On LaborVoices (2010–2019)

Earlier this year, I decided to close LaborVoices after 9 years of operations. I sent a long email to LaborVoices investors, explaining how we got here. Several of them suggested that I should share this more broadly. In the interest of helping others along similar paths and for our many partners and supporters, below is an adapted version of the email for a more general audience. I’ve highlighted the proximate reason for closing LaborVoices, as well as the biggest lessons we learned and our most-significant accomplishments.

This post joins several others, from folks who have reflected on closing their startups.

If you’re interested in future work in this area, please drop us a note here and we’ll keep in touch.

Authored by CEO Kohl Gill, with inputs and edits from COO Ayush Khanna.

Re: Winding down LaborVoices, Inc.

I am winding down LaborVoices, Inc., effective mid-July.

In 2008, as a Science fellow serving in the Federal government, I joined the US State Department’s Human Rights Bureau, covering labor rights and corporate social responsibility for South Asia and the Middle East. I noticed that companies had a very hard time knowing what was actually happening in overseas factories, despite hiring armies of inspectors to check on working conditions. I also noticed that policymakers, charged with enforcing our trade agreements, had no way of knowing whether other countries were holding up their end of these agreements, by treating their workers properly. Finally, I noticed that overseas workers, as addicted to their phones as any of us, did not have any reliable data on which factories were better to work at than others. There was not, as we later started saying, “an app for that”.

In 2010, growing out of this experience at the State Department, I founded LaborVoices as a simple experiment. Could we tap the feedback of overseas factory workers, via their existing mobile phones, to figure out what was really happening in their factories? Would workers really open up to us? Would we be able to collect data at scale? Would we do a better job than inspections and audits, themselves riddled with corruption and incompetence? Could we attract real corporate, enterprise customers, while maintaining our independence to share our data with workers, and with the world? As a jaded former scientist, I expected the whole enterprise to fail within a year, at which point I would retreat to a “real job”, make a bit of money, and try again. Rinse and repeat, it would be an interesting way to invest a decade or so.

Over the subsequent 9 years, surprisingly, we didn’t just fail to fail, we actually generated answers to these questions. We also helped build out the concept, pioneering an emerging market of worker-sourced data for supply chain compliance. And while we attracted many friendly competitors to this area, we continued to distinguish ourselves.

We became the first — and to this day remain, the only — organization to gather worker-reported data without restrictions on ownership or use. We reached a dozen countries and achieved scale in two of them. We delivered real value to workers and published our data openly , ranking factories by name on social metrics, like the risks of child labor and sexual harassment — another first-and-only. After serving dozens of private sector customers, we evolved towards a public sector approach to build the infrastructure to achieve our mission. In late 2017, we landed a $2M project with a US Federal agency¹, which was an excellent validation of this new direction. And yet, these achievements and learnings (described in more detail at the bottom of the email) weren’t enough. The government contract started to take more and more of our effort, so that, by the end of 2018, essentially all of our revenue was coming from the agency.

And then, they stopped paying us.

We’re still not exactly sure what happened behind the scenes. We were executing the contract beautifully. For example, challenged by the agency to change focus countries, this February we succeeded in securing written agreements with both a South American host government² and that country’s capital city government — those governments were requesting that we implement the project with them over the next 3 years — all without any help from the US Federal agency, and in the face of a US Government shutdown. It’s our observation that, by early 2019, the agency stopped acting in good faith, refusing to approve even the most basic of budgets for us, and arbitrarily questioning our prior work in 2018. Meanwhile, they continued to extract work for the project outside of any budget; in the hopes of getting the project going again, we complied, effectively extending our company’s credit toward the project. In the face of months of this resistance, and in consultation with our Board, I cancelled this contract in May. As a result of this loss of momentum, and this large, disputed contract with the Trump Administration with ~9 months of payments to us in arrears, LaborVoices was left non-viable.

While we continue to get in-bound interest from customers, investors, governments and philanthropic agencies, no additional investment, contract or other influx of cash can turn around the situation at this point. The crushing administrative burden of this ongoing contract dispute with the Administration alone would sap any incoming resources. I simply can’t responsibly ask the team to make further sacrifices, as they have taken significant pay cuts for the past 9 months below their already uncompetitive wages. Similarly, I can’t responsibly bring in new investors, donors or customers, to keep LaborVoices going at this time.

I know you all placed your faith in me, and you may feel disappointed. I’ve seen how hard this team has worked, from the inside. While I’ve had my stumbles as a leader, I can tell you that if anyone could have succeeded in realizing the promise of worker voice in any of the several approaches we tried over the years, this team would have. What’s more, with your support, we got really close! You helped us accomplish amazing achievements over the last 9 years — a brief summary of which is below in this email. Over the next few months, I intend to share the lessons we’ve learned more-broadly, and set the stage for any following firm to fulfill the hope we’ve seeded in the market.

So, what’s next? Well, our team has largely moved on, with the core executives staying to wrap up loose ends. Several of us are still committed to finding another way to capitalize on the lessons we’ve learned. We remain convinced that there is a vast, untapped reservoir of worker-generated supply chain intelligence out there, and it’s only growing in size and strategic importance. Developing products for sustainability offices wasn’t the right route, we now know, so any future firm should avoid that market and target others. We’ll be back in touch with you as and when we make a go at that.

In the meantime, one of my big jobs is wrapping up LaborVoices. We’ve swung for the fences, and now we need to pause and regroup.

