Case Study #1: The Reluctant Entrepreneur

Advice from Gordon Segal of Crate and Barrel

My advice to Gauri is this: Put on your Nikes. You're going to have to move quickly.

Clocky is very clever. I think it will appeal to college students or anyone who has trouble getting up. But you can't build a company or a brand on a single product. The George Foreman Grill was a wonderful idea--and Salton (NYSE:SFP), the manufacturer, sold a lot of them--but in a few years there were many knockoffs. You can't depend on patents because your competitors will still figure out ways to knock you off, and it takes a lot of time and money to patent something. I don't think most start-up companies have that time.

To become a brand, Nanda needs more products. The laptop bags are a good start--they're more attractive than your typical bag. The issue is finding the market beyond the website in which to sell them. Gauri has to decide whether she wants to be a high-end brand, selling through upscale stores and boutiques, or middle to low-end, selling to big-box stores. Going into places like Target and Wal-Mart (NYSE:WMT) can be tempting because it's easy to sell a big order. But there are pitfalls: If you sell most of your merchandise to one or two retailers, you'll be dependent on them. And if you discount at Target, you won't be able to go upmarket into specialty stores.

Whichever market she decides to go after, she needs help. Getting distracted is the biggest problem entrepreneurs face. Gauri is innovative and creative. Now she needs someone other than her parents to market and sell the product. She needs to convince people with passion and enthusiasm for developing products to follow her. This is easier to do when you have a start-up because employees will be challenged intellectually and there will be lots of room for career growth. It's not about a bigger bonus or a longer vacation; it's about making them feel like they're doing something unique. I try not to think about "training" employees: Stanley Marcus of Neiman Marcus once said that you train dogs and elephants; you educate people. In fact, many of our senior managers have backgrounds in teaching school.

When my wife, Carole, and I started Crate and Barrel in 1962, we were at a golden point in time when you could start a company with almost no overhead and few regulations. Forty-five years later, the cost of doing business has gone up much more quickly than price, so today it's more difficult to start a company. We opened our first store with $17,000; today I think it would cost $300,000 to $400,000. Plus, it's harder to be unique today: In the 1960s, very few people traveled internationally. You'd stay in a small hotel in Italy and it would take three days to arrange an international phone call. Now the world has grown much closer, which is great, but it means that products like this face more competition. On the other hand, because there are fewer different stores and more homogeneity in retail today, uniqueness is more highly prized. If you can develop a unique design--something visually or mechanically clever, or something beautiful--you have greater opportunity today than you did then.

More than anything, being a successful start-up entrepreneur is about hard work. You have to be willing to work 12-hour days six days a week for the first five years. We didn't take off a week until 1970. Now people walk into my office looking for a job and they want work-life balance. They ask for three or four weeks of vacation, and I'm saying to myself, "Ha. That's interesting." I don't think you can do a start-up and have a normal life. But it's worth it. I couldn't have done anything else.

Back to Gauri Nanda for some final thoughts:

"Knockoffs are inevitable, but I think the best we can do is penetrate the market quickly with extensive distribution and introduce the next version of the clock when the knockoffs start. We have filed patent applications all over the world and hold the trademark for the Clocky name.

"Whereas this version is designed to appeal to a store like Target, the next version will be attractive to upscale retailers in terms of aesthetics, feature set, and price point. In the long term, our goal is to build the Nanda brand and we have a lot of exciting things planned for the Clocky product line, as well as other products for the home and for travel."