Founders: Helgeson, Fuchs, Kurtzman
There are so many factors that contribute to the success of social venture, especially one like Better World Books that has a triple bottom line mission: philanthropy, the environment and profitabilty. My purpose in interviewing Xavier Helgesen, one of the founders along with Christopher “Kreece” Fuchs and Jeff Kurtzman, was to explore what makes Better World Books an innovative business venture and what are some of the contributing factors to its success.
In an increasingly profit-driven business climate, Better World Books stands alone. Unlike other online booksellers, Better World Books has a unique triple bottom line: providing customers a great online bookstore; funding and supporting world literacy as a byproduct of its service; and supporting the environment through book recycling.
While other small businesses have struggled in this economic climate, Better World Books has watched their revenues grow from $4 million a year in 2005 to a projected $31 million in 2009. “We have no intention other than to be a great online bookstore,” says Xavier, and they certainly seem to be realizing that goal.
How did Better World Books begin?
When I graduated, and the dot com crash had happened. I was very much looking for an entrepreneurial opportunity .
Then we tried to sell our books left over from school, and our friends’ books who had left; but the bookstore wouldn’t pay much; I took them home in frustration. Reece had asked me if one could post these things on the web, and we put them on Half.com , but I didn’t know if anyone would buy them. We probably sold $200.00 books in an evening. We were really stopping by the post office sending off these books in the mail and making a lot more than we would all day at work. We thought: “what if you could get a whole bunch of books that these bookstores don’t want in this one place”?
We didn’t know how to price them, the real insight was when we thought about a book drive and about partnering with a good cause, then people would just give you the books for a good cause. That was the real genesis. It occurred to us we might be able to sell them if we partnered with a community center. That was in 2002.
You partnered with the community center in the sense that you were going to give some of the funds to them?
Not only that, they were our first warehouse, we used their backroom, we basically said: “Hey, we want to do a book drive, but we want to collect textbooks, you don’t need textbook for your community center, but you could use the money, so if you let us use your backroom, we will sell them online."
That was our first book drive and then we thought about taking the model expanding it naturally, we couldn't find a community center in every town, we needed a more natural partner and so we reached out to Books for Africa which turned out be an absolutely ideal partner to help us grow and we partnered with them to run campus book drives all over the country. Two years later we were up to thousand book drives going.
Tell me more about how things went after you partnered with Books for Africa.That was a crazy period of rapid growth; we grew about 250% a year in first three years. It was ridiculous and we were really ambitious, cash flow spikes were dramatic and we really we had a one trick pony.College textbooks sell a couple of months out of a year we but the rest of the time it’s kind of slow going, so the rest of the time we had to make sure how to keep going.
That actually is what drove us to launch our library business which is about half of our business, go out and collect books from libraries, and sell them online and share with them the proceeds. That’s been great for us because it has given us revenue for twelve months a year. It allowed us to launch a brand new website, with a huge collection of books. Whereas, if we if we only had textbooks it would be a much less compelling site.
So that when we started to scale up we were really trying to find a replicable way of going out to the campuses without having to employ somebody on the campus. We partnered a lot with campus service organizations: honor societies, campus chapters of Kiwanis, and these kinds of organizations.
We were on Amazon and other sites as channels for our sales. We didn’t have to focus on marketing we just focused on efficiently selling these books on the channels, that was great, because it helped us scale up really quickly, without having to spend the kind of money you typically need to build a brand and establish yourself while your operation is still young.
How did Good Capital get in the picture?
They liked what we were doing and we liked what they were doing and they had go out and raise money and we had to prove our model.We raised 4 million dollars through that round.
Didn’t he suggest that you enable people to send your used books for free?
You can go to our website where we have a buyback and donated books site. You put in the numbers in on the back of the books and we will tell you whether we will accept the donation and pay for shipping.
Tell me about obstacles along the way
Sure,cash flow and financing the business was a constant headache. We had to come with all kind of ways to finance the business especially since we didn’t have any investments. It’s a real chore to find a bank that would lend to an unorthodox business like us. Diversifying the business, actually building a web brand of our own has been a learning experience.One of the ideas that we have gotten good at is that if we find an idea that works, we figure out how it works, we scale it, if we find an idea that’s not working, we take it out in back and shoot it.
The macro thing that has happened is, even though the book market in aggregate is shrinking, I believe that the internet has completely revolutionized the used books marketplace. The used book market continues to grow by double digits. It's not hard to see why. They are cheap, they are convenient and it’s no surprise, so it’s a preferred way for people to shop for used books. That has been huge. Also the development of the marketplace business model, such as Amazon, which allows other businesses to be on their site, that was pretty revolutionary thing when they did that. These were the two trends that we got on board with early on. But honestly our success has been dependent on our presence in the green space.
