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Episode
90

Roberto Milk

Co-Founder & CEO of NOVICA

Ep
90

Changing The Lives Of Artisans - Roberto Milk of Novica

Dec 21, 2021
With
Roberto Milk
50:50

Changing The Lives Of Artisans - Roberto Milk of Novica

In this world of mass-produced items and fashion, here is Novica, an impact marketplace dedicated to showcasing unique home decor, jewelry, clothing, and gifts handmade by some of the most skilled artisans all over the world. Founded in 1999 by Roberto Milk, his then-girlfriend and now-wife, and his mother-in-law, Novica empowers artisans by keeping their tradition and culture alive.


Inspired by Robert’s childhood where he loved watching National Geographic and got to travel and see the arts and crafts made by artisans in the places he visited, Novica was created. And eventually, companies like National Geographic themselves, the World Bank, and Scripps Ventures saw the positive impact of what Novica were doing and decided to fund them. Despite industry experts telling them they wouldn’t be successful, they managed to prove those people wrong.  


Fast forward to the present, Roberto shares the many challenges they faced working as a dot-com startup at a time when e-commerce wasn’t even a thing yet and how they overcame those and managed to rake in $111 million dollars in sales purely for their artisans. Roberto shares that they owe the success of Novica to the fact that they are, first and foremost, artisan-focused and customer-focused. Ultimately, there are many takeaways from this interview with Roberto.


Roberto’s key lessons and quotes from this episode were:

  • “The whole import/export for artisans is broken. It doesn't work. We have to reinvent it.” (17:48)
  • “This is a mission-driven company at the very root. Artisans can charge more. Customers pay less. We cut out all the middlemen.” (18:16)
  • “We're just thinking about customer first, like how do we provide an amazing experience for the customer and yet make it amazing for the artisan?” (24:11)
  • “We want the artisan to feel like a king or queen.” (28:13)
  • “Happy artisans, happy customers, and spreading global happiness” (29:24)
  • “The purer the business, the less friction, the less touch, the better.” (41:11)
  • “There is so much of a reduction in individual culture, language, traditions… part of the role that we want to play is keeping those traditions alive around the world, celebrating the master women and men that make these items, the time-honored techniques.” (48:49)

In this episode, we also talked about:

  • How Novica was created (3:40)
  • The partnership with National Geographic (12:03)
  • Choosing the right business model for Novica (16:19)
  • Lessons learned in 20+ years of being in business (19:45)
  • How Novica remains mission-driven yet profitable (30:12)
  • Artisans are in control (35:47)
  • Novica as a family business (44:05)
  • The world in 10 years if Novica succeeds in their mission (47:06)

Transcript of the episode

Maiko Schaffrath  00:02

You are listening to Impact Hustlers, and I am your host, Maiko Schaffrath. I have made it my mission to inspire the next generation of entrepreneurs to solve some of the world's biggest social and environmental problems. And for this reason, I am speaking to some of the best entrepreneurs out there who are solving problems such as food waste, climate change, poverty, and homelessness. My goal is that Impact Hustlers will inspire you, either by starting an impact business yourself, by joining the team of one, or by taking a small step, whatever that may be, towards being part of the solution to the world's biggest problems. In today's episode, I speak to Roberto Milk, the CEO and co-founder of Novica, one of the world's biggest marketplaces for artisans from all over the world to sell their handmade products. With most artisans based in developing countries, Novica has actually sold more than 100 million worth of artisan products on its platform. That's quite a number if you look at any platforms in that space, and Novica is really not a startup anymore. I think we can agree on that, but it has a really interesting journey. You started in 1999. I think that there's a lot of big companies that haven't been around at that time. Google was a small startup. Facebook wasn't around. Amazon was around for a few years, but wasn't close to what they're doing. So, you were really quite early in looking at commerce and how it can change lives and people, and it's really great to have you on the show, Roberto. Thanks for joining me.


Roberto Milk  01:57

Oh, it's such a pleasure to be here. I was just saying I love the Impact Hustlers name. It's so great. I guess, going to 1999, that makes me an OG impact hustler. We really do date back. It's been quite a journey, and we've survived various financial downturns in the markets and everything, and we're alive and thriving and making a huge impact in the lives of artisans, so [I'm] so happy to be here. So happy to share the story.


Maiko Schaffrath  02:27

I love that. Yeah, I was just recording an episode with Jessica Jackley, the co-founder of Kiva.org. She's now launching a new business called Alltruists, and I was already speaking with her like she was part of an early wave of social entrepreneurs with Kiva. They started in 2005, so you're way early. You're really the pioneers that even built the baseline, so that's super good.


Roberto Milk  02:58

It survived the one less dot-com crash than we did. Crazy. I remember when Kiva launched in 2005, I guess, around 2005. I love what they've done, and we've partnered with them over the years. They're just fantastic and Jessica is amazing, yeah.


