The toy industry is hard for new comers. Building a subscription business in the toy industry is doubly hard. Despite the obstacles, Shiva Kashalkar and her company, Green Piñata Toys, are starting to get traction. They report 50% organic growth month over month with 90% monthly retention. The secret of their growth has been the creation of an algorithm to predict from the first delivery, what toys will be of most interest to their customer’s children. Listen to this engaging conversation with a dynamic young founder who is beginning to see green shoots in her startup.
Transcript of Shiva Kashalkar of Green Piñata Toys
Sal Talks About Our Syndicates
SAL DAHER: Hi, this is Sal Daher of the Angel Invest Boston Podcast. If you've been listening, you might have noticed that I love being an Angel investor in Boston. The reason for this is that there's so much going on in the startup space here in Boston. Practical founders working with leading inventors, venture capitalists, angel investors, patent attorneys, it's a really exciting scene. Now, you can join us in syndicates, which allow people who are not part of the angel investment community to invest alongside Boston's leading angels. I invite you to leave your email address at angelinvestboston.com in the syndicate section and we'll be back in touch with you to help walk you through the qualification process as an accredited investor.
Remember, there is no obligation to invest when you put your email address there. I hope you really enjoy today's podcast.
Sal Introduces Shiva Kashalkar
Hi, this is Sal Daher of the Angel Investor Podcast and this is Founder Focus. Today we're very lucky to have with us Shiva Kashalkar of Green Piñata Toys, a young founder who is doing something really hard and really interesting. Welcome Shiva.
SHIVA KASHALKAR: Thank you Sal. It's a pleasure to be here.
SAL DAHER: It's tremendous. You know, the Founder Focus podcast is a product of the huge demand that I have from entrepreneurs who'd like to be on the podcast. The way that we normally record is that we sit down in the studio and we do a recording that requires studio time, engineer time, founder time, my time and so forth so it's really hard to coordinate. Founder Focus is an answer to that. What we do is, we're having a conversation now on VOIP, voice over IP and it's much easier to schedule and then later on, our sound engineer, Raul Rosa, will go in and clean it up and so forth and the product is perhaps less polished than a studio interview, shorter, it's meant to be around 20 minutes but it's much more immediate and therefore gives founders a immediate platform to talk about the exciting things they're doing. Let's launch into our conversation with Shiva Kashalkar who I met after she presented at Walnut Ventures. Shiva, give us a little bit of a bio of yourself. Where were you born? What did you study and so on?
Shiva Kashalkar Bio
SHIVA KASHALKAR: Sure. I was born in India. I did my undergrad in computer science engineering but I did coding for about a year. However, I moved to more a consulting role because I love meeting customers and I'm a people person. That's the kind of role I like, not sitting in a desk. I did that for a few years. That job I took after college also gave me an opportunity to travel and live in Sweden for a year and travel to few other countries and then I decided to do my MBA for which I came here to Boston. I went to Babson, I did my full-time MBA. Then, after that, I took a career in product management and moved into product marketing in high tech companies for several years and my focus was in big data analytics.
In 2014, I had my first child and when she was about eight months is when I came up with the idea for Green Piñata Toys and became an entrepreneur. After I launched it and we were doing it in stealth mode ... we did market tests for about a year and a half and then we launched it last year, that's my background. Technology background but then switched to consumer business and I've been doing that now for a few years. Really enjoy it. It's tough. It's hard. It's the toughest thing I have ever done in my life. Sometimes I feel like, "Why do I put myself through this?" But, it's the best thing in the world. I enjoy it.
SAL DAHER: Listen, as you should know, I've never heard anybody say, "Oh, being a founder is easy." Ever. It's hard. It's super hard. It's really hard.
Well. Shiva, one of the things that we like to do in this podcast is try to help young people who are trying to discern the direction their life should go in and so, we like to ask our hugely successful guests, who they discovered what it is that they wanted to do in life? Is there a moment that stands out for you?
Shiva Always Needed to Be Challenged
SHIVA KASHALKAR: Yes, it does. One thing is, I've never stuck with a job for more than three years because I always tell my boss, you got to keep me challenged. I'm always a pain for my boss because, whenever they find me comfortable with something, they know I have to be given the next challenge so I knew that I always need new challenges. Also, having going to Babson, there is this thing of entrepreneurship all the time but I never got to execute it after I graduated from there and then after five, six years after graduation when I was just thinking about .... Green Piñata Toys is all about renting high quality wooden toys focused on education.
