Jong Lee is Managing Director, RGL Holdings, Ltd. and has spent over 15 years building and reinventing businesses as principal, executive, investor, banker and lawyer in the United States, Japan, South Korea and greater China. Jong specializes in technology, media, social enterprise, traditional industries and special purpose real estate.
Current and prior portfolio companies include Nexon, Starbucks Beijing, MTV Japan, Good Morning Securities (Korea), SMIC (China), Bonham Strand, Hong Kong Commons and LotsofButtons.com. Jong leads RGL’s private equity and venture group and co-manages its real estate portfolio. His current areas of focus include early stage technology companies, social enterprises, education and business turnarounds. In Hong Kong, Jong has led RGL’s founding of Hong Kong Commons (www.hkcommons.com), a leading co-work and incubator platform, Bonham Strand (www.bonhamstrand.hk), a bespoke apparel social enterprise reaching out to disenfranchised master tailors, displaced garment workers and youth fighting drug addiction, Lots of Buttons, the world’s largest online button and crafts retailer (www.lotsofbuttons.com), and steak delivery service GoodChow.hk (www.goodchow.hk). He also recently partnered with H&Q Asia Pacific, a leading Pacific Rim private equity firm with over $3 billion under management, to help turn around and exit an investment in a Hong Kong listed supply chain management company.
Previously, Jong was an investment executive with H&Q Asia Pacific investing in and managing portfolio companies in China, Japan, Korea and the US. Prior to H&Q Asia Pacific, Jong was an investment banker specializing in technology private equity at UBS and a corporate attorney with Simpson Thacher & Bartlett (New York) where he specialized in large leveraged buy-out and private equity transactions for clients including KKR, Blackstone and JP Morgan. Jong earned his Juris Doctor degree from Columbia University where he was a Harlan Fiske Stone Scholar and graduated with honors from the Columbia University Parker School of International Law. Jong graduated with honors from the University of Pennsylvania with degrees in Bioengineering and Political Science. Jong is co-curator of TEDx Hong Kong and TEDx Hong Kong Education and is an Adjunct Assistant Professor on business reinvention, technology and private equity at HK Poly University.
Today, the Asian Entrepreneur is here to talk to Jong about Lotsofbuttons.com.
What exactly is Lots of buttons ?
Lotsofbuttons.com is the largest online retailer and wholesaler of buttons, charms and ribbons. We provide the greatest selection, best prices and easiest way to select and purchase exactly what you need for your crafts, projects, mending or other activities. We provide a welcome alternative to the traditional bad choices our customers typically face:
1) bags of cheap ugly buttons with few choices from Wal-Mart,
2) a choice of hundreds of buttons at very high full retail prices with little inventory,
3) “dumpster diving” in garment district button wholesale shops if one is “lucky” enough to be in a garment industry city; for example, New York or Los Angeles.
Our base in Hong Kong provides competitive advantage versus peers in the United States and China. We are expanding into complimentary product lines and our wholesale B2B business.
LotsofButtons.com recently won Startup Arena in Singapore and was the only Hong Kong company admitted into the competition.
How did you come up with the idea of Lots of buttons?
I almost purchased a large messy wholesale button business in downtown LA a few years ago and was acutely aware of the need for a better retail and wholesale solution. An opportunity came up to launch an ecommerce site to address this need so I went for it.
Could you walk us through the process of starting up Lots of buttons?
Two years ago, I met someone from the local startup community whose startup (completely different business idea) was not working out. I offered to an alternative approach with my idea and resources combined with him and the domain he was using, www.lotsofbuttons.com. I guess you could call it a restart.
How has it been like managing the business since?
It was a really steep learning curve as none of us are from the trims business. I had some trims exposure from the due diligence we did while almost buying the wholesale button business in LA and also from my time trying to turn around a publicly listed sourcing and supply chain company but nothing sufficient to run an actual button and trims business. We also didn’t have a ton of experience with the DIY largely U.S. female target customer base (almost all of the folks who were part of the starting team were guys!). I tried to use Lotsofbuttons.com as a way to get a couple of young guys into something with real potential and I tried my best to delegate and let them learn the hard way. Accordingly, we learned a lot of lessons by making pretty much every mistake in the book.
