Like most entrepreneurs, Frederick Hutson cannot resist trying to solve a thorny problem. His company, Pigeonly, based in Las Vegas, taps an underserved and “captive” market by offering prison inmates an easy and efficient way to receive photos from loved ones and to make phone calls to them inexpensively. “Isolation is the worst thing for an inmate,” Mr. Hutson said. “It makes it hard for him to rebuild his life when he gets out.”
Hoping to reduce recidivism, he came up with an idea for an online platform, called Fotopigeon, that lets friends and relatives upload photos, which are then sent through the postal service directly to the incarcerated for a flat fee of 50 cents a print. “Companies like Shutterfly and Snapfish — their packaging won’t get accepted by prisons,” Mr. Hutson said, “because they don’t like anything that doesn’t come in a plain white envelope.”
Mr. Hutson knows his market well. In October 2007, when he was 24, he was deeply immersed in solving a different business problem — the inefficient distribution of marijuana from Mexico to Florida — when 10 Drug Enforcement Agency officers showed up at his mail store in Las Vegas with guns drawn. Mr. Hutson had been moving marijuana through his business, using DHL, UPS and FedEx trucks to transport it to Florida. With no previous criminal record and an honorable discharge from the Air Force, which he entered directly after graduating from high school, Mr. Hutson expected to get off with a “slap on the wrist.” Instead, he was sentenced to 51 months in prison.
Like many former inmates, Mr. Hutson, now 29, has benefited from a growing number of support programs available to those who want to start businesses. In Manhattan, for example, Catherine Hoke founded Defy Ventures, a nonprofit organization whose participants have started 44 businesses, including an event-planning company, a cleaning service and a mobile barbershop. “One of the primary skills they need to survive on the street are good hustling and sales skills,” Ms. Hoke said. “I’m not saying that all drug dealers make great entrepreneurs, but many of the skill sets are shared.”
In Silicon Valley, Chris Redlitz, a venture capitalist, and his wife, Beverly Parenti, have started an organization called the Last Mile, which is opening a business accelerator within San Quentin State Prison. Mr. Redlitz runs a traditional incubator called KickLabs and is trying to replicate the model within the prison. “We’re looking for three things,” he said. “Do they have passion? Can they be a leader? And do they have perseverance? To survive in prison, you have to have those three things.”
Mr. Hutson was released in March 2012 from a halfway house in Tampa, Fla., where he had been working on the first version of his company, then called Fotopigeon. He got help refining the idea at NewME, an accelerator based in San Francisco that works with entrepreneurs in demographics that are underrepresented in the tech community. “He really is a natural-born entrepreneur,” said Angela Benton, who founded NewME two years ago. “At first, he wasn’t sure how much to share about his background.”
At one point, when he was trying to persuade the chief executive of a large photo-fulfillment company to work with his start-up, Mr. Hutson explained that he was aiming at a demographic that few understand. The executive, Mr. Hutson said, “asked me the million-dollar question: ‘How do you know all this?’ ” Mr. Hutson told his story, and the chief executive took the gamble, signing on as Fotopigeon’s fulfillment company. “I thought my record would prevent people from doing business with us, but it was just the opposite,” Mr. Hutson said. “I had domain expertise.”
His business plan involved tapping into the little-understood market of 2.3 million people incarcerated in the United States. According to his research, the average inmate has $300 a year in a prison commissary account, the means by which prison goods, including phone calls, are purchased. Inmate families spend $600 annually per prisoner, he said. Mr. Huston’s plan was to market directly to prisoners, who would send friends and family members to the Fotopigeon website. If 10 percent responded and their loved ones sent 10 photos a month, Mr. Huston estimated, the photos, combined with other offerings, like a phone service, could bring $22 million in annual revenue within three years.
At NewME, he said, “they thought it was a good business model, but they didn’t see how it could be huge.” His mentors at the accelerator, including Mitch Kapor, the founder of Lotus Development, who wound up investing $100,000, suggested that he re-evaluate. Sending photos, they suggested, was just one way for the company to make money.
One of Mr. Hutson’s fellow inmates was a designer who built Fotopigeon’s first site; another taught him to use Excel. And he reconnected with an old Air Force buddy, Alfonzo Brooks, who signed on as a co-founder and helped finance the cost of a web developer.
Then Mr. Hutson hit a roadblock. “I assumed that because incarceration information is public that I could just access it and market directly,” he said. “But there are a lot of state databases and they don’t talk to each other.” Finding up-to-date addresses for inmates was almost impossible.
Through Freelancer.com, he hired an engineer to build software that could index all public records related to court or criminal information and then organize it to identify people who are currently incarcerated. “We built the first centralized national inmate look-up,” he said. His database, which now contains all federal prisons, allows customers to search for inmates by name, regardless of location. By the end of this year, Mr. Hutson said, he would have all state facilities in the database.
One of Mr. Hutson’s mentors at NewME, Erik Moore of Base Ventures, is now Pigeonly’s biggest investor. Mr. Moore, who invested $375,000, said that Mr. Hutson’s experience as a drug trafficker “was a big part of why I wrote the check.” Initially, however, he said he, too, was skeptical about the size of Mr. Hutson’s market — until he “peeled back the onion.” Each inmate is connected, on average, to seven other individuals, making Pigeonly’s prospective customer base much larger than 2.3 million. “I believe there is great potential for the company to become very big,” Mr. Moore said.
In November 2012, after several adjustments to his website, Mr. Hutson used his database to send marketing material to 10,000 inmates, encouraging them to direct their loved ones to the site. “We saw a 25 percent response rate,” Mr. Hutson said, “and I realized we were on to something.” To date, he has shipped more than 50,000 photos and he says the company retains 87 percent of its customers, who send, on average, six to 10 photos at a time.
Mr. Hutson now thinks of his company as a data platform that produces branded products. For instance, he recently introduced Telepigeon, which offers an inexpensive way for inmates to make phone calls by teaming with Internet phone-service providers. By giving inmates local access numbers that can be used to make long-distance calls, Mr. Hutson said, he could reduce per-minute rates to 6 cents from 23 cents. He said he was converting 45 percent of his prospects into customers, with 80 people a day signing up.
Also in the pipeline: aiming at inmates who are scheduled for release and helping them get cellphones, set up bank accounts and find employment. “We’ll build relationships with them on the inside,” he said, “and they’ll look to us for answers when they get out.”
source-http://www.nytimes.com/2013/11/07/business/smallbusiness/released-from-prison-and-starting-a-company.html?pagewanted=2&ref=smallbusiness