Authenticity. There’s no greater vote of confidence in a brand’s development than when its awareness is driven by word of mouth, especially in a challenging economy. For most company founders, overcoming adversity on limited resources, let alone gaining access to the very caliber of people and advantages that leads to a breakthrough, isn’t determined by a good or bad economy, it’s a prerequisite. So what if it were made easier for company founders to gain access that helped increase options for overcoming such obstacles, and what if such benefits were presented and made available in a highly credible, appealing way? Eric Kuhn asked himself those questions and like any dynamic entrepreneur is prone to do, he saw an opportunity in the market to provide the answers.
Eric is CEO of FoundersCard (FC) based in New York City, an innovative loyalty program he established specifically for start-up founders that combines signature networking events for its membership, with exclusive benefit offers provided by FC marketing partners. Started in 2009, today FC is 5000 members strong with a plethora of discount deals accessible for business and personal use. FC has a vast array of marketer relationships grouped by travel, business, lifestyle and hotel categories. The deals even include offerings from companies on the rise that are quite often run by FC members, along with instantly recognizable names like Apple, W Hotels, Gilt City, Virgin Atlantic, Four Seasons, Equinox, ZipCar and NetJets to name a few. FC membership is by invitation and referral only, they don’t advertise, and yet has managed to develop brand awareness by providing its community accessibility and exclusivity in an unprecedented way. How? It’s that word again: Authenticity. I sat down with Eric to talk about how he’s cultivated FC as a brand and services success.
Sledge: Let me start by acknowledging for MO.com readers that FC isn’t your first entrepreneurial success. You were the founder of Varsity Books, which became the first e-commerce company listed on NASDAQ?
Eric: We were the first Internet company that went public to be listed on the NASDAQ, got de-listed during the dot.com technology crash, and then re-listed several years later. So, I’ve sort of seen it all through that one experience of going from 2 people with an idea in a garage, to an IPO in about 18 months, only to then have to face rebuilding the business; being able to successfully do that after quite literally changing the business model while we were a public company, building it up again; getting re-listed back on the NASDAQ and eventually a few years later selling the business, so, it was quite a roller coaster experience.
Sledge: And that was back in ’97?
Eric: Started it in ’97, ran it up through ’06, and so it was an 8 year experience of building and running it, and we went public quite early; think it was February of 2000.
Sledge: And Varsity Books was also the first company of its kind to sell textbooks online directly to students, correct?
Eric: Right. So we came up with the idea of selling textbooks online to college students. This was back in the day when Amazon was focused exclusively, it’s hard to believe, but exclusively on just selling regular books; they weren’t in any of the other categories and this was way before digital books, the iPad, book rentals, anything associated with that different model. It was really the first threat that college and university bookstores saw to their business model where all those years they had what was essentially one bookstore on each college campus that was sort of monopolizing the situation and we represented the first threat to that.
Sledge: Wow. It begs the question: What did you think of the announcement from Apple to further drive digitization of textbooks for the iPad?
Eric: If there was ever a market that made sense to go digital on one particular tablet product, it’s the textbook industry, so, thrilled to see it, and it should’ve happened 20 years ago. It’s overdue.
Sledge: Quite often, successful serial entrepreneurs catch “the bug” when they’re very young, sometimes in their teens or even younger. Yet, not that you didn’t have the paper route when you were a kid, but, am under the impression you really decided that entrepreneurship was the path you wanted to follow while you were in law school, that true? When did entrepreneurship first grab you?
Eric: Actually, my very first business was selling baseball cards when I was 13 or 14 years old, I used to drag my parents because I couldn’t drive…
Sledge: I would hope not! (laughs)
Eric: (laughs)…they would take me to baseball card shows and I would set up my table and sell baseball cards, and there would be people 3, 4, 5 times my age that would be coming and buying and so forth, and that was sort of the first experience I had of having a business. I also remember many years later, when I did decide to go to law school, it was very much not with a mindset to have a law career. I did practice law, if you can call it that, corporate real estate for 1 year in New York after I graduated, mostly because I thought owed it to myself to try it, but became very quickly convinced that it wasn’t where my passion was. I was the kind of person that, in a weird way, always knew that I wanted to be an entrepreneur ever since I can remember hearing the term “entrepreneur,” sort of understanding what that meant, it was always something that I aspired to be and connected to, the whole risk aspect of trying to create something, trying to build something that no one else has…it was always appealing, the aspect of that…it was always part of my DNA.
