Harvard MBA's Startup Success | Fortune's Brainstorm Tech 2015 | Fortune

All right, so I'll just give a very quick introduction by name and company and then have you guys describe what your respective companies do real fast for anybody who doesn't know. So Katya Bouchamp is the CEO of Birchbox and founder. Katrina Lake, founder and CEO of Stitch Fix. And Michelle Zatlin is co founder of Cloudflare. Can you guys maybe just go down one by one and say what your companies do in case people here aren't using your products or going online at all?

Yeah. Do you want me to start?

Yeah, that'd be great.

Hi, I'm Katya. I'm one of the founders of Birchbox. And Birchbox is. We started basically because we felt like it was too challenging to find and buy the best beauty products. And today we help men and women find the best beauty in grooming products, discover them through personalization that comes in a subsc service, $10 a month for men, $20 for men. And then anything that they discover that they want to purchase, they can buy from birchbox.com and actually right now they can also buy it from Birchbox in soho in our first brick and mortar store, as well as visiting us in a few pop ups that we have inside Gap right now. And we just announced we're doing a tour with pop ups. So offline is a part of how we think about getting customers what they discover.

Great, Katrina.

Stitch Fix is an online personal shopping service at a price point that we haven't seen personal shopping before. So the way it works is we have women who sign up, let us know their general size and style preferences. They'll schedule a date on which they want to receive a stitch fix, and then we will have a stylist who will put together five items for her to try on at home. She tries everything on at home. Keeps what she wants, buys what she wants, send back, sends back what she doesn't want. It's a lot like kind of going to your favorite boutique and having somebody pick things out for you behind the scenes. We do it all in kind of traditional retail with stylists and merchants, but also in conjunction with algorithms and machine learning. And we have a team of over 40 data engineers headed up by a guy who used to run all of algorithms and analytics at Netflix. So we're kind of a fun mix of art and science to deliver kind of a next generation retail experience. Great.

Hi, I'm Michelle Zatlin. I started a company called Cloudflare and our mission at Cloudflare is to build a better intranet. And what that means is our customers are anybody with a web property, a website, an app, an API. And we help make sure that those sites load fast around the world. We protect our customers from a range of online attacks, make sure that their site's always online, no matter how much media attention they get. And so we're really doing all of the things behind the scenes to make sure that every day as we are web surfers, that we get content as fast and safe as possible. And so we have about 2 million websites who use our service every day. 5,000 new sites sign up and it's been pretty amazing to see that grow over the last five years.

So between these three, basically you're getting people made up and moisturized and clothed and web security. So kind of crosses all. Yeah, checks everything off. So one of the things that you might have noticed in the tie title of this session, they're not only all three entrepreneurs, but they're all graduates of Harvard Business School. And I'm just going to throw out a few new numbers. So over the last six years, and Stanford people in the room, I apologize in advance, but over the last six years, 434 founders from Stanford GSB classes raised about 2.5 billion in capital across 127 companies funded companies. During that same period, HBS classes produced about 250 founders who also raised about 2.5 billion in capital, but just across 90 companies. So my first question to all of you is, what does that say about Harvard versus Stanford? Are Harvard entrepreneurs more productive.

Or expensive?

Who wants to start?

I'm happy to start. So I think that the Harvard GSB MIT rivalry is really silly. I think that it's great if you get to go to either school. You're one of the luckiest people in the world. So I'll just start with that. I think that HBS has a perception problem where historically everyone attributes granted great entrepreneurship to Stanford. And there's been a ton of great entrepreneurship that has come out of Stanford. But the reality is, and I think those numbers really show it, is that there's also a lot of great entrepreneurship coming out of Harvard. And there's still a perception of how things were maybe 10 years ago. And the school has done so much over the last eight years to really change that. And those numbers, which are really recent, show that there are entrepreneurs coming out of Harvard. They're building big important businesses. And the fact that funding, which is just one measure, and we can all debate whether it's the best measure, shows that because we have fewer people who have raised just the most money that we're likely building bigger companies.