Also the growth and awareness of socially conscious business, that caught us by surprise, we were sitting in the middle of this trying to develop our consumer brand when this whole kind of wave came washing over us. And people thinking about ethical consumption. This was great because we were already there. If had tried to go to a venture capital firm and said,” Hey I want to try to start a socially conscious Amazon, I don’t know we would not have gotten funding.
Tell me more about your partnership with non-profits, Room to Read, Books for Africa.
The main things we partnered with them was to organize the campus book drives . They also receive some funding through their other parts of our business. If you sell your books back online, you can donate part of funds to them, and that gave us the right to use their brand, and the ability to have huge amounts of results with a relatively little amount of money. We can go back to the people collecting the books we can tell then they are really making something happen, here is what you are doing.
Some organizations like Invisible Children actually have people out there who are organizing book drives with existing IC supporters. Some other orgs don’t have anyone organizing for them, but their brand is a big value.Books for Africa, is great because not only do we raise money for them, but we also distribute millions of textbooks a year. So any textbook that we can’t sell online are going to African students who can use them.
How did you connect up with them initially?
We approached them; looked them up on the internet. We researched them and called them and said would like to do this. Good for them, they were open to a new idea. Room to Read, came about a year later, I read about them and I approached them. They really liked our business approach and mindset and that’s where we have partnered with them on the college bookstore we have raised about 300,000.00 for them largely by student collecting books for them and we sell them online.
What is the legacy,long term impact of what you are doing?
We hope start to make a major impact on the number of people that can read in the world. That’s not only good for the world, but also good in the long term for our business because the more we grow the more we become an increasing share of the global book market. The international sales are already a big part of our business and we are competing . It will be really interesting to see when a lot of the people right now that don’t have the internet access , don’t have the financial resources ,and don’t have the literacy resources to buy books online, will join that market. It will dwarf anything that can happen with e-books or anything else.
We also see the potential that Better World Books can be a standard bearer of this kind of business, it can not only show people what is possible but give them a kind of world map that says here’s the thing that really a makes a difference and it will help build their brand. We already see smaller startups be a Better World Books of a particular market or region or something. It’s gratifying.
What is the lesson, you have gained from this experience.
One thing we’ve learned, the more we have doubled down on the vision side of the business and favored more of the mission, the more we do that, the more rewards we see. Because we really do see see people having the desire to help and to do well and to be part of positive change.I am honestly surprised that more businesses don’t tap into it, because it is not only good for yourself or the planet, the trick is it had to be done right.
I think almost any business leader can ask, how I can bring more meaning to my employees, how do I bring more meaning to the lives of my customer? It’s something they don’t teach in business schools, but I think they ought to.
What your personal strengths that you have brought to this.
A healthy tolerance for risk. Its’ really essential. You can only take so many things and map them out on a spreadsheet, you just got to see what is the upside of doing this is and what the downside is.
Anything else you would like share?I forget to mention: The literacy partners, they are now actually the shareholders of the company as opposed to only recipients of the funding. The five big ones, are all shareholders and they basically receive a grant for future for not only how they contribute to literacy, but also how well they contribute to our partnership, to help get more books in our door or to help promote our company. This will ultimately a give them a s seat at the table at the boardroom. This is pretty interesting and pretty cool. There is no better way to get the right decisions other than to align everyone’s interest, Books for Africa’s interests are the same as mine and the same as a shareholder.
Tell me about the carbon neutral shipping.
We are the first e-commence site that has tried to this. We don’t take it out of profits or revenue, it is built in the shopping cart, most people will pay a few pennies to pay for an offset. We have offset thousands tons of carbon by it being in the shopping cart. I think it also reinforces our message of our being an environmentally company. I was proud of that one and it was one of the things that when we launched our website I wanted to be a part of it.
How do you see yourself growing?
The used book market is really good market and we have a really healthy part of that.The money we raise for literacy programs is really dependent on the willingness of customers to try something new and our ability to perform on that, to provide the service and the selections as well as the literacy commitment. We have no intention than to be anything other than a great online bookstore.
Where do you see this 5 or 10 years from now?
I think everyone will have heard of us, but if you shop online books on a regular basis, I think that you will have heard of us and would have considered whether we would be the best option for you. And we want to be sure that we get the message across that not only are we a good cause but we are a good deal.