Maiko Schaffrath  03:13

Amazing. Let's talk about your journey, your entrepreneurial journey and how everything started with Novica. So, take us back to the year 1999. What situation were you personally in in terms of what were you doing in your life? And then, why did you decide to launch Novica and what was the problem you were trying to solve?


Roberto Milk  03:34

Oh, I actually have to take you back even further. 


Maiko Schaffrath  03:37

Okay, yeah. 


Roberto Milk  03:40

We're going to go back. So, to 1995, okay, I was a senior at Stanford, not sure what I was going to do. I'm looking at law school. I loved my time there and I was like, "What's next?" And then, this idea came and my girlfriend, who later became my wife, with my girlfriend, I shared this idea that came, actually, out of a Portuguese class that I was taking. Because she's Brazilian, and I was trying to learn Portuguese, and so I took this class and the teachers from Brazil were saying, "There's got to be a better way for artisans in places like Brazil to reach the market, because I saw some Brazilian handcrafted goods in San Francisco last weekend and they were so expensive, and I know those artisans weren't getting hardly any of that retail price," and so it was like a lightbulb moment, and there's a deeper part of that story. But really, that's when it all came together. I talked to my girlfriend. She's like, "You have to talk to my mom." I'm like, "Talk to your mom? I'm not sure about it." She's like, "Yeah, she's with the United Nations," and she was an officer with the UN. She had just actually been negotiating the Peace Accords in El Salvador. She said, "You've got to talk to her and tell her about this idea," and so I very nervously called her up and she said, "I like this so much that if you guys actually raise money for it, I'll leave my job with the UN and join you guys," and I said, "Wow, oh my god. This is for real. I'm a college senior, and I'm recruiting my girlfriend's mom to join us," and she was really into it. And then, there was a whole group of us there that we discussed it and we said, "Let's do this," and then we all incubated it for four years. I went into investment banking to basically learn how to raise money and get skills and I did that. And then, in 1999, it was the right time, and we raised the seed round from a lot of the folks that I knew in investment banking, including Michael Burns, who became our chairman. He was the head of our West Coast office and is fantastic. Then, we got to going in '99, and it was off to the races from there, really figuring out a whole new way for artisans to reach the world market.


Maiko Schaffrath  05:57

Yeah. So, was it a typical dot-com kind of startup at that stage where you were like, fully online, "We need to provide some sort of e-commerce angle on this"? Was that straight away the idea or did it change over the years?


Roberto Milk  06:14

Oh, no, that was the idea. Not only was that the idea, but we wanted to have offices where the artisans were. And so, we opened offices in Peru, my mother's home country, where I had spent a lot of time, and I had lots of family there, so they started the office out of my cousin's garage, and my buddy, my roommate from Stanford, his grandmother's garage in Mexico, and our family in Brazil, and a friend of mine in Ghana, and we started the offices there, and it was virtual from the very beginning in terms of setting up an online system for the artisans. So many industry experts said, "This is never going to work. This is never going to work. You have to bring in items and containers and send buyers. Why have these offices?" We heard so many negative comments early on from industry experts, really, trying to just discourage us from doing what we were doing, but we were young and stupid, and we just did it, and it was great. It was the best thing ever, not listening to the so-called industry experts. We made it happen, basically, servicing artisans in very remote areas and getting their items online and shipping items from all around the world to customers.


Maiko Schaffrath  07:34

Let's zoom in on that. If you look at digital-first startups, having a lot of infrastructure is always a little bit of a thing that investors don't really like if it's not really necessary. That's probably why a lot of people were saying, "Why are you opening these offices? Let's just focus online." In the US, just do that. But, let's zoom in on that issue. What did actually help you achieve by being in those markets, opening up offices? How did that unlock some opportunities for Novica going forward?


Roberto Milk  08:11

Well, I think it's because it was 100% authentic from the very beginning. We were mission-driven, and that goes back to just the way I was raised. My parents were both teachers, and we would take these extended summer vacations where we would just drive around different parts of the world, Peru, Mexico, wherever we were going, and my brother and I became really fond of collecting artisan crafts. And then, as we traveled, we would see, just growing up, how artisans really had a really hard time selling and making a living, even though they were super talented. And to me, it always struck me. I'm like, "How can such talented artisans be struggling to earn a living and peddling items in the streets?" It's a really tough life, and a lot of the crafts were disappearing, because there was no money in them, and people couldn't hand them down to the generations. It was like they were just disappearing, and that's happening right now. And so, we're really trying to reverse that. But thinking about it that way, we thought, "Look, this is not a system that we want to build for big companies. We don't want to work with some big company that they're up on email and they're going to be communicating with us and sending us items into a warehouse in the US or dropshipping. That's not who we want to work with. There’re other companies for that. We want to work with individual artists that we see when we're hiking the Inca Trail in Peru, and we see this talented artist. That's the artist we want to work with, that one. And how do we change it up for them to completely have them be successful through their work?" And so, we had to have the physical offices, and in order to do that, we really had to sell the dream too. We were thinking big from the beginning, and we ended up raising $20 million over the first few years. So, that really helped, because that infrastructure was not cheap to build. I mean, we were building out the offices and all the online systems, the logistics systems, that whole infrastructure. So, we got some great funders, National Geographic, the World Bank, Scripps Ventures, a bunch of really great seed investors, and we built it from there.


