail-oriented guy looking for the perfect fix—remains their operating model at HashiCorp, founded in 2012 to build opensource tools and commercial products for software infrastructure management. The number of users for the company’s open-source tools has doubled year over year since its founding. HashiCorp began charging for its products last year. —TESS TOWNSEND  FUNDING RAISED $10.7 MILLION EMPLOYEES 35

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Mending Relations Between Dogs and Mail Carriers CARLY STRIFE, 29 BARK & CO. NEW YORK CITY

 Growing up, Carly Strife was dog-deprived. “My sister and I played a lot of sports and we traveled a lot, so we never had a dog,” she says. She’s making up for lost time. Not only does she own three rescue dogs, but she’s also co-founded Bark & Co., a dog-centric company whose products include a subscription service that mails monthly dog treats and toys to pet parents. Bark & Co. was born in 2011 when she met Matt Meeker and Henrik Werdelin, her co-founders, and they lamented the sorry state of NYC pet stores. Meanwhile, Birchbox, the subscription service for beauty-product samples, was gaining serious traction. Why not give pooches a reason to look forward to the mail carrier? Today, Bark & Co. has shipped more than 20 million products in four million subscription boxes. —D.F.  FUNDING RAISED $17 MILLION EMPLOYEES 150

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Hearing No Evil NOAH KRAFT, 28 DOPPLER LABS SAN FRANCISCO

 As a senior at Brown University, Noah Kraft was such an impressive intern that a local film producer put him in charge of a 100-person movie crew at the age of 21. “It taught me how to run a company, make a product, and manage a team,” Kraft says. A musician at heart, Kraft spent much of his youth in front of a piano or a drum set. In 2013, he co-founded San Francisco– based Doppler Labs to turn wearable technology on its ear—literally. Doppler’s sound-processing earbuds are designed to let you selectively listen to your surroundings. Want to turn up the bass at a concert or lower the sound of a crying baby? Press a button on Doppler’s mobile app and you’ve got a volume knob for the world. “We want people to be tuned in to their environment,” Kraft says, “whatever that may be.” —GRAHAM WINFREY  2015 REVENUE $3 MILLION FUNDING RAISED $40 MILLION EMPLOYEES 56

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Turning Play to Energy JESSICA O. MATTHEWS, 28, UNCHARTED PLAY NEW YORK CITY

 At her aunt’s wedding in Lagos, Nigeria, recalls Jessica O. Matthews—who grew up in Poughkeepsie, New York, and has dual citizenship—the power went out. “They brought in a diesel generator to keep the festivities going,” she says. “I was 17, and it was by no means my first time in Nigeria, but for some odd reason, I was particularly bothered by the fumes coming from the generator. I started to cough and got dizzy.” The experience stuck with her and ultimately led her, as a junior at Harvard, to invent Soccket, a soccer ball that captures kinetic energy and stores it in an internal generator to power the LED light that comes with each ball. “Discomfort breeds innovation,” she says. Soccket, along with a jump rope called Pulse, generated more than $6 million in revenue last year for Matthews’s company, Uncharted Play, founded in 2011. The products are available on the company’s website, distributed worldwide through partnerships with NGOs, and private-labeled by corporate partners. Now Matthews’s wildly ambitious goal is to “democratize on-demand power for everyone” by branding the microgenerator used in her products (called M.O.R.E.: motion-based, off-grid, renewable energy), which can harness the kinetic energy of just about anything that moves. Matthews plans to partner with different manufacturers to get the micro-generator into various products, like a baby stroller that could power a cell phone. “If we wanted to have the most impact and grow in a way that would allow us to do the most good, it made sense to expand beyond play,” says Matthews. —D.F.  2015 REVENUE $6.2 MILLION FUNDING RAISED $810,000 EMPLOYEES 14

4 4 - INC. - JUNE 2016


••••

INC.’s 2016

30 UNDER 30 also includes:



BRIAN RUDOLPH, 25 BANZA DETROIT TOTAL FUNDING $1.3 MILLION NUMBER OF EMPLOYEES 13 YEAR FOUNDED 2014

 DANNY CABRERA, 23, RICARDO SOLORZANO, 26 BIOBOTS PHILADELPHIA 2015 REVENUE $300,000 TOTAL FUNDING $1.7 MILLION NUMBER OF EMPLOYEES 9 YEAR FOUNDED 2014

 TIM HWANG, 23, GERALD YAO, 23, JONATHAN CHEN, 23 FISCALNOTE WASHINGTON, D.C. TOTAL FUNDING $31 MILLION NUMBER OF EMPLOYEES 98 YEAR FOUNDED 2013



TATIANA BIRGISSON, 26 MATI ENERGY DURHAM, N.C. TOTAL FUNDING $1.5 MILLION NUMBER OF EMPLOYEES 6 YEAR FOUNDED 2012

 BEN LEE, 27 NEON ROOTS BEVERLY HILLS, CALIF. 2015 REVENUE $2.25 MILLION NUMBER OF EMPLOYEES 32 YEAR FOUNDED 2011

 ERIC DOLAN, 24 NEUTUN LABS SAN FRANCISCO TOTAL FUNDING $300,000 NUMBER OF EMPLOYEES 4 YEAR FOUNDED 2015

 MAX WINOGRAD, 28, BEN LUX, 29, MIKE WOODS, 29 NULABEL TECHNOLOGIES EAST PROVIDENCE, R.I. TOTAL FUNDING $22 MILLION NUMBER OF EMPLOYEES 21 YEAR FOUNDED 2009

 MACI PETERSON, 29, STEWART VOIT, 27 ON SECOND THOUGHT SAN FRANCISCO TOTAL FUNDING $210,000 NUMBER OF EMPLOYEES 4 YEAR FOUNDED 2014

JESSICA SCORPIO, 28, ELLIOT KROO, 25 GETAROUND SAN FRANCISCO TOTAL FUNDING $43 MILLION NUMBER OF EMPLOYEES 85 YEAR FOUNDED 2009







JAMIE BYRON, 24, GABE BLANCHET, 25 GROVE SOMERVILLE, MASS. TOTAL FUNDING $4 MILLION NUMBER OF EMPLOYEES 15 YEAR FOUNDED 2013

CLÉMENT PERROT, 25, DAVID ZHANG, 25 PRYNT SAN FRANCISCO 2015 REVENUE $2.3 MILLION TOTAL FUNDING $3.8 MILLION NUMBER OF EMPLOYEES 25 YEAR FOUNDED 2014

 JOSH BRUNO, 29, AKASH SHAH, 27 HOMETEAM NEW YORK CITY TOTAL FUNDING $38.5 MILLION NUMBER OF EMPLOYEES 500 YEAR FOUNDED 2013

 ALAN SCHAAF, 28 IMGUR SAN FRANCISCO TOTAL FUNDING $40 MILLION NUMBER OF EMPLOYEES 65 YEAR FOUNDED 2009

 ERIC DAHAN, 25, ALEX DAHAN, 22, FELIX LAHAYE, 27, JOEY CHOWAIKI, 23 INSTABRAND LOS ANGELES 2015 REVENUE $7 MILLION TOTAL FUNDING $3 MILLION NUMBER OF EMPLOYEES 60 YEAR FOUNDED 2013

 HAIR: IYANA WINFIELD; MAKEUP: MALI THOMAS



RYAN HOOVER, 29 PRODUCT HUNT SAN FRANCISCO TOTAL FUNDING $7.1 MILLION NUMBER OF EMPLOYEES 18 YEAR FOUNDED 2013

 ARMON SHAREI, 28 SQZ BIOTECH BOSTON TOTAL FUNDING $6 MILLION NUMBER OF EMPLOYEES 25 YEAR FOUNDED 2013

 TIMOTHY HARRIS, 29, FERGUS NOBLE, 28, COLIN BEIGHLEY, 27 SWIFT NAVIGATION SAN FRANCISCO TOTAL FUNDING $13.6 MILLION NUMBER OF EMPLOYEES 30 YEAR FOUNDED 2012

 BRYCE MADDOCK, 29, JASPAR WEIR, 29 TASKUS SANTA MONICA, CALIF. 2015 REVENUE $53.7 MILLION TOTAL FUNDING $15 MILLION NUMBER OF EMPLOYEES 5,200 YEAR FOUNDED 2008

PORTER BRASWELL, 28, RYAN WILLIAMS, 26 JOPWELL NEW YORK CITY TOTAL FUNDING $4.3 MILLION NUMBER OF EMPLOYEES 12 YEAR FOUNDED 2015







HILLARY LEWIS, 30 LUMI ORGANICS CHARLOTTESVILLE, VA. TOTAL FUNDING $1.8 MILLION NUMBER OF EMPLOYEES 18 YEAR FOUNDED 2013

JAMES BESHARA, 29 TILT SAN FRANCISCO TOTAL FUNDING $65 MILLION NUMBER OF EMPLOYEES 70 YEAR FOUNDED 2012 AERON SULLIVAN, 29 TRADIV SOLANA BEACH, CALIF. TOTAL FUNDING $1.1 MILLION NUMBER OF EMPLOYEES 21 YEAR FOUNDED 2015 ALL DATA AS OF 1/31/16

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L AU N C H PA D

Thomas Goetz •••• Working, Fast and Slow Startups are about doing things fast. Big customers are not. Founders must learn to go two speeds at once

to downshift all at once to first. The transmission is going to grumble. This fast-slow disconnect has caused no end of consternation for us as we try to plan and prioritize opportunities, and we find that our timeline more often than not just doesn’t sync with the needs or capacity of potential partners. It doesn’t help that we’re working in health care, which is extremely averse to change. Since ECENTLY, WE WERE thrilled when our startup, we’re developing tools for patients, which carry Iodine, made an agreement with a large online special risks and costs, potential partners have been pharmacy, a big player with serious consumer meticulous about putting our services through reach that would get our brand in front of its multiple layers of review and sign-off. For good customers. And our new partner went right reason: People’s lives are at stake. We need to put to work on integrating our API into its next some points on the board—closing deals and product release—a release that, it turns out, showing real revenue—as quickly as possible to won’t be ready to go live until the fall. That’s demonstrate that we’re serving a real need in the nine months from start to finish. Turns out, marketplace. But, as much as we try to move into ASAP can still mean slow. the fast lane, we still find ourselves subject to For a little startup like ours, this is an all-too-common phequarterly review boards and 18-month strategy nomenon. Because we’re small, we’re nimble. Being able to move documents. For a startup, that stuff can be death fast is one of our core advantages, but it’s also necessary to our by a thousand conference calls. success. We have a lot to prove in a little time—specifically, that Part of the disconnect is bureaucratic. But it’s we can make it as a business. But repeatedly, when we’ve had the also about tolerance for risk. Frankly, in any engagechance to work with big players in our industry, we’ve watched ment with us, an established business has to be the timeline drag out into an imponderably distant future. It’s like comfortable with some risk. After all, we’re new and we’re a little engine stroking away in a high gear that is then forced we don’t have much of a track record, and committing resources and opportunity costs to a contract with a company in our position isn’t for everyone. So vetting us, and making sure we’re going to stick Thomas Goetz is co-founder around, is part of the deal here. Hell, they may just be waiting to see if we are going to survive. and CEO of Iodine, a digital It’s also easy to get stuck in pilot mode. Health care in particular is fond of pilots and tests health startup based in San Francisco. He is also author before a full contractual deployment, and there’s a high bar for proving both effectiveness and of the book The Remedy. meaningful ROI. Again, that makes sense. I understand the perspective. But the danger for us Follow him on Twitter: @tgoetz. is getting stuck in low-yield, long-slog tests that don’t connect to revenue fast enough. So even as we’ve signed up for a few pilots, we’ve tried to press our partners on how, exactly, this will convert to real revenue at the earliest opportunity. Honestly, some paths are clearer than others. Like so much in Startup Land, this all comes down to balancing opportunities and tradeoffs. So far, our strategy has been to embark on slow, long-term discussions (there are always months of discussions) only when the potential upside serves several strategic objectives, such as letting us prototype a product and providing revenue. That hasn’t spared us entirely from some false hopes and fruitless conversations, but it has helped us avoid a few. The ultimate goal here is to make sure we stay nimble and fast, to jump when opportunity strikes—and to make sure the long game is part of our plan too.

CODY PICKENS

R LAUNCH

JUNE 2016 - INC. - 49


RETENT  ON

Offer the right benefits. Keep employees at their best. At Aflac, we know building your business starts with keeping your best employees. Which is why we help with costs not covered by major medical insurance and pay your employees directly. And with One Day Pay,SM we make it a priority to pay claims as fast as possible — in 2015, Aflac paid 1.2 million One Day PaySM claims. All so your employees and business can stay focused on success. See what Aflac can do for your business at aflac.com/retention *Aflac pays policyholders directly, unless otherwise assigned. **One Day PaySM available for most properly documented, individual claims submitted online through Aflac SmartClaim® by 3 p.m. ET. Aflac SmartClaim® not available on the following: Disability, Life, Vision, Dental, Medicare Supplement, Long-Term Care/Home Health Care, Aflac Plus Rider, Specified Disease Rider and Group policies. Aflac processes most other claims in about four days. Processing time is based on business days after all required documentation needed to render a decision is received and no further validation and/or research is required. Individual Company Statistic, 2015. Individual coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, individual coverage is underwritten by American Family Life Assurance Company of New York. Worldwide Headquarters | 1932 Wynnton Road I Columbus, GA 31999. Z160117

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How to make unlimited vacation work PG.67 The boom in craft booze PG.72

Grow Bigger.

 SHAGGY COMPANY STORY Hudson is top dog at CommonBond, one of Inc.’s 50 Best Workplaces.

LASALLE NETWORK DO WHAT YOU LOVE TO DO VINOPRO CRAZY CREATIVE COMPETITIVENESS COMMONBOND CUSTOMERS MAKE GREAT EMPLOYEES

BEST

WORKPLACES •••• PHOTOGRAPH BY VISHAL MARAPON



JUNE 2016 - INC. - 51


ROLLING WITH THE GOOD TIMES Arcade night is a regular thing at Arkadium. The woman with brown hair and jazz hands is CEO Jessica Rovello.

52 - INC. - JUNE 2016


BEST WORKPLACES 2016

We hear it over and over again at Inc.: The biggest challenge that your business faces is finding and keeping the best people. That’s why building a workplace culture that allows your staff to grow with the bottom line is critical. To guide and inspire you, Inc. has produced a roster of the 50 Best Workplaces, the first such measurement of American companies with up to 500 employees. From managing people overseas to helping workers pay off student loans, these companies deploy state-of-the-art techniques to keep their staff happy and productive. We hope you will join us in celebrating them— and learning from them. PHOTOGRAPHS BY MEREDITH JENKS

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Of our 50 Best, 74 percent offer one-on-one financial guidance. ABG Capital, a telecom in Pittsburgh, brings in financial consultants and hosts regular financial-wellness lunches for all employees.

ONSITE MEALS

Arkadium 97 EMPLOYEES

V

NEW Y0RK CITY

V

MEDIA

For a BorderSpanning Culture, Celebrate Your Successes, Large and Small

J

PATERNITY LEAVE

COMPANYWIDE TRIPS

1-ON-1 FINANCIAL GUIDANCE

“JOY TEAM”

ESSICA ROVELLO SWIVELS around and

plucks one of the dozen or so sticky notes off the bookshelf behind her. It clings to her index finger, and she lets it hang there for a few minutes while we’re talking. It’s just a little note from one of the game designers who work for her at Arkadium, saying nothing much, but emblazoned with her company’s logo, the Roman Colosseum, and “Thank You.” There’s another pad of sticky notes that all employees receive. Each note reads, “Lil’ Wins,” inviting staff to jot down the tiny accomplishments that happen every hour, or at least every day, at Arkadium. But they’re not for marking your colleagues’ achievements. These you keep for yourself. They’re for commemorating the things you have made happen—no matter how small. The Lil’ Wins stickies make an appearance every Monday morning at a half-hour staff meeting in Arkadium’s sunsoaked office loft a few blocks from New York City’s Flatiron Building. When precisely two minutes are left in the meeting, a timer begins counting down the seconds, and then the shouting, cheering, and laughing begin. “We finished a new game demo!” “My husband and I bought our first house!” “I hosted a Monday meeting!”

54 - INC. - JUNE 2016

86

Everyone is encouraged to chime in every week, and plenty of Arkadium’s 30 New York City employees do. They are shouting out the phrases they’ve jotted on their stickies over the previous seven days. Lil’ Wins is the brainchild of Rovello, who co-founded Arkadium with her husband, Kenny Rosenblatt, in 2001. The company makes standalone digital games for playing online and on screens of various sizes; it created the solitaire game that’s preinstalled on Windows computers. But its biggest business today is creating interactive portals— which include games such as sudoku or mahjong—for more than 400 media sites, such as USAToday.com. Corny as inspirational sticky pads might sound, they helped Arkadium (2015 revenue: about $10 million) achieve a higher score on feedback systems than any other company on our 50 Best list. They also contribute to a spirit of unusual cohesion, preserving a culture across eight time zones. In the early days of the company, Rovello and Rosenblatt worked with a few contract programmers in Ukraine and eventually hired them full time. The Americans soon fell in love with the rich talent pool in the region and opened an office in the Ukrainian territory of Crimea. They bought a house there, and spent summers working alongside the overseas team. Then in early 2014, Russia annexed Crimea. By the end of the year, U.S. sanctions on American companies operating in Crimea halted the 100 Arkadians there from doing any work. “I think most companies would have just shut down at that point,” Rovello says. “We didn’t—and I think that’s thanks to 10 years of deposits that we’d made in the relationship bank.” What she means is that the company has always treated its Crimean employees the same as its staff in New York. They have company T-shirts and lots of meetings with the founders, and sticky notes, too. They also have a “Joy Team” that organizes company gatherings, large and small. After an informal poll of the staff, Rovello decided to move the company’s foreign

ICONS: MATTHEW HOLLISTER

BEST WORKPLACES


PERCENT of the 50 Best match employee 401(k) contributions. Typical is 3 or 4 percent of income, but JLG Architects in Fargo, N.D., matches up to 12 percent.

Looking ahead, 18 percent of the 50 Best fund long-term care insurance for staff and 88 percent fund life insurance.

At Google, if a staffer dies, the spouse or partner receives 50 percent of the employee’s salary for the next 10 years.