SAL DAHER: I'd love to get into the startup first but what I want to think about here is, let's say when you were a young girl, was there something that set you in the direction that you've taken now, coding and then entrepreneurship? Can you remember a moment when you realized, this is for me? This is what I want to do?
SHIVA KASHALKAR: When I was very little, I didn't know what I wanted to do. I didn't really know what I wanted to do until I started Green Piñata.
SAL DAHER: Yeah. We're all like that. That's the thin. You think that's what you want to do but there's going to be something else that you're going to discover.
SHIVA KASHALKAR: Exactly. I was like, I have this technology background, product management is the thing that I want to do and I went in and I realize no, I'm more into go to market strategy and meeting customers so I did product marketing and then what happened is this idea of renting toys started happening so I started consuming me when my child was right around eight months. I was thinking about a day and night, day and night and at the same time, I was also moving jobs so I would drive to this interview but then, all I was able to think about during my drive to interview is, okay, this is how the business model be.
I was like really? In five minutes, you have to be in front of somebody talking about product marketing in some big data and that's when I realized, this idea's consuming me. I'm in love with something all over again. The first time I was like that was when I met my husband. I couldn't stop thinking about him and then I felt the same thing after eight years.
SAL DAHER: He didn't feel jealous of this startup?
SHIVA KASHALKAR: It's Green Piñata Toys, my daughter, then him. Right? Maybe he's there somewhere. Yeah.
SAL DAHER: Oh my gosh, yeah. I know.
SHIVA KASHALKAR: Anyways, that's when I realized, you know what? This is what I should be doing because I cannot stop thinking about it.
SAL DAHER: Let's be fair to your husband, I know that he rolls up his sleeves and helps you a lot on this.
SHIVA KASHALKAR: “…when you cannot stop thinking about it, that's when I knew that was my calling and I got into it.”
SHIVA KASHALKAR: Yeah, yeah, he does. At least when we started, we didn't have any house technology person and he certainly worked with the system architecture and things like that, yes. Definitely. But yes, to me, when you cannot stop thinking about it, that's when I knew that was my calling and I got into it.
The Business of Green Piñata Toys
SAL DAHER: Green Piñata Toys started out as an idea for renting toys. As I recall it, thought was that you would have very high quality toys, usually wooden toys that young children just love, love to play with but they'll play with them for a few months, few weeks and then they outgrow them. I see my grandson, how he is he has like a favorite thing he does for two weeks and then he's onto something else and you can keep buying these things. You could end up with a house full of toys that are not being played with so you're looking for a solution to that problem by having almost like just in time toy inventory.
High quality toy that three or four in an attractive package, it comes to your door, you keep them for as long as you want, if the kid really gets crazy about a toy, you could buy one but you could just return it and within a few days, you get a new set of toys. It solves the problem of people having a lot of clutter. It saves money and it keeps kids really engaged. Am I being fair to the approach?
SHIVA KASHALKAR: Absolutely. Absolutely.
SAL DAHER: Okay. That kind of business is tremendously interesting but I imagine it has its challenges. What are the challenges that you found there?
SHIVA KASHALKAR: You're right. Kids grow up very fast within the first five years because 85% of their brain develops within the first five years of our lives. The core of our business was and is, enabling parents to rent instead of buying the toys so that they don't have to be stuck with the toys they outgrow. Then the challenge we found, after we tested it with several hundred customers, we have never done a free testing. It has always been paid market tests.
SAL DAHER: I applaud that. I applaud that. I have 50 applauses from Medium for that one.
The Problem Is Figuring Out Which Toys a Certain Kid Will Like to Avoid Churn
SHIVA KASHALKAR: Thank you so much. We learned from customer's money, not with any investor's money, which is one of the fantastic thing about Green Piñata Toys. Anyway, what we learn is, we only were solving half of the problem where toys are being out grown but then the rest half of the problem is, parents themselves don't know what their kids are going to like or not like because when you're so small, you cannot even guess because they're changing interest and secondly, each and every child is different. You may think your friends' kid like a particular toy that costs $40 or $50 and you gift it, as a grandparent you gift it and then turns out, no, this kid doesn't like it.
