Interview with Rho Kook Song, CEO & Co-Founder of Freenters

Q: Let’s start from the beginning, from your high school. Did you have any interest in entrepreneurship starting off then?

A: I went to a foreign language high school, in Korean [Daewon]. There were lots of kids looking to study abroad in the United States. So for us, most of the curriculum focused on the ACT / SAT and going to US colleges.

I did do some entrepreneurship activities. There were several Korean entrepreneurship competitions. Basically, it was the CNVC [College New Venture Challenge] for the high school level. I also ran an entrepreneurship club for the high school.

For me going into UChicago, I was more into the financial services — like banking and consulting. So I did things like The Blue Chips. Really, I was away from entrepreneurship for the first two years of my time there.

Q: Before we get to your time at UChicago, I’m interested in hearing what that initial spark for entrepreneurship was?

A: Honestly, in high school, it was cool to do stuff that other people didn’t do. A lot of students were thinking about banking or consulting, before graduating high school. Other people were thinking about grad school or med school. Not a lot of people thinking about entrepreneurship then.

The reason why I wanted to do it, beyond being different, was something that I still believe today: that entrepreneurs provide value to society. And capturing that value is very important. In high school, it was probably a bit more of the being cool thing.

Q: Gotcha, let’s return back to your time at UChicago then.

A: When I first came to the US, I was very close to the Korean society. I still am today. Koreans at UChicago tended to be studying Economics and going into banking or consulting. Naturally, I was inclined to follow what the upperclassmen were doing.

I joined The Blue Chips and did an internship in an Investment Bank in Korea my first year. So yeah, was into banking. The internship was a good experience. I learned a lot, but it turned me down from pursuing a career in banking, and made me go back to entrepreneurship.

Honestly, the stuff was repetitive and boring for me. I wasn’t creating any substantive value.

Most of the things for the internships were just not very important things. I was able to see what other people were doing (including my VP and President of the division). And lots of it was just trying to get deals, making pitch decks, making financial analysis with weird assumptions to fit the target value that a client had in mind. It got very artificial.

After coming back and joining UCIB [UChicago Careers in Business], I was able to talk with a bunch of the guest speakers and entrepreneurs that they brought in. To be honest, I wasn’t really sure about the next steps for me. I was talking to bankers, entrepreneurs, VCs, just to see what sorts of things I was looking for next.

Actually, in that sense, UCIB was a great program. To get value out of it, I recommend doing what I did. I didn’t stop at just listening to the lectures, but actually followed up with most of them afterwards to get their personal contact information. Then I followed up for coffee or call, and talked about what they’re really doing, what they enjoy, and see what their career path is like.

I also applied to banking in that summer, and was thinking of graduating in three years. I luckily got an offer from Nomura Securities in Hong Kong. Around the same time, a friend who was involved in entrepreneurship around campus since he first got there came to me to start a company together. I had to make a choice between the summer internship in Hong Kong or start a company with my friend.

It was a very tough decision, from the fact that I was turned off from banking from the past summer, but still tried to talk to a lot of people about it and give it a lot of thought. I made the choice to pursue the career in entrepreneurship.

Q: And at that time, did you have any progress on the start-up idea? That seems like a huge leap to take.

A: At that time, we had no progress, just some business plans. Business canvassing, you know, just to see what the value proposition was, and what channels that could be created. No real work had been done.

Q: What was the initial idea for Freenters at that time?

A: Well, we saw a company called Add2Paper in Korea. They were doing a very similar thing to what we ended up doing with Freenters. Basically, install a kiosk in school, give free printing to students, and place banner ads at the bottom.

We thought there was a better business model for this in the States. Here, there are ten times as many schools, printing is much more expensive for them, and more advertising spend towards students. We said, they’re doing great, we could probably do this.

The next step for us was to find the technical co-founder. My friend did not have any technical experience. Even though everything about the business was not technical, it still involved technical coding. So, we were looking around for people who could be the CTO for us.

And, that’s how we reached out to one of my cofounders’s friends in New York. He was studying at Columbia at the time. He came over to UChicago and stayed at my apartment for the summer. He created our first website and oversaw initial development of the printing application.