Maiko Schaffrath  10:30

Yeah, let's talk about that a little bit. I think, in '99, was there a lot of impact investment going on? I'm not sure. Probably. There wasn't even a term, right?


Roberto Milk  10:41

I didn't hear that term until later. I love it. I'm a total social entrepreneur like, "Oh, finally, there's a term that defines me," but yeah, no, all this great infrastructure that's been built out in the impact community, this didn't exist in 1999. So, it was more like going to National Geographic, groups that we knew were legit, impact-focused organizations, but they didn't particularly- and then, the World Bank, I mean, we had an incredible experience with them, but there was a long legacy of mixed results with the World Bank and development work in the prior 20 years when they got involved, but we had a phenomenal experience with them and they were, what I would say, they were looking at developmental goals and capital returns. So, the industry was forming, but it was early.


Maiko Schaffrath  11:36

Hmm, interesting. So, with National Geographic, was that similar as well? Were they really looking at it as an investment? What was it that, actually, you managed as a, I think at that stage, it was pretty early on that National Geographic came on, I think, within the first year of operations. How did you convince them to invest in a tiny little idea whereas there were loads of things going on in the whole boom?


Roberto Milk  12:03

It was crazy. That whole National Geographic deal, it was total serendipity. It was just meant to be. You know why? Because we loved- I grew up on National Geographic. It was my favorite magazine. We would get it every month, and I had NatGeo Kids and I had the classic yellow book, and we loved it as a family. As a child, I loved it. It was like, "Man, if we want to be authentic, we want to work with artisans, we need to connect ourselves with the group that's the most authentic in that space," and so we knew National Geographic. That was the path and I guess, kind of by a bit of an error, our branding, our initial branding had rectangles, not yellow rectangles, but we had around our creative and we did an ad campaign and we had blue rectangles and all our logo colors were in the rectangle. And then, we were advertising in the National Geographic Traveler Magazine, and we got a letter from their lawyers, a cease and desist.


Maiko Schaffrath  13:10

Good way to start building investor relationships.


Roberto Milk  13:13

Yeah, I know. Exactly. It's a little risky, isn't it? Then, we thought, "Well, wait a minute. You can't have a copyright trademark on just borders," but they said, "Yes, actually, it's in our space and there's a border." And so, we said, "Okay, fine, we don't want to- we will change it up. Of course, we don't want to make you guys mad at all." And then, at that same time, one of our investors contacted the CEO of National Geographic Ventures, and said, "Hey, there's this really cool company that I'm involved with," and the head of NatGeo Ventures said, "Oh, are you talking about Novica? I clicked one of their ads. They were copycatting our ad, but I thought it was so interesting, and I have it here pinned on my wall, and I was meaning to reach out to them." So, it got us on the radar. And then, it just turns out they had only invested in four companies, NatGeo had, and those companies were all along the lines of areas that they didn't get involved with and they classically would not get involved with, actually. They would report on culture, report on anthropology, report on all these things, but they wouldn't actually get involved. In our company, we were actively preserving culture by giving artisans a space to make money and thrive and all these incredible crafts. I mean, there's 75,000 live items at any given point, covering so many, everything handmade, but by actively doing that, we're preserving culture, and they said they had just turned 100. They said, "We actually want to play a role now. We are seeing this. This is the globalization in a way that we're a little nervous about is happening and local culture is dying and we, as National Geographic, want to play a role in preserving." And so, it just fit perfectly in their trajectory, and their investment in us came around the time of the 100th celebration when they made that organizational shift, and it was fantastic. It's been great with them, yeah.


Maiko Schaffrath  15:16

Amazing. So, quite early on, you raised quite a lot of money, actually. You embraced a for-profit business model, as far as I understand, early days. And even now, if I speak to social entrepreneurs now that are trying to solve social and environmental issues, even today, there's loads of investors that are like, "Oh, yeah, that's a nice little social issue. That's cute, but you can't really make money that way." So, here you are in 1999 saying, "Hey, we're going to make money with this. We want to raise investment. We're going to pay you back. It's a good way to invest your money," whereas solving this clear social issue and focusing on that, I just can't imagine that investors were like, "Oh, yeah, we get it. Let's do it." Describe to us a little bit how the investment landscape was at that time and maybe how it has evolved in your view till today.