We were not solving that in our initial launch because parents were still coming back, "Hey, I thought kids would have liked it but they didn't like this box so I don't think Green Piñata Toys worked for us." Sometimes they would cancel if two boxes don't work for them. What we realized is the biggest asset that we have is, we are able to track what a particular child liked or not liked say in the first box, get their preferences, okay, what is your child into this month? Into puzzles or into print and play? We get that data and then we also track-
SAL DAHER: Predictive analytics. You have a suggestion engine like Netflix.
SHIVA KASHALKAR: Absolutely. Yeah. We apply multiple layers to it. One is that particular child's preferences, second is; what is the thing that they are into now and the third is; we have our educational experts who have developed up what's called toy curriculum and it is a recommendation engine ... okay, for an 18-month-old, in general, these are the few fine motor skills. They will be into stackers. It has a certain science that applies in terms of what is a general expectation from a child is and so we do that. We combine it so we not only have just a child's individual preference but also, you're working on their milestone tracking and what not.
“That way, we're really helping parents pick toys that their kids will like so that we will send more of what the kids will play with and less of what they don't.”
That way, we're really helping parents pick toys that their kids will like so that we will send more of what the kids will play with and less of what they don't. Over time now, the system is built to learn and apply predictive analytics on it because that was the second half of the problem that we were not solving before. We even knew, coming from big data background myself, I knew I have to do this but I was thinking about like a series A sort of a thing right? When you have money ...
SAL DAHER: Eventually you get around to it but you decided you really needed to do it now because it solved your problem of churn.
SHIVA KASHALKAR: Exactly. It's sort of nice to have it. We decided no, it's a must have in order to gain interaction so that's the path that we took and that's what we're working on now and we are already seeing the great traction we're receiving. We're already seeing the results from it.
SAL DAHER: What were the before and after numbers in terms of charge?
SHIVA KASHALKAR: When we launch at the time, I think I saw you, we had very small growth. Month over month was tiny. We were depending so much on paid ads. We thought that was the holy grail. Then I spoke with people from Run the Runway and Stitch Fakes and whatnot and learned that you have to have organic road ship should be about 50% and have that wider effect from customer reference. That is a success for a subscription business.
SAL DAHER: The organic growth is the base. It can be amplified with advertising but if you don't have that base, it's a losing match.
SHIVA KASHALKAR: Right. We improved it from 15% growth to 50% organic growth and we added some ...
SAL DAHER: Over what period?
SHIVA KASHALKAR: Starting last summer. July to December. The number I'm telling is month over month.
SAL DAHER: Month over month. 15% month over month.
SHIVA KASHALKAR: 50%.
SAL DAHER: 50%.
SHIVA KASHALKAR: Yeah.
SAL DAHER: Wow. Okay. Okay.
SHIVA KASHALKAR: Then we layered it with some paid ads, we saw 70% growth, just minimal amount is what we spent, not even a lot but it amplified even our organic channels, which was tremendous and our retention is right about 90%, which is the average for rental subscription service. Not even average. It's an excellent number to have, 90%.
SAL DAHER: Your retention is 90% over what time?
SHIVA KASHALKAR: All of our metrics are month over month because it's extremely important in the early stage that we monitor it very closely. We monitor it weekly, monthly and this is the month over month retention, which is tremendous. We are working in fact, to improving and expanding in the subscription industry so we want to improve it even further in the coming year.
SAL DAHER: Tremendous. The big discovery was that you needed an algorithm to inform the choice of toys. If I remember correctly, you're looking at the response of the child to the first set of toys that are set out, to the kind of thing that the child is involved with at the moment and third, a developmental overlay, looking at the age of the child and thinking about what a child of that age would be interested in. This is really ,really powerful. When is it that that shift came through?
SHIVA KASHALKAR: This came through last summer because we had good data for more than six months of data to analyze and compare and then after that, when we launched it nationwide last summer, we had this new pack and they'd been working on it since.
SAL DAHER: That is tremendous. Have you been in touch recently, with Walnut members about your new approach?
SHIVA KASHALKAR: I have not been in touch with them yet. No.
SAL DAHER: Okay. Maybe it's time for us to look at it again and see how things are going. What are your plans?
SHIVA KASHALKAR: Our plans now is to hit 3,000 subscribers by the end of the year.
SAL DAHER: You're hoping to hit 3,000 by year end and having had this very fast ramp up, you're working on a compelling story.
“Next year is going to be our biggest year so we want to go from 3,000 to 20,000 subscribers next year.”