I didn’t know anything about incorporation, patents, IP or things that are required to start a company at the time. We went to the Polsky Center for Entrepreneurship at Booth and talked to the folks there. Starr Marcelo and Jonathan Allen — Jonathan’s no longer at Polsky though.

We gave them the pitch of the idea. They were kinda impressed about the concept. We followed up with them to ask about the things that were needed to start a company. We also asked for a lot of mentors and started our advisory board. Some of the people from the initial advisory board are still on with us today.

Q: That seems like a large step to make from showing up at someone’s office and pitching them, to actively getting an advisory board for your start-up. How did that happen?

A: Well, we went to Polsky, because the entrepreneurship at the College wasn’t what it is today. It was the beginning year for College New Venture Challenge. There wasn’t the CIE to go to, no Midway Ventures, or anything like that. They were the only resources that we could think of.

When we talked to Starr and Jonathan, we talked about a business in sales / marketing. We asked them “Do you know anyone who is willing to help a college start up and has some experience there?”

They connected to James Bain, currently the COO of Parking Panda. He was at the time a City CEO for around seven cities for Groupon. And importantly he’s a Booth alum. He’s still on the board too.

Q: So apart from connecting with mentors and getting the technical development done, what else did you do that initial summer on Freenters?

A: We decided then to start at UChicago to do a beta test of our service. So we spent a lot of time talking to a number of people to place the initial printing kiosks. This is where we found our first challenge. The school has an exclusive contract with the printing vendor. We couldn’t place a printing kiosk where the printers were already located, in any of the hotspots like libraries or dorms.

As we were already facing an obstacle of where we could place a kiosk, we expanded the search outwards to individual building managers. We talked to a lot of academic buildings, which were really planned to be secondary places. We were able to talk to the building managers though of BSLC, the Kent building, and the Divinity School. At each one, we found the decision maker.

Turns out they are not connected to the library or dorm system for printing at all. They have their own decision makers for each of the buildings. So, through each of them, we got approval to place the kiosks.

That’s how we got the first five locations.

We still needed to get the advertisement for the bottom banner ad. We talked to a lot of mom and pop stores in Hyde Park. I actually still know most of owners of most of the restaurants in the area. Some of the initial contracts were free trial or discount. We really just wanted to start with some advertisement when we started the beta. We were able to secure a couple thousand dollars of advertising.

Q: Wait, so you’d just walk up to Valois and sell them on the spot then? How’d you get those initial people to pay?

A: Haha, I remember selling to Valois really well. We needed to make a phone call to the owner using the phone in the back of the restaurant because he wasn’t there. For each of the restaurants in Hyde Park I was able to sell the value proposition for them pretty easily.

We want you to subsidize students’ printing money — an everyday activity. And we were going to use that subsidy money to place the banner ads. You can put discounts, promo codes, whatever you’d like. Students will be more thankful for the business, because they see it as giving away a service to them. You can really shape the brand awareness through these ads.

The first problem was the owners weren’t actually there when were visited. And we were just cold visiting these various stores. Cold calling didn’t really work for us because we couldn’t show the value proposition as cleanly without the physical product. Yet, the managers and owners were not usually there. I remember we had to go there like 5 or 6 times just to talk to the owners. And of course, sometimes they weren’t convinced, and we ran into a chicken-egg problem of needing to have advertisers as well as users.

Q: Well then, how did you over-come that?

A: We didn’t have any data to show or speak of. So we usually tried to provide a free trial to them or do some steep discount, just to get them onto the platform. The revenue and money wasn’t the focus at that time, rightly. Really we wanted as much advertising as possible, so that students would see it as a legitimate business, and we could really make money off of them the second time.

Q: Great, so now what happens once the summer is over. You’ve gotten the technical specs down, secured a few advertisers and gotten locations arraigned for. How did you launch it?

A: The way we started was simply handing out flyers on the first day of classes to thousands of people. We’d either go into Hutch [Hutchinson Commons, a common lunch destination] or stand outside waiting until classes ended. We signed up 500 people on the first day. To put that in context, that’s about 10% of the undergraduate population. That gave us a lot of confidence and hope going forward.

We also asked a lot of professors to give us three minute times to address their class at the beginning (we’d say ‘something that really helps your students’). Most professors we asked gave us time to speak.