POSITIVELY ENERGIZED Rovello found that sharing accomplishments creates the ties that bind.

office to the nearest major city within Russia proper, Krasnodar. Fifty employees made the move to the Russian city, which is roughly the size of Nashville and more than a seven-hour drive from Crimea. “They didn’t move to a place where they had family or roots. They just had each other,” Rovello says. “And they had the company.” Rovello flew in, and met the team when they arrived with their moving vans. She showed them their beautiful new office, with sweeping views of a river harbor and island. When Rovello returned to the United States after helping her Crimean employees settle in Russia, she had a lot to settle at home. Arkadium was scrambling to fill in for the Crimean employees who didn’t make the move and trying to recover from a couple of big bets on new games that had vastly underperformed. The mood was glum. “We knew the joyful company we were was still there,” she says. “It was like a ship that was

PHOTOGRAPH BY MEREDITH JENKS

battered at sea, and we needed to rebuild some things.” She moved the New York team into the Flatiron district office, gleaming new and full of fun décor and high-tech gear to ease communications with Russia. She knocked down a wall in the company café to create an open space with a long table, where lots of staffers eat lunch together daily. She reintroduced an old company staple, game night. And there are annual company trips to the beach and to Great Adventure, organized by the Joy Team. “I think the joy is back in the company,” Rovello says. Employees and casual observers would agree. Sami Aviles, Arkadium’s newest associate manager of partner development, often Snapchats her boyfriend from the office. “It’s usually playing games with colleagues or some competition we are in,” she says. “He asks all the time whether I get any work done.” Well, she’s got proof that she does. It’s on a sticky note. She saves every single one. —CHRISTINE LAGORIO-CHAFKIN

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BEST WORKPLACES

To cut down on cubicle fever, 84 percent of the 50 Best let employees telecommute. Compare that with outdoor gear company REI, where staff get “yay days”—paid time off to enjoy favorite outdoor activities.

HAPPY REBIRTHDAY TO YOU ... Technology services team leader Paul Wallenberg is up to his hips in balloons to mark the fifth anniversary of his hiring.

56 - INC. - JUNE 2016

PHOTOGRAPH BY PETER HOFFMAN


Of the 50 Best, 74 percent give time off for volunteering. HR specialist Premier Staffing of San Francisco expects employees to devote 20 days a year to community service.

CHICAGO

V

HUMAN RESOURCES

150 EMPLOYEES

V

LaSalle Network

For play time, 24 percent of the 50 Best offer unlimited vacation. Compare that with Airbnb, which gives employees a $500 quarterly travel credit if they use Airbnb for their accommodations.

Want to Make Your Team Feel Great? Shower Them With Appreciation

I

F YOU WAIT until the annual review to tell people how valuable they are—or, worse,

until they have one foot out the door—you’ve already missed your chance, according to Tom Gimbel, founder and CEO of LaSalle Network. “I may say the wrong thing sometimes,” he admits, “but I’m never going to have somebody leave here for something I did not say. People want to be appreciated.” To turn that appreciation from an annual affair into a daily drumbeat, Gimbel has invested heavily in employee development and training, winning top scores for that measure in our 50 Best audit. He takes ideas that are common enough—like mentorship programs and staff trips—and finds ways to build genuine excitement around them. The result is a team that actually enjoys coming in to work, helping fuel redhot growth at the $50 million Chicago-based staffing and recruiting agency. Revenue was up 18 percent last year and head count 35 percent, and the company has been on the Inc. 5000 a remarkable nine years in a row. Many struggle to maintain a cohesive culture while scaling, but Gimbel, who’s also an Inc.com columnist, seems to have found the formula. —KATE ROCKWOOD

REBIRTHDAYS The sight of two professional colleagues enthusiastically embracing might raise eyebrows elsewhere, but here it’s simply too common to be conspicuous. When Alexandria Fandino, 25, recently celebrated her second rebirthday (that is, her hire-date anniversary), co-workers greeted her with open arms nearly every time she stepped away from her desk. Filling the foyer were balloons, streamers, and poster-size photos of her beaming at work. And at her party, 100-plus employees gathered for chips and heartfelt speeches from both Gimbel and Fandino, who choked up as she said, “I had no idea, two years ago, that working here would be so awesome!”

GRANDPARENTING “People confuse appreciation with perks,” says Gimbel. “But putting a pool table in doesn’t make it a culture. Caring about employees is culture.” Gimbel saw that rather than seeking distractions from work, his mostly Millennial staff wanted help doubling down on it. So LaSalle Network launched a mentorship program and embraced “corporate grandparenting”—managers guide not only their direct reports but the layer below as well. The company is now assembling a three-person training department. And employees with a tenure of as little as a year can join a staff council, where they meet directly with the CEO to ask questions and share ideas.

INCENTIVE TRIPS Each year, Gimbel sets a sales goal, and if the staff meets it, everyone—from the chief operating officer to the office assistant—gets an allexpenses-paid trip that has so far bounced from Miami to Napa Valley to Vegas to San Francisco. Everyone agrees the goals are not easy. So recruiters turn walls and windows into dry erase boards for tracking placement metrics. And along with flowers from recent rebirthdays, adorning the desks are mugs bearing the company’s internal motto: Get Shit Done. The shared goal creates unity: If one recruiter is struggling to fill a position, people from other departments volunteer to come in on Saturday (with bagels and mimosas) to pound the phone lines.

CONCIERGE SERVICES

COMPANYWIDE TRIPS

ONSITE FITNESS

TIME OFF TO VOLUNTEER

REBIRTHDAY PARTY

RESPONSIVENESS Gimbel spends half his day talking to employees about— literally—anything. He knows who speaks Latin and Hindi, who’s put her dog down recently, who was homeschooled. That insatiable curiosity encourages openness when he asks employees what they want to do next. When one staffer moved to San Francisco because of her husband’s work, LaSalle opened a West Coast office and put her in charge. When a recruiter said he might want to work in operations someday, he was reporting to the COO two weeks later. Ninety percent of management rose from within, and half began in entry-level roles. “It doesn’t matter where you start,” says Gimbel. “It’s what you do with it. We believe in our people enough to give them a shot.”

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Companies are experimenting with health benefits. Of the 50 Best, 28 percent have onsite health care clinics. Keller Williams Realty in Austin has a full-time wellness coach and closes its doors to customers for its annual Wellness Day.

46

PERCENT of the 50 Best have onsite fitness facilities. Their employees still might envy staffers at Burton, a snowboarding outfitter in Burlington, Vt., who get the day off to hit the trails if two feet of snow falls in 24 hours.

50 BEST WORKPLACES — ABG Capital

How the Best Places Measure Up

I

NC. HAS LONG BEEN a specialist in small companies that

grow fast. And as an expert in employee engagement and culture, Quantum Workplace knows that the pressures of rapid growth can take the pleasure out of work. So, in this inaugural list of the 50 Best Workplaces, Inc. and Quantum honor a group of companies that make the happiness of their employees a prime goal. To find the true innovators in managing and motivating people, we audited more than 500 companies that completed online applications in February and March. To be eligible, applicants had to have been in business at least three years, have between five and 500 employees, be based in the United States, and be independent and privately owned, with 2015 revenue of at least $2 million. We scored companies in three main areas:

FOUNDED 1992 INDUSTRY TELECOMMUNICATIONS LOCATION PITTSBURGH CEO JEFF TAPOLCI NO. OF EMPLOYEES 53 2015 SALES OR REVENUE $20M–$49.9M

— ADURO FOUNDED 2007 INDUSTRY HEALTH LOCATION REDMOND, WASHINGTON CEO DARREN WHITE NO. OF EMPLOYEES 96 2015 SALES OR REVENUE $10M–$19.9M

— Advantages

WALLET AND WORKPLACE: 30 percent of the score

FOUNDED 1992 INDUSTRY ADVERTISING & MARKETING LOCATION KEW GARDENS, NEW YORK CEO FRAN BIDERMAN-GROSS NO. OF EMPLOYEES 7 2015 SALES OR REVENUE $5M–$9.9M

We assessed how well companies look after their staff’s financial security through retirement, insurance, and other financial benefits. We also explored work arrangements that increase employee satisfaction, such as flextime and unlimited vacation time.

— Alliance Solutions Group

EMPLOYEE FEEDBACK: 34 percent of the score The best companies by this measure go to great lengths to capture, understand, and act upon insights from their staff. We scored companies on the design of their systems, the depth of their insights, and the thoroughness of their follow-up.

PERFORMANCE INNOVATION: 36 percent of the score We looked for companies that take special measures to motivate and recognize employee performance.

Among our findings, offering a retirement plan is merely table stakes in the talent game: 90.3 percent of applicants have one. The high scorers distinguish themselves by the proportion of employee 401(k) contributions they match: 56.7 percent of applicants match contributions of up to 4 percent of income versus 72 percent of the 50 Best. Only 9.3 percent of applicants match more than 4 percent; 14 percent of the 50 Best do. The most glaring difference between the best performers and the also-rans is how companies set and track goals. The high scorers set individual, team, department, and company goals and communicate results in ways visible to all. The majority of companies still rely on email, physical bulletin boards, or paper-based scorecards to communicate goals, and 7 percent of companies have no organized method for making company goals visible at all. See what you can learn from our honorees that will help you lead your company. Your employees will love you for it. —GREG HARRIS, CEO, Quantum Workplace, Omaha

58 - INC. - JUNE 2016

FOUNDED 2005 INDUSTRY BUSINESS PRODUCTS & PROFESSIONAL SERVICES LOCATION NEWPORT NEWS, VIRGINIA CEO & PRESIDENT ROBERT CAMPBELL NO. OF EMPLOYEES 12 2015 SALES OR REVENUE $2M–$5M

— Apto FOUNDED 2012 INDUSTRY SOFTWARE LOCATION DENVER CEO TANNER MCGRAW NO. OF EMPLOYEES 55 2015 SALES OR REVENUE $5M–$9.9M

— Aquilent FOUNDED 2002 INDUSTRY IT SERVICES LOCATION LAUREL, MARYLAND CEO DAVID FOUT NO. OF EMPLOYEES 381 2015 SALES OR REVENUE $100M–$499.9M

— Arkadium FOUNDED 2001 INDUSTRY MEDIA LOCATION NEW YORK CITY CO-FOUNDER & CEO JESSICA ROVELLO NO. OF EMPLOYEES 97 2015 SALES OR REVENUE $5M–$9.9M

— Avionte FOUNDED 2005 INDUSTRY HUMAN RESOURCES LOCATION EAGAN, MINNESOTA CEO JOHN LONG NO. OF EMPLOYEES 115 2015 SALES OR REVENUE $10M–$19.9M

— Barrett Distribution Centers FOUNDED 1941 INDUSTRY LOGISTICS & TRANSPORTATION LOCATION FRANKLIN, MASSACHUSETTS CEO TIMOTHY BARRETT NO. OF EMPLOYEES 350 2015 SALES OR REVENUE $50M–$99.9M

— Bateman Group FOUNDED 2004 INDUSTRY ADVERTISING & MARKETING LOCATION SAN FRANCISCO FOUNDER & CEO FRED BATEMAN NO. OF EMPLOYEES 48 2015 SALES OR REVENUE $5M–$9.9M

— Burwood Group

— C1S Group FOUNDED 2009 INDUSTRY CONSTRUCTION LOCATION DALLAS CEO JULIE STRONG NO. OF EMPLOYEES 22 2015 SALES OR REVENUE $10M–$19.9M

Specializing in sustainable construction, C1S Group keeps employees healthy and happy through physical activity, with standing cubicles and workout stations in the office and regular offsite exercise sessions.

— Credible Behavioral Health

FOUNDED 1997 INDUSTRY IT SERVICES LOCATION CHICAGO CEO MARK THEOHAROUS NO. OF EMPLOYEES 140 2015 SALES OR REVENUE $50M–$99.9M

FOUNDED 2000 INDUSTRY SOFTWARE LOCATION ROCKVILLE, MARYLAND CO-FOUNDER & CEO MATTHEW DORMAN NO. OF EMPLOYEES 140 2015 SALES OR REVENUE $20M–$49.9M

— CommonBond

— DSi

FOUNDED 2012 INDUSTRY FINANCIAL SERVICES LOCATION NEW YORK CITY CO-FOUNDER & CEO DAVID KLEIN NO. OF EMPLOYEES 95 2015 SALES OR REVENUE $2M–$5M

FOUNDED 1999 INDUSTRY BUSINESS PRODUCTS & PROFESSIONAL SERVICES LOCATION NASHVILLE CO-FOUNDER & CEO TOM TURNER NO. OF EMPLOYEES 76 2015 SALES OR REVENUE $10M–$19.9M

— Eliassen Group FOUNDED 1989 INDUSTRY IT SERVICES LOCATION WAKEFIELD, MASSACHUSETTS CEO DAVID MACKEEN NO. OF EMPLOYEES 253 2015 SALES OR REVENUE $100M–$499.9M

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BEST WORKPLACES

— Evolve IP FOUNDED 2007 INDUSTRY IT SERVICES LOCATION WAYNE, PENNSYLVANIA FOUNDING PARTNER & PRESIDENT GUY FARDONE NO. OF EMPLOYEES 200 2015 SALES OR REVENUE $50M–$99.9M

— Field Fastener FOUNDED 1976 INDUSTRY MANUFACTURING LOCATION MACHESNEY PARK, ILLINOIS CHAIRMAN BILL DERRY NO. OF EMPLOYEES 128 2015 SALES OR REVENUE $50M–$99.9M

— Firespring FOUNDED 1992 INDUSTRY ADVERTISING & MARKETING LOCATION LINCOLN, NEBRASKA CEO JAY WILKINSON NO. OF EMPLOYEES 223 2015 SALES OR REVENUE $20M–$49.9M

— Fragmob FOUNDED 2007 INDUSTRY SOFTWARE LOCATION SAN DIEGO CO-FOUNDER & CEO JADE CHARLES NO. OF EMPLOYEES 38 2015 SALES OR REVENUE $2M–$5M

— Greenspire FOUNDED 2012 INDUSTRY ENERGY LOCATION LOS ANGELES CEO DAVID MURRAY NO. OF EMPLOYEES 150 2015 SALES OR REVENUE $5M–$9.9M

— GRS Group FOUNDED 2009 INDUSTRY REAL ESTATE LOCATION IRVINE, CALIFORNIA CEO CHARLES VICTOR NO. OF EMPLOYEES 49 2015 SALES OR REVENUE $20M–$49.9M

74

PERCENT of the 50 Best offer onsite meals. They might emulate Twitter, which serves employees three meals a day, helps their waistlines with free CrossFit classes, and eases their aching muscles with onsite acupuncture. Kombucha is on tap too.

— Innovid

— LaSalle Network

FOUNDED 2007 INDUSTRY ADVERTISING & MARKETING LOCATION NEW YORK CITY CO-FOUNDER & CEO ZVIKA NETTER NO. OF EMPLOYEES 201 2015 SALES OR REVENUE $20M–$49.9M

FOUNDED 1998 INDUSTRY HUMAN RESOURCES LOCATION CHICAGO FOUNDER & CEO TOM GIMBEL NO. OF EMPLOYEES 150 2015 SALES OR REVENUE $20M–$49.9M

— Integrity HR FOUNDED 2007 INDUSTRY HUMAN RESOURCES LOCATION LOUISVILLE FOUNDER & CEO AMY LETKE NO. OF EMPLOYEES 18 2015 SALES OR REVENUE $2M–$5M

— IT Direct FOUNDED 2002 INDUSTRY IT SERVICES LOCATION HARTFORD, CONNECTICUT PRESIDENT ARI SANTIAGO NO. OF EMPLOYEES 24 2015 SALES OR REVENUE $2M–$5M

— JLG Architects FOUNDED 1989 INDUSTRY CONSTRUCTION LOCATION FARGO, NORTH DAKOTA CEO LONNIE LAFFEN NO. OF EMPLOYEES 90 2015 SALES OR REVENUE $20M–$49.9M

— Keller Williams Realty International FOUNDED 1983 INDUSTRY REAL ESTATE LOCATION AUSTIN CEO CHRIS HELLER NO. OF EMPLOYEES 265 2015 SALES OR REVENUE $50M–$99.9M

— Keono FOUNDED 2011 INDUSTRY ADVERTISING & MARKETING LOCATION ELMHURST, ILLINOIS CEO & PRESIDENT MICHAEL MEDEMA NO. OF EMPLOYEES 15 2015 SALES OR REVENUE $2M–$5M

A creator of organizing and fundraising technology for progressive political campaigns, NGP VAN lays on four-day all-staff retreats to the Caribbean every two years, and the CEO accepts employee feedback during paintball outings.

60 - INC. - JUNE 2016

— Limeade FOUNDED 2006 INDUSTRY HUMAN RESOURCES LOCATION BELLEVUE, WASHINGTON CEO HENRY ALBRECHT NO. OF EMPLOYEES 181 2015 SALES OR REVENUE $1OM–$19.9M

— LiveIntent FOUNDED 2009 INDUSTRY ADVERTISING & MARKETING LOCATION NEW YORK CITY CEO MATT KEISER NO. OF EMPLOYEES 193 2015 SALES OR REVENUE $50M–$99.9M

— MediRevv FOUNDED 2007 INDUSTRY HEALTH LOCATION CORALVILLE, IOWA CEO CHRIS KLITGAARD NO. OF EMPLOYEES 256 2015 SALES OR REVENUE $20M–$49.9M

— Munify Corp d/b/a Rafael Marrero & Company FOUNDED 2008 INDUSTRY BUSINESS PRODUCTS & PROFESSIONAL SERVICES LOCATION COCONUT GROVE, FLORIDA FOUNDER, CEO & PRESIDENT RAFAEL MARRERO NO. OF EMPLOYEES 10 2015 SALES OR REVENUE $2M–$5M

— 97th Floor FOUNDED 2005 INDUSTRY ADVERTISING & MARKETING LOCATION LEHI, UTAH CEO CHRIS BENNETT NO. OF EMPLOYEES 47 2015 SALES OR REVENUE $2M–$5M

— Nina Hale FOUNDED 2005 INDUSTRY ADVERTISING & MARKETING LOCATION MINNEAPOLIS CEO DONNA ROBINSON NO. OF EMPLOYEES 53 2015 SALES OR REVENUE $5M–$9.9M

— nLogic FOUNDED 2009 INDUSTRY GOVERNMENT SERVICES LOCATION HUNTSVILLE, ALABAMA CEO & PRESIDENT TIM THORNTON NO. OF EMPLOYEES 124 2015 SALES OR REVENUE $20M–$49.9M

Provider of high-tech services to aerospace and defense customers, nLogic was created by an employee-led buyout of Torch Systems, letting staff own a piece of the company.