Roberto Milk  16:19

Well, it's so true. I think, basically, there's that route choice of, "Should we be a for-profit or should it be a nonprofit?" There's that route choice that a lot of social entrepreneurs struggle with at the very beginning. They're like, "Which path should I go?," because they're both worthy paths. I think back in the day, it was definitely more challenging to go the for-profit role in our space, because of exactly what you said. There were fewer impact investors, so it made more sense to go the nonprofit route. But then again, in '99, dot-com was booming, and we had a dot-com idea. Essentially, that's what helped us is that it was an online idea at a time where people were interested in online, not so much the social impact angle. And so then, we were able to find investors that were mission-aligned with us within that ecommerce, because the classic retail venture investors, they did not like our idea. They were like, "No, you need to have containers and save money on shipping and into the US," like I'd mentioned. It was really the dot-com investors that were excited about it, and it was disruptive. I mean, we were disrupting. We came at it like rebels. We were basically social impact rebels before social impact existed as a category and we were just like, "We are going to redo this whole- the whole import/export for artisans is broken. It doesn't work. We have to reinvent it." My grandmother on my Peruvian side, my abuelita, she was one of our first artisans, and I would channel her a lot. I'm like, "How can we make this better for artisans?" And so, that's what we ended up doing, and that really did- being mission-driven and being clear about it with the investors. This is a mission-driven company at the very root. Artisans can charge more. Customers pay less. We cut out all the middlemen. The only ones that suffer in this one are the middlemen. Basically, we're improving the whole system for artisans, making it better for customers, customers get to know who they're buying from, they get the stories, they get hand-signed pieces. It's just really, really cool as a customer too, because you get to know who's making it, not broadly, like there's some groups that have artisan goods and like, yeah, it's an artisan in Kenya, there's no name, there's no picture. This is like really personal to see who's making it and hear their story and the whole thing. It's cool.


Maiko Schaffrath  18:59

Got it. Let's talk a bit about the journey since then, since the early days. You said already, you've survived a bunch of crises. On the way, you generated more than 100 million in sales for the artisans which is just amazing to hear, but let's talk about some of these hard lessons or crises, moments of crises in your whole journey and the lessons that it taught you or how it may actually make you a better company in the long run maybe and share some insights from that. So, what were some of the lessons you had to learn or some of the real problems you had to solve along the way? I'm sure we can talk for days on that, but like some of the key ones?


Roberto Milk  19:45

Well, I think for a lot of entrepreneurs, focus is the key thing and so is opportunity. Often, we find opportunity fall in our laps and we're like, "Wow, that's pretty good. That's an interesting opportunity." And then, we have to condition that by saying, "But wait a minute. Does that take me a little bit off my focus?" So, that's the hardest choice for a lot of entrepreneurs, especially in a lean startup environment where you're testing things out and you're like, "Whoa, wait a minute. Is that a pivot that I need to make for my company? Or is that taking me down the wrong path and with the real nugget, the real original idea was really where I should have focused?" And so, with us, one of the opportunities that came under our plate was that there were a lot of companies, existing brick and mortar retailers, that were really interested in what we did. They were like, "Wow, we would love to buy from you wholesale, and you guys can ship into our stores." Many of them allowed us to have branding on the goods, so it was great marketing and branding for us. And so, we spent a lot of time, and I personally. We had as an advisor, Marvin Traub, the former Chairman of Bloomingdale's. He was one of our advisors, and he would open up doors, and I would take some of those meetings, and we had some high-level salespeople and wholesale salespeople that would go, and they would do some of these things too. Then, we spent a lot of time figuring out, "Okay, now, this company wants to buy 3,000 pieces of this." And so, with the artisans, we were developing some of the infrastructure for them to produce a larger capacity. And you know what happened? Every time there was a financial downturn, and also with brick and mortar, there were times when that would just disappear and we'd be like, "Okay, so what's on deck for wholesale?" And we would have an awesome year, the prior year, in wholesale, and then it would be, "Oh, no one's buying, so now what?" And then, the artisans that had built out structures for producing, the buyers would say, "Oh, no, we did that last season. We're not interested in reordering any of that." "Like, what do you mean? It sold well." "Nah, we need fresh stuff for the stores. We want to try another country." "Okay. Alright." In the meantime, the customers online just kept buying, buying and supporting, and they'd get our items, and they would love how we're- the wrapping is incredible. It comes with a postcard and gift-wrapping stuff and the artisans- I mean, it's really, really nice. It's coming from all certified from our offices. So, the artisans leave the stuff in the offices. We ship this stuff. The artisans never have to ship the stuff out of the countries. We're doing that. We were like, "Wait a minute. We're focused on this thing, but this thing is what's working is the B2C online, the customers," and so those choices are the ones that you've got to make sometimes. We're like, "Let's really focus back in our core," and that helped. That was one of the key things that we needed to do is focus in on our online sales.