I still recall going one day into the Chinese History class, which had about 150 students in a lecture hall. I got their eyeballs and attention before the class started, and really was able to connect with them. It was all about that sort of thing then — getting the word out.

We weren’t really technically ready then to launch, unfortunately. The kiosk wasn’t fully ‘locked’. There were a lot of ways that people could overpass the technicalities of the system. In that system, people were supposed to just go to their email and download whatever they wanted to print and print through the Freenters printer driver. But on the kiosks, they could have just selected the printer they wanted, not the Freenters driver, and printed for free.

It’s hard to explain, but there are some ways that people could abuse the system. And we knew that they were. The printing meter on the printer wasn’t the same as that on the computer.

Of course, we wouldn’t have learned this lesson without launching first. That’s an important lesson because what you think is perfect is not always so in front of the users. Trial and error is a constant conversation with the users. Not a verbal conversation, per se, seeing what they perceived and how they used it.

Q: To bring this back to you, though, how did you balance this work on the launch of your application with the job of being a full time student, especially if you’re planning on graduating early?

A: Ah, so I was only thinking about graduating early if I was going to be pursuing a career in banking. I decided to stay in school and do the regular four years, although I didn’t end up taking a lot of classes. The Econ major can really be done in 3 years, quite easily. I think I took two classes total in my 4th year. Before I get into the discussion about my 4th year, I want to talk about our CTO situation.

We replaced our CTO multiple times in the first year of running the company. Recall, we had a guy from Columbia initial. Now at that time, we felt that technical ability was very important for the development team. But another thing that’s almost more important is the enthusiasm to the business model and to entrepreneurship in general.

Our first CTO wasn’t really into the business mode. Though he did great work all things considered during the summer, once the school year started, he didn’t really focus on the business. So development during the school year was a slow process, and all that. We ended up having a very honest conversation where he told us he wasn’t really into entrepreneurship or the business any more.

That wasn’t the only time we replaced the CTO position, we had to replace the next CTO two more times. We were really focused on the technical ability of the person, not the enthusiasm that they had. That ended us up with some talented but non-motivated team members. We had a PhD student from UChicago join the team, but he just didn’t put the effort in. It’s important when you’re finding a co-founder or team member to focus not just on ability, but enthusiasm. You can grow your ability as the business grows, you can’t replace the enthusiasm.

Q: And how did you end up paying these CTOs that you were working with? Stock or in cash?

A: Mostly, it was giving them ownership of the company. In the first case, we didn’t even have any vesting preference. It was pretty costly. We had to buy back the shares from the first guy for a couple thousand dollars. After that, learned the lesson, didn’t have anyone non-vesting.

That reminds me of one of the funny moments when we only were based at UChicago. I started going downtown to pitch some pretty big businesses, like Pepsi. It was really funny, because Pepsi wouldn’t never work with us, especially then. We just didn’t really know anything. We just kept trying to get conversations with Navy Pier or United, or with any of them. The first year was a bunch of lessons.

Q: Let’s chat about that then, how did you organize your knowledge early on so that you didn’t make the same mistakes early on?

A: We had weekly meetings where we oversaw what we did in the past week and plan for the week in advance. We discussed a lot about what we did wrong and what we did well. There was no actual format for documenting things, but early on, we had conversations and that’s about all we needed.

Q: Gotcha. So let’s return back to the Freenters’ story. After you launched, what was next?

A: After the first year, we saw that the model was working at UChicago. We had 3,300 users from UChicago, with a lot of printing going on. So we decided to launch into another school.

I emailed a bunch of administrators at Northwestern to see if they’d be interested. Now, I’ve got no grudge against UChicago, but Northwestern admins were a lot more favorable about the idea. We set up a meeting pretty easily with the director of library services, the president of student government, the head of IT, and a few others, and talked about what we could do for them.

From that meeting, we secured four locations, mostly in the dorms for the freshmen. They suggested that they didn’t have a printing system in the dorm system, so we went into some of the bigger dorms at Northwestern. So yeah, that’s how we got two schools by the beginning of 2013.