— One Click FOUNDED 2005 INDUSTRY CONSUMER PRODUCTS & SERVICES LOCATION GREENWOOD, INDIANA CO-FOUNDER & CEO RANDY STOCKLIN NO. OF EMPLOYEES 43 2015 SALES OR REVENUE $5M–$9.9M

— OpenSymmetry FOUNDED 2004 INDUSTRY BUSINESS PRODUCTS & PROFESSIONAL SERVICES LOCATION AUSTIN CEO TODD LEBARON NO. OF EMPLOYEES 180 2015 SALES OR REVENUE $20M–$49.9M

— Pathoras FOUNDED 2008 INDUSTRY GOVERNMENT SERVICES LOCATION HERNDON, VIRGINIA PRESIDENT MARCY EISENBERG NO. OF EMPLOYEES 70 2015 SALES OR REVENUE $10M–$19.9M

— Premier Staffing FOUNDED 1998 INDUSTRY HUMAN RESOURCES LOCATION SAN FRANCISCO FOUNDER & CEO SARA MENKE NO. OF EMPLOYEES 70 2015 SALES OR REVENUE $20M–$49.9M

— PulsePoint FOUNDED 2011 INDUSTRY ADVERTISING & MARKETING LOCATION NEW YORK CITY CEO SLOAN GAON NO. OF EMPLOYEES 117 2015 SALES OR REVENUE $50M–$99.9M

— REP Interactive FOUNDED 2010 INDUSTRY ADVERTISING & MARKETING LOCATION SAN DIEGO CEO JUDY GATENA NO. OF EMPLOYEES 22 2015 SALES OR REVENUE $2M–$5M

— RevLocal FOUNDED 2010 INDUSTRY ADVERTISING & MARKETING LOCATION COLUMBUS, OHIO CEO MARC HAWK NO. OF EMPLOYEES 220 2015 SALES OR REVENUE $10M–$19.9M

— SADA Systems FOUNDED 2000 INDUSTRY IT SERVICES LOCATION NORTH HOLLYWOOD, CALIFORNIA CEO TONY SAFOIAN NO. OF EMPLOYEES 130 2015 SALES OR REVENUE $50M–$99.9M

— NGP VAN

— SimVentions

FOUNDED 1997 INDUSTRY SOFTWARE LOCATION WASHINGTON, D.C. CEO & PRESIDENT STUART TREVELYAN NO. OF EMPLOYEES 195 2015 SALES OR REVENUE $20M–$49.9M

FOUNDED 2000 INDUSTRY GOVERNMENT SERVICES LOCATION FREDERICKSBURG, VIRGINIA CEO LAWRENCE ROOT NO. OF EMPLOYEES 196 2015 SALES OR REVENUE $20M–$49.9M

— Summit Technical Solutions FOUNDED 2001 INDUSTRY GOVERNMENT SERVICES LOCATION COLORADO SPRINGS, COLORADO CEO & PRESIDENT KELLY TERRIEN NO. OF EMPLOYEES 259 2015 SALES OR REVENUE $20M–$49.9M

— The Credit Pros FOUNDED 2009 INDUSTRY FINANCIAL SERVICES LOCATION NEWARK, NEW JERSEY PRESIDENT JASON KAPLAN NO. OF EMPLOYEES 52 2015 SALES OR REVENUE $5M–$9.9M

— Vdart FOUNDED 2007 INDUSTRY IT SERVICES LOCATION ALPHARETTA, GEORGIA CEO & PRESIDENT SIDD AHMED NO. OF EMPLOYEES 389 2015 SALES OR REVENUE $50M–$99.9M

— VinoPro FOUNDED 2008 INDUSTRY FOOD & BEVERAGE LOCATION SANTA ROSA, CALIFORNIA CEO JEFF STEVENSON NO. OF EMPLOYEES 60 2015 SALES OR REVENUE $2M–$5M


50 Best lender CommonBond of New York City contributes $1,200 a year to help employees repay student loans, with no cap on the total. Some bigger companies, including Fidelity, contribute up to a total of $10,000.

ONSITE MEALS

PET FRIENDLY

FAMILY FRIENDLY

UNLIMITED VACATION

ANNUAL TRIP TO GHANA

NIKKI SINGH, CAMPUS RELATIONS Paying off loans to Harvard and NYU; favorite perk: pet-friendly office

JULIANNA YOUNG, OPERATIONS Favorite perk for the long term: 12 weeks of maternity leave

CommonBond FINANCIAL SERVICES

NEW YORK CITY

95 EMPLOYEES

Helping a Loyal Young Staff Lower the Toll of Higher Education

D

AVID KLEIN WANTED

GRANT BILES, UX DESIGN Big lover of the Seamless-Uber combo when working late

DAVID KLEIN, CEO Repaying student loans for a graduate degree that helped him start this company

KEVIN BAILEY, BUSINESS DEVELOPMENT Using loan savings and unlimited vacation to see the world

ANNIE BROWN, EVENTS Paying off loans on a five-year plan instead of taking seven or 10

PHOTOGRAPHS BY VISHAL MARAPON

to become an entrepreneur so badly that he racked up $100,000 in student debt to learn how to start a business. At least he started one that could help him pay off those loans more quickly. His staff is happy about it too. That’s because Klein, the co-founder and CEO of online lending startup CommonBond, turned his MBA stint in Wharton’s entrepreneurship program into a company that simplifies—and reduces the costs of—taking out educational loans. And now it helps its employees repay their student debt every month. One of the most important attributes of our 50 Best is the financial security they provide their staff. CommonBond

BUILD


BEST WORKPLACES

64

CHANDNI CHOPRA, SPECIAL PROJECTS Happy for help with $150,000 in loans for Wharton business school

PERCENT of the 50 Best offer paternity leave. Business product and professional services outfit Rafael Marrero & Co. of Coconut Grove, Fla., offers “as many days as needed.”

MARCO ORELLANA, MARKETING ANALYST Using extra cash to pay down principal and splurge on the odd Broadway show

helps its employees when they are still fledglings. “We understand that student loans fit at the very top of mind,” says Klein, a former McKinsey consultant and American Express manager who often still talks like both. “It makes perfect sense to provide the most comprehensive private loan repayment benefit.” Since December, his New York City company has offered workers $100 per month to help with their loans. Klein estimates that about a third of CommonBond’s nearly 100 employees use the benefit, meaning that his company is spending roughly $36,000 per year on its employees’ college debt. That’s a savvy recruiting move for a fast-growing but still small company. CommonBond is part of a crop of high-tech financial startups vying for Millennials’ money, starting with one of its biggest drains: huge student debt balances, often accumulated while attending elite, and expensive, colleges and graduate programs. Venture-backed and picky about the borrowers it chooses, CommonBond refinances existing loans at lower-than-usual rates (about 5 percent versus 7 percent), claiming that it saves customers $14,500 on average. It also makes new loans for education and, in a pilot, anything for which existing customers might otherwise use a credit card. So far, says the company, it has funded and refinanced more than $500 million in credit. Revenue was $5 million in 2015, with 2016 projections of two to four times that amount. CommonBond offers the student loan benefit in lieu of some more traditional workplace benefits, such as matching 401(k) contributions. But its startup-young employees are more concerned with the steep bills due today than the distant prospect

62 - INC. - JUNE 2016

VICTORIA GREEN, CUSTOMER SERVICE Looking to pay off all her student loans by the time she’s 24

of retirement, and they don’t seem to mind the tradeoff. Victoria Green, a bubbly 22-year-old on CommonBond’s customer service team, graduated in 2015 from St. Olaf College in Minnesota with a double major in theater and race and ethnic studies—and $27,000 of debt. “That’s tough for my family,” she says. “I’m a first-generation college student, so the whole student debt thing is very new to us.” The loan benefit is helping to smooth her transition to postcollege life in a very expensive town. “They put that $100 into your paycheck every month,” she says, “and then I’m just $30 out of pocket for my loan.” She was also won over by a secondary but more longstanding benefit: CommonBond’s unusual effort to adopt the buy-one give-one charitable model. The startup funds the nonprofit Pencils of

Promise, which builds schools and provides scholarships in Laos, Ghana, and Guatemala. For every student loan it makes, CommonBond funds one year of education for a Ghanaian schoolchild. The program has provided $250,000 to Pencils of Promise so far, helping more than 2,000 children, according to Klein. “I am very inspired by the one-for-one model, but I wasn’t sure what form it was going to take,” says Klein. “For Warby Parker, the unit is a piece of eyewear. We’re funding units of education.” This social mission has helped as a recruiting tool; CommonBond claims an 85 percent acceptance rate for its job offers. And Klein’s employees sound even more enthusiastic about this benefit than about the help with student loans, in part because it lets them support a social mission while getting paid.


Netflix may be the U.S. leader in extended parental leave, offering a full paid year of it to new parents, who can then return to work full time or part time.

60 EMPLOYEES

To Keep the Buzz Going, Be Sure to Hire People Who Fit In PET FRIENDLY

ONSITE HEALTH CLINIC

UNLIMITED VACATION

“I’d worked at big companies, and I thought I was giving back through volunteering,” says Nikki Singh, CommonBond’s director of campus relations (she’s repaying $30,000 in debt, mostly from grad school). “Finding such a strong social mission, I felt like I’d won the lotto. My work life and my volunteer life don’t have to be separate anymore.” Tall and angular, with russet-tinged hair offsetting a pale pate, Klein can seem less tech founder than corporate manager. But though he was privileged enough to pursue an MBA at a fancy school and then start his own business, he has had to eat his own metaphorical dog food. “I have about half of my student loan balance left,” he says. “The good news is, I was finally able to refinance with CommonBond.” —MARIA ASPAN

SANTA ROSA, CALIFORNIA

V

••••

FOOD & BEVERAGE

CONCIERGE SERVICES

HUDSON, GOLDENDOODLE Making his first office visit with employee owners Sam Luk and Emma Chao Luk

IBM and Accenture help nursing mothers by providing the necessary materials and funds to ship breast milk home when they’re traveling for work.

VinoPro V

Of the 50 Best, only advertising and marketing company Keono of Elmhurst, Ill., offers onsite child care.

MONTHLY FOOD & WINE PAIRINGS

IT’S WEDNESDAY MORNING, and the 60 employees of VinoPro have assembled in its Santa Rosa, California, office for the daily 10:30 a.m. “quarterback meeting.” In the front row are 13 new hires, in training to do direct telephone sales on behalf of wineries. Projected on a big screen is the bearish and somewhat haggard face of CEO and founder Jeff Stevenson, who is Skyping in from a rental villa in Italy, where he’s taking a working holiday— “working” meaning tasting as many Italian wines as he can. Stevenson is not the swish-and-spit type of wine taster. “If my eyes look a little red, it’s because I got shitfaced last night,” he announces by way of greeting. After Stevenson signs off, VP of sales Donnie Varner announces that today will be a “Mario Kart” day. Each salesperson will start with three helium balloons tied to his or her desk, symbolizing the three lives allotted to a player in the Nintendo racing game. Selling $750 worth of wine lets you pop a co-worker’s balloon; selling $1,000 worth earns you an extra balloon. At the end of the day, the sellers with the most balloons win the top prize: a special wine tasting. The veteran reps have played this one before; Varner’s explanation is for the newbies. How they react— excitement? fear? all-out aggression?—will determine whether they thrive or wash out in a hurry. Competition is everything at VinoPro (2015 revenue: $4.5 million). Stevenson and Varner have devised a devilish array of contests, games, and gimmicks both to winnow out the misfits and to keep the reps at their desks. There’s a Wall of Fame with a running tally of the biggest individual daily hauls. There’s Darth MotiVader, a video board that shows who’s gone the longest since making a call. At the start of every quarter, reps choose their desks anew, in order of the previous quarter’s sales totals. If the games pall, no matter: VinoPro had the highest score for financial benefits in our Best 50 audit. “You have to have a certain personality to work here,” says Brittney Fernandez, who evidently has it. Her big private office has a primo view of the duck pond, proof of her chart-topping Q1 sales haul. New reps begin with a single account; churn in the first 90 days is brutal. For the survivors, however, retention is high, and the rewards are ample. Top reps typically earn $70,000 to $120,000 in base pay plus commissions. And there’s the wine. Hang around the office long enough and someone will hand you a glass of something tasty. It’s hard to sell wine before lunch, so as an inducement to finish strong, Varner often ends the day with a working happy hour. Like bowling or darts, performance improves with a light buzz, he swears. Fortunately, showing up worse for wear after a late night is no sin at VinoPro. Just don’t let it affect your sales, unless you like sitting by the bathroom.

—JEFF BERCOVICI

BUILD


INC. BRAND VIEW /

FVR:WQQR]3R]RŬcb ^S8aRMc3R]RŬcb A strong company culture is the surest road to a stable, highly productive workforce. And the right benefits package helps reinforce all those great outcomes.

Company culture has suddenly become a top priority for company founders, senior executives, and even middle managers. Just two years ago, only about 20 percent of business leaders surveyed by Deloitte* rated culture, engagement, and employee retention as top talent challenges; today, more than half do. That comes as no surprise to Matthew Owenby, senior vice president and chief human resources officer at Aflac. A company’s culture, he says, is “the secret sauce” for attracting and retaining the best employees. “Culture is particularly important today in light of shifting workforce demographics,” he notes. “Millennials, especially, are looking for companies that match their value systems and are able to nurture not only their careers but also their lifestyles.”

Each of the winners and finalists in this year’s Best Places to Work competition has developed its own unique “secret sauce” in creating a culture that is optimally suited to its particular business model and mission. Rather than trying to be all things to all people, these companies focus on the aspects of culture that most closely align with both their strategy and their values. To reinforce the connection between values and culture, in fact, Jason Kaplan and Damon DeCrescenzo, co-founders and president and CEO, respectively, of Newark, New Jersey-based The Credit Pros, post the company’s values on the office walls. They include such mandates as “We do the right thing,” “We treat each other like family,” and “We constantly learn and improve.”


There are eight in total, and the founders take them so seriously that they recently fired a top salesperson for failing to adhere to them. “Our feeling is that if we keep someone on whose behavior doesn’t map to our values, the damage to our company will outweigh the value of whatever sales might be at issue,” Kaplan says. A bonded and licensed credit restoration firm, The Credit Pros has grown from 29 employees to more than 50 over the past year, and it projects it will reach 110 in 2018. The key metrics it uses for weekly, monthly, quarterly and annual evaluations are all based on its core values. It places a premium on employee feedback, something studies have shown is particularly important to Millennial workers, and it institutes changes based on that feedback. Along with generous and flexible benefits and compensation packages, and a raft of team-building activities, Kaplan credits the emphasis on core values and two-way communication for retention rates that are far higher than his industry’s average. JLG Architects credits its homegrown “One Firm Culture” with allowing it to grow to 10 offices and about 100 employees since its launch in 1989. The Fargo, North Dakota, business has been named one of the top architecture firms in the U.S. by Architect magazine and has won multiple awards for its corporate culture. In 2014, the firm created an ESOP and became 100 percent owned by its employees. JLG’s employee-centric “One Firm Culture” mandate developed organically from its desire to retain top talent. In fact, its initial expansion, from one office to four, was driven primarily by the need to “keep good people who, for one reason or another, needed to relocate,” explains Michelle Mongeon Allen, partner and COO. “Once we had four offices, we realized there were other advantages to the approach we were taking,” says Lonnie Laffen, president, CEO and a founder of the firm. “Everyone is trained the same way, so

it’s very easy to put together teams across multiple offices to assemble the right skill set for any project. We also achieve economies of scale and avoid duplication of services, which gives us more flexibility with pricing.” The firm’s open-book management style encourages all employees to share feedback and supports the “creative, collaborative and fun” work environment JLG fosters. Eight years ago, Spectrum Aeromed was “a deeply troubled, effectively bankrupt company working without processes and with a broken culture,” says Dean Atchison, CEO of the Fargo-based maker of air medical and air ambulance equipment. “We needed to build a positive, caring, fun culture, and that’s just what we did.” Spectrum Aeromed uses an evaluation tool called Officevibe to survey its employees weekly and measure engagement and satisfaction in real time. It maintains a continuous improvement program that encourages all employees to submit new ideas, and rewards them with gift cards for doing so. Average compensation is 24 percent higher than the industry norm, and a rich benefits package includes fully paid health insurance, an HSA, Aflac insurance (which is offered by all the companies profiled here), financial counseling, and more. Clearly, Spectrum Aeromed’s corporate culture is working. Turnover is almost non-existent: 14 of the 16 workers the company employed in 2007 are still with the firm, and its staff has grown to 26. That kind of stability, this year’s winners agree, is invaluable, and if a strong benefits package helps in that retention, it is rewarded several times over. “Companies should create a culture that provides clear opportunities for career growth, and that is ‘customized’ to acknowledge that there is no one path that fits every employee,” Owenby says. “In the same vein, they should provide a robust benefits program that covers all the normal things but also offers supplemental benefits, like Aflac insurance, that help employees meet their specific needs.”

Tips for Creating a Corporate Culture that Works 1. Adopt a leadership style in which every employee has a voice. 2. View culture building as a journey, not a destination. 3. Allocate needed resources, including a benefits package tailored to (and acknowledging the value of) your employees. 4. Commit to transparency, and create an atmosphere of trust.

* Deloitte “Global Human Capital Trends 2016” study.


2ůMPP^]UaMcdZMcRbcVR;]P3RbcI^aY_ZMPRbfW]]Rab

they’ll return the favor. Aflac herein means American Family Life Assurance Company of Columbus and American Family Life Assurance Company of New York. Worldwide Headquarters | 1932 Wynnton Road | Columbus, GA 31999 Z160456

4/16


TIP SHEET VACATION

Time Off Well Spent Unlimited days off may be the antidote for your workaholic workplace

C TOM SCHIERLITZ/TRUNK ARCHIVE

HRISTOPHER HANKS,

founder of the Entrepreneurship Center at Kennesaw State University in Kennesaw, Georgia, loves leading sessions about unlimited vacation. “It’s a fun seminar to do, because it’s never quiet,” he says. “Some business owners get really upset. Others are evangelistic. It excites so much emotion.” Unlimited vacation policies are still the exception, but the idea is spreading beyond its Silicon Valley roots. These policies can have unintended consequences, though. “People take less time off than before,” Hanks says. That’s not good news. Nielsen research shows employees who vacation are happier with their jobs, more engaged, and less likely to quit—or have a heart attack—than their nonvacationing peers. Those who skip vacations are also likelier to be depressed—and to dent office morale. Unlimited time off is becoming a requirement for some companies seeking top talent. “We were recruiting from other companies that had it,” says Margaret Wheeler, chief people and culture officer at Stitch Fix, which provides online personal fashion stylists. Stitch Fix switched to unlimited late last year. So far, Wheeler is pleased. “People responded really well to it, and it feels correct for us,” she says. Other small-business leaders agree that offering unlimited vacation time can be a great thing—if you do it right. —MINDA ZETLIN

BUILD

S224

BILLION U.S. companies’ total liability for unused vacation time, according to Oxford Economics. That’s an average of $1,898 per employee.