I thank each of you for your early and continued support. I’d also be happy to discuss this with any of you. Please just let me know.

The mission continues,
Kohl
CEO, LaborVoices, Inc.

[1] I’ve withheld the name of the US Federal agency for this public blog post. I did this both to avoid further retribution against former team members, and to avoid unfairly maligning employees of the agency, many of whom operated with entirely positive intent.

[2] Here, too, I’ve withheld the name of the partnering country. I did this because international negotiations are delicate at the best of times, and this outcome was an embarrassment for all concerned, particularly for our in-country embassy colleagues, and our colleagues within the host country government. They worked very hard to approve this project, under very tight timelines; I want to avoid discouraging further well-intentioned hard work in this direction.

Lessons Learned

Briefly, we’ve learned a lot over the 9 year history of LaborVoices.

1. Gathering worker-reported data, at scale, is not only possible — it’s straightforward. We’ve shown we can do this in 12 countries on 4 continents in over 15 languages. Workers do want to share what they’re going through, to help other workers, and to find the best jobs available for themselves. This is great, because it means that our primary social mission, improving the lives of vulnerable workers in global supply chains, can be accomplished, simply by aggregating and sharing this type of data among workers. To have real social impact, we needn’t wait for companies or factories to act. Workers can vote with their feet, immediately.
2. Gathering this data in an unencumbered fashion — so we can release public data and re-use it for benchmarks, advocacy and industry products — is also straightforward, but is something no one, other than us, is doing, even today. To the contrary, the rest of the worker-voice market is still completely “captured”, gathering one-off survey data, where the resulting data is owned by their customers, and doesn’t contribute to any sector-wide accountability. We had expected that others would duplicate our data ownership model — we certainly made no secret of it! — but no one has. That is disappointing.
3. The infrastructure to gather this data at scale cannot be built piecemeal, by selling resulting products and subscription services to individual companies. Rather, economies of scale require larger-scale investment. Investors are particularly hesitant to invest in this infrastructure, we’ve found. This means the ideal first partners for any infrastructure are governments and foundations. We have found a decent appetite for this kind of investment among these stakeholders, which is great news.
4. The products built on top of this infrastructure should target, as customers, companies who don’t care about workers. We started out doing the opposite, targeting only companies who have budgets to monitor working conditions — companies who care. Even these companies have only small, volatile budgets for this work. These companies are almost entirely US- and EU-headquartered companies. We found that, whether pilot projects were $10K or $500K, they never grew to any larger scale, no matter what metrics we hit. We would do better to build products, not for monitoring working conditions, but rather for managing supply chains more generally. For example, worker feedback can show us which suppliers are likely to be late with shipments. This kind of supply chain intelligence is valuable regardless of whether the customer cares about the workers. An approach like this — focusing on delivering “secular” monetary value, rather than social value — is much more likely to scale in today’s market.
5. In the long term, corporate social programs are under threat, globally, which makes it a bad market to be in. As BRIC consumers and investors start to dominate the global market, we should expect a values-shift away from US-EU human rights priorities. This means that companies will face immense competitive pressure to minimize efforts to monitor for labor rights abuses in their supply chain. All vendors providing this monitoring will find their customer base drying up. The only supply chain social initiatives that will survive are those that provide some secular value. For example, if a socially-minded startup could help a company in satisfying legal requirements, they might survive. Similarly, if a startup could provide operational efficiencies, similar to how energy efficiency is a “no-brainer” for any company, they may also survive. This is likely the only way to survive the rise of BRIC consumers and investors, who simply do not, and will not value social responsibility the way US-EU folks do.

Now, with all these lessons, one might think that LaborVoices would be well-placed to execute on this path. We were well-placed, almost perfectly, in fact. Late in 2017, we signed a major, $2M contract with a US Federal agency, to build our sector-wide infrastructure in another host country, a huge vote of confidence for this approach. This contract went south, as described above. We expect that another window will open for this approach, likely involving a US or European sponsoring government or foundation.

Accomplishments

A brief list of LaborVoices accomplishments, 2010–2019:

• Built an anti-human-trafficking start-up targeting the $50B supply chain management market, from self-funding through a seed investment round, operating in 12 countries.
• First-to-market with an online dashboard of independent worker-generated intelligence on child labor, human trafficking and migrant worker abuses.
• First with audio-based “Glassdoor-like” intel for workers to vote-with-their-feet for better jobs, in over 15 languages.
• Grew to a peak team of 17 full-time employees and contractors.
• Secured $4.8M+ in revenue through detail-oriented product development, sales, and operations.
• Attracted a sales pipeline of 100+ multinational corporate brands in apparel, agriculture, and electronics.
• Achieved 6 years of customer revenue, including from Apple, Gap, Nike, and Walmart.
• Delivered 2 country-wide, multi-year supply chain compliance solutions for customers in Turkish apparel and Argentinian agriculture. Both became repeat, reference customers.
• Discovered many individual abuses (infant deaths in Indian factory child care facilities), systemic issues (Syrian refugees in Turkish sweatshops), and industry conditions (statistically-significant signals of human trafficking across Bangladesh apparel factory workers).
• Published first industry-wide benchmarking, ranking named factories in Bangladesh and Turkey.
• Inspired press coverage: BBC, Bloomberg, Wall Street Journal, Reuters, Forbes, Entrepreneur, Inc. Cited in The Big Pivot and a SJSU business case study. Authored a chapter in 2019 book on tech approaches to human rights in supply chains.