I forgot to mention that at the beginning of the summer 2013, we won the College New Venture Challenge at UChicago. I think that it wasn’t as competitive then as it is now. None of our competitors were actually doing any operations back then. They were just in the idea stage. We were just ahead of them. I didn’t necessary think we had a better model, but we really had just done something already.

I went to some of the CNVC events last academic year, and the companies [including Midway Ventures’ portfolio company UProspie] were actually doing some of the beta testing beyond where we were. Amazing to see what college students are doing now with companies, compared to what they were doing a while back.

Anyways, one of the judges was from Korea and an alum of UChicgo. He co-founded a big tech company called Hostway. He also ran an accelerator and VC in Seoul called SparksLab Global. So he knew about our competitor in Korea, and how the business model could work. He invited to compete in the accelerator in Korea, where we could participate remotely. It was very serendipitous that he was there.

He ended up investing $25k himself and $25k from his accelerator, giving us enough small funding to expand at least some. Honestly, I wouldn’t know what we would have done without any funding at that time.

I think our pitch to him was so successful because we understood the market, the problem it was facing, and the solution to the problem was really clear. Printing was a clear problem to college students, and we are making printing really easy for students.

Q: That’s terrific. Now, do you want to switch gears a bit and talk about how you’ve been able to scale up from there? I recall you saying that you later expanded to Boston.

A: Sure, but before that we should definitely talk about the major hacking incident that we had after the summer. In November, I woke up and had a text from one of our interns saying that the website was, well, fucked up.

Q: Oh gotcha, that incident — when an anonymous hacker took down your website and distributed user information right?

A: Yep, that one. I just kinda started to panic. At that time we didn’t have any CTO, it was just at the transition period when we had just let a CTO go. So we were just panicking essentially.

I got calls from the University and students. They wanted to know what sort of information was compromised. The University wanted to see if our passwords were hashed and salted, for security. Now that was something unexpected and crazy for us. We learned that technical stuff is very, very important. And during that time we found a CTO that has stuck with us until now. While it was unfortunate that it happened, it was good to happen when we had only two schools, and not more.

We did know the person that was going to be the CTO then, and he said that he was really interested, but we were looking to see if he was a real fit for the business. Of course, we were trying to stop having so many turnovers in that position.

But after that, we had no choice and said “go solve the issue”. Because even I didn’t actually know how to shut the website down. That very day, he started working with us. It was a — let’s see how he handles the crisis — and then offer him the CTO position sort of thing. That’s how he started working with us.

Another lesson we learned that day was from not letting the investor know about this until we had a full grasp and a solution to the problem. I remember that the investor John was pretty pissed that we didn’t contact him on the day it happened. He actually learned about it from a news article that had come out of the story. He told us that, this is the sort of thing that can really get you sued if you didn’t let investors know. Lots of big companies get hacked too, and it’s not that big of a deal, but you need to let the investors know about it.

We had some clues as to who did it, but didn’t really delve into it. Finding the perpetrator wasn’t really a big deal for us, more of getting the business back up. When some company or page got hacked last year, we got a lot of calls from the school, seeing if we had any information because they thought it was the same group. For us, it was just something in the past.

From the user’s perspective, the only information we used was the ID and the password for Freenters. Fortunately, even the passwords weren’t that much of a big deal since we had them hashed and salted. We also never stored the credit card information about the advertisers online either, so there wasn’t an issue there.

Q: Wow that sounds like a terrible thing to have to go through. How did you bounce back from that? What were the next steps?

We launched again in January after relaunching the website with better security and such. We wanted to wait to start expanding to when we thought we’d really be ready. So when we decided to grow, we tried to contact a lot of schools in Chicago and Boston. Boston, because it was a large campus community, and because a lot of advertisers focused on that market there.

Slowly and slowly, we got 10 and 15 and 20 schools. As we got more schools on board, talking to them got even easier. We started to expedite the process as we kept expanding. Schools were really interested in the same things, the hacking incident / security issues, third party verification and such.

In the summer of 2014, we had the SparkLabs accelerator. We connected with a lot of corporate advertisers and others. From there, we got seed funding of $400k and our feature in the Wall Street Journal. It was a really good time for us, finding publicity and such. Most of the capital we put towards expanding the team and going forward doing more marketing and sales.