JUNE 2016 - INC. - 67


TIP SHEET VACATION

 MEASURE PERFORMANCE Before offering unlimited vacation, you’d better have key indicators that tell you how well each employee is doing, Hanks warns. “If my vision is fuzzy, I can’t really hold you accountable,” he notes. “I’ll say, ‘You’ve been out of the office a lot. I feel like you haven’t been working hard,’ and you’ll say, ‘No, no—I’ve been up till midnight a lot of nights.’ ”  CALL LEGAL In some states, including California, these policies are challenging to establish for hourly employees, because vacation days are considered part of their pay. So some companies offer unlimited time off for salaried, “exempt” employees and traditional policies for nonexempt workers. And offering unlimited time off means you need a policy that distinguishes vacation from maternity and medical leave.

THE SURPRISING ADVANTAGES OF AN UNLIMITED VACATION POLICY You’ll cut costs. Many companies carry unused employee vacation days on their balance sheets; departing employees then cash in on their way out. Introduce unlimited vacation with plenty of advance notice, giving your staff time to use up accrued days off before they “lose” them to the new policy. If use-it-or-lose-it is the policy already, you will still gain by recapturing time that’s currently spent on tracking how many vacation days everyone is taking. Ask.com claims its unlimited policy saves 52 HR hours every year— hours now used for recruiting and retention.

Hiring is simpler. Many companies offer unlimited vacation so they won’t lose talent to competitors that do. But it can also help when hiring someone from a company with traditional rules. “It was a challenge to take employees who had been at another company for five years and had worked their way up to five weeks’ vacation and ask them to start over at two,” says Carol O’Kelley, CEO of Salesfusion. “I’m frankly happy not to have to negotiate that anymore.”

You have an earlywarning system.

 THE CEO MUST GO TOO “Whether you see everyone around you, above you, and below you taking advantage of it is really what makes or breaks the program,” says Heidi Kim, senior product manager at ZestFinance, an underwriting tech company with about 100 employees. “A policy on paper is meaningless.” Because ZestFinance’s leaders take time off, lowerlevel employees do too—about four to five weeks per year.  BAN “WORKING VACATIONS” If vacationing employees constantly check in with the office, time off can quickly dissolve into time at work. That’s bad, because they—and you—lose all the brain, health, and productivity benefits of a real vacation. Make sure they unplug. “I know loads of companies where people on vacation are still producing documents and joining meetings,” says ZestFinance chief people officer Sonya Boralv Merrill. “If our CEO sees someone answer an email, he replies: ‘You’re on vacation, dude! Your input is not welcome here.’ ” He copies this reply to everyone in the conversation. That gets the point across quickly.

68 - INC. - JUNE 2016

Employees rarely abuse unlimited vacation. When they do, it’s a signal that something’s wrong. Sonya Boralv Merrill of ZestFinance recalls a staffer who returned from a twoweek trip and immediately requested another week off. So she asked the employee why he was taking two vacations in a row. “It turned out he was quitting,” says Merrill. “He wound up just coming clean on it.”

LEAVE ALREADY! With Americans notoriously vacation-averse, employers are rethinking PTO (paid time off)

53 2 41 PERCENT

of employers offer PTO plans that combine vacation, sick, and personal time, says a 2015 Society for Human Resource Management survey.

PERCENT

of employers offered unlimited PTO in 2015, up from 1 percent in 2012, 2013, and 2014, according to SHRM.

PERCENT

of Americans in a Skift survey say they didn’t take a single vacation day in 2015.

BUILD

ILLUSTRATIONS: CHI BIRMINGHAM (3)

 DON’T LEAVE PEOPLE GUESSING The marketing automation company Salesfusion launched its unlimited vacation policy in 2014. Some of its 72 employees, uncertain about how much vacation is too much, started taking less. So the company created an FAQ document to address issues like how much vacation to take at a time (two weeks max) and how to arrange that time off. “It really did help to provide folks something in writing they could review,” says CEO Carol O’Kelley. “If you stood up and said, ‘Does anyone have questions?’ you’d hear crickets.”

••••

THE ESSENTIALS


MONEYWISE BY ALINA TUGEND

Put your money where your values are

was once taken about as seriously as tree hugging. I remember one conversation I had with my financial adviser 15 years ago: When I inquired about do-gooder funds, he wrote them off as bad investments, likely to offer only small returns. In fact, he was so dismissive of such bets—also known as green, sustainable, or impact investing—I never followed up. It’s well past time to take another look. Social investment is growing quickly, buoyed by greater popular consciousness about how our money can affect the world. In 2014, one dollar of every six of U.S. assets under professional management was invested in some form of sustainable fund, up from one of every nine just two years earlier, according to a 2015 report from Morgan Stanley’s Institute for Sustainable Investing. And, despite my then adviser’s reaction, social investing has “usually met, and often exceeded, the performance of comparable traditional investments,” the report states. So there are more sustainable funds and they perform well overall. But what does it actually mean to be socially conscious with your money? Impact investors usually consider three major criteria when deciding whether to include a company’s shares in their funds: the company’s environmental impact on everything from land use to ozone depletion; its treatment of its people, including workers and customers; and its corporate governance, including executive compensation and how diverse its management is. That leaves room for a lot of contradictions, as many for-profit businesses can draw praise in one area and criticism in another. A company with progressive environmental practices might underpay workers, or one with a diverse board might do business in a much-maligned industry, such as fracking. “It’s a judgment call,” says Amy Domini, whose Domini Social Investments manages $1.6 billion in assets. “We balance a great many issues.” For example, Apple remains in Domini’s funds

70 - INC. - JUNE 2016

6.6

ALINA TUGEND is a New York City–based journalist and

the author of Better by Mistake: The Unexpected Benefits of Being Wrong.

BUILD

NACIVET/GETTY

S

OCIALLY RESPONSIBLE investing

despite its mostly white, mostly male board, in part because Apple has in recent years appointed a second woman director, Sue Wagner, and its only current black director, James Bell. (Still, the company this year opposed a shareholder proposal to increase senior governance diversity.) Meanwhile, McDonald’s was once in Domini’s portfolio, in part because it had stopped using beef from cattle that graze where rainforests have been clear-cut, but she recently dropped the company over its failure to pay a living wage. (Once Domini selects the stocks it’s willing to include in its funds, it gives that list to a more traditionally minded submanager, which adds or drops companies on the basis of their shares’ anticipated financial performance.) Some big names have joined asset managers like Domini, Pax, and the Calvert Foundation, which have touted socially responsible funds for a long time. In October, BlackRock launched an Impact U.S. Equity Fund, which measures social and environmental outcomes coupled with returns. Be aware that some socially responsible funds charge higher fees than many traditional funds. And there’s the question of whether any Guns and Smokes individual’s targeted investing really Social-impact investors can be makes a difference, by pressuring compabetter known for what they shun than for what they buy. Shares of nies to improve labor, management, or firearm manufacturers, tobacco environmental practices. David J. Vogel, companies, and oil producers are a professor emeritus in business ethics at some of the most commonly avoided; others include those of the University of California, Berkeley’s alcohol companies, gambling Haas School of Business, is skeptical: operators, and nuclear and con“The number of social investors is too ventional weapons makers. “The more successful such companies small to affect share prices,” he says. are, the greater the cost they But there’s still a case for impact impose on society,” according to investing—not least because it forces us Domini Social Investments. to think about where our money is going and whether we can have a more active say in how it is used. And sometimes it does make a concrete difference. For example, I’m personally concerned TRILLION about the resources available to older, low-income  The amount of Americans, so I’ve been looking at bonds offered by U.S. wealth invested the AARP Foundation, along with Capital Impact sustainably as of 2014. This amounts Partners and the Calvert Foundation. Such investto nearly 18 percent ments help finance projects like a nonprofit food of total U.S. assets company that provides healthy meals to seniors. under management, according to the US Yes, it takes some research. Many smart SIF Forum for Sustaininvestments do. As Lisa Woll, CEO of the US SIF able and Responsible Forum for Sustainable and Responsible InvestInvestment. ment, says, “You need to do due diligence, just like an investor who is interested in anything.”


IF YOU’RE INVESTED,

WE ARE TOO. Whatever you’re building, it’s good to have someone who’s got your back. So when you invest in a managed portfolio from Amerivest with a qualifying deposit, if in the next year that model portfolio experiences two consecutive quarters of negative performance, the advisory fees for both quarters will automatically be refunded. Because this isn’t just about building a great portfolio. It’s about building your trust. The best returns aren’t just measured in dollars.

Call an Investment Consultant at 800-440-8124 or go to tdameritrade.com/rebate for details.


BEST INDUSTRIES

THE HEADY GROWTH OF CRAFT BOOZE

M

AKING DISTILLED SPIRITS IS an ancient process, and for

21st-century craft distillers—currently there are about 1,000 of them in the U.S., according to the American Distilling Institute—everything old is new again. And profitable. ADI’s annual survey estimates that craft sales moved about 2.4 million cases in 2015, about 40 percent more than the previous year. From 2011 through 2015, segment revenue grew more than 40 percent annually. Global imbibers’ new taste for U.S. bourbon and rye is one force behind the boom, says the Distilled Spirits Council of the United States. The resurgence of classic cocktail culture, led by Millennials, is another factor— domestic retail sales of U.S. whiskey in 2015 amounted to $9 billion. Can it last? “The most significant challenge for craft spirits producers is brand sustainability: a combination of good product, pricing, and getting the story across in a competitive marketplace,” says industry consultant Robin Robinson. Craft is an especially broad term. Not all craft spirits makers operate their own still, a fact that irks the sweatequity guys who ferment, distill, redistill, and, in the case of the seedto-bottle startups, grow their own ingredients. But for savvy consumers eager to be liquor locavores, such squabbles may not matter. Enjoy this round of some hands-on spirits-making bounty. –COELI CARR

962 COCKTAIL DEMOGRAPHICS — The LDA population—as in those of legal drinking age—has gradually increased. Yet the number of distillers has zoomed.

50

500

25

250

30

PROP STYLING: GÖZDE EKER

PERCENTAGE OF U.S. POPULATION 21 AND OLDER

750

NUMBER OF IN-PRODUCTION U.S. CRAFT DISTILLERIES

75%

0

0 2002

2015

SOURCES: U.S. CENSUS; NATIONAL BEER WHOLESALERS ASSOCIATION; AMERICAN DISTILLING INSTITUTE

PHOTOGRAPH BY WILL ANDERSON 7 2 - INC. - JUNE 2016


SPIRITS ARE RISING ACROSS THE NATION: A SAMPLING OF NEW WHISKEYS, GINS, AND LIQUEURS — ST. AUGUSTINE DISTILLERY (2011) St. Augustine, Florida

— WIGGLY BRIDGE DISTILLERY (2012) York, Maine

CO-OWNERS

CO-OWNERS

Philip McDaniel, Mike Diaz

Dave Woods, David Woods II

Colorado whiskey. Aspen Valley’s seed to bottle organic gin- and vodka-maker embraces the dark side.

2016 INTRO

2016 INTRO

Pot-distilled rum. Aged in vermouth barrels. “Pot” refers to the vessel, in case you were wondering.

Sour mash gin. Family whiskey recipe also yields a light, subtle-juniper dry gin with a citrusy finish.

2015 BOTTLES SOLD

2015 BOTTLES SOLD

2015 BOTTLES SOLD

210,200

118,200

15,000

— WOODY CREEK DISTILLERS (2012) Basalt, Colorado CO-OWNERS Mary and Pat Scanlan, Mark Kleckner 2016 INTRO

— FEW SPIRITS (2010) Evanston, Illinois CO-OWNER Paul M. Hletko (with investors) 2016 INTRO

Few Breakfast Gin. Infused with juniper, lemon, and Earl Grey tea. We suggest you wait until dinner.

— SANTA FE SPIRITS (2010) Santa Fe, New Mexico OWNER Colin Keegan

— HARVEST SPIRITS (2007) Valatie, New York OWNER Derek Grout

2016 INTRO

Apple brandy. Sourced from the owner’s orchard, aged five years in bourbon barrels.

Slow Burn gin liqueur. Infuse gin with hickory and applewood smoke; sweeten for a hay-andheather smell. 2015 BOTTLES SOLD

31,800

2016 INTRO

2015 BOTTLES SOLD

18,000 — YELLOW ROSE DISTILLING (2012) Houston CO-OWNERS Ryan Baird, Troy Smith, Randy Whitaker 2016 INTRO

Maple rye whiskey. Finished in maple-syrup barrels. Good with pancakes, we presume.

— SOUTH HOLLOW SPIRITS (2013) North Truro, Massachusetts CO-OWNERS

Dave Roberts Jr. and family 2016 INTRO

Dry Line Gin. Includes 9 botanicals, none of which would have been acceptable to the Puritans. 2015 BOTTLES SOLD

13,500 — DRY FLY DISTILLING (2007) Spokane, Washington CO-OWNERS Kent Fleischmann, Don Poffenroth 2016 INTRO

2015 BOTTLES SOLD

O’Danagher’s American Hibernian Whiskey. Locally sourced, aged in white-oak barrels.

72,000

2015 BOTTLES SOLD

2015 BOTTLES SOLD

43,200

110,000 — GREAT NORTHERN DISTILLING (2013) Plover, Wisconsin CO-OWNER

Brian Cummins 2016 INTRO

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BUILD


WA L K T H E WA L K

Gary Vaynerchuk •••• Employees Are More Important Than Clients Workers who feel truly cared for are the key to creating a business that can grow quickly

engineering—by asking what each worker wants most out of your company. Everyone has different drivers, so you have to use your ears and listen: What’s her ambition? What does he want to do with his life? I learned that my former assistant Phil Toronto was drawn to the VC and investing world. Now he’s a partner at my investment fund Vayner/ RSE, doing what he loves. Other staffers value worklife balance or coaching their kids or exhibiting their T VAYNERMEDIA, we like to say, “Family first, photos in a gallery. I respect that. Respecting your agency second.” Your employees are important, team earns you their care for the company. There’s no one tool or tactic for building real because it is their skills that keep your machine relationships with employees. I prefer to interact running. I started VaynerMedia in 2009 with with them beyond emails and meetings. Sure, my brother, AJ; a handful of his closest friends you can use Namely or Slack to message them, became our earliest employees. Having taken but it doesn’t have the same impact. With 600two businesses from $3 million to $60 million plus staff members, finding time for all of them in revenue, each in less than five years, I’ve is difficult. But I always make sure that I engage: learned that employee happiness and well-being chatting about a favorite sports team, the town come before everything else—including signing they grew up in, or their career ambitions. A fiveon new clients. This emphasis has allowed me to scale up the busiminute meeting creates opportunities for other nesses and build committed teams as we continue to innovate. But as much as you care for them, don’t expect your staff to be as small interactions—a hello in the elevator, a picture committed to your business as you are. Too many entrepreneurs together at the holiday party, or their coming to complain that staff members don’t work as hard as they do. It’s a ludiyou with an issue because you make them feel safe. crous expectation: Why should they be concerned about a business All of that becomes valuable to the culture as that’s not theirs? To reduce that friction, you need to treat them first you build your company. If your business is growas individuals, not as employees. This can be accomplished by reverse ing quickly and you need to hire rapidly, using your veteran employees will speed the process. In the early days of VaynerMedia, I made sure that its first 10 to 50 employees were passionate about, and Gary Vaynerchuk is co-founder knew how to execute, my business philosophies. If you share your personal intellectual propand CEO of VaynerMedia, a erty—your vision—with those first staffers, they can become a scalable version of you. Put the digital media agency based in New York City. people you trust most in the recruiting process so they are using their emotional intelligence to hire the right people. This will allow you to invest in your new hires to ensure that they grow at the same rate as your veterans. Whether someone is a new hire or a longtime employee, I provide him or her with challenges that point the way to success. I have 20-somethings gaining real experience—in leading new business pitches and teams, for example—who at other companies would just be exiting the “getting coffee” mode. I refer to myself as an HR-driven CEO. I thrive under the pressure of having the entire business on my shoulders, and I feel a responsibility to keep my workers happy, not as a group, but as individuals. I develop my relationships with my employees, and put in the time to learn what is most wanted from me as their CEO, because that will result in their caring about my company. It’s about building trust, and trust has to be earned. Put in the effort to make your people happy, and you will grow faster.

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BUILD

ERIK TANNER

A


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I N C . B R A N D E D C O N T E N T / WA S H I N G T O N , D C

WASHINGTON, DC:

WINNING THE VOTES OF COMPANIES SMALL AND LARGE The nation’s capital has rapidly evolved into a booming business center and shows no signs of slowing down.

W

ith an election year in full swing, candidates across the country are vying for the chance to head to Washington. But it’s not just politicians who are eager to make new homes in the nation’s capital. Established in 1790 by virtue of land donations from Virginia and Maryland, the 68-square-mile power center known as the District of Columbia is increasingly attracting a vast array of innovators, from entrepreneurs to well-established companies to researchers, investors, and others. Among the companies making the 2015 Inc. 5000, for example, DC ranked as a Top 10 city as measured by the concentration of fast-growing firms based there. The Kauffman Foundation, meanwhile, named DC among the top 20 US cities for business ownership in general, and among the top 30 for startups in particular, with some 134 startups per 100,000 residents.

Being able to rub shoulders with decision makers for such contracts is often a big advantage for startups. “The close proximity to the Defense Department, the intelligence community, and the various federal civilian agencies made DC a fantastic city for my last company, SecureForce, where we supported the cyber security requirements of many agencies,” says Jonathon Perelli, a serial entrepreneur and investor who has long been based in DC.

Proximity to the federal government

In fact, by law some federal contractors must ensure that a percentage of the work they subcontract goes to small businesses. While a DC location isn’t essential to win such business, the networking value of doing business here can’t be ignored.

