John Henry, 23, is running a non-profit business accelerator in New York City called Cofound Harlem. It’s free for companies who make it into the program. They get mentoring and $50,000 worth of in-kind services like legal and accounting help, email marketing tools and cloud storage, in exchange for a four-year commitment to remain in Harlem. Three of the four companies that came through the program early this year are still in business, including Bandhub, a music collaboration site with 80,000 users that has raised $500,000. Henry describes how he got his start in business as an 18-year-old doorman, how he sold his first company, and some of the entrepreneurship lessons he’ll be sharing in a new podcast.
Susan Adams: Tell me about your background.
John Henry: My parents come from the Dominican Republic. My mother was a custodian and my father was a presser at a dry cleaner. They taught me that the way you do anything is the way you do everything. They took an enormous amount of pride in what they did, even though my mom was cleaning toilets.
Adams: How did you come to start your own business?
Henry: I moved to New York from Florida to become a jazz musician and was working as a doorman while going to school full time. I was the best doorman you could have. I learned tenants’ names, their kids’ names and all their preferences. The real currency was not the $14 an hour I was making but the value of the relationships. A resident in the building offered me my first business opportunity.
Adams: What deal did you strike with him?
Henry: He had a chain of 15 dry cleaners. He said you seem like a smart kid. We’ll clean any clothes you bring us at a wholesale price and you can charge the market rate. He’d charge me $3 to clean a jacket and I’d charge $12.
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Adams: How did you turn that into a business?
Henry: I connected with the people I knew best, other doormen. I’d slip them $20 for every customer they’d give me. I hit the real gold mine when another resident heard I was doing dry cleaning. He had been in the film and television industry for the past 25 years but he had yet to find a dry cleaner who could pick up their cleaning at 3am. That same night he took me to the set of The Wolf of Wall Street. At first they didn’t want to entrust the entire wardrobe on this multimillion production to an 18-year-old. After that he made introductions to Boardwalk Empire, Law & Order, Ninja Turtles II, and it kept going from there.
Adams: How much money were you making?
Henry: We were doing revenue of $100,000 a month, with healthy margins. Coming from a household where my parents’ total income was $25,000 a year, that was something. We built a team of 15 people and we rolled out dog walking and housekeeping. I also brought in a close friend who made a web app so customers could order their dry cleaning and home services on demand.
Adams: What made you sell the company?
Henry: I realized early on that my passion was not dry cleaning. We were using different vendors. One was acquired by a large private company. They made an offer to acquire us for around $1 million and we sold in Dec. 2014. I had bootstrapped the company and owned 100%.
Adams: How did you get from there to building a startup accelerator in Harlem?
Henry: Cofound Harlem was initially going to be a once-a-month meetup for productive, thoughtful people in Harlem who were interested in startups. We weren’t sure what it would be. But then I sold my company.
Adams: How did you decide on your structure?
Henry: I had lunch with the cofounders of a big incubator called Grand Central Tech. They give companies free space for a year and they take zero equity. They just want businesses to make a commitment to stay in the Milstein building. They serve as a feeder for the building. We thought it would be interesting if we could be a feeder to the Harlem community. We take zero equity in exchange for a commitment to remain in Harlem for four years.
Adams: What benefits do you give the companies in Cofound Harlem?
Henry: We don’t give them cash. We give them free space and resources. They get $50,000 in kind. That includes $10,000 worth of legal and accounting work over their nine months in the accelerator, $5,000 a month of email marketing credits from a company called SendGrind, $10,000 a month of cloud hosting from SoftLayer by IBM. We also have mentors.
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Adams: Where did you find your mentors?
Henry: I used to doorman for a lot of them, including the founders of Rap Genius, who raised $40 million for their company, which crowdsources annotations to songs. We also had mentors from Google and Quora, among others.
Adams: How are you making a living?
Adams: Tell me about your podcast.
Henry: I was approached by Gimlet Creative to be the host of Open for Business, a podcast they’re doing in collaboration with eBay, about building a business from the ground up.
Adams: What are some entrepreneurship lessons you’re sharing on the show?
Henry: Pricing. The majority of entrepreneurs price based on cost. They figure out what the product will cost and they add a desired margin. But the most successful companies like Starbucks and Apple do value-based pricing. Starbucks focused on the psychological need people have to buy coffee and the environment they provide. They can charge $4 for a latte.
Adams: What’s another lesson?
Henry: Hiring. You should not rely entirely on your gut to hire people. As an entrepreneur you’re relying on your gut a lot. I did that and I made a lot of bad hires. Just having a process for hiring can bump up your success rate by 40%. For example, you should ask the same 10 questions of everyone. Beware of hiring people who remind you of you. That can introduce a lot of sameness and groupthink, which creates weakness in your company. It’s more important to assess their attitude, disposition toward work and their skill level.
Adams: Can you share a lesson from a failed business that came through Cofound Harlem?
Henry: A company called Localtarian offered a platform to buy home-cooked meals from cooks in your area. They were getting orders and growing. Their issue was execution. They had won second place in a business plan competition at City College. But you have to be willing to put in a gut-wrenching number of hours. Their momentum slowed. It’s a tough industry, and they were joking around too much. They were treating it like a school project. Eventually one of the cofounders quit.
Adams: You say you want to revitalize Harlem but aren’t you accelerating gentrification and making it tough for long-time residents to afford to stay there?
Henry: I suppose so, yes. But longtime natives who wouldn’t have been exposed to these types of startups can now engage in these conversations. We also have internal quotas. It’s not a hard number but we want 75% of our entrepreneurs to be non-white.
Adams: Where do you want to be in five years?
Henry: I want to do another startup. I’m also running a real estate project called AREA with a powerhouse in New York City technology, David Rose. He has an accelerator that invests $50,000 in cash into promising real estate companies. We just announced seven companies we’ll be investing in.
Adams: Are you getting a salary?
Henry: Yes, it’s a nice amount.