SHIVA KASHALKAR: Working on a seed round and our goal for next year. Next year is going to be our biggest year so we want to go from 3,000 to 20,000 subscribers next year. I think we will certainly be able to do that and we have all the nuts and bolts of getting ready so I think that should be possible for the two year time frame.
SAL DAHER: Now Shiva, I'm just thinking that, one of the things that could go wrong here is that you hit it out of the park with your algorithm and you really, really get tremendously fast viral growth but then your logistics can't keep up. What are you doing with that aspect?
SHIVA KASHALKAR: Yeah. That's where we are going to focus the second half of this year once we are at a good place with our toy recommendation. The second thing we are working on is inventory re optimization. The technology co-founder that's recently come on board, he has built something like this for several big box retailers for inventor optimization. He's done other analytics and mobile advertising and consumer analytics, which helps a lot for us. In terms of inventor optimization, what our plan is, to data mine the demand, what particular toy people are renting more versus the other, for seasonality and also target region. There is so much that goes into inventory optimization because we will be having not just one warehouse that we have now in Massachusetts. By the end of the year, we'll be having another one in California as well so data mining which customers have to be assigned to where.
We are approaching it with a science because not having science around it, not having people who have done this already can actually, like you're saying, can be risky, especially fast growth can be risky but then I think we have taken care of it. At least we have the plans now so I'm pretty sure we'll be good.
SAL DAHER: I recently interviewed Bryanne Leeming. You also know I'm sure. She's a Babson grad. She's doing something different from what you're doing but it's in a similar way. What I see in common with what you're doing and what Bryanne's doing is that you are two very innovative young women who have completely new ideas about how to approach a very established industry and I think you're both wise enough to bring in some gray beards, perhaps I'm being unfair to your technical co-founder but somebody who's been around the-
SHIVA KASHALKAR: Oh no, he's over 50. Yeah.
SAL DAHER: Okay. He's got a beard, gray beard. I'm not going to talk about belt lines or anything like that. You're bringing in gray beards. At the same time, you're getting them to work in an innovative direction you want them to go in and I think this is really, a winning formula for the toy business, which is a really, really tough business to break into because it's just so stayed and so large, incumbent players who are tremendously powerful and smaller players find a really hard time to break in until they do. Which I think, given your new approach, you stand a fair chance of breaking through.
SHIVA KASHALKAR: Absolutely. We really think we are disrupting the toy retail because if you look at the toy retail industry, it has not changed in decades. Earlier, it was Toys R' Us is the big box retailers, had it and that's gone. They have gone out of business. The only place you can go is Amazon whereas, Amazon is everything for everything. If you know what you are going to buy, yes. If you are looking for a purple color ... that's what I bought last week for my daughter. She wanted purple gymnastics clothes for a three year old and I got that. But if I want to get pretend toys for a three-year-old, I'm given 100,000 choices.
Let's say you're getting a gift for your granddaughter or grandson, you are even more lost because, probably, your daughter or son in law would know more than what you would know. It's not a curated experience when you don't even know what a child is going to like. When it comes to buyer's remorse, it's the biggest when it comes to toys.
SAL DAHER: Oh.
SHIVA KASHALKAR: Yeah.
SAL DAHER: No doubt. My grandson is three years old was in the toy store and saw Rubik Cube, the 2X2 Rubik Cube which is really for, I think, like six-year olds. He was fascinated. He wanted it but it was beyond him because he doesn't have the patience to sit and to solve it, do the trial and error work that has to be done to solve it so for him, it's developmentally inappropriate but superficially attractive so I'm looking for some kind of puzzle is accessible to him at his level, that he can work on and then eventually, get to play with Rubik Cubes and then solve the full blown one, 4X4 or even more. Your developmental focus is, I think, extremely, extremely important.
SHIVA KASHALKAR: Right, right. Yep. Yeah. Nobody has done this and this is a great time for this. There are no more toy stores. The mom and pop stores are completely consolidated and there is only Amazon out there and it's a great time for us to really shine here and capture a big chunk of the market.
Green Piñata Toys’ Ambitious Product Road Map
SAL DAHER: Shiva, what is on the product road map for Green Piñata Toys? You're hoping to have 3,000 users by year end and then by the end of the following year, 20,000 consumers. What is it that you're going to be doing beyond this algorithm for recommendation?
