How Two MBAs used their alumni networks to create a $1 million company
It sometimes takes a few swings to craft the right product to meet market needs.
For Ben Young and Fred Kukelhaus, the co-founders of Hugo & Hoby, it took them a few swings at creating a B2C company by creating a standing desk, a coffee table, and even beds before they finally hit their home run with B2B products.
Today, Hugo & Hoby builds custom furniture to create unique spaces, strengthen communities, and better our planet. This all stems from the co-founders’ grandparents, Hugo & Hoby.
Hugo & Hoby is almost 10 years old, operating as a 7-figure business, and I’ve had the incredible privilege to watch from the sidelines since nearly the beginning when I met them at Yale in 2015.
To understand how they became a 7-figure business, let’s dive into the beginning of their story.
Before Hugo & Hoby
Ben & Fred both started their careers in different places. Before joining Yale, Ben was a high school math teacher for 5 years, and Fred was a consultant for 8 years. In 2014, Ben & Fred started at the Yale School of Management to study entrepreneurship in their Masters of Business Administration (MBA).
They met at welcome weekend and instantly clicked. They were both from DC, interested in entrepreneurship, and really loved working with me. Okay, wait. They didn’t know that yet. More on that later.
With some shared interests, such as both enjoying building furniture as a hobby, Ben and Fred decided to become roommates at Yale “with no intention of starting a company together.”
For their apartment, they were building furniture in the basement and came to the same conclusion: Why are we building our own furniture rather than buying it at the store?
At this time, e-commerce was just starting to take off, and many different business models were beginning to take off. Business models like Kickstarter, Warby Parker, and Allbirds started taking off.
The start of Hugo & Hoby
With the trend of e-commerce and seeing an opportunity in furniture, they decided to build furniture for people like them: young professionals on a budget. It is not the cheapest piece of furniture you can buy, but the one that is just above that.
A business-to-consumer (B2C) model.
They ended up deciding that a standing desk would be their first product.
Standing desks were just starting to become popular, and they had already built a desk that they liked.
At the time, many of the standing desks looked the same, and they weren’t great to look at. If they did look good, you had to give your left arm to get them.
Ben and Fred wanted to create a standing desk where “old school craft meets modern features.” It allows you to organize your cords, wirelessly charge your phone, and have a stand for your backpack, but it has a solid wood, homey feel.
They created 6 desks and wanted to sell them to people they didn’t know.
According to Ben, they created a “horrible” website and ended up posting the desks on Craigslist.
To their credit, they sold pretty quickly on Craigslist and sold out.
Hugo & Hoby might not have had any more desks, but it had legs!
The growth of Hugo & Hoby
Physical goods or hardware are hard to scale because they typically require a lot of capital to start scaling. As you can see with Hugo & Hoby, building the first units by hand and selling them isn’t the hardest thing in the world, but what do you do when you need to build 100 units at a time or 1000 units at a time?
That’s where figuring out how to scale and be profitable simultaneously is tricky.
Ben and Fred spent the entire summer of 2015 trying to figure out their supply chain and nail down the design for a scalable, manufacturable standing desk.
They did this as part of Yale’s Summer Fellowship program, and that’s when I met them.
I was the intern who made sure the food arrived on time for that program, and they had the incredible privilege of sitting across from me every day that summer 🤪
By the end of the summer, they realized that they were hitting a wall in trying to make this standing desk manufacturable so that they could scale it.
They were still excited about the prototype they had built (it was awesome), but as they tried to manufacture it, it became unaffordable. It looked beautiful and was incredibly functional, but their target customer couldn’t afford it at the price point they needed the desk to be at to make a profit.
They decided they needed to see revenue come in and put the standing desk on pause.
They ended up building simple furniture themselves again, such as coffee tables, side tables, and beds. These were simple, easy furniture pieces they could build themselves.
Shortly after they started selling these simple products, someone replied to their email newsletter asking if they could create the tables for their new restaurant.
Ben said, “We kind of scratched our heads and said we can make tables.”
They delivered a set of tables to that restaurant and took on a few more business-to-business (B2B) deals that worked well for them.
That’s when they realized that maybe B2B was the stronger play for Hugo & Hoby.
Pivoting Hugo & Hoby to B2B
At this point, Hugo & Hoby had made around $70,000 on B2C sales since they started. That’s a significant number, but it might have been only about $20,000 in profit.
That amount of money wasn’t something they could scale quickly, and they needed to increase the numbers a little faster since they were graduating in May 2016 (about eight months after the end of the Summer Fellowship program).
Pivoting to a B2B business model allowed them to scale revenue faster because, as Ben put it, “We just work one person, but they ordered a lot of things.”
Pivoting to the B2B business model also aligned more with their values, as they wanted to create highly durable, sustainable furniture that could be built locally. They could do that much easier with B2B clients, as they wanted great-looking and highly durable furniture and had much larger budgets than their initial target customer, a young professional.