As home to the majority of federal agencies, Washington is where the nation’s purse strings open and close. While

Being close to regulators helps, as well. Whether you need to search patent records to protect

So what makes this city so appealing to people with big ideas, and to companies eager to grow?

S1

employment by the federal government dropped by about 6 percent between 2010 and 2015, according to research by real estate firm CBRE and the Bureau of Labor Statistics, government spending has continued apace, tallying some $3.7 trillion budgeted last year.


I N C . B R A N D E D C O N T E N T / WA S H I N G T O N , D C

your intellectual property, or win an agency’s approval to sell your product, “you have all these resources that are conducive to growing your business right in your backyard,” says Keith J. Sellars, president and CEO of the Washington, DC Economic Partnership, a public-private organization aimed at fostering new business opportunities in the city. And Washington is not just a hub for US government resources—it’s also home to some 175 foreign embassies, as well as many international organizations and professional associations. “If you’re looking for international opportunities, you pretty much have direct access,” says Chad Shuskey, senior vice president, research and real estate for WDCEP. In fact, the city recently launched a new initiative called ExportDC aimed at helping DC-based small businesses find exporting opportunities. In addition to providing a natural home for government contractors and exporters, DC has a burgeoning technology community, not to mention many high-profile startups involved in education, healthcare, retail, and hospitality. Well-known companies in the area include education technology startup Blackboard, roadside assistance provider Urgent.ly, and hospitality software maker SocialTables.

“We’ve found that entrepreneurs thrive in communities where they can collaborate, lean on, and seek guidance from other founders. Starting a company is never easy, and having access to a network of mentors provides tremendous value to DC entrepreneurs.” — Tiffany Thacker, senior director of tech & entrepreneurship for WDCEP

Financial and mentoring resources Thanks in large part to the backing of the city government, DC has developed a thriving business community that offers both financial and strategic support to growing companies. Approximately five years ago, “the city purposely made some investments in some early incubators,” says Brian Kenner, DC’s deputy mayor for planning and economic development. Those investments included incubator and investment firm 1776, which has now graduated some 500 startups that have gone on to create more than 2,300 jobs and raise more than $300 million in funding. Most recently, in March, the city announced that it will contribute nearly $1 million in grant funds to help build a new incubator providing affordable co-working space on the campus of Howard University. That backing has spurred plenty of others to join in. AOL cofounder Steve Case, for one, is a major investor in the region, S3

in part through DC-based investment firm Revolution LLC, which he co-founded in 2005. Local companies often get preferential treatment from DC investors. Of the 40 investments that Perrelli has made as an angel investor in the past several years, for example, 35 were based in the area, he says. “Angels, not unlike many VCs, prefer to invest close to home. I refer to it as the “pop-in” factor,” says Perelli, who previously founded and led Fortify Ventures as well as an associated accelerator program. Beyond financial resources, sometimes it does take a village to raise a startup – and among Washington, DC’s robust mentoring community, WDCEP leads one of the city’s top mentoring programs, AccelerateDC, which provides support to DC-area technology-based startups through a high-value network, educational seminars, and a confidential team-based mentoring service. With more than 100 volunteer mentors and specialists and 50 venture companies enrolled, AccelerateDC has created pathways for entrepreneurs through committed and unbiased expert guidance introductions to investors, and programming focused on funding options. Since the start of the program, companies enrolled in AccelerateDC have raised a collective $12 million in funding. “We’ve found that entrepreneurs thrive in communities where they can collaborate, lean on, and seek guidance from other founders,” says Tiffany Thacker, senior director of tech & entrepreneurship for WDCEP. “Starting a company is never easy, and having access to a network of mentors that can guide you through failures and help celebrate triumphs provides tremendous value to DC entrepreneurs.” AccelerateDC entrepreneur, Ryan Huss, founder of Syde Fantasy Sports, agrees with Ms. Thacker,


adding that DC is “a hub of innovation that provides a growing supply of startup talent and resources.” To help retain companies as they grow, the city has also created a wide range of tax incentives aimed at midsize companies. Qualified high-technology firms can enjoy a variety of forms of tax relief, including tax credits for training and hiring disadvantaged employees, exemption from the sales and use tax, and a partial exemption on some personal property taxes. A newer incentive passed last year known as the Creative and Open Space Modernization Grant offers up to $5 million in tax savings over 5 years to companies with a minimum of 50,000 square feet of office space that make improvements to it. The commitment is more than money. Kenner says city officials frequently meet with startups to “help them navigate the DC government, and remind them that we’re a customer for many of the products and services they’re working on.”

Highly educated workforce “You see a lot of innovation coming out of Washington, DC, because we have a talented, educated workforce,” says Julie Y. Weber, director of marketing and communications for WDCEP.

About half of the Washington DC’s workforce has a bachelor’s degree, according to the Census Bureau, and one-third have a masters’ degree or higher. A report last year by the American Institute for Economic Research found that DC was the top destination for young college graduates among large metropolitan areas. Part of the allure may be that the city itself is an engine of graduates: DC boasts many well-known universities, including Georgetown University, George Washington University, and Howard University. That kind of brainpower quite literally helps keep the trains running on time. Amtrak, which has been headquartered in DC since its founding in 1971, has about 2,500 employees in the city. The roles at headquarters range from finance and legal positions to government affairs and marketing—not to mention the many mechanical engineers and train operators it takes to keep DC’s Union Station (Amtrak’s second busiest stop after NY Penn Station) humming—and DC can generally provide them all. “DC has been a great headquarters location for us, because it has the right combination S4

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I N C . B R A N D E D C O N T E N T / WA S H I N G T O N , D C

Livability A major reason that businesses want to locate or expand in DC is that it’s an increasingly desirable place to live. The city has seen an explosion of new retail and restaurant offerings in recent years, notes the WDCEP’s Shuskey, many of exceptional quality. World-renowned chef José Andrés bases his ThinkFood Group –which owns restaurants all over the globe—in the city, while last year Bon Appetit picked DC’s Thip Kao as one of its top 50 new restaurants in the nation.

of schools, technology expertise, and well-educated, wellmotivated employees,” says Matt Hardison, executive vice president of marketing and sales for Amtrak. “We have a tremendous pool of talent to draw from, not only from universities but also from other companies in the area.” Diversity Washington, DC, is not content to simply fashion itself into just another a startup hub; the city is also consciously working to overcome many of the inequities that are common to the startup world. According to the most recent Census data, more than onethird of DC-area businesses are owned by people of black or African-American descent, making it the top such location in the country. It is also known as a city that is welcoming to other minority entrepreneurs, and women entrepreneurs, particularly in the often male-dominated world of science and technology. “We want to be the leader nationally in inclusive innovation,” says deputy mayor Kenner. Networking groups to support different facets of the population have taken off in recent years, says Shana Glenzer, who helped spearhead the DC FemTech group (which focuses on women in technology) about two years ago, as well as a DC chapter of the Vinetta Project for female founders. Meanwhile, a new group called Black Female Founders just launched in the city. Support for such groups extends far and wide, with many local firms and investors sponsoring various events. “There is a huge outpouring of support from the community,” says Glenzer, who by day is chief marketing officer at MakeOffices. Kenner notes that the new city-backed incubator at the historically black Howard University, slated to open this fall, will be in one of the most popular neighborhoods for startups in general, and that “it is not just for people connected with Howard; it’s for the range of underserved communities and including people who are physically disabled.” S5

Meanwhile the retail sector saw a 21percent increase in employment between 2010 and 2015, while the hospitality industry saw a 17 percent jump. At the same time, Shuskey notes, the city’s population has grown by about 11 percent since 2010, according to the WDCEP’s most recent report on DC neighborhoods, in large part because “it’s a very livable city.” At the epicenter of this activity is Amtrak’s Union Station, which is slated for a major overhaul that seeks to triple its capacity over the next 20 years. Recent planning studies suggest that there has been 25 percent population growth around the station since 2010, largely in the up-and-coming NoMa (North of Massachusetts Avenue) section of the city. “I don’t think that’s a coincidence,” says Hardison, noting the many restaurant and retail options that can now be found at and around Union Station, not to mention the convenience of living near such a major transportation hub. With so many reasons to build and grow a business in DC, it’s no wonder that Perelli is happy to sum it up by saying, “All the elements combine here to make DC a truly great city, in every way.” For more on the companies and organizations cited in this special section, please visit the following: Amtrak amtrak.com Office of the Deputy Mayor for Planning and Economic Development dmped.dc.gov Washington DC Economic Partnership wdcep.com Department of Small and Local Business Development dslbd.dc.gov US Small Business Administration sba.gov


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What do you stand for? Write it down PG.101

Design Better.

IN T S E B UAL N N A IRD H T R U O

A W A S S CLA

RDS

 WINNERS’ CIRCLE Turn the page to see which entrepreneur-made products excelled

•••• ILLUSTRATION BY ISTVÁN SZUGYICZKY

JUNE 2016 - INC. - 83


P

RODUCT DESIGN CONTESTS invariably lend themselves to

superlatives. Winning designs are inevitably the most beautiful, elegant, disruptive, and accessible products yet created. But sometimes what’s most important in recognizing excellent design is acknowledging—and celebrating—what it is not: fussy, overly tech-reliant, poorly explained, or most of all, needlessly expensive. That became quickly apparent this year, during the judging of Inc.’s third annual Iconic Design Awards. “As an art project, this is great. But as a go-to-market product, it doesn’t feel ready. It’s not scalable,” as Vivian Rosenthal, the founder of tech design firm Snaps and a co-founder of Google’s 30 Weeks design incubator, says of one beautifully impractical finalist. Fortunately, she and her fellow members of our judging panel (below) found much that does make sense from the entrepreneurial designers and makers whose products marry form and function. The winners of this year’s awards include startups tackling categories such as household practicalities, medical necessities, and recreational luxuries. Each winning product, in its own way, solved a problem, looked great doing it, and didn’t overwhelm with too many frills. “Design is a powerful tool. It’s at its greatest agency when it’s in the hands of the most people, which means it has to be accessible,” says Teran Evans, an entrepreneur and architect by training who’s now a design director at PepsiCo. “We must celebrate design that strikes aesthetically but also has responsible pricing. If it’s just beautiful, we’re celebrating only Maseratis.” Each of the entrepreneur-made products you’ll see on the following pages earned, yes, superlatives from our judges. Most of them earned an even more fundamental endorsement: the judges’ desire to buy ones of their own. Witness Rosenthal’s enthusiasm for the Starry Station Wi-Fi hub (see opposite page). “I want to buy this for my mom. She’s been on the phone with her provider for like a month trying to figure out how to reset the password on her router,” she says. “This is pretty badass.”

TEXT BY ABIGAIL BARON + KEVIN J. RYAN / PHOTOGRAPHS BY GRANT CORNETT / STYLING BY JANINE IVERSEN

••••









THE STARTUP MASTER

THE MAKER ADVOCATE

THE EXPERIENCE EXPERT

THE BRAND BUILDER

Vivian Rosenthal teaches entrepreneurs how to turn their designs into reality. As a co-founder of Google’s 30 Weeks design incubator, she spent two years helping students bring their product ideas to fruition. Now she’s focusing on her own company, Snaps, which has created customized emoji keyboards for, among others, MTV, Hillary Clinton supporters, the movie Deadpool, and Dove. “I tend to look for the things that have really well-thought-out functionality,” she says. “The products I continuously spend time using are the ones that provide utility—but also are beautiful to look at, or feel good in my hands, or that I want to see in my apartment.”

Jim Brett thinks globally about local design. The president of home-decor outlet West Elm— and the man who spearheaded the company’s pivot toward local products—is inspired by the journeys he’s taken around the world. “Even more than a country’s culinary traditions, craft represents cultural heritage to me,” says Brett, Inc.’s Made columnist (see page 101). He’s particularly drawn to products that combine multiple aesthetics to create something new—and that retain a sense of their own provenance. “If I’m drawn to a handmade look,” he says, “it’s undoubtedly because I also love the story in design. It makes design human.”

Mona Patel likes products that solve a problem. The founder and CEO of Motivate Design, a user-experience and design agency that’s made the Inc. 5000 list two years in a row, has worked for almost two decades on user interfaces for companies including Tumblr and Jet.com. (She also lectures at the New School’s Parsons School of Design and is the founder of UX Hires, a user-experience recruiting firm.) But her keen eye for designs that attract and engage a customer isn’t exclusive to the digital front. “You can invest in an industrial design that’s gorgeous,” says Patel. “But it needs to have that use case or pain point that you’re fulfilling.”

Long before Teran Evans earned his master’s in architecture from Harvard, he and his twin brother used to convert their playroom into miniature cities—complete with Lego neighborhoods and currency. Now Evans is the design director of PepsiCo’s global brand experience, which means he’s overseeing the creation of the company’s first physical restaurant, in New York City’s meatpacking district. It’s a role uniquely suited to Evans’s cheerfully sharp practicality, and his focus on how design—including of live events—functions in the real world. The key questions he advises designers to ask: “What’s the essence of a brand? What does that experience look like?”

84 - INC. - JUNE 2016

FROM LEFT: COURTESY SUBJECT; ERIK TANNER; COURTESY SUBJECT; TEMAN EVANS

JUDGING INC.’S ICONIC DESIGN AWARDS


Best Router to Rule Them All

STARRY STATION BY STARRY FOUNDER: CHET KANOJIA DESIGNER: DON LEHMAN

If you could put a price tag on a life free of Wi-Fi stress, it would be $350 and come in the form of the Starry Station. The next act from Aereo founder Chet Kanojia, who’s made a career of trying to simplify outdated consumer technology, Starry Station is an ambient, touchscreen Wi-Fi hub meant to replace the boxy, dated router you get from your internet service provider. With a 3.8-inch LCD touchscreen, the router takes the guesswork out of your internet connection: Instead of blinking lights that don’t actually tell you why your connection is down, it displays the exact speed at which your service is running, what devices are currently on your network, and how strong the connection to each individual device is. “There are full-on arguments that have gone on in my house, where my laptop isn’t working but something else is,” says Patel. “Starry would help me figure it out.”

“Routers are difficult. This simplifies the process and offers an elegant design.” —VIVIAN ROSENTHAL

ICONIC DESIGN  MADE


Best Way to Make Coding Into Child’s Play

DASH AND DOT BY WONDER WORKSHOP

CO-FOUNDERS: VIKAS GUPTA, SAURABH GUPTA, MIKAL GREAVES

These plastic toys are on a STEM-centric mission. Dash and Dot ($200 for the pair) are personality-filled robots that will teach your kids how to code, with accompanying apps that become more advanced as children learn how to program them. The judges were particularly impressed with Dash and Dot’s playful sounds and bright, inviting colors, which help them avoid contributing to the pink ghetto of toy stores’ girls’ aisles. “It accomplishes a lot of things,” Rosenthal says. “It’s well designed; it’s aesthetically pleasing; a kid learns something from it; it’s gender neutral.”

“I love the color and shape of these robots—so much personality—and that boys and girls can learn coding with immediate results.” —JIM BRETT

86 - INC. - JUNE 2016


“We’re coming back to things that have utility but also are beautifully designed. That’s the sweet spot.” —VIVIAN ROSENTHAL



Best Solution to Texting While Biking HAMMERHEAD ONE BY HAMMERHEAD

CO-FOUNDERS: LAURENCE WATTRUS, PIET MORGAN, RAVEEN BEEMSINGH VP OF DESIGN: JULIO RADESCA

Anyone who’s ever gotten lost on a bike ride will embrace this hands-free, words-free navigator, designed to mount on a set of handlebars. The Hammerhead One ($99) connects to a phone via Bluetooth, and 29 LED lights guide the rider along a route preprogrammed into the app. Radesca and his team drew inspiration from the light systems that help pilots land jets on aircraft carriers at night. Riders can view the device with their peripheral vision while keeping their eyes on the road: The system distinguishes between hard turns and slight ones, and colors differentiate dirt trails from streets. “I like how intuitive it is,” Patel says as the dots blink in blue and red. “You don’t have unnecessary information.” And just as easily as it can be secured with a twist-lock, the device pops off for safekeeping. “It’s smart,” Rosenthal says. “We all want one.” 

ICONIC DESIGN  MADE


Best Aid for Beating Your Personal Record R1 GOGGLE BY ROKA SPORTS

CO-FOUNDERS: ROB CANALES, KURT SPENSER

If you need a leg up on the competition at your next swim meet—or just want better visibility when doing laps—look no further than the R1 Goggle. Founded by two former Stanford All-America swimmers, Roka Sports has been making wetsuits since 2013; now it’s branching into accessories. What makes the R1 ($35) stand out from other goggles on the market is its expanded field of view, which allows swimmers to see their target straight ahead without breaking form or compromising speed—the two keys to winning any race. The judges also praise its compact design and sleek lenses, which adapt technology more often seen on the slopes than underwater. “It’s like snow goggles meets swimming,” Patel says.

“Color me impressed. I expected these to be more expensive, because they look very premium.” —TERAN EVANS

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ICONIC DESIGN  MADE


Working van. Priced for the working man. The Sprinter WORKER can hold over 3,500 lbs. of payload and has 319 cu. ft. of cargo volume. With service intervals of up to 20,000 miles,1 you’re looking at the hardest-working van in its class. Now at an equally hardworking price. Visit MBVans.com

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“There are definitely other electric bikes on the market, but this one is really speaking to the design consumer.” — VIVIAN ROSENTHAL



Best Past-MeetsFuture Transporter

PORTEUR S BY FARADAY BICYCLES FOUNDER: ADAM VOLLMER

Cycling’s future looks a lot like its past—only faster. This electric bike propels its rider with a nearly silent motor, powered by a battery hidden within its frame. (Max speed: 20 miles per hour, plus however much more you can pedal.) “It’s not advertising that it’s an electric bike,” Evans says. Instead, Vollmer mimicked the design of European delivery bikes of the 1940s and ’50s, with fenders and an upright riding position that give it a retro look. At $2,499, the Porteur S is pricey, but no more expensive than a high-performance racing bike. And you’ll be hardpressed to find a more eye-catching competitor.

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ICONIC DESIGN  MADE


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Limited time offer; subject to change. At participating locations. Corporate liable only. 12-line maximum. Credit approval, deposit, and SIM starter kit purchase may be required. No overages for domestic, postpaid, non-pooled use; pay-per-use charges may apply on some services (e.g. pooled). See Terms and Conditions (including arbitration provision) at T-Mobile.com for additional information. T-Mobile and the magenta color are registered trademarks of Deutsche Telekom AG. ©2016 T-Mobile USA, Inc.