Maiko Schaffrath  22:56

Wow. That's a really good story and lesson to share. Definitely. I think what strikes me as well compared to other big e-commerce players, obviously, there's the big elephant in the room, Amazon and how they operate and how logistics-heavy their operations are versus other players, but your operations is logistics-heavy, because you actually have to fulfill these orders, sourcing these products from all these different countries, and operate in countries where maybe the infrastructure is much less present to be able to fulfill these orders reliably. So, how did you solve that problem of, you had these offices locally but then actually fulfilling these products and making sure they get shipped?


Roberto Milk  23:57

I really do like the Amazon model. We're structured in a very similar way. I mean, there is some dropshipping and stuff, kind of like Amazon has the marketplace, but really, what we want to do is we're just thinking about customer first, like how do we provide an amazing experience for the customer and yet make it amazing for the artisan? And so, from the very beginning, we knew that there would be communication issues and all kinds of other stuff going on if we expected our artisans to ship, and our artisans didn't want to ship anyways. They wanted to make items, make items, they can dictate the prices that they want to get for them. Artisans always control the prices. They can increase or decrease their prices. And on any given moment, like if you go to the site, there's tons of limited editions, and you may see something that you like that day and the next day, it might be more expensive, so you should've bought it the day before, or it might be lower, and the artisans can make those changes. They don't often adjust daily. It usually is monthly or quarterly or whatever. They'll take a look. But the prices do move and the artisans control that. What we want to do is, what's the best experience for the customer? And how can we reduce all the friction with international duties, and tariffs, and shipping things in, and make it so that someone can buy a gift? Because we're a major source for gifts. That's become one of our major growth areas is that people love buying our items and then they're like, "Well, let me give gifts using Novica," because they come so beautifully packaged, and they're certifying everything. I know that everything is great quality, and all the extra stuff, the gift wrap and the artisan cards and also other stuff, the postcards that come signed. So, people like to buy it as gifts, but imagine if you're buying a gift, and the person that's receiving the gift, they're charged with import duty. That would not be good, so we had to solve for all that stuff. We figured out, basically built out a global infrastructure around airfreight consolidations and moving it, so you don't even see it- the customer doesn't see any of that. The customer, you go and you get on our site and you place an order and you can choose the fastest shipment, which is a door-to-door shipment or a two- to three-week shipment, which is usually $3 or $3.99, very inexpensive, and that one is the one, those are coming in consolidated, and we're doing all kinds of fancy stuff behind the scenes on that, but that's part of the IP and the infrastructure that we built out.


Maiko Schaffrath  26:34

Amazing. What's your benchmark for that? You mentioned Amazon, but when you started out, Amazon was around for a few years. Was it the benchmark from the beginning? Did you have to come up with all that by yourself? How did you actually come about these ideas?


Roberto Milk  26:52

Well, yeah, and really, they weren't. They weren't so broadly focused back then either when we first started. They were mostly books. It was mostly that, and they were branching into other areas. No, it's fantastic. Amazon, that is our benchmark. I mean, we want to be the Amazon in handcrafted, so that really is our benchmark. I think they do a phenomenal job thinking about customers. I think we do an even better job thinking about customers, because I've had bad experiences with Amazon where you can't talk to people. You know how it is, so our customer service, all of that stuff, we go above and beyond. We always want to make the customer happy, and we want to have that personal relationship with the customers when possible too. But they are the benchmark. They are fantastic. Back then, there weren't any. There weren't any great companies doing it well online. There really weren't, and I think Jeff Bezos was a visionary in that area, where he was just so customer-centered, so customer-focused. Basically, you get it right for the customer and you get the right, period. That really has been influential for us, is get it right for the customer. And in many ways, we see the artisan as a customer too. We are a service provider for our artisans too. We want the artisan to feel like a king or queen. And artisans in our countries, they are not treated well by many people. In many countries that we're in, our artisans are second-class citizens. They are not respected. There's not dignity in the incredible stuff that they do, and that's why I really get emotional when I see how badly a lot of our artisans are treated, and we wanted to change that too. We wanted to provide a safe space where the artisan is king and queen. She comes into our office, and she knows she can get microcredit through us, 0% interest microcredit, which we've partnered with Kiva on that. It's great. We're a non-traditional MFI, so the artisans can get microcredit. They get design advice if they want it. If they don't, then they don't. It's not going to be pushed onto them. We want them to come up with their own creative solutions. We want the pieces to be their pieces. There's this whole focus on the artisan, and that's also been very formative for our company. Artisan-focused, customer-focused. We actually transitioned that into a whole brand thing, which is "Happy artisans, happy customers, and spreading global happiness," and we just simplified it to that.