Sledge: Full disclosure, I’m a FC member who’s had the pleasure of getting to know you and your leadership team independent of this interview over the past year. Talk about a unique selling proposition: FC is described as “the AmEx Black Card for start-ups.” How would you describe it?
Eric: I think in a way that’s a flattering description; sort of this aspirational meets practical. A lot of the idea behind FC really came from my own experience as an entrepreneur, having experienced the ups and downs and the different cycles, and it was that sense of why has there never been a community that really the goal of which was to provide entrepreneurs with not just equal footing to what others in large companies were getting, but access and privileges that actually were better and trumped that. That was the idea: to come up with, and do something that had never been done before by any community for entrepreneurs specifically. That’s a pretty apt way to describe it.
Sledge: And if you were to describe FC in a sentence, how would you describe it?
Eric: “An amazing community for entrepreneurs and innovators that provides them with access and opportunities that they otherwise wouldn’t benefit from.” More and more it’s about the access, it’s about the networking, it’s about the opportunities for our members.
Sledge: One of the great things about FC is its authenticity as a word-of-mouth brand. As you continue to grow both the membership, as well as, the volume of benefits from marketing partners you offer, how do you keep from becoming a fad, or, flavor of the month?
Eric: The key is substance. More than anything that have done in my career, we focused every aspect of FC around genuine value and substance. You know, we haven’t been much for the flash and the glitz…we haven’t spent one penny on marketing, it’s all been word-of-mouth. And it’s because people believe in it; they’ve seen the value themselves and so, have been willing to share that. We focus a tremendous amount of energy on curating these benefits for our members, structuring them in a way that’s very unique and compelling and unlike so much of the deal clutter that’s out there today, we focus our benefit partnerships in sort of the old fashion way: once you become a member of FC you have ongoing privileges and access. There aren’t flash sales components to it; no gimmicks. These are ongoing partnerships and access to events that accrue to our members’ benefits. They’re also very deep and rich in nature, that go beyond the circus of what so many of these other deal sites have. Here’s an example: We partner with some leading airlines in some pretty compelling ways that I don’t think anyone has ever done before. Our benefits with airlines match 2 things: They match value with ongoing discounts, so, discounts on all flights, all classes of service — and we match that with access — in which we get for our members elite status in their (the airlines) frequent flyer programs as part of the arrangements we have, so, there’s these two powerful components we’re able to bring together to forge a real deep relationship.
Another example is what we’ve done with our hotel partnerships which have really become wildly popular. We’ve shaped the hotel program around how I’ve traveled as an entrepreneur, namely, you’re constantly on the road, needing to change plans, cancel and re-schedule, right? But, wanting to stay in great places, but on a budget and to be treated incredibly well. So, what we’ve done is carefully selected properties that we deeply believe in and individually negotiate arrangements with them that typically brings into play an incredibly great rate that is generally always available with a flexible cancellation policy. In fact, virtually with all our hotels you can cancel within 24 hours, and with many of them, we add upgrade opportunities and/or unique amenity opportunities, so you’re able to stay at a hotel that previously wasn’t in your budget; you’re able to get the royal treatment while you’re staying there, and if you thought you were going to be in LA, but end up switching to San Francisco, you’re able to get your money back. So, it’s something that’s very much appealing and tailored to how entrepreneurs travel. We now have about 150 hotels that work with and all of them are in this model and this mold. We also take great pride in our role as curators. We don’t work with just anyone, we have a pretty extensive vetting process and do that because we want to go to our members with marketer partners that we really believe in — not just well known leading brands, but also innovative lesser-known brands we think are intriguing and really add a lot of character and value for our membership as a whole, many of which come from fellow FC members. Allowing FC members to craft their own benefit deals to offer other FC members has really strengthened our community in a way I don’t think any other (loyalty program) community has previously done.