Best Environment Saver

STASHER BY STASHER

FOUNDER: KAT NOURI

Save the environment and your wallet: The Stasher is a reusable, plastic-free bag with an airtight seal. At $12, one will cost you more than a pack of Ziplocs, but it can be washed hundreds of times. Nouri spun off the startup from another company she founded, Modern-twist, which creates sustainable products using silicone. That polymer is the key to the Stasher’s BPA-, PVC-, and latex-free design; a bag can be safely frozen, dishwashed, and microwaved without fear of releasing toxins. “Right now, most U.S. households have a lot of products that aren’t just bad for the environment,” Rosenthal says, “but bad for the people in the household as well.”

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JUNE 2016 - INC. - 93


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“I’m a sci-fi fan, so the bionic aspect is very appealing on its own. But when you consider that people who have trouble hearing can feel isolated, being able to better connect to the world around them via their phones is empowering technology.” —JIM BRETT



Best Elegantly Updated Medical Device

HALO 2 BY STARKEY HEARING TECHNOLOGIES

FOUNDER: WILLIAM F. AUSTIN CHIEF TECHNOLOGY OFFICER: TIM TRINE

Sleek and nonintrusive, Halo 2 is a product that wins by cramming a large amount of useful technology into a small space. “They’re not the clunky things we’re used to,” Evans says. “They’re not trying to scream. They’re trying to be almost invisible.” The hearing aid isolates and enhances speech while dimming ambient noise. Too windy? Turn it down via an app on your phone. Need to tune in to low voices? Swipe your phone to turn the whispers up. A geolocator tag on the app remembers preferences for particular locations. The aids ($1,500 to $3,000 each) double as headphones—users can wirelessly play music or hear email and messages from their phones. The Starkey team designed them with input from musicians and hearing-aid wearers. And while the aesthetics might not be revolutionary, the utility certainly is.

95 - INC. - JUNE 2016


“You’re winning a design award because you nailed a real-world problem.” —MONA PATEL

ICONIC DESIGN  MADE


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WE’RE CHANGING

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FOR GOOD.

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D E S I G N S T O RY

Jim Brett •••• What Do You Stand For? Figure out your company’s vision—then write it down

slogan is a challenging but necessary exercise. If you succeed, your guiding statement will act as a built-in editing device and focus your future decision-making processes. One of the biggest mistakes I see companies make is writing a statement for the way the words HEN I BECAME president of West look on paper, with little regard for how they Elm, the company had a narrow will be expressed in action. When my company design vision. It was like that updated our words, we also updated our practices, Henry Ford quote: “Any customer with changes that had to filter right down to each can have a car painted any color sales associate in every store. For example, we that he wants—so long as it is stressed the importance of personal communicablack.” Our mission was about tion, and did away with rote retail greetings like having customers buy our style, “How can I help you?” This was not difficult, not about reflecting theirs. because when we began carrying collections from That had to change. It was my local artisans, customers recognized the makers or job to reinvigorate the company, the neighborhoods where the products were made, and I saw so much opportunity in the expanding aesthetic of home which prompted more natural conversation. We design. Customers wanted more autonomy in their style choices, and also put more of an emphasis on regional commuthe ability to order cars (or their equivalents) in any color of the nities, primarily through ground-level store events rainbow. Instead of proclaiming ourselves the style authority, we and social media. That helped us become better had to give up that power—in practice and, crucially, in writing. Our listeners about what customers really want, and resulting guiding statement promises that West Elm “inspires you guided us as we expanded product offerings and to express your personal style at home.” created a new, more eclectic modern look. And it It seems simple, but such statements go far beyond mere led us into the world of handcraft; three years after marketing. Whether you are redefining your business or launching launching our Local initiative, this shift to artisanal one, distilling your hopes and dreams and plans into an internal products has redefined our entire company. Figuring out what your words should be isn’t always easy. The founders of Public Supply, a Brooklyn-based maker of office and writing Jim Brett is president supplies, spent more than two years hashing out what their company valued and how to of West Elm, the Brooklyn, New express it. “It was important that our mission statement reflect group thought,” says co-founder York–based home-furnishings retailer, and a proponent of local and W. Brian Smith. “We’d have long chats over drinks, or our internal meetings might involve Fair Trade–certified products. debates about who we are and what we’re doing.” The for-profit company, which sells products through West Elm, donates 25 percent of its revenue to public-school arts projects. After many a group brainstorming session, Brian and his partners wrote down Public Supply’s mission—“We create writing essentials in support of public-school arts”—but they didn’t consider their job finished. “We regularly review our mission statement,” says Brian. “When we update the website, for example, we ask ourselves, is this how we’re currently thinking and acting? We want to make sure that our words and strategies truly reflect how we feel about our business.” This is exactly how modern businesses must define their identity: You have to be flexible and open-minded when it comes to revising or revisiting what you originally set out to do. That makes for a stronger guiding statement and a more thoughtful strategy, which then adds up to a sustainable business.

ERIK TANNER

W MADE

JUNE 2016 - INC. - 101


I N C . B R A N D E D C O N T E N T / S TA F F I N G F I R M S

The War for Talent: Don’t Fight It Alone How staffing firms can help your company gain a competitive edge in hiring and maximize the advantages of the “skilled contingent workforce” From engineering and technology to health care, advanced manufacturing, and many other fields, the highly publicized “skills gap” is a real challenge for many companies. For the past 10 years, companies report they’ve had trouble filling jobs because of a lack of available talent, and that bringing top talent on board is often a slow and frustrating process. One simple solution is to enlist the help of staffing firms. Staffing firms “match companies’ needs with a global workforce of specialized labor,” explains Jeffrey Neal, chief marketing officer at Kforce, a leading professional staffing services firm specializing in Technology and Finance & Accounting. This enables businesses to adapt to changes in supply and demand as well as their own rapidly evolving business needs. Time is of the essence. The unemployment rate hit an eight-year low in January, at 4.9 percent, and is even lower among college graduates. Top talent is often off the market within 48 hours or less, according to Kforce. Job seekers with technology prowess are especially hot commodities. “Almost

all companies have some technology needs—it’s not just tech companies anymore,” observes Neal. “For example, you now have healthcare providers competing against the most innovative tech companies for the same talent. That has been a very big shift.”

Neal notes that staffing firms also help businesses navigate through this increasingly complex regulatory environment. “This is a big concern, as there are heavy penalties associated with compliance and reporting for any size company,” he says.

Another shift has been the surge in temporary workers, known as the contingent workforce. According to the American Staffing Association, more than three million temporary and contract employees work for America’s staffing companies in an average week.

Businesses are also taking more time to educate their recruiting partners about their business goals and company culture. Staffing firms then act as marketing enterprises, pitching a business to a pool of candidates, many of whom have chosen to work as consultants rather than seek long-term employment.

Neal notes that businesses’ embrace of the contingent workforce gained real momentum after the Great Recession. Just-in-time labor emerged as a tool for facilitating nimbleness and flexibility. “There is now strategic awareness at the executive level, and we have seen a real advancement in the way projects are built. They’re often designed to include staffing strategies in their execution,” he says. The word strategic is key here. “Clients have become more strategic in their engagement with us, just as they have become more strategic in their use of just-in-time talent to drive productivity and cost-effectiveness,” says Neal.

Today’s top candidates often have the luxury of being very selective, and understandably so: They know their skills could make all the difference for a growing business. That’s why your company should consider partnering with a staffing firm that can help you find and hire the best, on whatever terms make the most sense for both your company and the new hires. “Think about what propels companies from the startup stage to something truly significant,” Neal says. “At the heart of the matter, it is all about your people. Who you surround yourself with makes all the difference.”


BETTER update that yuck-colored bathroom.

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Tech tools for employee engagement PG.106

Invent. Experiment. Disrupt.

George Zimmer hasn’t gotten over Men’s Wearhouse PG.108

“We view our role as a bridge between the speed of business and nature.” —DOUGLAS RIBOUD, co-founder of coconut water company Harmless Harvest

120

PG.

 GLOBAL TRADE Harmless Harvest co-founders Justin Guilbert (left) and Douglas Riboud hail from France, run their company in San Francisco, and farm coconuts in Thailand.

•••• PHOTOGRAPH BY CEDRIC ARNOLD

JUNE 2016 - INC. - 105


TIP SHEET CULTURE HACK

TRACKING THE MOOD OF YOUR EMPLOYEES How a new wave of real-time, data-driven tech tools can turn a disengaged staff into a passionate one FOUR EMPLOYEES TO 250 in

less than seven years is the type of growth most entrepreneurs would envy, but it was a management abyss for Assurex Health. “Engagement was so straightforward when we all sat around the same table,” says co-founder and COO Don Wright. “We could jump up on a desk and yell at each other when we had to.” But as the Mason, Ohio–based pharmacogenomics company mushroomed from one table to three offices, it became harder to keep a handle on the company culture. Some employees struggled to understand its financial state amid so much growth. Others had ideas for how to make the company more transparent, but didn’t know where to take them. By the time HR would send out its annual survey, the feedback was no longer relevant. “You can’t force people to spend two hours answering 50 questions every week,” says Wright. Enlightened companies understand

that a passionate work force leads to higher profits, productivity, and retention, yet many feel stuck using engagement tools that are arduous and untimely. Several new startups are setting out to help you by pairing the convenience of smartphones with the aptitude of real-time data analytics. Didier Elzinga, co-founder and CEO of Culture Amp— which has an engagementanalytics dashboard used by Airbnb, Pinterest, and Adobe, among others—says companies need to interact with their employees just as they do with customers. “Marketing has found amazing ways to get customer data and turn that into actionable insights,” Illustration by DAVID PLUNKERT he says. “Yet there haven’t been great tools to look inside a company to see who’s motivated and mobile “happiness meter”—has helped who’s not and figure out how to fix it.” her avoid sinking money into fixing the Ursula Adams, director of employee wrong cultural problems. “When people engagement at United Way for Souththink about engagement, they think eastern Michigan, says using the dailyhoverboard and foosball, ice cream and engagement app Niko Niko—which ponies,” says Adams. “But when you dig tracks employees’ mood data with its into the data, you find that people are

THE HIGH PRICE OF A GRUMPY WORK FORCE Fewer than a third of American workers are giving it their all on the job. According to recent polling, 66 percent are either unengaged or—more starkly— “actively disengaged.”

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3X

Engaged teams grow profits three times faster than disengaged ones. Highly engaged employees are 87 percent less likely to leave a company.



DAVID LIVINGSTON/GETTY

••••


OPTIMIZING HAPPINESS Want to get the most from the newest engagement tools? The people who created them share their insights

asking for things like greater role clarity and more information about strategic vision.” To stay on top of its rapidly growing work force, last year Assurex Health began using BlackbookHR, an online platform that lets a com-

An unengaged worker costs an organization approximately $3,400 for every $10,000 in annual salary.

LET YOUR EMPLOYEES DEFINE WHAT HAPPINESS MEANS “Think of engagement as less about asking how happy your employees are and more about measuring if your employees are having the experience both of you want them to have. Until you know what’s most important to your culture—say, a sense of open dialogue or supreme creativity—it’s hard to ask specific questions around it, to see if the company is measuring up to that goal and how it can be stronger.” —DIDIER ELZINGA, co-founder and CEO of Culture Amp

pany lob questions to its staff on the fly and track them via dashboard. A manager can send a question from a mobile phone, and then slice and dice feedback on the basis of variables such as tenure or department, to identify real-time trends. After a recent underwhelming all-hands meeting, Wright used BlackbookHR to ask his staff whether such meetings were valuable. It turned out the meetings weren’t a problem, but the logistics were: Lunchtime worked well for the team in Ohio, but not for West Coast schedules. Remote workers struggled to follow along on the phone. By the next all-hands, Wright had overhauled the format: new time, new structure, video streaming. “The smallest things can often be the most irritating to an employee,” says Wright. “While we’re focused on trying to solve the next big thing, they don’t understand why we can’t solve something as simple as making a meeting work for all time zones.” —KATE ROCKWOOD

SET UP A RESPONSE PLAN BEFORE YOU GET THE DATA “Some companies are hungry to collect data, but they don’t have any idea of what’s going to happen next. I’d tell them to wait until they have people in place who can take this feedback and work on making changes. If not, you risk lowering morale even more. When employees share their feedback and personal feelings, it’s frustrating if nothing happens.” —DIA SERAZUTDINOVA, co-founder and CEO of Niko Niko REVEAL THE WARTS “Trust and transparency are the two biggest factors that impact engagement metrics, and if you don’t share survey results, you’ll erode both. You don’t have to do everything the employees want, of course, but explain why you’re moving forward with some ideas and not with others. Organizations tend to do a poor job with the ‘why.’ They tell the team the ‘what,’ but not the reason behind it. That’s a quick way to kill engagement.” —CHRIS POWELL, CEO of BlackbookHR



98 PERCENT of CEOs look at employee engagement surveys once a year. Yet 62 percent agree that hearing from workers once a year isn’t enough for timely insights.

SOURCES: GALLUP, CEB CORPORATE LEADERSHIP COUNCIL, MCLEAN AND COMPANY, MOTIVOSITY, WAGGL

INNOVATE


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George Zimmer’s done pretty well since he got fired from the company that made him famous. He has two new startups. He’s free to be himself more than ever. So why can’t he stop talking about Men’s Wearhouse? By Tom Foster PHOTOGRAPHS BY JASON MADARA

FUTUREPROOF  INNOVATE


ZIMMER: THE HIGHS AND LOWS  1971 AFTER GRADUATING FROM WASHINGTON UNIVERSITY IN ST. LOUIS,

Zimmer joins his dadâ&#x20AC;&#x2122;s raincoat company as a traveling salesman.  1973 THE FIRST MENâ&#x20AC;&#x2122;S WEARHOUSE OPENS, IN HOUSTON.

The cash register is a cigar box, and Zimmer puts the storeâ&#x20AC;&#x2122;s logo on his van.  1986 ZIMMER STARS IN HIS FIRST COMMERCIAL

and later debuts his full catch phrase, â&#x20AC;&#x153;Youâ&#x20AC;&#x2122;re gonna like the way you look. I guarantee it.â&#x20AC;?  1992 MENâ&#x20AC;&#x2122;S WEARHOUSE IPO RAISES $13 MILLION.

EORGE ZIMMER,

the Menâ&#x20AC;&#x2122;s Wearhouse founder and besuited TV pitchman, looks a little startled as I enter his office. â&#x20AC;&#x153;Oh!â&#x20AC;? he exclaims in that famous languid and gravelly voice, and his hand darts up to his desk and shoves something small into a drawer while his assistant stiďŹ&#x201A;es a laugh. Thereâ&#x20AC;&#x2122;s a distinctly skunky-smelling haze in the air, and the sounds of downtown Oakland, California, waft through the open windows. Itâ&#x20AC;&#x2122;s been almost three years since Zimmer was abruptly ďŹ red by the company he built from a single store into a multibillion-dollar empire, and heâ&#x20AC;&#x2122;s begun to settle into the world of tech startups. Heâ&#x20AC;&#x2122;s wearing a charcoal suitâ&#x20AC;&#x201D;from his startup Generation Tux, an online formalwearrental outďŹ tâ&#x20AC;&#x201D;that hangs slightly loose in a way thatâ&#x20AC;&#x2122;s breezy rather than ill-ďŹ tted, along with a looser-ďŹ tting ďŹ&#x201A;oppy-collared shirt. He explains that the brilliance of this particular suit is a comfy little hidden stretchband on each side of the waist. Women donâ&#x20AC;&#x2122;t get it, he conďŹ des. But men love it. As comfortable as Zimmer seems in his new life, heâ&#x20AC;&#x2122;s also tormented by the loss of his old oneâ&#x20AC;&#x201D;and how his longtime boardroom colleagues, in his telling, ambushed and ďŹ red him two years after he turned over his CEO role to his handpicked successor, Doug Ewert. After battling with his former board over his ouster, Zimmer launched not one but two startups that compete with Menâ&#x20AC;&#x2122;s Wearhouse. In addition to Generation Tux, thereâ&#x20AC;&#x2122;s zTailors (the z is for Zimmer)â&#x20AC;&#x201D;essentially an Uber that summons tailors for house calls. He has a hundred-some employees and more than $30 million in funding from investors like Salesforce Ventures, and Workday and PeopleSoft co-founder David Duffield. Zimmer, whoâ&#x20AC;&#x2122;s now 67, says his new companies will utterly transform how people shop for clothes. Whether or not heâ&#x20AC;&#x2122;s right about that,

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For the next eight years, it averages one new store per week.  2008 MENâ&#x20AC;&#x2122;S WEARHOUSE BECOMES ONE OF THE COUNTRYâ&#x20AC;&#x2122;S LARGEST MENâ&#x20AC;&#x2122;S APPAREL RETAILERS, WITH 1,278 STORES.  2013 AFTER CLASHING WITH HIS HANDPICKED SUCCESSOR, DOUG EWERT,

Zimmer explores taking Menâ&#x20AC;&#x2122;s Wearhouse private; the board ďŹ res him.  2015 ZIMMER LAUNCHES TWO STARTUPS,

Generation Tux and zTailors, that compete with Menâ&#x20AC;&#x2122;s Wearhouse.  2015 MENâ&#x20AC;&#x2122;S WEARHOUSEâ&#x20AC;&#x2122;S STOCK TANKS.  2016 ZIMMER TELLS INC. HEâ&#x20AC;&#x2122;S EXPLORING BUYING BACK MENâ&#x20AC;&#x2122;S WEARHOUSE.


TINKER, TAILORS Zimmer, along with a few tailors who work for his zTailors startup—which summons them, à la Uber, to make house calls.

