Editor's note: "Shirtsleeves to shirtsleeves in three generations" is the classic curse of an entrepreneurial family, meaning that wealth rarely survives much past the founding generation. These families plan on defying the odds.

In 2013, Teddy Fong was roaming the showroom of a factory in Shenzhen, China, when a stylish, modern sectional caught his eye. He asked the factory owner how much it cost to make. About $200 to $300, the owner replied. Fong was astonished. It was the kind of sofa that might sell for thousands at a Room & Board. "There are crazy margins in the sofa business," Teddy thought.

At the time, Teddy was in the crib business--but this was enough to make him think maybe he ought to be in the sofa business, too. Teddy runs Million Dollar Baby, a $70 million children's furniture wholesaler his parents, Daniel and Maryann Fong, started in 1990. (Since then, MDB has made six appearances on the annual Inc. 5000 list of America's fastest-growing private companies.) It produces six brands of cribs, at nearly every price point and style, and sells them through almost every major online retailer, including Amazon, Walmart, and Target, and at many specialty retailers. Heard of the best-selling $379 minimalist Babyletto Hudson crib? That's MDB. Beyoncé's $4,500 translucent acrylic Vetro crib? That's MDB, too.

But MDB didn't always have Beyoncé-caliber customers. Almost three decades ago, Daniel Fong was a venture capitalist with an urge to start a company. He did some research and bought and then merged two baby-furniture wholesalers, which had low overhead and were profitable.

Each generation needs to find its voice
When Teddy Fong took over as CEO of MDB, his father, Daniel, had a "seagull" problem--he'd drop in, criticize, and then disappear.The family hired a leader­ship training expert to mediate meetings and provide constructive feedback. "It's through those that my dad and I have found our voices--when to defer, and suggest rather than direct," says Teddy. "As a second-generation person who is taking the place of my father, I've learned that the family dynamics should always come first."

One innovation that set the company apart in its early days was its distribution. Most crib vendors required retailers to place their orders twice a year and then hold the inventory themselves. Daniel made the contrarian move of setting up shop in a 30,000-square-foot warehouse in the L.A. suburb of Montebello, an industrial area close to the retailers he served. Retailers could pick up furniture at any time, while saving floor space. "My tag line was 'Use my warehouse as your warehouse,'" Daniel says.

He took a similarly effective tack with his manufacturers in Asia. Instead of having a transactional relationship, MDB would order inventory it didn't need just to keep business steady for its most coveted factories, which over time became so loyal that they worked with MDB exclusively, or agreed not to make copycat designs for competitors. "I act as their sales department and I treat them as our manufacturing department," says Daniel, who would even invite factory owners to stay with him and Maryann when they were in town (a couple did).

Teddy and his sister, Tracy, grew up roller-skating around MDB's warehouse, sometimes helping package nuts and bolts, but Daniel didn't expect them to join the business. He had worked reluctantly in his own father's textile company for four years, and didn't want to apply that pressure to his kids. Both went to Harvard, but in 2004, after Maryann developed colon cancer, Tracy put off an art curating job at Sotheby's in New York City to come home--and never left. Teddy graduated in 2006, interned at ESPN, worked briefly as a movie producer's assistant, and then followed Tracy's lead.

Daniel had them start in junior roles. When Tracy arrived, many vendors still thought customers wouldn't purchase furniture online, but the then-23-year-old saw opportunity. Daniel had tested eBay as a place to sell discontinued items, so Tracy used the eBay business--which was pulling in about $100,000 annually--as a way to iron out the logistics of shipping cribs.

In 2005, when Babies "R" Us cold-called Tracy to see if the company could start drop-shipping its signature Jenny Lind crib--a vintage design made with carved wooden rods--MDB was ready. "Our core competency became drop-shipping" and making products "FedEx-able," says Tracy, who's now MDB's VP of sales. Soon, MDB added Walmart, Amazon, Target, and other major e-commerce sites to its customer list.