Kajuna, you actually did your undergrad at Stanford, right? So you're kind of an anomaly here. But what's your.

Yeah, I mean, I would completely agree. I think there's some differences in terms of at least my experience of what people who come out of Stanford, how they think about funding their companies and how they think about growing their companies versus Harvard. And so I do think the fact that a lot of the companies who came out of HBS are raising larger rounds of capital, I think is, I don't know, hopefully part of what will make it successful. But I think from Stanford there's a lot more people volume wise, who are interested in being entrepreneurs. And part of that is selection bias also because there's a lot of people who go to Stanford because they want to be entrepreneurs. And so I think it's a different mentality and there's a lot more companies coming out of Stanford that where people just want to bootstrap, they want to maintain ownership and they just really feel strongly about being an entrepreneur versus I think at hbs people are more passionate about the market that they're disrupting and more passionate about the opportunity in terms of industry.

Anything to add, Katya?

I don't think there's. I mean, I agree with what they said.

Okay. All right, all right. So another thing you might have noticed is that these three entrepreneurs are women. And this is another. I'm not going to throw out a bunch of numbers, but Harvard actually tops the list of female MBAs receiving funding higher than Stanford and MIT. Any idea of why that is? And from your classes in particular, there have been quite a few pretty successful female founders. Is there something at Harvard that is helping to cultivate more women entrepreneurs?

None of us have the experience of going to Stanford, so hard to say. But I'd say the case method is a unique experience where it puts everybody on the same footing.

Describe that.

So the case method means that every single class at HBS is taught through a case where you're given a certain amount of information. Depending on the class, there's different levels of detail and without perfect information, every single day, sometimes five times in a day, you're asked to make a decision as the protagonist of the case, which is often the founder or the CEO. So every single day you have the practice, you are graded on participation. So you know that it isn't just about understanding and appreciating the strategy that's unfolding and listening. You have to raise your hand and contribute to the conversation and everybody has to do that. And that is how you will be perceived by your classmates as successful, that is how you'll be perceived by your professors as successful and that is how you'll be graded.

I think I would add two things to that. I think firstly, I completely agree. I think the case method does kind of encourage and places you in the shoes of somebody who would found a company. I think two things from my perspective. One difference, I did go to Stanford and my experience as an undergrad at Stanford was that there are a ton of really, really smart engineers who looked and acted like Mark Zuckerberg. That for me it was intimidating. I think of feeling like I did not fit that mold. And at hbs I felt like that was not a thing. And the second thing is I graduated after these ladies did and I had such a massive advantage of being able to see so many women entrepreneurs before me. So both Michelle and Katya as well as Rent the Runway and Gilt Group and there are tons of examples of women founded companies that were before me that I really, that kind of made it normal at HBS and also made it so that I really had easy kind of people to look to in terms of role models.

So less hoodies at Harvard even though Zuckerberg came and more heels. Yeah. Did you have mentors and did you have female mentors when you were there?

The way I think about it is that it, you know, if you go to a business school or any school and at some point your school year comes to an end, you have to decide what to do next. It's really about finding your passion to fulfill what you're looking for. And Harvard does an amazing job of wanting to give opportunities to their students to let you follow whatever your passion is. So if you're really into non profit work, they want to be have a path for students like, like that. If you want to go into the finance route, they want to have a path. And they've had all these paths and again the last eight years they've really honed the entrepreneurship path and they're really trying to support entrepreneurs to say if you want to do this, here are the ways to support you. I graduated in 2009. If you think back to 2009, the economy was not in a good place. I did my summer internship at Google the summer before and there was something like 65 MBAs who did their internship at Google at which they didn't give one person an offer. It was a very scandalous because In October of 2008, the economy collapsed, and that was a very scandalous topic. As a business school student. People were outraged because again, you kind of do these internships thinking that you're going to get offers. I think back and think, thank God I didn't get an offer from Google, because if I did, I maybe wouldn't have started Cloudflare. And because the economy wasn't doing great in 09 and there weren't as many jobs as available to the students coming out, people kind of were inspired to say, let me forge my own path. And the school does a great job with business plan competitions, connecting you to alumni to. Again, if you have any interest in entrepreneurship, they make it really easy to support you.