INNOVATE


there’s something comforting in knowing that he’s out there bankruptcy. A Barclays analyst recently called it “uninvestable.” hawking suits again. His face was a near daily presence on TV Lawyers are circling with class-action shareholder lawsuits. for decades, and that reliable promise—“You’re gonna like To Zimmer, it’s a great “I told you so” moment, made even the way you look. I guarantee it”—was a nice safety net. You sweeter by the prospect that he might build something special knew he’d be there if you needed him. again with his new companies. But he’s hardly moved on. Which is probably why his dismissal became such a sensaStifel analyst Richard Jaffe, who’s followed Men’s Wearhouse tion. Late-night host Jimmy Kimmel said it was like firing for 20 years, says Zimmer has “founder’s regret”—a condition Santa Claus. “You lost my business. I guarantee it!” became that sometimes afflicts entrepreneurs who let go of the reins, a refrain on Facebook. At first, the board offered no public causing them to scramble to get hold of them again. In fact, explanation for the firing. Eventually, it announced that Zimmer tells Inc. exclusively that he’s been talking with private Zimmer had left it no choice: He had become an obstructionist equity groups about trying to buy back Men’s Wearhouse. “The bent on retaking the authority he’d ceded to Ewert. combination of what I’ve built in the past couple of years and For a time, the board looked smart. The company paid what we created in the 40 years before would be a fantastic $1.8 billion to acquire competitor Jos. A. Bank, a previously new-paradigm business,” he says. “And, obviously, the existing discussed merger Zimmer had opposed. From the time Zimmer board and executive team would mostly have to be replaced.” was fired to mid-2015, the stock price nearly doubled, to $65, Don’t get Zimmer started about those executives. “Cassius partly on hopes that Jos. A. Bank could be repositioned as an and Brutus, I believe their names are,” he says. “You read upscale complement. But then the new numbers started coming Dante’s Inferno—they’re standing next to Lucifer in the frozen in, and the stock crashed to the midteens, where it languishes lake.” He says he enjoys the role of “betrayed benefactor”—it today. Sales at Jos. A. Bank have gives him a kind of righteous plummeted since its new parent power now that Men’s Wear

THE GLORY DAYS eliminated its aggressive buy-onehouse is suffering. “I’m dealing Zimmer signing off on yet another TV ad, this one get-three-free suit promotion, and with a big deck,” he says. “I from 1993—one year after Men’s Wearhouse’s successful IPO. the heavy debt Men’s Wearhouse really feel the future of Men’s took on to pay for the acquisition Wearhouse is in my hands.” has hampered earnings. In FebruT’S IMPOSSIBLE to ary, the business announced it understand Zimmer’s would restructure as a holding journey without company called Tailored Brands, understanding his a move that could better insulate involvement with the chains from each other. something called the Though the Men’s Wearhouse Institute of Noetic unit continues to perform well, Sciences, which studies “the Wall Streeters speculate that intersection of science and the company might be headed for spirit,” as he puts it. “Noetic is a fancy word for knowledge that does not come through the five primary senses,” Zimmer explains. “It’s like intuition.” He has long been a board member of the institute, which was founded by a late lunar astronaut who was an outspoken believer in UFOs, and occasionally retreats to its headquarters in California’s Sonoma County to, he says, “talk about science and new ways of understanding how consciousness and matter and energy are connected.” It’s easy to dismiss Zimmer’s interest in noetics as more evidence of his inner stoner. (Zimmer, who says he once smoked six joints in one hour with hippie icon Baba Ram Dass, used to inhale “anything that combusts.” Now, he reassures me, it’s just pot.) But it always comes up as he explains key decisions. If the coldly analytical technocrat is today’s model entrepreneur, Zimmer is the opposite. “We have to learn to think with our hearts, and then let our brains do the calculations,” he says. In business, the approach translates to making decisions based on humanistic values, rather than purely economic ones. To Zimmer, bigheartedness was the core of Men’s Wearhouse; it was a company built as an extension of his psyche.

Zimmer’s now in tech, but he’s no technocrat: “We have to learn to think with our hearts, and then let our brains do the calculations.” 112 - INC. - JUNE 2016

INNOVATE

FEATURE: GROOMING: OLGA PIRMATOVA; PROP STYLING: JAMES KUEHN; WARDROBE STYLING: ANGIE DEMARTINI. THIS PAGE: IMAGE SOURCE: YOUTUBE

I


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The first Men’s Wearhouse store opened in Houston in 1973, thanks to $30,000 in credit from Zimmer’s dad, $7,000 of his own, and help from a college buddy. Zimmer started opening a store per year around that city for the next decade, and expanded to San Francisco in the early ’80s. Apparel was a natural choice for him. His dad worked for a discount clothier, and later started a raincoat company called Royalad Apparel. Zimmer grew up hiding in the clothes racks as his dad visited stores around New York City, and spent summers packing coats in the warehouse. In college, he grew his hair into a bushy “Jewish Afro” and got involved with the Vietnam War protest movement. He also joined a fraternity and ran with a more conservative crowd. “I saw myself as a kind of liaison officer between the straights and the freaks,” he says. In time, he realized that becoming an entrepreneur would allow him to continue nurturing his independent streak and have a respectable career. Zimmer started shaping the company with his philosophies. In the mid-’80s, he decided to break the traditional retail cycle of inflated prices and constant discounting, and establish everyday low prices instead. “Our business went down double digits,” he remembers. “Had we been a public company, we’d have all been fired.” That’s exactly what happened a few years ago to then J.C. Penney CEO Ron Johnson when he tried the same thing. “But all we really needed was the courage of our convic-

tions,” says Zimmer. “It was tough, because people kept saying, ‘George, we’re doing less business!’ I’d nod and say yeah. But by the second year, it started to turn around.” Then came those ubiquitous commercials, and then an IPO in 1992, which funded more aggressive expansion. Men’s Wearhouse had about 100 stores when it went public, and afterward, 50 or 60 new ones opened each year. It was anything but a conventional public company: Zimmer’s executive team included his brother, who retired last year after 35 years, and his dad, who joined as the head of real estate after Royalad failed. There were old friends, too, including Charlie Bresler, a psychologist in Fresno, California, who joined the company in 1993 without any particular job lined up. Zimmer and Bresler had been tournament bridge players together as kids, and, Zimmer explains, “when you play bridge, you get an intuitive sense about your partner.” Bresler spent six months doing nothing but shadowing Zimmer; eventually, he became president. Policies were designed around Zimmer’s values. When the company first established an employee stock-ownership plan, any income employees earned up to $200,000 counted toward their stock distribution. “About five years in, I looked at the annual distribution and saw that there were half a dozen of us at the top getting half the money,” Zimmer says. He lowered the threshold to $100,000, and then to $50,000. Eventually,

••••

A Brief History of the Fired Founder

DOV CHARNEY American Apparel

STEVE JOBS Apple

ROB KALIN Etsy

SANDY LERNER Cisco Systems

DAVID NEELEMAN JetBlue

As he built American Apparel into a powerful brand and innovative domestic manufacturer, Charney careered from one sexual misconduct charge to another, until the company’s board fired him in 2014. He tried partnering with private equity to retake the company, to no avail. American Apparel, meanwhile, declared bankruptcy last year and has re-emerged as a private company.

In 1985, nine years after he co-founded Apple, Jobs was fired by—or fled—the company in the wake of battling with the seasoned CEO he’d brought on, John Sculley. He spent 12 years away and returned as interim CEO when Apple acquired his high-end personal computer company, Next. You, and everyone else, know what happened then.

The founder of the craft-goods marketplace always had the soul of an artist—which made him great at articulating his company’s Zeitgeist, but not so great at scaling a hot tech company. After Kalin was replaced by his CTO in 2011, he moved to New York’s Hudson Valley and began transforming an old mill into a complex of craft workshops, with plans for a hotel and more.

The co-founder of Cisco (with her then-husband, Len Bosack) was fired in 1990, two years after the company’s main investor installed a new CEO. Bosack quit in solidarity with her, and they reportedly sold all their shares for $170 million. Lerner co-founded cosmetics firm Urban Decay in 1996, and now splits her time between England and Virginia. She is a philanthropist, a writer, and runs a sustainable farm and restaurant.

After JetBlue stranded passengers during a winter storm in 2007 and failed to fully resume operations for five days, Neeleman was replaced by his longtime number two, Dave Barger. So Neeleman started Brazilian carrier Azul a year later. He still runs it. Barger was pushed out of JetBlue in 2014.

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INNOVATE LAUNCH

FROM LEFT: JOHANNES KROEMER/GETTY; TED THAI/GETTY; RAMIN TALAIE/CORBIS; JAMES M. THRESHER/GETTY; DANIEL ACKER/GETTY

IT’S HARD FOR ANY ousted founder not to fantasize about making a triumphant comeback to the company he or she started. But the record strongly suggests that this kind of outcome is the exception, not the rule.


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the average store manager got as many shares as top executives. When Zimmer left, turnover among store managers had been around 10 percent for years, compared with an industry average of 25 percent. “Capitalism was never meant to be about maximizing short-term shareholder value,” Zimmer says. That message didn’t always go over well on Wall Street—his bankers at Bear Stearns warned Zimmer not to talk about his “crazy ideas” on the road show before the IPO—but it didn’t stop the company from dominating its category. When Zimmer was fired, one in five suits purchased in the U.S. were coming from Men’s Wearhouse. Jaffe, the Stifel analyst, calls Zimmer “lucky and smart,” but says the company’s success was a function less of Zimmer’s management ideas and more of his having perfectly ridden the changing winds in mainstream men’s retail. As mall department stores found they could make more money per square foot with in-store brand-name boutiques than they could with large suit departments, Men’s Wearhouse swooped in with more convenient (and cheaper) locations, wider inventory at lower prices, onsite tailoring, and solid service. Marshal Cohen, a longtime retail analyst with NPD Group who started his career in menswear competing against Men’s Wearhouse, uses words like revolutionary for Zimmer. “He was constantly trying to reinvent the business,” Cohen says. “He wasn’t always right, but you have to give him credit. He was always saying, ‘This is where we’re going, folks,’ even if it wasn’t happening yet.” Such a moment came in 1999. An employee suggested getting into tux rentals, a segment that had no big national chain. Zimmer saw it as a “minor league” for new customers, one revolving around proms and weddings. Men’s Wearhouse already had real estate all

In 1999, Zimmer’s suit business was booming. Then an employee suggested something even better. 116 - INC. - JUNE 2016

over the country and a tailor in each of its stores, so a tux station could be added with little incremental cost. By 2013, Zimmer says, the company was pulling in more than $400 million a year in tux rentals, at an astonishing 80 percent gross margin—15 to 20 percent of the retailer’s revenue, he estimates, and closer to 50 percent of its profit. And yet, problems lurked.

Z

IMMER WAS LOVED AT his stores, because the rank

and file made good money and he made high-profile efforts to connect with them. Every year, the company would hold dozens of black-tie holiday balls all over the country, many of which Zimmer would attend, get on the dance floor, and play the fun, famous boss. In the upper ranks, though, Zimmer was known as what one insider calls a “tough son of a bitch.” He drove his executives hard; he railroaded big decisions; he had a tough time giving credit to others. Former executives say he routinely disregarded anyone’s priorities but his own. Richie Goldman—one of Zimmer’s first hires, who stayed for almost 30 years and ultimately ran marketing—says Zimmer often surprised him with his “sheer genius—his ability to take a step back and see the simple solution that others missed.” At the same time, “I spent a lot of time backpedaling for George with the other executives,” Goldman says. “I felt he treated senior management of the company with disdain, and I never understood it.” Even the famous “I guarantee it” line is in dispute. Zimmer has long told interviewers that he made it up on the spot—that the script read, “That’s a fact, Jack,” but he ad-libbed instead. “That is not true,” Goldman insists. “A copywriter at an agency came up with it. I cringe every time I hear George tell the story.” Zimmer wasn’t blind to the discord. He recalls telling store employees that if a bride and groom came in to browse tux rentals and said they could get a better deal elsewhere, the store should match that price on the spot. His reasoning was that, since wedding parties were big-ticket sales involving multiple groomsmen and family members, giving up $20 per tux from an extraordinarily high margin was worth it. “Obviously, it would be best if a supervisor authorizes the markdown, but that’s not always possible in real time,” he would tell the staff. “So I’m authorizing you: Get the wedding party!” He later learned that, once he’d left the room, another executive would contradict him. “They’d say, ‘George is full of shit. Do not give unauthorized discounts.’” Zimmer tells me this story over patty melts at a diner near his office where the waiters know his name. “I’ve always allowed people to badmouth me,” he says. “A couple of weeks ago, somebody was saying to me, ‘George, they used to just

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tear you apart when you walked out of those meetings.’ Maybe I should have been a little more concerned about that.”

D

OUG EWERT JOINED Men’s Wearhouse from Macy’s in 1995. He was a neckwear buyer at first, and over the years Zimmer groomed him to take over. Ewert became CEO in 2011, but Zimmer was an active executive chairman, and they began to clash. One dispute had to do with K&G, a longunderperforming deep-discount menswear chain that Men’s Wearhouse bought in 1999. Ewert and the board wanted to sell K&G. Zimmer did not. In the spring of 2013, the company announced that it had hired a bank to explore selling K&G, and tensions boiled over at a board meeting. Zimmer was also furious that the board had voted to increase key executive salaries—theirs included—by as much as twofold, without consulting him. Ewert’s base salary doubled, to $1.25 million; Zimmer was offered $1 million. (For the

was the real danger. “What I learned in the meditation is that Doug can’t run this company,” Zimmer said. The next morning, the directors asked Zimmer to resign and offered him a figurehead chairman emeritus position. He told them he’d have to think it over. Later that day, he turned them down. At that point, the board told Zimmer he was fired—and that his office had been packed up. That’s Zimmer’s version. The company declined to comment for this story beyond a pat statement wishing Zimmer success. But reacting to a wave of terrible press after the firing, the board released an unusual statement detailing its inner workings. Zimmer “had difficulty accepting the fact that Men’s Wearhouse is a public company,” it read. Zimmer “refused to support the team unless they acquiesced to his demands” and “expected veto power over significant corporate decisions,” including executive pay. “The board was left with no choice but to terminate him.” One important detail doesn’t quite add up. Zimmer chose the board members over many years to reflect his eccentric leadership style—such as Chopra and lead director Bill Sechrest, a colleague of Zimmer’s on the board of the Institute of Noetic Sciences. Why would such a group unanimously turn against him so swiftly? Several sources close to the situation suggest that Zimmer was simply much more estranged from the leadership than it appeared. Another explanation is that, in trying to take the company private, Zimmer not only betrayed the board’s confidence but essentially put the company up for sale. Months after Zimmer’s firing, Jos. A. Bank attempted a hostile takeover of Men’s Wearhouse, which was forced to buy Jos. A. Bank at a price many considered inflated. That deal is precisely what’s put the company in peril today.

“I thought you guys knew I can’t be bribed,” Zimmer seethed to the board. Two months later, he was gone. previous 20 years, Zimmer had donated his $500,000 salary to a scholarship fund for employees’ kids, and funded his lifestyle by selling stock.) Zimmer had never implemented Whole Foods– like executive compensation caps, but he considered them part of the company’s DNA. He lost it in the meeting. “I would have thought you guys knew I can’t be bribed,” he seethed. After the meeting, Zimmer decided it was time to take the company private. A neighbor and confidant of his in Piedmont, a ritzy enclave in the hills above Oakland, a serial entrepreneur and investor named Chris Hemmeter, started talking to bankers about putting together a deal. Zimmer says he told the board on a call that spring that he’d been advised the company could get a 30 to 40 percent premium for shareholders by going private. “Isn’t it our fiduciary responsibility to explore it?” The board had discussed going private several times over the previous few years and had put the issue to rest, concluding that it would saddle the company with too much debt. And here was Zimmer pushing the idea again. Two months later, there was another board meeting. The night before, Deepak Chopra, the New Age guru and a friend of Zimmer’s who was also on the board, led Zimmer on a guided meditation that focused on the best way to protect his legacy. Afterward, Zimmer told Chopra (who did not respond to multiple requests for comment) he agreed his legacy was on the line, but allowing Ewert to continue leading the company

118 - INC. - JUNE 2016

T

HE OFFICES OF zTailors and Generation Tux occupy

the second floor of a former department store in central Oakland, across from where Uber is constructing its new headquarters, and look like those of other young startups. There’s a lounge area with red bubble chairs and a big swoop lamp, and a kitchen full of good snacks. Zimmer took up Ping-Pong, and recently offered staff members $100 if they could beat him (many promptly did). His corner office is large but unassuming, with chalky white walls and mismatched chairs. Aside from the framed pictures of Zimmer with various luminaries (Bill Clinton, Nancy Pelosi, Reggie Jackson), it could be your insurance guy’s office. To hear Zimmer tell it, he bounced right back after his dismissal, but Hemmeter suspects it was a lot worse. “I was side by side with him for much of the next couple of weeks,” he says. “It was so sad. It’s his life’s work, his identity, just going …”—he makes an exploding noise. “George has a CONTINUED O N PA G E 1 2 6  sort of metaphysical worldview that helped

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Jacob Sanchez Diagnosed with autism

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 THE SPEED OF NATURE Douglas Riboud (left) and Justin Guilbert at a farm in Thailand where Harmless Harvest coconuts are grown.

120 - INC. - JUNE 2016


How We Did It

Sustainability in a Bottle Justin Guilbert and Douglas Riboud Harmless Harvest

Coconuts typically evoke a tiki hut on a beach, but to Justin Guilbert and Douglas Riboud, the tropical fruit inspired something much wonkier—an ethical supply chain. In 2008, the two Frenchmen found themselves on conventional MBA tracks— Guilbert as a marketing director at L’Oréal and Riboud as a vice president at finance firm Lazard. The former business school buddies had an impulse to start a company that could benefit consumers, its producers, and the planet—they just didn't know what it would sell. Seven years later, their San Francisco–based coconut water brand, Harmless Harvest, has 300 employees, 200 of whom live in rural Thailand, where the coconuts the company uses are ethically harvested, processed, and packaged. Guilbert and Riboud, now Harmless’s co-chairmen, spoke to Inc. about its surpassing $100 million in sales and becoming a top player in the hyper-competitive coconut water wars.

As told to LIZ WELCH Photographs by CEDRIC ARNOLD

UILBERT: I WISH I COULD SAY Douglas and I were walking on a beach when a coconut fell from a tree and that we wanted to bottle how delicious it tasted. Our approach was actually more conceptual and aggressive. We both believe in deep ecology, which looks at the long-term effects of a product on the entire ecosystem versus immediate returns, and the constructive capitalism model, which allows the whole supply chain to benefit. This was our goal. So we said, “Let’s find an industry and then a product to prove this works.” We narrowed it down to food, because that’s a tangible source with a quantifiable impact. We were in Brazil looking for native fruits for possible drink products and used coconut water to tone down acidity. It was everywhere, but tasted terrible—nothing like fresh coconut juice. We did research and learned that a lot of the coconut water brands sold in the U.S. are made or co-packed at the same plant. It’s a joke! We searched for organic, Fair Trade, and sustainable alternatives, but they were nowhere to be found. This was 2008, and coconut water was being marketed as the next-generation Gatorade—it has a

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similar chemical proďŹ le, but itâ&#x20AC;&#x2122;s natural. So in 2010, when we learned that CocaCola and Pepsi were purchasing the smaller brands, we knew we could beneďŹ t from their marketing efforts as to why coconut water is great. All we had to do was come in and say, â&#x20AC;&#x153;By the way, this is how itâ&#x20AC;&#x2122;s supposed to taste.â&#x20AC;?