When Teddy joined in 2006 as a junior account rep traveling to retailers on the West Coast, he realized the company had no brand recognition. "We were always at the back of stores, not in the [display] windows," he says. He analyzed the crib market, and observed that design innovation happened only at the high end. So he pitched his father on a modern, affordable crib brand for design-savvy parents. The result was Babyletto, which launched in 2009 and is a big part of why MDB started to pick up roughly $10 million in revenue each year. In 2010, Teddy orchestrated the acquisition of the upscale Nursery Works line, which sells that $4,500 acrylic Vetro crib.

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Over the years, MDB had become an extended family affair. Daniel's younger sister, Julia Fong Yip, joined in the early 1990s and eventually became the company's VP of talent management, and his older sister's husband, John Kwok, became MDB's CFO. Other spouses entered the fold too--Tracy's husband, Eric Lin, a trained architect, was hired in 2011 as MDB's head of product development, while Teddy's wife, Tiffany, who once worked as Steve Jobs's assistant, became MDB's creative director in 2015.

Eric and Tiffany further elevated and diversified the company's offerings, helping to create a crib-brand powerhouse. With Nursery Works, MDB had a vehicle for higher-end designs but lacked the in-house expertise. That changed with the arrival of Eric, who discovered that the company's design process was relegated to Microsoft. "Babyletto was born in MS Paint," he says. Like most crib wholesalers, MDB was somewhat reactive, mostly tweaking competitors' styles. As MDB's first professional designer, Eric helped move the company toward more original looks, competing on brand rather than on price. One of the results was the futuristic, $7,500 solid maple Gradient crib, which got attention from the design community. Meanwhile, Tiffany started creating distinct identities for each brand, helping target every price point more effectively.

By 2014, Daniel was preparing to pass the CEO torch. Tracy wasn't ready to take the helm, so her brother and father decided to share the role for a year, until 2015, when Teddy became the sole CEO. The elder Fong--who gave himself the title of teacher--gestured toward his son's autonomy, announcing to employees that a new direction was healthy in a family business. But in strategy sessions and management meetings, Daniel's voice retained its outsize influence, and employees often became confused about whose lead to follow.

To bring clarity to everyone's roles, the family hired a leadership training expert who set up quarterly meetings. At one, the expert addressed what he diagnosed as Daniel's "seagull" problem: Despite the fact that he'd handed over the CEO role to Teddy, Daniel had a tendency to swoop in, crap all over the place, and fly away. "That was an interesting, tough conversation," says Teddy. It's still a process, but now Daniel strives to use suggestive language instead of directives. "Comments like that I love," says Daniel. "Without that, I can't improve."

With MDB now dominating the nursery, Teddy decided to tackle another part of the home--the living room. In 2015, two years after visiting that Chinese factory where he learned how inexpensively modern couches could be made, he launched MDB's first startup, Capsule Home. The e-commerce company sells modern, neutral sofas that range from $900 to $5,000 as well as other furnishings.

It's the first time MDB has tried to sell directly to customers, and it's doing so in a category that is already well populated with such retailers as West Elm and Crate & Barrel and online upstarts like Article. While Capsule has gotten some good press, Teddy and his Capsule co-CEO, Kelly Hwang, are upfront about the difficulties they face. "The biggest challenge is the slow pace of growth tied to building brand awareness," says Hwang, a former startup adviser and investor. So they're experimenting--email marketing, pop-up shops, Instagram giveaways, wholesaling earlier product iterations on sites like
Wayfair--to see what sticks.

They're hoping that Capsule's secret weapon will be those close manufacturing relationships Daniel cultivated over two-plus decades. That Chinese sofa factory, for instance, is owned by Kenneth Chong, a loyal MDB manufacturer. Chong values his relationship with the Fongs so much that last year he prototyped roughly 50 concepts for Capsule that he'll produce in very low quantities--sometimes just five or 10--as the startup figures out what sells well.

Chong is also working with Capsule to produce a $400 sofa with USB charging ports that will debut in August. Teddy hopes the new couch will be just the audacious product the company, which recently hit seven figures in revenue, needs to cut through the noise. Daniel is patient. "A brand is just a hobby until it hits the $2 million mark," he says.

FROM THE JULY/AUGUST 2017 ISSUE OF INC. MAGAZINE