Several months ago, the young man I co-founded the business with had to leave for health related reasons so we bought his shares back and have been moving forward with a new and expanded team.
Things have improved substantially month after month after learning from our lessons, having complete control of operations and being more hands on.
Did you find anything particularly difficult during the startup? How did you overcome it?
Other than being almost clueless about what we were getting into? I started with an idea that to me made a lot of sense on paper and common sense but no real experience in the specific sector or the target customer. The team was tiny and 100% of the funding was in-house on a month to month basis as if this was a pilot project that we threw against the wall to see if it would stick. This is not the best way to do a startup! If this was an arm’s length passive venture deal, I would have demanded full time commitment from a solid team of folks with real experience and I think that would have made things much better faster.
All startups are difficult and entrepreneurs encounter manifold surprises and unexpected challenges and are forced to learn, adapt, rethink and compromise in order to survive and hopefully thrive. Lotsofbuttons.com is no different.
Practically speaking, think about the insanity of what we do! We offer thousands and thousands and thousands of buttons for sale online. We let folks buy a single button to be shipped thousands of miles way. As you can imagine, sourcing and merchandising this sort of business is extraordinary and we are lucky to have some great people with us now. We as a team needed to learn and understand what we were offering and where everything came from. We need to know where to source these things every day and what to do when hundreds of styles are constantly going out of stock. Easier said than done! We had to experiment with a number of sourcing, supply chain and logistics strategies with a number of merchandising and operations staff before things got better. Things are much better now but we have a long way to go.
How was the initial reaction from the consumers? Did they buy into the product/service?
Great question! I think people were very skeptical at first. This is a very traditional business where folks buy in brick and mortar settings or order from paper catalogues. We tried everything – adwords, bloggers, direct mail, sponsoring churches and drama clubs, etc… you name it. They also were surprised by our product range, pricing and organization. If you check online, you’ll see there aren’t a lot of other sites that try to take the button business so seriously, I must be missing something. In any event, we had a lot of “it’s too good to be true” resistance for months even when bloggers tried the service and wrote positive reviews about us. I jumped up and down like crazy people when the first order came in over a year ago. I think it was for U.S. $14.35!
Thankfully, our target customers have started to come around and have become more comfortable with buying their buttons and trim from an online retailer. We have been open for more than a year, have moved onto a new much better eCommerce platform and our growth comes from new organic customers and the increasing number of repeat customers. As a result, traffic is growing as are revenues. They are both still very modest but heading in the right direction.
Do you face a lot of competition in this industry? What is your strategy against your competition?
Yes, plenty. Fortunately for us, most of our competition comes from brick and mortar retailers, big and small. Most of the online vendors are either in the US or Europe and are online extensions of brick and mortar retailers or cheap-buttons-by-the-bags guys from China. Our strategy is to expand both our Hong Kong and US teams to continue being 100% western to our customers and 100% resourceful and experienced Hong Kong merchandiser when working with our suppliers and manufacturers. We also plan on increasing our button range, offering custom buttons, seasonal buttons and more complimentary product ranges such as beads, gems, ribbons and fasteners. Our business is busy enough for us to also start working with local social enterprises and charities to offer the products they make to fund their activities.
Finally, we have some “stealth mode” projects in the works that we hope to launch in 2014.
What can you tell us about the industry? Have you developed any industry insights that you could share?
The industry is as large as we thought it was when we started the business (about $1 billion USD +) and it is very very fragmented, traditional and slow moving. We’ve accumulated some experience in reinventing traditional businesses like buttons. For example, we also started bespoke suit social enterprise www.bonhamstrand.hk and one thing we’ve had to learn is that our business is not the same as selling a spare smartphone battery on Amazon and that we have to be very patient and try lots of things to see what works, with whom and when. As traditional as the business and our customers may be, we also have learned that we still have to be a 100% online retailer and we’ve had to get much better with our eDMs, marketing campaigns, button merchandising, web site layout, and mobile versions order fulfillment times.