And putting aside the Harvard versus Stanford versus MIT questions, do you, I mean, today, if you're talking to an aspiring entrepreneur, would you advise them to get an MBA at all? Is it necessary?

I mean, early on when people ask that question, I said, it really depends on how much you understand about what you want to do in your career and your current network that you have, either, like from life or from undergrad. That's what I would have said. I said, you know, it doesn't have to be. For me, it was life changing. I, you know, obviously learned about entrepreneurship. I'm from El Paso, Texas. I had no baseline for what that meant, but for other people, I didn't think it was necessary. Five years in, oh my gosh, life changing to have classmates in the positions that they are all over the country in so many industries, peers that you can call and feel an instant sense of camaraderie, as well as bankers who are giving you industry updates like a friend and don't have much of an agenda. Help you raise capital, help you think about acquisitions. I truly could never have imagined what they told us it would be, but I think it's such an impact if you have the opportunity to attend. It really is life changing.

So speaking of raising capital, you've all raised pretty impressive numbers. Can you kind of walk us through what that experience was like for you? And I know you had some connections and introductions that were already made because.

Of the mba, but yeah, early day is painful. Horrible. Pitching to people who are not your end consumers was awful. And we were.

What was your original pitch? Was it close to what you're doing today?

Definitely close to what we're doing today. But we would bring in a prototype of the product, we would explain the problem. There was no company to point out that was doing this. There was nothing like it. First thing, everyone did was call their wives. Second thing everybody did was say, you know, like, why? And their wives would be like, well, I won't pay for samples. Samples are given free. I mean, everybody said no instantly to what we were talking about. And we had this chart start to put it in context of this industry has to go online. Before Birchbox, every consumer Internet company was going like this. And the beauty industry was flat adoption online, flat penetration, because the only thing women were doing online was replenishment. And when we just showed them that hundreds of millions of dollars are going towards acquisition and new product launches, that changed the conversation. It taught me a lot about fundraising. And then in later stages, was able to work with a good friend of mine from my section at HBS to raise capital. And it was a really enjoyable experience. We knew each other as classmates, we trusted each other. I'm very motivated to succeed for him and he's very motivated to succeed for me.

And by the way, I want to get to you guys and your fundraising experiences as well. But just while we're on the topic, you started out with the kind of online model and you've done the bridge between online and offline in a different way. And you've also done the bridge between catering to women and men. So you actually have Birchbox for men now and you have a new product that you're announcing.

Can you talk a little bit about that? Yes. So it's something that we are so excited about because when Birchbox started, our big insight was, yes, trial and sending people personalized trial was gonna be game changing to getting them to convert online. But we knew that the step between personalized trial and conversion could only be bridged by something that you appreciate so much, which is content. And content is actually the momentum driver in purchase. And when we started seeing what was happening in VR, we decided we really wanted to be a part of it. So in August, all of Birchbox man subscribers are receiving Google Cardboard and we partnered with river to develop an app with content. So Birchbox man subscribers will be experiencing this new wave of content, which is in its very early days. VR is so much about just enjoyment today. But in our minds as Birchbox, where we are such a content company as well as a commerce company, this to us is something we have to understand in a very intimate way. We want Birchbox to always stand for discovery. So letting our customers see something that's so new, nascent, the evolution of where we thought VR was going to be and it coming in cardboard is so amazing to us. But also thinking at Our company, How is VR going to change our relationship with subscribers? How is it going to change the need to do offline? How many offline stores are we going to have to do when you can really send customers to experiences? And so we're really excited about learning early days.

What kind of content, by the way?

So experiential content, so you can see what it's like to be on a surfboard. You can travel to different parts of the world. So it's really experiential today. But as we think about partners that we have and really getting to know a celebrity, a chef, something that you like, VR content and immersion, we think could really change the game. So we're excited, we're early days. The CEO of YouTube said yesterday that it's going to be game changing. We feel the same way and we want to be at the forefront of learning about it.