Maiko Schaffrath  29:30

Love it. Love it, really. Well, that's such an interesting journey in coming up with these models and putting artisans first. I'd be curious to understand how you've managed to keep that focus on the artisans, because if, let's say, you were going to optimize solely for profit, I'm sure you would have taken decisions that wouldn't always be the best for the artisans. At the same time, you are a for-profit company, and your job is to be profitable. So, how do you manage that and how have you set up the company in a way that you're mission-driven but also profitable?


Roberto Milk  30:12

Well, we have the real-time tracker for funds to artisans, and that's the one that you quoted, and it's like $111 million as of this morning, I think, something around that. Our offices, each of the offices have that, and that's actual funds to artisans. That's not our sales or anything. That's the funds that are to the artisans. It's a real, pure tracking mechanism that we have, and we ended up incorporating that into our internal reporting. Basically, what do we do to increase the amount going to artisans? And as long as we're tracking that, then everything else is great, because the sales are on top of that. Everything's on top of that, but if we can manage around that metric and that $111 million, how do we turn that into a billion? Kiva hit their billion in loans made to people. We want to hit the billion in funds sent to artisans, and so we're like, "How do we amplify the mission?" We really ask people to spread the word. That's the best way. I mean, we do all kinds of marketing, but nothing's better than when someone tells someone about us, and buy gift certificates and gift cards on the site. It's a great way to spread the word, that kind of thing. But really getting people to spread the word and for us to amplify our impact. I think that, and this is something that B Corps, I was reading, because we're going through that process, I think it's really cool that it's like, "What impact metric can you actually incorporate into your Board of Directors reports, your employee reviews?" What's that metric? And if you can figure out a way, like for us, because it's core to the business, funds to artisans. If you can figure out a way, as a social entrepreneur, one of the listeners out there, if you figure out what's that metric, and I bring that into my general reporting, then it really helps you in terms of streamlining impact.


Maiko Schaffrath  32:15

Let's talk about your business model and how it aligns with the interests of the artisans as well. So, if you look at the big platforms out there which maybe your artisans are not usually on, but that provide platforms for small businesses to sell products, things like eBay, Etsy, and Amazon Marketplace that always take a cut, basically, is that your model as well? How does your business model work? And how do you align incentives with your artisans?


Roberto Milk  32:50

Yeah, so no. We're similar in that we see ourselves as a marketplace, but we're probably closer to Amazon than some of the other ones that you mentioned. From the very beginning, the way that we set it up is the artisans get to just basically manage their pricing, and it's completely transparent, because they'll put their price and they see what the corresponding retail price is. It depends on the category, the duties, all these other elements, what the final retail price is, but if the artisan lowers the price, the retail price comes down. It basically is like a scale, and so it's totally transparent. For them, they're like, "Well, okay, if I want to get it under this price of retail, I've got to go into this price with my artist price," but they're in control, and that really, from the very beginning, no contracts. We don't lock them into anything. It's a total fair system for artisans, basically. They get access to the microcredit at 0% interest. They get to manage the pricing, so it's really a system setup for the artist. Basically, that's how it works. We say, "Look, you manage your pricing and focus on making new items, and new items, you can see what's selling, so focus on making new items based on the ones that are you're succeeding with. And then, every month, try something artistically crazy. Try something just out of left field. Just try something. Put it out there and make it make something new." A lot of traditional retail are like, "Just do the same thing over and over again." And then, if they'll have some designer send some design to the artisans like, "Oh, our designer came up with this. Can you make this?," and then they're just producing things. It's like, no, we want the artist to be inspired by what they've sold. But also, any new ideas, try it out, because they can put up one, two, or three, and that's why you'll go onsite as a customer, you'll see there's a lot of stuff that says "Limited quantities," "One available." You put it in your cart and it's no longer available for anyone else, so there's a lot of experimental products and that's really cool.


Maiko Schaffrath  34:59

Wow, so quite truly unique. I guess that connects with the gift focus as well that people really get some unique gifts that are not mass-produced, really.


Roberto Milk  35:10

Yeah, absolutely, yeah. 


Maiko Schaffrath  35:12

Amazing. I love the idea of letting artisans set the prices exclusively, because I think there could be easily a model where you negotiate with the artisans, and you're probably going to be in a stronger negotiating position than them, leaving them to make choices that may not be great for them in the long run or may actually not be great. So, I think that's a really important part of your model, that artisans choose the prices, and you take things from there. It's amazing, yeah.