NEXT-GEN RED BULL Last year, Harmless Harvest debuted its caffeinated coffee coconut water, which sources arabica beans from a Fair Trade cooperative in Peru. Below: A company farmer declusters coconuts before sending them off for processing; a Nam Hom ready to be juiced.

RIBOUD: WE HAD TO FIND the best-tasting

coconut. I started searching in South America and Africa before settling on a variety in Thailand called the Nam Hom, which means â&#x20AC;&#x153;fragrant ones.â&#x20AC;? Theyâ&#x20AC;&#x2122;re small, with little water yield, but the taste is exquisite. The average coconut water is a blend from different types of coconuts. In our case, we wanted to focus on one variety, and go deep in understanding how it is grown within the communities that harvest the crop.

RIBOUD: WE KNEW WE WERE on to some-

thing big the day a bottle came out of one of our pilot HPP plants and we couldnâ&#x20AC;&#x2122;t tell the difference between it and fresh coconut juice. We threw it into a cooler and brought it to Errol Schweizer, then the global buyer at Whole Foods. He drank it, and Harmless Harvest was on the shelves at Whole Foods a couple of months later.

people come through, so it was very hard to develop a trusting relationship. They didnâ&#x20AC;&#x2122;t want to give us a cropâ&#x20AC;&#x201D;they wanted to test us. Farmers wait until you come back six or seven times before they begin to trust you. It took us a year.

GUILBERT: THROUGHOUT THIS process,

we realized that we had no clue what we were doing. So we reached out to people who had changed the food industry to be our mentors, like StonyďŹ eld co-founder Gary Hirshberg and the global grocery coordinator for Whole Foods. We showed them preliminary prototypes, and they told us, â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ll walk by your side because youâ&#x20AC;&#x2122;re being transparent.â&#x20AC;? We had products that had failed in the beginning, but they let us know that part of the process of changing any type of industry is that youâ&#x20AC;&#x2122;re going to have to fail a few times. We started researching extracting and bottling methods and learned about

122 - INC. - JUNE 2016

The Highs and Lows of Sustainability  Beverage Mavens In September, Guilbert and Riboud stepped back, hiring former Coca-Cola executive Giannella Alvarez to be the companyâ&#x20AC;&#x2122;s CEO and Brad Paris, from POM Wonderful, for the COO position.

 Cash for Coconuts The company subsequently raised $50 million, which will fund a new production plant in Thailand, along with expansion into new product categories.

 Bottle Rehab In December, Harmless suspended its bottling operations after the FDA complained about the safety of its methods in Thailand. The company has since developed a new ďŹ ltration process.

GUILBERT: WE REALLY FOCUSED on one retail partner, Whole Foods. A lot of entrepreneurs hedge their bets and work with a lot of sources. We worked with literally one farm, one plant, and one retailer. That meant if something went wrong, everything went wrong, but the deal was to stay super focused, and Whole Foods as a footprint was humongous for us. Once we knew that we had something intrinsically exceptional, we didnâ&#x20AC;&#x2122;t wait for the market to validate it, because then youâ&#x20AC;&#x2122;re allowing yourself to be exposed to competitive forces that can crush you even if you have a better product. So we decided to stock up. We had a million units in a warehouse before we sold a single bottle. The idea was to suddenly appear out of nowhere. As a result, we were a best-selling item at Whole Foods within one year. RIBOUD: THE MARKET DEMAND is fast, but

farming is slow. It takes three years to grow a coconut to harvest. Our model has been to be a decelerator, meaning we absorb the speed and volatility of growth in our business model, rather than put that pressure on our farmers. We view our role as a bridge between the speed of business and nature.

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FROM TOP: COURTESY COMPANY; CEDRIC ARNOLD (2)

GUILBERT: FARMERS SEE a lot of excited

RIBOUD: WORKING CLOSELY with the farmers, I learned that the speed of extraction from harvesting to bottling is key to ďŹ&#x201A;avor retention, so we set up our plant in the middle of the farmland. Now we have thousands of acres of organic farms and are certiďŹ ed Fair for Life, which is even more rigorous than Fair Trade.

heat processing, which everyone was doing then. But heat burns off the compounds that give coconut water its complex vanilla and almond ďŹ&#x201A;avor. After lots of trial and error, we settled on HPPâ&#x20AC;&#x201D;high-pressure processing, which uses pressure instead of heat. It has been used in preserving deli meats, but there was almost no application for beverages, so we worked with universities and scientists to develop a proprietary HPP technology for coconut water.


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GET REAL

Jason Fried •••• We Don’t Want Your Money Large enterprise customers can be enticing—but they can upend your product, your staff, and the stability of your business

or $79 monthly and $3,000 for a year.) But we also established very clearly from the start that we’d never allow a customer to pay us more than that top-tier price. Not even for a customized product for a massive enterprise company that’s offering to throw $100,000 our way. We would never waver from our mantra: If you’re a big company with special demands, we don’t want your money. That single decision has probably had the HEN WE LAUNCHED the first version biggest positive impact on our company. And it of Basecamp in 2004, we decided to all started with a simple answer: No. build software for small companies Why say no to such a windfall? There are two just like us. We know how growing reasons. First, we wanted to build a self-service from four to six or eight employees is software company. One that doesn’t rely on a a huge move. We know that it’s during large sales force to move products, that doesn’t those growth moments you need a need an army of key account managers keeping system to help you keep everyone on the whales happy, and that doesn’t require us the same page, and help your expandto offer extensive training for something that’s ing teams be more self-sufficient. been specially made for hundreds or thousands Being roughly the same size as our customers was a product-focused, of people at the enterprise level. Saying yes to mission-oriented decision we made then and have stuck to ever since. a company that might increase our revenue by But limiting our customers to small companies was also a philo100x would require us to suddenly create staff sophical—some might say counterintuitive—decision about the infrastructure to support that. kind of business we wanted to run. But more, at Basecamp we believe there’s We based our original pricing model on charging customers what strength in numbers. Not large numbers of we’d be comfortable paying ourselves. We offered three monthly dollars, but large numbers of customers. We’d price tiers: $19, $39, and $59. (Today, the tiers have increased to $29 much rather have tens of thousands of companies paying us a small monthly payment than a few huge accounts covering that same amount. A diverse customer base helps insulate you; a few Jason Fried is co-founder large accounts can leave you vulnerable to their whims. of Basecamp (formerly Over the years, we have said no to a bunch of companies we deeply admire. We don’t want 37signals), a Chicago-based software company. to bank all our risk on a small collection of big companies. We don’t want to lose 20 percent of our business if one big account goes away. We don’t want to push the product in the direction big companies prefer at the expense of the small companies we love so much. Some might wonder, “Why not just do both—sell to small businesses and also have a group of people dedicated to servicing big businesses?” First of all, we believe if you have a large pool of customers all paying you roughly the same amount, and then a small handful of customers paying you 100x that much, you’re no longer a product company—you’re actually a consulting company working for those big payers. You’ll do what they say because they pay. We also don’t want to be a two-headed company with two cultures. Selling to small businesses and selling to enterprises take two very different approaches with two very different kinds of people. We’d rather focus on one—the massive number of companies around the world that have fewer than 100 employees. That’s plenty of sweet spot for us.

124 - INC. - JUNE 2016

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JEFF SCIORTINO

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 UNFINISHED BUSINESS C O N T I N U E D F R O M PA G E 1 1 8

investment arm put in a seven-figure sum, and Generation Tux launched, amid much media buzz, at Salesforce’s 2015 Dreamforce convention. SEVERAL MONTHS LATER, after Zimmer

him not get caught up too much, but I know that inside it took a terrible toll.” For a few weeks, Zimmer and Hemmeter talked with lawyers and PR people and private equity groups about attempting a takeover. They didn’t. The two considered franchising a popular local ice-cream-sandwich shop and expanding it across the Sunbelt. They talked about starting a Warby Parker–style eyeglasses company. They tried to buy K&G, but the deal fell apart because they tried to hide Zimmer’s involvement, and Men’s Wearhouse balked when it found out. Then they heard about a startup called the Black Tux that rented tuxedos online. “You could just see the light bulb go on over George’s head,” Hemmeter says. “‘Tuxedo rental online? I’m probably the only guy in the world who knows that business at scale.’” He says they offered to buy a controlling stake from the 20-something founders, who told Zimmer he could invest $250,000 for 2.5 percent, which he considered pointless. (The Black Tux denies it ever discussed numbers.) Shortly thereafter, Zimmer found himself on the beach in Hawaii on New Year’s Day 2014, alongside his pal Marc Benioff, the Salesforce founder. Benioff had initially counseled Zimmer not to go back into business after the firing, because the outpouring of support had been such a powerful way to cement his legacy. Now Zimmer was telling him he wanted to create an online tux company, and Benioff, a bear of a man not known for being emotive, slowly turned to him with an ear-to-ear grin. “Man, George. That is a killer idea,” he said. Benioff’s

had started building his new company, he and a few key lieutenants went to Benioff’s house for a meeting. It became clear they were flailing on some technical issues and missing internal deadlines, and lacked the expertise to fix the situation. “George, do you have a product manager?” Benioff asked. “You mean someone who purchases the tuxedos?” Zimmer rumbled back. Benioff, realizing his friend needed help with the basics, explained he meant someone who defines site features and

Men’s Wearhouse, and could dispatch a tailor for touchups on the day of an event. Generation Tux’s revenue, while growing, is still small. (Inc. estimates it’s less than $1 million per month.) Zimmer says he doesn’t expect it to turn a profit for at least another year. The task for now is figuring out ways to re-create all the in-person sales tactics that push up order size—for instance, getting a bride and groom’s dads and granddads to order suits alongside the groomsmen. At Men’s Wearhouse, the average number of tuxes rented for a typical event was eight, Zimmer says; at Generation Tux, he told me, it’s fewer than five. Zimmer had thought zTailors might take off as a consumer brand, because it stitches together an industry consisting

When he heard Zimmer’s pitch, Salesforce founder Marc Benioff beamed. “Man, George. That is a killer idea.” shepherds team members to build them. “Understand that you’re running a technology business, not a tuxedo business,” he said—pointing out that Salesforce had more engineers working on the site than Zimmer did. “George didn’t understand what it took to scale the tech side of things,” says Matt Howland, the experienced CTO Zimmer eventually hired. “It was like going into bricks and mortar and not having anyone to set up the actual stores. But what George brings to the table—it’s so different from what you typically get in Silicon Valley.” When Zimmer started planning Generation Tux, for example, he knew that delivering a proper fit is the biggest challenge in formalwear rental, so he devised a solution before launching. Men’s Wearhouse solved that problem by having a tailor in every store. By creating his online tailor network zTailors, Zimmer figured Generation Tux could have greater geographic reach than

almost entirely of mom-and-pop shops. Instead, it’s showing more promise as a business-to-business operation. A deal with Macy’s offers house-call tailoring for Macys.com purchases, and Zimmer says the company is testing similar ideas with the likes of Amazon and J. Crew. It’s easy to see why. The ever-rising cost of shipping, coupled with the increasingly standard e-commerce practice of free returns, can devastate online retailers. What if, rather than returning or exchanging an item that doesn’t fit, a customer could just summon a tailor to adjust it? Retailers could keep the sale as well as save on shipping. For zTailors, it’s a perfect way to acquire customers and push up revenue, because once a tailor is in someone’s house, other items that need fixing almost always come out of the closet. “We’ll send someone in to hem a pair of khakis, and they walk out with nine or 12 garments,” says Hemmeter, who’s now CFO of both companies. And yet, as Zimmer and Hemmeter

PRINTED IN THE USA. COPYRIGHT ©2016 BY MANSUETO VENTURES LLC. All rights reserved. INC. (ISSN 0162-8968) is published monthly, except for combined July/August and December/January issues, by Mansueto Ventures LLC, 7 World Trade Center, New York, NY 10007-2195. Subscription rate for U.S. and Possessions, $19 per year. Address all subscription correspondence to Inc. magazine, P.O. Box 3136, Harlan, IA 51593-0202; 800-234-0999; icmcustserv@cdsfulfillment.com (U.S., Canada, International). Please allow at least six weeks for change of address. Include your old address as well as new, and enclose if possible an address label from a recent issue. Single-copy requests: 800-234-0999. Periodical postage paid at New York, NY, and additional mailing offices. Canadian GST registration number is R123245250. POSTMASTER: Send address changes to Inc. magazine, P.O. Box 3136, Harlan, IA 51593-0202. Material in this publication must not be stored or reproduced in any form without permission. Requests for permission should be directed to permissions@inc.com. Reprint requests should be directed to The YGS Group at 800-290-5460, ext. 128. Inc. is a registered trademark of Mansueto Ventures LLC. JUNE 2016 VOL. 38 NO. 5

126 - INC. - JUNE 2016


home in on their customers, Men’s Wearhouse continues to dog them. Shortly after zTailors launched last spring, Men’s Wearhouse prohibited its in-house tailors from moonlighting for Zimmer, despite its being common practice for them to work freelance for other retailers. Zimmer had leaned on his former Men’s Wearhouse talent to build his initial roster of 600 tailors—and in one move, Men’s Wearhouse eliminated around 150 of them. Then a deal Generation Tux had made with Macy’s to offer tux rental online and via in-store kiosks evaporated while in legal review. The business ended up going to—of course— Men’s Wearhouse. Zimmer can’t contain his sense of persecution about losing out so late in that game: “The deal makes no sense. It has to be just to block me.” Those battles aren’t over. After Men’s Wearhouse’s stock collapsed, the company’s tailors, fearing layoffs, reached out to zTailors again. “So I decided we’re going to start hiring Men’s Wearhouse tailors,” Zimmer tells me. “We’re working with lawyers. If [Men’s Wearhouse] wants to raise a stink, we’re prepared.”

HEMMETER THINKS he knows why Zimmer

is so fixated on Men’s Wearhouse. “If it were me, I’d see it as an opportunity to do a great transaction and create a lot of shareholder value and get the last laugh,” he says. “But he just feels terrible about all the people he left behind. He wants to go back and help them. And it would so energize the company.” “Let’s just say it would be wise to explore it,” says NPD analyst Cohen. “The company has lost its personality.” But Goldman sees nothing but revenge in Zimmer’s second act. “He could have gone and been on the board of any public company,” he says. “He could teach. He could start a retail company in any other field. Why start two companies that go directly at Men’s Wearhouse?” They’re all right, of course. Zimmer is self-righteous and vengeful. He’s idealistic and heartbroken. He’s a father watching his baby suffer. He’s a born entrepreneur who sees an opportunity. One evening in Oakland, en route to a Golden State Warriors game, Zimmer pulls a folded-up sheet of notebook

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JSfS`ebQWNcSRŮfS;NXZeTN^cN^RX^TNQdgSfS cdSSbSRcSfSbN[TbXS^Rcd_;NXZe;_]ST_bdWSXbTN^c 6_^dQWN^VSNdWX^V –Daniel and Judy W., La Verne, CA

paper from his pocket as we stop at a red light. Over the past three days, he’s told me in a dozen ways that, although he’s been fielding calls from private equity and making a few himself, he has yet to sketch out how a Men’s Wearhouse deal would add up. He’s been trying to protect himself from getting too attached to the idea, he explained. But now, he says, “I sat down last night and tried to work it all out.” He peers at his columns of hand-scrawled numbers and runs down some basic figures from the different Men’s Wearhouse brands, the contributions of his new businesses, some estimates about a potential new model that he’s fond of: subscription suit rental. Then he points out the company’s market cap, the premium he’d have to pay shareholders, the $1.7 billion in debt. It’s a $3 billion transaction. “I just don’t know if it’s going to make sense,” he says as the light turns green. “It’s hard to see it working.” But that’s his head talking. His heart knows exactly what he should do. TOM FOSTER is an editor-at-large for Inc.


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FOUNDERS FORUM

Bethenny Frankel The Real Housewife and founder and CEO of Skinnygirl knows that getting your business on TV can be fool’s gold—but tells you how to make it real As told to MARIA ASPAN Photograph by AMY LOMBARD

REALITY CHECK “You have to think of everything. As a boss and a company owner, no one thinks of the things that I think of,” says Bethenny Frankel.

You sold the Skinnygirl name to Beam Suntory—only for alcohol products. How did you hold onto the brand for everything else? When Beam was interested, I thought: When Grey Goose sold, that was it. Now the company can’t go make Grey Goose lip gloss or dresses. And this is Skinnygirl—she could do so many different things. Beam is a liquor company; the only reason it would want the rest of Skinnygirl is to control the way that I use it. So I have to have a trusting relationship with these people, and I have to let them know that I won’t ruin the brand by doing irresponsible things. What’s your biggest regret? When Skinnygirl first started out, I had these individual packets of green juice cleanses. We got into a big-box retailer, but we had only one SKU. My partner was very excited, but I didn’t think we should go in there—if we have one product, it’s just going to sit there lonely on some shelf and no one’s going to see it. That’s what happened, and we ended up discontinuing it. I’ve been drinking green juices for years, and now, all of a sudden, every deli has green juices. You had a healthy-baking business on The Apprentice in 2005, and you started Skinnygirl on Real Housewives. When is the right time to try to get your business on TV? A lot of people on reality TV are promoting something that isn’t even in stores yet. People don’t care unless they can go buy it—so if you’re going on Shark Tank, make sure your product is available. When I was on The Apprentice, I had a cookie business, but my manufacturing wasn’t up to par and I didn’t really have distribution. I talked about my business on the show—and what did I sell, a couple of cookies online? TV can be fool’s gold: It’s a great leg up, but you need to be completely ready. Timing is important. Execution is important. It’s kind of like Hillary Clinton being the representative for women. If she makes it into the White House, she needs to do a great job, or we won’t be invited back for a long time.

For a video interview with Skinnygirl founder Bethenny Frankel, go to inc.com/founders-forum.

132 - INC. - JUNE 2016

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