Sledge: The chairman of Ferrari once said the aura of the brand is every bit as important as the design, craftsmanship and performance of the cars. They never advertise and never build enough cars to meet demand. Do you have any rules of thumb to help you cultivate and maintain FC brand equity?
Eric: Yeah. More than anything that I’ve done before, this is about quality. Not in a snobbish way, but the connection that every FC member has is their deep connection to entrepreneurship. Most of our members are founders of their companies, but increasingly, many are also connected to the entrepreneurial community in other ways. That’s really the hallmark. In terms of what I can relate to about what you’ve shared on Ferrari, with every decision we make, we very much think about the brand, the quality of what we’re doing. We have an internal saying which is, “Is it FoundersCard worthy?” We don’t want anything on the site that’s not. We’re not looking to exclude for exclusion’s sake, we just look to create a high quality experience for our members in terms of everything they do with FC.
Sledge: How do you weigh that Eric? Is it a question of taste level? Is there some criteria that needs to be met when you start with that question of something being FoundersCard worthy?
Eric: Well it can be applied different ways. There’s obviously a vetting application process for members, you can’t just join. We’re not a fake membership organization that’s just like, you know, calls itself that. There’s a true membership application process that’s associated with it. There’s that aspect of it. There’s how we think about the benefit partners we want to partner with and how we think about the offerings that we want to shape. So, it’s not good enough for us to partner with a marketer that’s well-known. It’s gotta be an offering that we think is going to be highly unique and appealing. We don’t do anything that dilutes the quality of what we offer, plus, there’s our events. I’ve been incredibly gratified how that’s grown and have been in a fortunate position to have partnered with so many amazing hotels that are now stepping up and wanting to host and co-sponsor events for our members, and so, we’re incredibly pleased by what we’ve seen.
Sledge: With an established first mover advantage as the premiere member loyalty program for start-up founders and key people, how do you protect that position?
Eric: Well at the end of the day, our greatest asset is our membership base. I think as long as we continue to do things to make members happy; exceed their expectations, we’ll be fine.
Sledge: You self-financed FC, correct?
Eric: (Nods). It’s a funny thing because, like my first experience there’s a few similarities. With Varsity Books, we sort of re-invented an old, traditional model using technology. With FC, we’ve re-invented the membership model using technology and Web 2.0 techniques, but, there’s obviously a host of differences. I’d like to think I Iearn as I age. Being able to self-finance FC has really been a liberating experience. We raised $80 million at Varsity Books; when you think about all the time that’s taken up pitching investors, meeting with investors, preparing for board meetings, attending board meetings, following up with board members; every aspect of that time, we’re now able to focus on just building a stronger membership experience at FC.
Sledge: What was your criteria for success, for determining you had a viable business, or, pulling the plug?
Eric: I guess I didn’t think of it exactly like that. I go into an entrepreneurial venture as kind of a ridiculous optimist almost. The fears of failure are obviously there and the insecurities of not being successful are clearly there, but I sort of use them as self-motivators and so, the way I approach and think about it is…it’s not a question of whether if it will succeed…it’s just a question of how and when. There’s a lot of things I’m not good at but one of my strengths is the ability to iterate something so once get it to market, will make it work, and I think FC, more than anything, felt there was the need for this; the market and opportunity to create something like this. So I never really looked at it from the standpoint of, “OK, so I’m gonna put in x-dollars and if we’re not profitable by this particular month, or, this particular point, we’re gonna pull the plug.” We were fortunate enough that we were cash flow positive very early and have grown profitably ridiculously early in the business cycle, and never seriously faced any of those challenging internal decisions that most entrepreneurs, and even I have faced in the past, have to. I can’t tell you how many times from the Varsity experience, within a single day, was thinking, how are you gonna make your next payroll, and 4 hours later you’re convinced you’re gonna build the biggest company on the planet. With FC it’s been knock on wood and didn’t face those challenging internal debates.