Roberto Milk  35:47

Well, what you what you said just now is actually- that's the system that we're trying to change, because the system that exists, the traditional system, is one where the artisan in a remote area is usually serviced by some middleman, some local distributor selling to then a national distributor, selling then to an international distributor, or through a gift show or something like that, then the retailer buys it. There's a long list, and the artist has no leverage. We're talking no leverage. If that local distributor says, "I'm going to use some other artist," or, "You sell this to me for $5. Even though the price is $10, sell it to me for $5." There's no negotiating, not $6, $5. The artist has to basically do it or lose the order. Sometimes, losing the order means, how are they going to feed their family? So, there is no leverage in the traditional system for the artisans. And then, if they say, "Oh, I'm going to hold my price," then that local distributor's like, "Oh, I'll work with some other artist. There's plenty of supply." I mean, the artisan sector is, in the developing world, the second biggest employer after agriculture, so there's plenty of artisans, there's not a lot of leverage. So, we wanted to completely change that and say, "You're in control, and it's your name, your stuff. You make the best quality, because that customer is going to leave a review or buy from you again. You're in control. If you want to give that discount, you give that discount." That's really how we switched it, and there was plenty of margin in there, because we're cutting out so many middlemen, so it's like, okay, artisans can increase the price, and the customer can actually get a better price than in boutiques and some of the traditional venues.


Maiko Schaffrath  37:43

Got it. I've got one more question around your model and maybe trying to extract some insights for social entrepreneurs that are trying to solve similarly complex problems. I think the way you describe it and the way your platform runs, although you started in the dot-com boom, it's not a straightforward dot-com website and e-commerce, we just take a commission and sit in our offices in Silicon Valley, and everything else is outsourced, and we don't have to worry about it. You worry about having these offices in these countries. You worry about the packaging. You're sending the products, the whole logistics. All that, you are controlling, so that you can provide a great customer experience. For the people buying the products, they feel like, "Whatever I order on that platform, it will arrive. My money won't be gone, and then I'll have to chase it up. It will arrive in a nice packaging." The artisans are making quality products and not just some random people, but that means for you, as an entrepreneur, a massive headache, potentially, especially if you think about somebody that's starting out with maybe a similar concept in terms of providing a great customer experience in a sector where that's so fragmented with all these individual artisans all over the world. I'm just wondering, how do you make that work without actually spending every single dollar of your profits on making that work? Because, first of all, I think I imagine you've got to coach a lot of the artisans as well and make sure they understand what they've got to do to provide this great customer experience and create products that are really attractive, so that seems very high-touch, then you have to do all these logistics, all that. I know it's a broad topic, but I'd love to extract some insights for you from the lessons you've learned on being this really high-touch business for other entrepreneurs to learn from if they're trying to do something similar.


Roberto Milk  39:57

Oh, that is such a good question and really a challenging question to answer. It really is. Actually, a visual came to me when you were talking about investors doing due diligence, when one of our investor groups, they were coming in and they said, "We want to do some due diligence," and I'm like, "Okay, cool. Where do you want to go?," and they're like, "Oh, well, we want to go to this and this and this country." I'm like, "Okay, cool. That's great. So, who on your team is used to about 110-degree high human? Because we're going to be going into areas where you better be ready for that. I don't want to be worried about that." Because most of our team, we've lived in the tropics. We just like the humidity, and we love it. I love the heat. Anyway, those investors had a lot of fun, but we're sweating a lot during their due diligence, and they're like, "Wow, that was one of the most fun, but also most trying." As you say, it's high-touch, and there's a lot of action that happens where people aren't in air conditioning, virtual, all online. There is a lot of touch. I basically really think that the purer the business, the less friction, the less touch, the better, and that will be my advice for your entrepreneurs. It would be, which are the elements that, because of either the mission or what you're doing, you need to have a touch? Basically, touch for touch's sake, that we're always figuring out ways to reduce it, but how do we remove that friction? How do we make it easier? Can we put this online? Can we put this in a report? Can we automate this? Because it's basically the enemy of efficiency. It really is, and scalability too. It is really hard to scale a high-touch business, it really is. So, how do you do it? Amazon is incredible about it. It's a high-touch business that has reduced all the frictions in the infrastructure. I mean, it's amazing. How do we look at that? That's my advice is really, first of all, if there's touch, then you've got to love that touch. You've got to be like, "I want to be in the community doing this," and we do love that part of it. I mean, that's the part that gives everybody their mission juice. It's like, "Woah, okay." When we're doing artisan rallies in Peru and there's 100 artisans coming, and we're pumping them up about the next thing that we're about to do, I love that, so you've got to love the touch, but also reduce it as much as possible, or else, how are you going to scale? That's why that question is so hard, because if you do have a pure business, that is a better business. It really is. It's a pure business that that has very little touch, and you can scale it, that is great.


Maiko Schaffrath  42:54

But at the same time, you're taking a conscious decision to be able to provide this great customer experience, not to just leave everything but the e-commerce to others. I think that could be a decision. But then again, I may order, the order may never arrive, because the logistics aren't sorted out. So, I think you're focusing on the key issues. 


Roberto Milk  43:15

Exactly. Absolutely. 