You think this is something that every company, every consumer company at least, will be rolling out in some way or another?

Every consumer company that's thinking about video has to think about this.

Right.

It's early, so there isn't like an immediate play where you're monetizing this, but this is showing your customer that you're committed, that things are changing. Where they are spending their time is changing, where you're spending your time is changing and showing them that you care about that change and that you're going to introduce them to those experiences and commit with them too. I think it's a really important statement.

Katrina, are you guys looking at all at any kind of VR applications down the road?

We haven't looked at VR specifically, but the content side really is true. I mean, for us, a lot of the most, the most engaging email content that we send out is actually based on what is personalized. For example, if a client had these pants, we can suggest four ways to wear your M ers today. And that's some of the most engaging content that we see. And so this way to be able to have content as a way to continue to add value to your brand and be able to be part of her life, I think over the long term is definitely something that resonates for us too.

And just going back to fundraising real quick because you have a great story, if you could share about your experience initially when you were going out, pitching the company and some of the reactions that you received.

Yeah, I mean, similar to Katya, I think we had to do a lot of educating people on the industry and educating people on why this is interesting. You know, one of the Hardest parts about what we do is that when somebody signs up to get a stitch fix, we will have had to have bought that product three to nine months in advance. And they're coming to us and saying, I'm looking for a red top or red jeans in my inseam. And the inventory piece is really hard. And so a lot of money that we raised in the early days literally went to buying dresses, which VCs don't really love. So it was definitely really rocky in the first couple of years. And I think it really resonated to me when Katya was talking about talking to a predominantly male industry. And so I had a VC who I very, very much respect, who's at a top tier fund, who said to me, I think you're great, your team is amazing, your business is on fire, you. He's like, at the end of the day, I get to pick one or two board seats a year that I'm going to be on. And I just really want to be passionate about what I'm doing. And I just don't feel like I can get passionate about dresses. And I completely understand that. And at the individual basis, I mean, I'm not interested in hunting or fishing or guns or video games. And like, I wouldn't want to be a board member on those companies either. And so I completely understand why he would have those preferences. But when 96% of VC are male and 96% of males likely share some of those preferences, it made it really, really hard. So we got to a lot of final rounds and a lot of, well, who's going to be the partner to do this? And do I really think I can be the guy who can represent Stitch Fix? And we got to a lot of last rounds where it didn't work out. And at the end I think it made us stronger because it made us kind of force ourselves to be less dependent on outside capital. But it was really tough.

You really learn about what meetings you're going to take. Yeah, that's very true. You look at who people have funded in the past and you understand, like, how likely this conversation is going to be. Do people, first of all, in our business, do people like stuff is a big question. Do they like stuff?

Physical product? Yeah.

And then have they ever invested in industry where that main consumer is a woman?

Yeah. So what do you think, by the way, is the solution to this? How do you look at it? I mean, we just heard from Greylock and they just hired their first female partner. Kudos. But that's moving at A very slow pace.

So Sarah's awesome. I can confirm Sarah is great. The new partner from Greylock. So I'm optimistic. I think that there's lots of. There are more men than women in tech. I mean, absolutely. But I'm optimistic for the future. I feel like there are so many women doing interesting things and that it is changing. You know, we're at least having the conversation and people have acknowledged it's a problem. And when you acknowledge there's a problem we're really good at, the tech industry is really good at fixing the problem. And so I'm optimistic. I think things are getting better. My own personal experience, I mean, I feel incredibly lucky. I feel like I've been able to build a really big, important, very technical business as a woman and that no one's ever treated me differently. I know that other people haven't had that experience, but. But again, I think that it is getting better. There's lots of smart people who want it to get better and there are a lot of women doing interesting things. And at the end of the day, you just want more role models to encourage the next wave of people to get into the industry to go build what they're passionate about. I think that's the most important thing.