With their values more aligned and the potential for getting more significant revenue faster, they entirely pivoted to a B2B business model.
They ended up furnishing entire apartment buildings, building furniture for their alma maters at Swarthmore and Yale, and doing more restaurant furniture.
By the end of 2017, 2 years after starting Hugo & Hoby, they reached their first $250k in revenue. After 1-2 years after their first $250k, they reached their first $1 million revenue year.
Scaling of revenue & mission
One of the things that I love about Hugo & Hoby’s growth is that not only have they been able to scale their revenues up, but they’ve also been able to tie their revenue growth to the growth of their mission. They’ve built a model where if their revenue goes up, so does their impact on the people they want to impact.
Instead of building the furniture themselves these days, Ben and Fred have built a network of local fabricators across the United States to build the furniture for Hugo & Hoby. It’s the Hugo & Hoby style and values, but crafted by the people they wanted to support: craftsmen like their grandfathers.
Today, Hugo & Hoby has used 75,000 feet of local, salvaged, or reclaimed materials to build their furniture, contracted over 60,000 hours of labor to their partners, and planted over 85,000 new trees in at-risk forests in the United States.
The Growth Strategies of Hugo & Hoby
Hugo and Hoby’s growth strategies are all based on one growth strategy: connections. However, these connections have some nuances. I broke them into three categories: alma maters, adjacent partners, and clients.
1. Alma Mater Connections
When talking with Ben about how they used connections at their alma maters (Yale and Swarthmore, specifically), it felt like cold outreach. They were just messaging people who were alumni from their schools and playing up the student card a bit.
There are two pieces to point out here.
First, you could call it cold outreach, but people will at least read your message by very blatantly having an important similarity. They could have done cold outreach to other potential customer segments, but I don’t think it would have been as effective. Even if they focused on local relationships in New Haven, CT, or Washington D.C., I don’t think they would have had that same response rate.
Using their alma mater networks automatically warmed up their connection to the person. I would argue that this alma mater connection at least increased their potential response rate from maybe 1% to 10% of people responding back to them.
Second, the student card is always interesting. For MBA students, I think it’s a better play. For undergraduate students, it can definitely work, but I don’t think it works as well.
The student card can open doors as people love helping students. It’s just built into the fabric of society. If you’re willing to learn, most people want to help you do that somehow.
The problem sometimes, for undergraduates specifically, is that you’re not always taken seriously with your venture or idea. It can be seen as a “cute” project. The people who view ventures that way aren’t entirely wrong either. Most of the time, your first venture isn’t the one that is going to work. It’s usually the second or third one.
MBA students typically have some experience, and even just by appearances, they seem a little more mature. It’s easier to be taken seriously and not viewed as a “cute” project.
I don’t have any data to support the undergraduate vs. MBA student card dynamic, but hopefully, I will at some point.
2. Relationships with Adjacent Partners
It’s a lot easier to sell something when someone else tells your customers they need to buy from you.
Ben and Fred effectively achieved this by creating relationships with adjacent industry roles, in this case, architects and designers.
For Fred & Ben, if they built trust with architects and designers, it was easy for those architects and designers to include Hugo & Hoby products in those buildings and essentially advocate on behalf of Hugo & Hoby to their clients.
In some ways, this creates a similar network effect to the one I talked about with OnePointFive.
Hugo & Hoby can create one relationship with an architect or designer but gain a subnetwork of hundreds of potential clients via that architect.
You build enough of a reputation with architects and designers, and eventually, you have a pretty wide net of potential clients. You don’t even have to pitch—the architects and designers do the pitch for you.
This seems to have worked pretty well for Hugo & Hoby and oddly enough, was the reason they were able to sell furniture to one of their alma maters, Swarthmore.
3. Referrals from Past & Current Clients
At this point, I write this section in some fashion in every deep dive.
Past and Current clients are also crucial to Hugo & Hoby’s growth.
This is similar to the Asia Orangio deep dive in particular.
This is different from other referrals from other deep dives in that Hugo & Hoby’s products almost do this referring by themselves.
Let’s say you’re in someone’s building and see the Hugo & Hoby furniture. It’s pretty easy to ask: “ Hey, this is awesome. Where is this from?”
The Hugo & Hoby products are built in some ways to make that question happen.
They’re handcrafted by local craftsmen, made of solid wood, and built sustainably.
Their products have a look, and each piece has a story that goes along with it.
Every product that Hugo & Hoby complete is one part furniture and one part art.
It makes standing out easier.
As someone who’s been able to see Hugo & Hoby from close to the beginning, I find it incredibly cool to see where they are today.
You can learn more about Hugo & Hoby by going to their website: hugoandhoby.com