Maiko Schaffrath  43:17

Yeah. One thing I'm curious about before we get to the final question, because I think Novica is truly a family business. You already mentioned it earlier. You launched Novica with your mother-in-law, which is super interesting, and your brother, I think, is involved as well, also other parts of the family. Generations of grandparents have been involved in this. So, I don't know if there's a lesson to be shared, but I'd love to learn a little bit more how this actually came about, and how does it make you strong, but what's maybe also the challenge with that setup, where people from your personal life are involved in the business?


Roberto Milk  44:05

Well, for me, I always, I think, as a kid, even dreamed of when I was an adult having something where I could have tons of friends around me. I really was so nervous about, "Is my future one where I'm going to be going to an office with people that don't really like me, and I'm just doing some work for some boss, and there's no fulfillment in that?," and that was a scary vision of the future. And the visions of the future where I would get most excited would be when I'm surrounded by people that I love and that I love being with and that we're excited to work together, and everyone's working on a common goal, and even better if that common goal makes the world a better place. What more can you ask for in life? That's really at the root. Everyone that's listening to this is thinking about how to have business with purpose. You're onto it. I mean, this is it. It was so fulfilling, so I really encourage you to do that, to figure out how to how to do that. And in our case, one thing with partners, I think you have to be risk-aligned. I hear a lot of people when they're having partner issues and stuff, I'm like, "Okay, well, let's just break this down a little bit. Why are you guys not seeing eye-to-eye?" And it might be because one person's a risk-taker, and the other one is really nervous about all those risks. I'm lucky that a lot of the people that we've had in the company that are all involved, they're all risk-takers. We've had times where we've had to be really lean, and we've had to do that, and it hasn't created a lot of fights or issues. Instead, we've been pumped up, we hunker down, and we make it happen. So, definitely make sure if you're getting partners, that you're risk-aligned, or else that can be disastrous. And yeah, family, I mean, let's say things blow up, and then you have to see them around the holiday table or whatever down the road, and it's awkward. That could happen to people, and so think twice about who you get involved, but also make it fun. If you like working with someone, I mean, a lot of my close friends are involved with the company and it makes it that much more fun fulfilling, yeah.


Maiko Schaffrath  46:29

Yeah, I absolutely get a sense that you have so much fun and fulfillment on doing what you do. I mean, you wouldn't have stuck around so long. You've been doing this for more than 20 years. In a world where maybe a lot of startup founders are out there trying to exit and do the next thing, it's really amazing to see you really committed in the long run. On that question, on that note, one last question. If you think about the world in 10 years' time, how does the world look like in 10 years if Novica continues to succeed and if you're fulfilling your mission?


Roberto Milk  47:06

Oh, wow, what a question. I think that's very similar to what I was just talking about where the vision of the future as a child, like what was my future going to be like: one working in the office with bosses that didn't like me, or whatever, or one where we're helping change the world? And I think there's two visions of the future that I've got, and one of them is a very scary, mass-produced, everything is made cheaper and cheaper, big factories. There's work that goes into the design aspect, but the actual manufacturing and process is all automated, and it's a fast fashion, cheap fashion. People just, assembly line buying stuff, and one where artists don't have a voice, there's less room for art, for culture, for expression, and that's one future. And in that future, so much of the developing world, our artisans and stuff, they suffer in that future. They're cut out, basically. And then, I see a future that's a very bright future where people start rejecting this whole cookie cutter, mass-produced, fast fashion, "Let me get this cheap thing, cheap piece of apparel that I'm going to use a few times, and it's going to be no good." It's one where quality is honored, the time to create a piece is honored, and we go back to thinking like the romanticizing of the Middle Ages, where there's guilds, and there's artisans, there's makers, and they're keeping tradition and culture alive, because as we all get networked and that all happens, there is so much of a reduction in individual culture, language, traditions. I think that's part of the role that we want to play is keeping those traditions alive around the world, celebrating the master women and men that make these items, the time-honored techniques, and having a place for if you've got talent, and you work on it, and you live in a remote area, you can succeed and you can have customers all over the world that not only buy your items, but that read about them, want to know more about it, leave you incredible reviews, you guys connect, you just feel this bond across international boundaries, and we take away some of this nationalism, this rabid nationalism. We're all part of the world together. We all can have our individual countries and geographic locations within this world, but we're all citizens of the world and let's celebrate that and make the world a happier, smaller place where we can all thrive. That would be my great vision of the future.


Maiko Schaffrath  50:02

Love it. Thank you, Roberto, for joining me on Impact Hustlers. It's been really inspirational listening to you and your journey, and I think there's so many nuggets of insight that people can learn from. So, thanks very much for taking the time and joining us.


Roberto Milk  50:17

Oh, thanks so much for providing this platform, and this whole community that you have is amazing Maiko, so congrats to you and thanks so much.


Maiko Schaffrath  50:24

Thank you. Alright, I'll just press stop.


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