One interesting thing I’ve come to believe is that after generations of business as usual in this industry, I actually think the trims and fastener B2C and B2B business has the potential to rapidly develop and evolve to provide much better and compelling value to the customer. The current prevailing approach is simply too inefficient and requires way too much isolated inventory. For the longest time, buttons were not taken seriously as they weren’t a material cost relative to the cost of a coat or pair of pants and service and choice were not areas of focus. This is no longer necessarily true and our customers appreciate the superior value and service we provide them.
How have you managed to stay relevant in this industry?
First, by still being in business! Thankfully, we’ve been live for longer than a year now and we are growing. I think it is essential to never rest on one’s laurels or to stop innovating. We need to try a million other things, learn the right lessons from our mistakes and apply these learnings quickly and then reassess. I’m sure the online competition will grow which means we will need to continue to work harder to strengthen our customer relationships and differentiate ourselves.
What are your future plans for Lots of buttons?
Over the next 12 months we will have to make a decision as to whether we will try and grow slowly and organically to hold for the long term as a cashflow positive business targeting 1,000,000 uniques a month or whether we find opportunities and the resources to grow and acquire more like a Silicon Valley startup with far bigger ambitions and valuations. In the latter case, we will need to greatly expand our team, product offerings, services and we will probably have to consider acquiring complimentary businesses and building affiliate networks. In both cases, I would very much like to use the platform we’ve created to offer a way for social enterprises from around the world to offer their products to fund their initiatives and to offer what we sell for free to communities and organizations in need. We support local church groups, drama clubs and special needs associations that use buttons and trim for projects and therapy.
If you could start all over again, would you change anything about your approach? If so, what?
I would probably insist that I practice what I preach (we run the largest privately funded accelerator & co-work space in Hong Kong – Hong Kong Commons): Go all in or don’t go in and view time as your enemy. I think the market is big enough and the potential is such that Lotsofbuttons.com deserved to be treated like a real bona fide startup that should have had more funding and a very strong starting team instead of the pet project, pilot test, internally funded jobs program approach we took with what I think is a pretty good idea.
I don’t know most folks who would invest in a startup whose founders are not 100% committed and full time and who aren’t pushing pushing pushing every day and we share that sentiment to entrepreneurs all of the time. I would have followed my own advice and I think we’d be doing even better today.
What do you think about startups in Asia?
We are just finishing up StartmeupHK Week in Hong Kong and it is amazing how much the startup scene has grown just in Hong Kong. I think it is reflection of growth, energy and interest throughout the region. Over the next couple of years, I think you will start seeing some good sized exits and IPOs for Asian startups and that will accelerate things even more. All of this is reinforced by the inflow of human capital and creativity from all corners of the world, especially Europe, as Asia and its growing economies offer greater opportunities than many other regions in the world.
I think there are five “Asias” when it comes to your question: China, India, Korea, Japan and the rest. I don’t want to pretend to know much about the Indian market as we aren’t focused there. I think China will continue to determine its own destiny for better or worse and that most of the bigger startups in China will continue to focus on their huge domestic market. Korea and Japan have had decades more experience in the startup / entrepreneur space with mixed success. Each has had a number of great successes in specific verticals.
What I’m focused on and excited about is the rest, especially Hong Kong. We’ve been investing in and helping build the startup community in Hong Kong for almost 3 years now. We run Hong Kong Commons, TEDx Hong Kong, TEDx Hong Kong Education and have started or invested in a number of startups in Hong Kong. I firmly believe that startups benefit the most from the “Three Freedoms”: the freedom to move people, money and ideas. I don’t think there is a single place in the world that can hold a candle to Hong Kong on those terms. Like many places in Asia, the cost of starting a business in Hong Kong is substantially less than the US or Europe and yet you can target the same customer and comparable revenues depending on the business you have.