Yeah, I mean, I agree that I'm optimistic and I do think it will. I mean, I think it'll take an immense amount of time for it to trickle down to the VC partner level. But I mean, I think the fact that the three of us are up here, that the fact that there are 50 some VCs out there who passed on Stitch Fix, who probably would look back and wish they hadn't like this. Pattern recognition, at least over the long term, will help.

Yeah, I'd say, you know, the biggest responsibility that I'm sure we all share right now is winning. Building massive exceptional companies that happen to be led by women that are doing things that other companies can't do in the public markets and the private markets, whatever that is. But I see that as a responsibility both to create a business that is truly meaningful game changing in a $500 billion market for us. And why can't we be number one in that market? And secondarily, I'd say, like building a fleet of alumni, both men and women, who see women leaders as great leaders too. It's really important, I think, that we see that as a part of our legacy because those people will go on and start businesses, they will also go on and fund businesses. And them saying that it's really great to have diversity at the top is meaningful. So I think it's.

Are any of you investing in companies at the moment, by the way?

Every. Yeah, I definitely am, but I mean, not in a meaningful way because I don't have meaningful capital to invest. But there are a few of early employees who've left Birchbox to start companies. And I say like, I'm first money in because I hear the idea, I know them, and I'm like, yup, whatever this you are going to, you're going to make this work. I believe in our alums.

Are you investing, Michelle? Katrina?

Nothing meaningful.

I'm not. I feel like running Cloudflare is 110% of my time. And then I have a family and then I have friends and then, you know, some personal time. So I have not, I have not bridged the. I need to talk to Katya after.

To figure out how she does it.

But I just like, I want to be first money in. I want them to know, like, I'm really a believer.

But that's a good question and we should be asking ourselves that, frankly, because I do think that one of the problems, at least when I was fundraising was that there, I did talk to every single woman vc. It was not hard because there were not many of them. But I mean, we should be asking ourselves those questions, I think.

Yeah, yeah.

So back to how busy you are. And by the way, I want to open up for questions in just a minute, so I'll get to you in a sec. But you have been very busy. You guys have been growing like crazy and you're also expanding abroad. Can you talk a little bit about some of the challenges and some of the new things that you have going on on that front?

Yeah. So we're coming up on our five year birthday and we've been growing at about 350% annual growth year after year after year. And we're getting a big number. So that's a lot of growth in a short period of time. And so we, we want to make the Internet better. And the Internet never sleeps. And so that means that we have a lot of customers in North America, a lot of customers in Europe, and a lot of customers in Asia. And so we have an office in San Francisco, an office in London, and we just started opening up our Singapore office to help support those local markets. So we took team members from both San Francisco to London to go see the team there because we want to be one global company. And while there'll be regional differences, we really want to be one company around the world. And so when I think back, and I was like, I was a business school student six years ago and today I'm running this global company and we have offices in different continents around the world. It's pretty amazing that the Internet really has enabled so many different sorts of things. And so I'm really proud of, of our initiatives to open this office in Singapore. And as we've heard about a couple times the last two days, we're just getting started, which is the most exciting part.

Questions from the audience go to you first. Is there a microphone around? Can you just give us your name? Oh, sorry, Rick. We'll get to both of you.

Yeah, Rick Chaby with Interworks. Katya and Katrina, you both talked about content and the importance of that. And what I'm wondering is if we go back to Yesterday when Mike McNamara was talking about collaborative innovation, working with the suppliers upstream and downstream in design, are you doing that kind of collaboration of collaborative content, let's say, and demanding things of the your suppliers and the people that are part of your ecosystem?

We do. We launched a content collaboration platform recently. We've always had the majority of content about Birchbox on a monthly basis come in the form of UGC that lives on other platforms. Millions of views every single month, people unboxing their boxes and Instagram and all that. And so we formalized it, we really believe in it and we're allowing contributors to just contribute directly onto birchbox.com content. We ask them questions sometimes, sometimes they volunteer the topic.

