For many entrepreneurs, that nauseating moment arrives - often after considerable investment of hours and money - when it becomes apparent that their business ideas just aren't going to work.
Some ventures go aground. Others figure out a way to change course and right themselves. That's what MilkCrate LLC did.
For Morgan Berman, CEO and founder of the Philadelphia start-up launched in 2014 to help sustainability-oriented consumers find like-minded businesses through a free app, the moment came more than a year ago.
"I had some really wonderful advisers giving me some tough love," Berman recalled.
Among the roughest messages she received: "You can't sell [to investors] what you hope to have in the future." MilkCrate had hoped to make money by selling advertising space on its site, whose list had grown over the years to nearly 10,000 businesses nationwide, about 3,000 of them in Philadelphia.
But ad revenue wasn't pouring in. On top of that, app users called for "a more guided experience, and they wanted to be challenged on taking actions, and they wanted to be rewarded for it with points." Which sounded great, except for one problem, Berman said: "We weren't exactly sure how to afford all that."
The solution for sustaining MilkCrate itself? Revenue sources that also could benefit from its technology - a shift in approach that's beginning to show results.
Berman found research that 75 percent of S&P 500 companies were creating sustainability reports and citing four common challenges: tracking and reporting, engaging employees, insufficient budgets, and staff size.
If MilkCrate gave users the experience they wanted, she realized - challenging them to eat less meat, or sign up for a bike-share program, or do some volunteer work - it would help companies build employee engagement in socially responsible initiatives. And, through MilkCrate's platform, the companies could then track those efforts to measure their impact.
"By giving our users what they wanted, we could fill this need in the corporate and sustainability space," Berman hypothesized.
Meetings with "dozens and dozens" of potential customers yielded much enthusiastic feedback - but little else. "They would say, 'This sounds great. Let us know when you build it, when someone pays for it, and if it worked,' " said Berman, 31, of Center City, one of two full-time MilkCrate employees.
Then came a break: Philadelphia University, an early adapter on sustainability, became the first paying client for the new MilkCrate for Communities. A five-week trial program in the fall garnered what Berman called a better-than-expected participation rate: Sixty students from a designated pool of 170.
Through environmentally sensitive activities including walking/biking, using a reusable coffee mug, and doing only full loads of laundry, students earned a total 1,078 points, with cash prizes awarded to the top point earner and two others chosen through a lottery.
Their feedback is guiding the next version of the app, Berman said. Students suggested a function that reminds app users to log in when they patronize a green business.
They also asked MilkCrate to make more personalized activity suggestions based on user profiles, Berman said. "A not-too-complex intake process to get to know you" is being added, she noted, along with a function to track volunteering efforts. Philadelphia University is going to expand the program campus-wide in the spring.
“The pilot was integrated into our classes and student USGBC [U.S. Green Building Council] chapter, and it was exciting to see how a well-designed app can raise the way students think about their everyday choices,” said Rob Fleming, architect and director of the university's master’s program in sustainable design. “MilkCrate for Communities has great potential because it targets the culture of an organization by helping to create a community of like-minded individuals who can leverage their impact on the world."
In the spring, Comcast Corp., the city's biggest publicly traded company, will begin using MilkCrate for six months to engage a portion of its local workforce in sustainability initiatives and track those efforts. Berman called it an opportunity "as significant as you can imagine, and more so."
"To have the biggest corporation in Philadelphia that also happens to be the biggest tech company say, 'Your technology is going to solve a pain point for us,' that's so incredibly validating," she said.
Comcast is just as thrilled, Susan Jin Davis, the company's chief sustainability officer, said in remarks at a candlelit party Jan. 12 at MilkCrate's offices at Benjamin's Desk in the Curtis Center. The event was to mark the one-year anniversary of MilkCrate's business pivot, and to celebrate securing Comcast as a client. Neither would disclose the dollar value of the deal.
Comcast employees "are very passionate about making a positive impact on the communities in which they live and work. They drive us to do better as a company and as a corporate citizen," Davis told a few dozen party guests, including investors and others working in sustainability.
By helping companies understand their social impact, Berman is helping "change the face of business," said John Moore, managing partner of Robin Hood Ventures, president of Investor's Circle, and executive chair of the steering committee of Impact PHL, a nonprofit dedicated to building the region's impact economy that launched in July. He is also an investor in MilkCrate.
Calling it "a great local company," though not one of MilkCrate's clients, is Dave Stangis, vice president, corporate responsibility and sustainability, at Campbell Soup Co.
Measuring a company's social impact "is not only important to build a narrative in a company, it also helps you outline your priorities to suppliers and the community," Stangis said. "There's lots of ways the measurement adds value."
At Campbell, that includes sponsoring programs in Camden to improve the eating habits and, consequently, the health of young people, along with reducing the company's water use, greenhouse-gas emissions, and overall environmental footprint wherever it does business.
Companies are increasingly finding such commitments integral to recruiting employees, millennials in particular, Stangis said: "They really are interested in coming to work for companies with a purpose, with sustainability at its core."
In Philadelphia, there are financial incentives for achieving such goals, including qualifying for a sustainable-business tax credit, applied against the city's Business Income and Receipts Tax liability, Berman said.
Finding even more lures is a goal at MilkCrate.
"We're all about figuring out the right carrot to help people get excited to grow their impact," Berman said.