Sledge: When did you realize you had a viable business?
Eric: It was probably after the first year that realized we were onto something pretty significant. We were really receiving incredible feedback from our members. It was that more than anything. I’m not a numbers guy, or, much of a metrics person. I’m instinctively driven and kinda go with gut reactions. I can remember an e-mail sent out to our members where we were soliciting feedback about a few things we had done, and the percentage of our membership that had replied to that, and the quality of their comments was so high and significant that immediately I’m thinking, Wow! People are passionate about this, people wanted it to succeed, they want this to work. There’s no better business where you have your customers, in our case our members, that are actually rooting for this to be successful and actually want you to be a vehicle for their – well – I won’t say hopes and dreams – but certainly their desires. That’s what we’ve been hoping to achieve. It’s very much of a 2-way street. We look for member input and feedback. So many of the things we do have come from member suggestions; member introductions, or, member referrals. It’s such a great thing that we’re building with our members as both our partners and our customers.
Sledge: Who do you consider FC competitors? What do you focus on to ensure distinguishing what you offer from other such member programs?
Eric: You know, with Varsity Books, I was so defensive about competitors, yet, competitors are what make you want to stay steps ahead. It’s funny, because there would be a number of people who were referred and they may say something like, I’m a holder of the American Express Centurion Card, why should I join FC? We’re not directly competitive with anyone, we’re not taking away from anything, so, I wouldn’t even know who to say our competitors are because there is no other organization where people join something else instead of joining FC. It’s not like if you join FC you can’t be a member of X,Y or Z organization. Truly (laughs), I think this is the first time I can think of having to answer this question I honestly don’t think of a competitive element in this. That’s pretty bad because having competition can be a real driving internal force, but, I think FC is a compliment to other offerings, we don’t compete with them directly.
Sledge: So you see FC strictly as a value-add to the market, it’s not on a mission to disrupt and take market share from someone else?
Eric: No! A lot of people don’t know this or realize this, but we don’t take a single dollar in commissions from our hotel partners for example. Think about that. How that helps our members is, when we’re negotiating rates on behalf of our members we’re able to in essence, take the commissions that hotels are used to giving other sites, and use that to our members’ advantage to further reduce the rates and get other benefits for them. We’re also in a situation that way, where we’re truly objective in deciding which properties to work with because we’re not selecting or giving preference to one hotel over another based on getting a commission from one property, but a better commission from another . We’re putting properties on our site because we believe in them and think they’re of great value for our members.
Sledge: FC has dual business development channels: a physical channel of exclusive networking events organized for members, and a virtual channel with the FC website acting as a social media platform, promoting benefits from marketers the membership weighs in on. Why does this approach work so well?
Eric: There are no better people who understand what our members want than our members, so, that’s part of it. Our members are deeply committed to FC succeeding and people want to share, innately. It’s an instinctive feeling for FC members to want to create and benefit from insider deals with their fellow members. I think people have a bond to the community and also think it’s a situation where people who are very successful entrepreneurs are interested in helping younger and first-time entrepreneurs. I don’t think you find that in most other industries or most other environments. I think in most traditional environments, you have people at the top of a particular situation that don’t interact and only involve themselves with people who are at their level. One of the attractive qualities that I’ve always seen about being an entrepreneur is that shared comradeship of how the people that are on their 5th or 10th company, really are available and make themselves available. I think that really plays out in the FC community in that they’re looking to help and experience and share with fellow FC members, and in particular, ones that are just starting out and can benefit from someone in sort of a mentor type role.
Sledge: We’ve just kicked off 2012. What does FC have in store this year you’re excited about MO.com readers would be intrigued by as potential membership candidates?
Eric: Another way we’re re-inventing the membership model is to not offer the same benefits and events that remain static. What our members, and members to be can look forward to is a lot of new things: new events, benefits and venues. And through a lense that’s not about quantity, but quality. We deeply listen to our members’ suggestions and use that to come up with all sorts of interesting things. 2012 will have a number of amazing events, a number of amazing changes to our website, a number of new amazing benefits that are the direct result of what our members have suggested. We’re committed to constantly improving and enhancing in ways that make sense to our members.