Yeah, we do. Not as much purely on the content side, but we work a lot with our vendors. So we work with over 200 vendors and every single fix that we ship out. One of the most amazing parts is that we get this immense amount of feedback on what the client thought of every single piece. And that's really, really valuable for us, for our stylists, for our merchants, and ultimately for our vendors also. So we can work with our vendors so that they actually know when a blouse works or doesn't work, why, which really helps them in production cycles in the future. We actually can even do things. We've just started doing more of this, but we can mine the Pinterest boards of what our clients are pinning and then be able to use that to inform vendors about what our clients are looking for. So like last holiday we did these sequin elbow patch things that we saw all over Pinterest that we didn't have and we had vendors make that for us and it worked really well. So we're Doing more and more of kind of reaching, I guess, reaching back into the supply chain with what we know about our clients.

We do collaboration too. So we have 2 million websites and we basically crowdsource all of the security data across all of them. So if one of them gets attacked the same, we basically protect the other 1.9999 million sites against that same attack. And so it's basically crowdsourcing security, which is how we make the Internet better. You think about it like, of course that makes sense. Of course we should crowdsource that. We also collaborate with our vendors, just like Mike was talking about yesterday, where we're basically building hardware that's specially built for our needs to enable to build this better Internet. And so we work with all of the hardware manufacturers to special design hardware that'll work perfectly for our needs. And so lots of collaboration in all of our businesses. Lorna.

Hi, I'm Lorna Borenstein from Groker Question.

Particularly Katrina for you. Great to hear. You've got this massive 40 person data science group. Curious what percentage of them are women and curious of your female focused businesses, how many of your employees as a percentage are female?

So we have, we have over 2000 employees across multiple employee populations in our headquarters, which is about combining San Francisco and Austin. We're probably around 300 people and we are probably 60% women. I would guess our board is half women. Our management team is more than half women on our data science team. It's on our website so I could find it, but it's probably, it's a little bit, it's definitely less than half, but it's probably like 20, 20, 25 to 30% or so women, which for the industry honestly is pretty good. So I would absolutely love to see more women in data science, more women in engineering. We would love, love, love to see it. I think right now a lot of that effort really needs to go into encouraging women, encouraging girls really to pursue careers in stem. So I'm definitely a huge advocate of that and would love to see more of that. But we're proud of the number of women we're able to recruit at Stitch Fix. For sure.

We're almost out of time. Just one more real quick question.

Hi, I'm Brian Stengel with Perella Weinberg Partners. Hi, Katrina and Katya. This is a question for you. How do you think about as your businesses evolve working with other branded products versus creating a proprietary product of your own? Do you see that as part of the roadmap? We do, because I think You, Katrina, you've done some of this already, right?

Yeah, we do both. So we work with over 200 vendors and so the majority of our product is source from vendors that you might be able to find at other department stores. That being said, even with those vendors, we actually do a lot of exclusive product where we know specific things about what type of fit we're looking for. Denim with shorter inseams. And so a lot of times, even the product that we're working on with vendors is still going to be exclusive to Stitch Fix, even if it has a tag that says Splendid or mauvy on it. We do supplement what we do with the vendors with things that we create on our own. And a lot of that actually we use data to figure out where the opportunities are. So some easy examples we needed like an everyday work cardigan and we couldn't consistently get that from vendors when they're looking for newness every single season. So that's something where we wanted to develop and create the perfect cardigan and kind of have it evergreen in other cases.

Cardigans instead of dresses, by the way.

Because men care about cardigans. Men do wear cardigans.

Yeah, it's true.

Very similar to that. So we're a multi brand retailer, but we do work with brands and we use our data to inform them on launches. But also because we do access a unique customer, our sentiment is that every beauty retailer of all time has focused on the hyper beauty junkie and as a result, the beauty normal who is our core customer and where we focus is underserved. So we work with multiple brands to create product that we think appeal to her. We also supplement that with some brands that we own wholly but are not branded. Birchbox. And it's really great having the data to be able to identify trends and then having the scale to be able to get to the front of the lines to create product faster so we can do it in a quick way.

Well, we are out of time. I want to thank all three of you and hope to have you back next year so you can tell us about all of your investments that you've made. Right. Thank you so much.

Thank you.