All of the activity hasn’t gone unnoticed by investors and service providers. We’ve just recently announced a partnership with Ace & Company to be an incubator and accelerator partner for their new US$25 million angel fund. We are working with them to open their Asia office in Hong Kong. There are now dozens of co-work spaces in Hong Kong. Yes, Hong Kong is a little behind but catching up quickly!. Over the next few years, I think the funding an startup services eco-system will continue to grow to meet demand.
What are some personal principles or personal values that guide you and your career?
As someone who has done many many dumb things in his life, who has invested and asked others to invest in deals that have not turned out as expected, I look back over the past decade trying to make sense of the good and bad to identify some recurring themes.
I’ve always been driven by macro followed by critical analysis before actually starting a business. That doesn’t mean the process has to take a long time but I believe you have to get a good sense of the macro and be critical upfront. I studied bioengineering and political science as an undergrad and then law school so perhaps my education has had something to do with it.
I think it is important to honor your partners and investors by working your tail off on something until there is nothing more you can do, because the business has failed or because it is successful whether or not your partners and investors care or appreciate it.
I’ve always been perhaps too willing to enter the arena of ideas. Ideas matter, smart ideas matter a lot. I agree with the 1% inspiration 99% perspiration notion but the 99% perspiration has no direction without the 1%. Unfortunately, the success of the venture is very much dependent on 99% and good timing!
Finally, whether I like it or not, I’m pretty old school Korean and Koreans are famous for jumping on grenades.
What is your definition of success?
I think success for me is a three stage process. First, I have to be proud and satisfied with what I’ve done and am doing. Second, my boss and wife, Sonia and my kids, have to think something we are doing is cool. Third, success is defined as third parties and the market acknowledging that what we are working on is meaningful numerically and financially.
Why did you decide to become an entrepreneur?
Tim Draper gave a talk at the StartmeupHK Venture Forum yesterday and he mentioned a term that I love a lot. I really love the idea of “Starting From Zero”. It is quite liberating and exciting and allows you to do and think in ways not traditionally possible. I’ve also worked in large and more formal organizations and it became very clear to me that my personality lends itself to doing things dynamically where I have an opportunity to determine my own destiny, for better or worse. I also love being contrarian and taking the road less traveled which is much harder to do in someone else’s company.
What do you think are the most important things entrepreneurs should keep in mind?
Being an entrepreneur is really really really hard and when things aren’t going well, it is a very lonely existence. That being said, there are few more fulfilling experiences than that first dollar of revenue, that first dollar of profit and your first exit hitting your bank account after all of that hard work. Hang in there, be humble enough to challenge your assumptions and adapt and really focus on the important things that are going to make a difference in your business. Finally, try your very best to keep smart and experienced people around you. Mentors, advisors, friends, colleagues… That is one of the things that makes the Silicon Valley so successful. That being said, there are a lot of people who want to play such roles for a little piece of your company who may not be as helpful as you hope – be careful.
In your opinion, what are the keys to entrepreneurial success?
You have to be mentally ready for at least one year of hard going on one business. You should generally have at least one partner. Don’t get hung up on being 100% original as everything is derivative. I said this before but it is essential for you to work with as many super smart and driven and trustworthy people as possible. Your business will suffer if you compromise on these qualities, trust me. Finally, being able to identify “luck” when you see it.
Any parting words of wisdom for entrepreneurs out there?
I tell many local kids in Hong Kong to think rationally about their time and future. I joke with them that if they listen to 100% of what their loving mother tells them and just study, memorize, take no risk, get a stable job, that mathematically it is highly unlikely they will ever achieve the financial wealth sufficient to realize whatever life they envision for themselves. The real estate, BRIC, banker, lawyer bubbles are deflating. Makers matter. Risk takers matter and they are increasingly being better compensated for that risk. More and more companies; potentially, future employers, respect you if you took risk and learned from starting a new company whether it works or not. With these macro realities, what do you really have to lose?
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