A good example would be expansion of our hotel program. We’ve added over 50 new properties in over 20 new locations including Anguilla, Berlin, Istanbul, Munich, Melbourne, Prague, Vienna and Zurich. And just last week, we launched a new deal with The Cosmopolitan Las Vegas.
Sledge: FC isn’t out to become a giant critical mass company with massive capital infusion needs, but, have seen first-hand how much your member community and number of partnerships have grown just in the past year. Do you have plans to scale FC as an operation? Being an experienced entrepreneur at raising venture funding, do you foresee a time when you’ll seek backing beyond the success you’ve had as a bootstrapped company?
Eric: No, I think we’ve been tremendously successful as is. The quality of companies that we have relationships with: Virgin Atlantic, Apple, American Airlines, I can’t think of, going down our list, doing this another way. When I started FC I came up with a dream list of 10 or 20 (I forget what the number was) or 25 partnerships, and, in a pretty short period of time we’ve not only been able to establish relationships with these kind of companies, but meaningful ones. So, if raising money would increase the quality of our membership experience, I would be the first person that would want to do that, but, we’ve been remarkably successful in achieving and improving the experience per how we’re staffed and how we’re going about things right now. I had 250 people working for me when I was 29 and we went public with Varsity Books, and have learned that it’s not the number of people that you have at a company, it’s the kinds of people, the quality of those people and of course the approach that you take. So, we’re very well-funded for the kind of company we are and what we want to achieve. We have 5000 members now and we’re actually global at this point. We have 15% of our members outside the U.S. and have become appealing to entrepreneurs outside the country.
Sledge: Your membership model is invitation-only, which is tricky to establish exclusivity and cachet for when first starting out. How did you attract your very first members to bring FC to market?
Eric: When I started FC, I don’t know if it was the smartest thing but it ended up working, I actually gave memberships to 100 entrepreneurs that I have a connection to; many of which are pretty prominent, well known entrepreneurs. Like many entrepreneurs when first launch, I probably launched FC way too soon but, you know, if you wait until something is perfect, nothing ever gets launched. And so, I remember mailing out the first 100 membership cards and after dropped them off at the post office, sort of said to myself, “Oh my God, what did I just do?” But that kind of pushes you into the water and then you’re off and the you’re in and the pressure really begins. It was that sort of excitement and energy that channeled me to go out everyday and make it a better experience. As the team has grown, everyday, we leave the office where our mantra is having a stronger product, a stronger community and I like to think most days we’re successful at doing that.
Sledge: What’s your Holy Grail? Is there a particular category or marketing benefit you’d like to see FC provide its membership one day, you’d consider an ultimate milestone?
Eric: I know this sounds strange, but, it goes back to why we started FC: it was to create and help entrepreneurs and do something for them that had never been done before. The thing I find most gratifying is when FC opens doors and access in the world to a single member in a way they previously didn’t have before. Those benefits are big and small. We’ve had members who have gotten funding because they were at one of our events and got introduced to a member in venture capital, or, an angel investor. We have members tell us about how they experienced an amazing benefit status or an amazing hotel upgrade, or, fly with an airline partner they previously never dreamed of. Opening those doors, that’s the thrill behind FC. As we look to grow, what we’re constantly driven by are those experiences, attributes and goals. It’s not a particular number of members we’re trying to hit, it’s not a particular benefit or a certain number of benefits. It’s the thrill of connecting entrepreneurs and opening up doors for them. In many respects, who better to create an organization for than the people who go out there and take risks, and everyday, struggle with things that the average person never has to think about? So, to be able to reward and provide; give things to entrepreneurs…it’s a tremendous thrill and privilege.
Sledge: Eric, this has been a great pleasure. Thanks for sitting down to talk about the business development of FoundersCard.
Sledge: Eric, I wanna thank you for your time, this has been great!