Building a High Impact Social Enterprise over 20+ Years: Roberto Milk, CEO of NOVICA (Part 5)

Sramana Mitra: When 9/11 hit, you were still operating with just that $6 million in funding?

Roberto Milk: We had funding from National Geographic as well.

Sramana Mitra: What was the cash portion of that?

Roberto Milk: We don’t disclose that. It was cash and assets.

Sramana Mitra: In September 2001, you still had some capital that you’ve raised and you have revenues. Were you at breakeven or were you still losing money?

Roberto Milk: We were still losing money.

Sramana Mitra: But you had cash left from the funding that you did.

Roberto Milk: Yes, but we had to raise more at that point. We didn’t have enough funding to get us to break even.

Sramana Mitra: How did you raise money?

Roberto Milk: We were able to raise money through contacts. We had some funders in Europe who stepped up. We had a few angels that were also customers. 

Sramana Mitra: Are there any highlights during those five years of strategic moves that you made?

Roberto Milk: Those five years were really getting to profitability and figuring out a path to do that.

Sramana Mitra: What did you learn about merchandising, categories of merchandise, and price points that allowed you to do that? In any kind of retail business, that’s what drives profitability, right?

Roberto Milk: From a merchandising standpoint, we learned not to be too controlling and not to curate too much. The tendency is to come up with this beautiful collection that’s very specific. Customers really enjoy us for the variety. We have 75,000 products live at any given moment. To have broad variety is the secret to success.

Sramana Mitra: The price point is still $30 to $100.

Roberto Milk: The average order ended up around at $100. We were selling between $20 to $400.

Sramana Mitra: At the end of that five-year period, what kind of revenue levels did you get to?

Roberto Milk: We measure the amount sent to artists. In October of 2009, we achieved the milestone of sending $25 million to artisans. The annual revenues then were about $10 million. 

Sramana Mitra: $25 million sent to artisans over the years.

Roberto Milk: Yes.

Sramana Mitra: 2009 is another troubled period in the macroeconomic situation. Did that impact you?

Roberto Milk: We had gotten to a breakeven situation in that period. We had 150 people working with us around the world. The team was not small, but we were lean. That recession didn’t affect us as much. It just caused us to grow a little less fast, but we still had growth year over year.

Sramana Mitra: It took you 10 years to get to $10 million ARR.

Roberto Milk: Yes.

Sramana Mitra: What was the total amount of capital that you raised at this point?

Roberto Milk: Close to $20 million.

Sramana Mitra: Were your venture capitalists getting antsy?

Roberto Milk: No. We were one of the only operating companies alive in their portfolio. Because we were building a true core business, there was a high level of satisfaction with the way that we had not only survived the crisis but also achieved profitability. 

Sramana Mitra: The problem with the venture capital model is the way their funds are structured is, they’re trying to go from zero to $100 million in five to seven years. If that doesn’t happen, they get into territories where the fund length has expired.

It’s not like they don’t want to support their portfolio companies. They just have structural issues. Let’s go back to your story. In 2009, you had survived the financial crisis. You have reached breakeven. What happens next?

Roberto Milk: We partnered with Kiva to become one of the first non-traditional micro-financing institutions in their system. We began offering loans to artisans at 0% interest. We would get customers and lenders on Kiva to contribute to our artisan loans program. The artisans would then receive financing. We would receive the funds at 0% and we would pass it along.

That was very unusual in the Kiva model. Most of the MFIs working with Kiva needed to have an ROI in order to survive. For us, we just wanted to expand the capacity of artisans. We were thinking, first and foremost, about their ability to succeed on the retail front. 

Sramana Mitra: That’s wonderful.

Roberto Milk: Kiva backs the idea in a major way. They help us continue to fund the artisans. At the same time, we partnered with the grassroots business fund. It was a World Bank-affiliated entity. They gave us many grants to do specific projects related to artisan-capacity building whether it was building out jewelry programs in Africa or furniture construction programs in Peru.

We were able to fund capacity for artisans through micro-credit and through training programs. That gave us another five years of constant expansion for artisans. 

This segment is part 5 in the series : Building a High Impact Social Enterprise over 20+ Years: Roberto Milk, CEO of NOVICA
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