SHIVA KASHALKAR: 2018 first half is recommendation algorithm and then the second half of the year, we are going to focus on our inventory optimization and at the same time, we'll also be working towards end of the year, working on launching a phone app for the service because that's a request we keep getting from customers. If it's easy for them to choose a choice right there, on their phone and track the packages, it will really solve a lot of headache for them having to log in. I mean, they can still do it on the mobile but people prefer the app.
SAL DAHER: Impulse buying.
SHIVA KASHALKAR: Right. Yeah.
SAL DAHER: It's the key to success in marketing to consumers, capturing the consumer the moment that she or he is ready to purchase.
SHIVA KASHALKAR: Yeah. Absolutely. That's one other thing. Then what we will be focusing on in 2019 is ... this is also another big asset our technology co-founder brings is, we see our platform as something that'll be a great marketing platform where we can promote other organic brands or brands that are targeted towards moms.
SAL DAHER: Oh. Okay.
SHIVA KASHALKAR: That is a big margin booster for us. Why? This service targets top 30% millennials who earn ... these are the high-income target which shops at Whole Foods buy organic products but also, if you see, there are so many small to medium organic brands that are coming. They are not on target. It's so hard for them to have a huge space.
SAL DAHER: To break through. Yeah.
SHIVA KASHALKAR: Exactly. These people are all there on Facebook spending $60 for just a click through. We know how much it costs because we target the same segment but, what they can do is advertise in our box because the box itself is a great marketing platform like, throw in a diaper and we will charge them $20 for it because the potential customer gets to sample, not just click on your website. That's one thing. Also, on the technology side, we don't have the roadmap fully scaled out yet. There is so much we could do just on our platform too and that is our goal for next year so that by 2020, we will have this promotional revenue and margin because it's pure margin for us coming in so that is the big roadmap item for the next three years.
SAL DAHER: That's tremendous. Shiva, Kashalkar, this has been a really illuminating interview for me because I enjoy seeing the progress you made since we last talked and I'll talk to my Walnut buddies and have them listen to the podcast.
SHIVA KASHALKAR: Sure. Thank you very much.
SAL DAHER: Kind of take a new look. This is important for angel investing in the sense that you're tracking the progress of an entrepreneur, seeing how she is doing and the ones that are likely to win are people who, they're not just banging their head against the wall doing the same thing over and over and not getting anywhere. You really seem to have made progress here, which is tremendous. Tremendous. Well, I invite you now to address our audience on anything we haven't touched on.
SHIVA KASHALKAR: My closing thoughts are pretty much on the same line of what you just mentioned Sal. What I want to tell the other entrepreneurs listening in is; you have to show traction. Depending on what your business is, if it's a subscription business, showing traction is important because investors want to see what their returns are because it's not groundbreaking AI technology for example, even though you may be using AI technology like we do in Green Piñata but, what you're selling is, people are willing to buy it, its' going to grow and you're solving a problem.
Even though your business may not be ready for getting an investment right off the bat, it's important that you keep testing it out with the consumers, especially for our business, consumer business, the best way is you test it out with a consumer and you keep learning, you keep doing better. Keep progressing. Every month, go through your metrics. What have you done the last month? Is this something I can show when I go in front of an investor if they ask, "What have you done the past six months? Can you show progress every single month?" That is something important, that you keep going forward. That's my final thoughts here. Keep at it.
SAL DAHER: I think that is spot on Shiva. That is spot on. It shows a really impressive amount of self-awareness and ability to learn. It's a painful thing to develop a product and initially, you have results that are disappointing and you seem to be working through it in a way that's really productive and from the numbers that you mentioned, you're really getting traction and hoping to get 3,000 users by the end of 2018. I look forward to that. I'm really grateful to you, for joining us today.
SHIVA KASHALKAR: Thank you so much Sal, for having me here. It's a pleasure to be here. I had a lot of fun in this podcast. Thanks.
SAL DAHER: Well, this is tremendous. Your experience is inspiring to me. I hope that our listeners also enjoyed this. I'm grateful to them for tuning in. I ask them to please, leave a review on iTunes and if you have any suggestions or questions, address them to firstname.lastname@example.org or you can go to our website and look at what we're doing now with syndicates. This is Founder Focus on Angel Invest Boston. I'm Sal Daher. I'm glad you were able to join us. Our engineer is Raul Rosa. Our graphic design is by Katherine Woodman Maynard. Our theme was composed by Raul Rosa. Our host is coached by Grace Daher.