I think one of the mistakes we made around then was dividing the offices into two locations. After the funding, we opened an office in Boston. We wanted someone on the ground focused on selling to the schools around there. That was a huge mistake at that early stage.

Communications weren’t perfect between the two offices. Even though we had a group chat and daily skype calls, discussing in person versus over Skype is really different. If we went back, we would probably only keep one office.

Steve, who is the current CTO, took two years of leave of absence to focus on the company. A number of the team members are people who have some sort of experience in the field. For example, our Chief Sales Officer worked in Verizon as a sales manager previously. It was much easier getting the team members involved after the funding.

Q: For sure, and just as you look back on these experiences, what’s the sort of advice that you’d have for college students either with an idea, a small company or an established start-up now?

A: I would say just when you have an idea, launch the business and try to do as much market validation as possible. Talk to your users, advertisers, and customer. Ask, “Does it really solve the pain points for the customers? Are there any additional pain points to cover?” Having that answered early on will help you scale the business.

I also wanted to mention that we’re pivoting to a software model this summer. We realized it was not as scalable model before as we thought because we needed to place the kiosk in the school. Selling to schools was a lot of work, with a long time to get to a full decision. There was also lots of Capital Expenditure and Operating Expenditure as well. Many VCs have voiced this to us as a concern, of the scalability.

So this summer, we pulled out all the hardware from the schools. We are almost done with software development, doing a private beta test in a while. The new product will be a virtual driver where on the first page and every five pages, there will be an advertisement. If you print a five page document with the driver, you’ll get $.50 for printing with the advertisement.

People anywhere can still use the driver on the home printers. Actually home and 70% of college printers, because you can download the printer driver onto their computer. What we are doing at this point is validating the market for this service. If we tried harder in the past, we would have learned that the market for our past product wasn’t as good as it could be. So now, we’re focused on talking to users, advertisers, etc. The initial results are that students like it, investors like it, and campus advertisers are partnered up to distribute with it.

This connects to the idea to validate the market early on, fit the product to what the market wants. Before this, we were buying hardware, leasing it, selling to students and marketing it. Now, we’ve scrapped most of it, and we’re pushing the hardware to the users. Now we are marketing heavily to students and making as much connections to advertisers. We have a core focus now. Not core focuses. And now were focused on marketing and our go to market strategy.

Technicality will always be there — we still have a lot of work to do on that front. We’re trying to develop the product for every operating system Mac and Windows (7, 8 and 10). We’ll use the private beta for compatibility / maintenance with each OS. We really want to make it perfect, and then we will push out the product in late October

We also want to try and see if there is any value that we are missing. For example, we want to see if it could be made more convenient or have any other features into in. Does it solve all the pain points?

We are also part of the iCorps program in Booth that focuses on market validation. The program goes from Late September onwards. It was started last year, and we quickly realized that a lot of the winners of the Booth New Venture Challenge (NVC) were a part of that program. It has four major sessions and lots of tasks for interviewing users, validating product-market fit, speaking to investors, and others. It’s a great fit for any company at this stage.

Another good thing we’re working on is a partnership Hewlitt-Packard. This last May, we were pitching at a demo day in Boston, and got connected with one of the VPs at HP. We’re in talks to try a partnership with their Instant Ink program for a couple thousand users. Hopefully after the pilot, we will be able to launch it and find some more sources for users outside of college students.

Instant Ink is HP’s ink replacement program. I can pay $3 a month and print as much as I contract with (50 pages, 100 pages or something else), and they will send me the ink. It’s like your practically buying print quotas, while they are constantly sending you ink. The idea for the partnership would be if you use a number of ad pages, you could get participation in this program for basically free.

But, even before launching, we want to have every piece nailed down. We want a clear go to market strategy, clear partnerships. This has been our focus for the summer. This is a part of the validation process. We don’t want to start a pivot without the validation. We think that we had a good amount throughout the summer. Until we launch in October, we need to check if there is anything that is iffy about it.

If we start with a bad product, we would eventually have to be stuck with an obstacle in the future. Before launching the business, we just want to see that everything makes sense.

This is the process that every entrepreneur should take to see and get more validation. You should find the loopholes. See if your product solves the problem. Only after this process, should you try to fully launch and scale.