Thursday, 21 August 2014
Photos-- How This Man Built A $3M Business A Year After Four Years In Prison
Frederick Hutson is a man who sees business opportunities in everything. By his own admission, this doesn’t always work out for the best. Hutson spent over four years in prison after getting busted for opportunity he saw in drug trafficking, a huge market, and one that was as he saw it, ripe for disruption. Police busted him at his Vegas mail store, where he’d been reducing inefficiencies by rerouting marijuana through his Florida business via FedEx, US and DHL.
Hutson, who’d built several businesses before and after a stint in the Air Force, which he left with an honorable discharge, began meditating on new ideas soon after he started his 51-month sentence in 2007, aged 24. “I did my time that way,” he says. “While I was there I just saw how grossly inefficient the prison system was and there was just so many opportunities.”
A big gripe for the 2.3 million doing time in the US is keeping in touch with friends and family on the outside. There’s no internet in prison so all communication is through snail mail or the phone. Calls are often expensive and long distance. Relatives and friends, leading increasingly digitized lives, write less and don’t get around to sending photos for weeks on end.
“It was a pain point I experienced firsthand,” says Hutson. “I’m very close with my family and I knew they cared about me but even with knowing how much they cared about me they were still sometimes unable to send me photos.”
Transitioning from digital to analog is tough, says Hutson. It’s hard to sit down and write a letter now but simple to text or email. What if you created a website that printed out emails, texts or photos from your computer, Facebook or Instagram and mailed them for you in the plain white envelopes these institutions favored?
The idea for Pigeonly was born. Essentially, it’s a platform that centralizes the myriad state-level databases making it a quick search to find where an inmate is in the system – Hutson himself was moved eight times during his stay – as well as a way to communicate. “People get lost in the system all the time,” he explains. “We have attorneys contacting us trying to find their clients.”
Through its sub-brands, Fotopigeon, which sends digital prints to inmates and Telepigeon which lowers phone call rates through VoIP, Pigeonly is on track to be profitable on about $1 million in revenue in its first year following $2 million in seed financing from and Hutson’s Las Vegas-based team has jumped from two to twelve. Key to this was getting accepted to NewMe, a Sillicon Valley-based accelerator for underrepresented minorities. It was the only accelerator to accept Hutson, he says.
When he started as part of the winter 2013 cohort, he and his cofounder Alfonso Brooks had already launched a version of Pigeonly while Hutson was still in his halfway house. They’d quickly picked up 2,000 customers by directly mailing inmates touting their services.
“We identified 500 people and sent them greeting cards saying here’s a product people can use to send you photographs. Three or four days after our cards landed we started seeing people show up on our website creating accounts and sending photos so we kept doing that,” says Hutson.
At NewMe Hutson started re-orienting the business from a few services to a searchable platform and began taking meetings with investors. “In the very beginning I was hesitant to even talk about my background but the question would always come up, well how do you know?” he says.
NewMe’s founder Angela Benton gave Hutson some advice. “She said, look some people are not going to vibe with you and they’re not going to be able to get on board with what you’re doing – there’s going to be a block because you’ve been in prison and you don’t look like the typical person they invest in,” he remembers.
When he focused instead on the people who were open and understood that his background was why he knew this problem exists he started gaining ground. “A lot of times a thing that can be perceived as a weakness actually turn into the greatest strength and for me it was that. It actually became the reason people invested – because I’d been there, and I know and understand this market better than anybody else,” he says.
Still, fundraising was no cakewalk, he says. “It can be hard because as an entrepreneur you feel like it’s your baby and when you talk to someone about your baby and they go, no that’s whack I’m not interested you can’t take that personal, you have to be able to talk to the next person with the same intensity and fervor,” he says.
Convincing investors to write a check for the first million was the hardest. “I probably talked to about 60 investors, and in our seed round we had six, so that gives you an idea of how many no’s you had to get to the six yes’s,” he says.
Hutson thinks prisons are a natural pool of entrepreneurs. “When you take away that seven percent or so that did something violent that people are afraid of, people who we need to have locked up, most of the other guys were selling drugs or involved in some kind of scam or did some kind of wire fraud, or white collar crime that was motivated by finances,” he says. “So you just really got the business model wrong, you got the product wrong, the goal was wrong but if you can apply that same drive and bottom line principles to something positive then now you have a viable business.”
He learned a lot from his fellow inmates inside. “In some facilities that the classes they have aren’t taught by people outside, they’re taught by other inmates,” he says. “So you’ll have a guy who has a white collar crime who might have embezzled 40 million dollars and he knows something about business because he ran some listed company and now he has a 36 month federal sentence for tax evasion – he’ll teach a class on how to form an LLP or start a balance sheet.”
Still, getting prisoners ready to reenter society isn’t a big priority, thinks Hutson. “Most institutions are geared around containment. Most institutions are based around you don’t leave and you guys don’t kill each other while you don’t leave – that’s their priority number one.”
With reoffending rife – one study tracked 404,638 prisoners in 30 states after their release from prison in 2005 and found 68% were rearrested within three years – some organizations are already turning to entrepreneurship as a way forward. For example, the Houston-TX-based Prison Entrepreneurship Program, which trains around 250 prisoners a year in launching a business says instances of inmates reoffending once they’ve completed the course is only 5%.