Startups Get an Unusual Message: Go Slow, Think Small

Startups Get an Unusual Message: Go Slow, Think Small

Etsy-backed business-education program counsels founders to focus on sustainability before growth

Ariel Barbouth, owner of Nuchas, a small New York fleet of empanada stands, was urged to shift his focus from expanding to boosting product quality and sustainability standards. PHOTO: CASSI ALEXANDRA FOR THE WALL STREET JOURNAL

Ariel Barbouth, owner of Nuchas, a small New York fleet of empanada stands, was urged to shift his focus from expanding to boosting product quality and sustainability standards. PHOTO: CASSI ALEXANDRA FOR THE WALL STREET JOURNAL

By LINDSAY GELLMAN

June 1, 2016 1:55 p.m. ET

Startup founders often feel pressure to chase rapid growth at any cost. So it is notable that one new program urges them to think small.

In an era of startup accelerators, the Good Work Institute, a free business-education program for entrepreneurs with modest-sized firms, might best be called a decelerator. Run by Etsy.org, the philanthropic offshoot of online craft marketplace Etsy Inc., the program counsels founders to focus on virtues like sustainability rather than new storefronts and staff. It also cautions them against “just growing to grow,” in the words of Matthew Stinchcomb,Etsy.org’s executive director and the company’s former sustainability chief.

The philosophy is diametrically opposed to that of most current programs for entrepreneurs, who typically come in seeking help on growing their ventures.

“Even the most well-intentioned business education is just teaching people to do work that’s less bad” for the community and the environment, said Mr. Stinchcomb.

While many business-school deans would dispute that characterization, it is fair to say that few M.B.A. programs involve team-building exercises at the Brooklyn Botanic Garden, in which participants instruct partners to close their eyes, then guide them on a walk to strengthen communication skills and appreciation for their surroundings. Other Good Work Institute sessions cover investing in environmental initiatives, fair wages for staff and community involvement.

The ethos reflects Etsy’s main mission of boosting small, online merchants as it works to limit the presence of mass-produced items on the site. The online crafts bazaar, born in a Brooklyn apartment in 2005, went public in April last year to the tune of a $1.8 billion valuation. The company said it “democratizes access to entrepreneurship” by offering low-risk opportunities to start small businesses.

Entrepreneurs in the Etsy.org program don’t necessarily sell their wares on the company marketplace.

Etsy issued 188,235 shares of its common stock and gave $300,000 from its initial public offering to fund the independent nonprofit. Twenty-two entrepreneurs took part in the organization’s inaugural program, which took place on weekends over a six-month period in New York City last year. The course included instruction in bookkeeping basics, talks by local business owners and group discussions.

This year’s program, which begins in June, will be based at sites throughout New York’s Hudson Valley. From a pool of about 80 applicants, Etsy.org chose about 30 founders based on the strength of their business ideas and the element of diversity they brought to the group.

The program isn’t for founders dreaming of building the next Uber Technologies Inc. or Chipotle Mexican Grill Inc., said Mr. Stinchcomb, adding that he hopes to add a unit to the program for founders to “learn how to slow down.”

Etsy.org’s gospel of small, slow expansion is jolting for some founders, who are typically encouraged to think big.

“We’re told it’s all about growth, scaling, getting bigger and bigger,” said Jeffrey Monteiro, a participant in the first class and principal of J.M. Generals, a maker of home goods like blankets and cushions. Mr. Monteiro said he learned to strive for thoughtful growth. For J.M. Generals, that meant re-evaluating the company’s shipping and fulfillment and switching to more environmentally friendly packaging. Since the program ended, he has been delivering more items via bike messengers and the U.S. Postal Service, rather than large commercial shippers.

Nuchas expanded from a single Times Square kiosk to a handful of stands, carts and trucks in and around the city. PHOTO: CASSI ALEXANDRA FOR THE WALL STREET JOURNAL

Nuchas expanded from a single Times Square kiosk to a handful of stands, carts and trucks in and around the city. PHOTO: CASSI ALEXANDRA FOR THE WALL STREET JOURNAL

When Ariel Barbouth applied to the program last year, he had dreamed of transforming Nuchas, his small New York fleet of empanada stands, into “the biggest empanada company on the planet.”

In his five years running Nuchas, Mr. Barbouth had taken advantage of six-figure loans and a $1 million mortgage on a manufacturing facility from the U.S. Small Business Administration, along with New York City funds earmarked for entrepreneurs and educational support from Goldman Sachs Group Inc.’s 10,000 Small Businesses Program. Nuchas grew to more than 40 employees, expanding from a single Times Square kiosk to a handful of stands, carts and trucks in and around the city. During that period, Nuchas also began supplying empanadas to gourmet grocers.

In the Etsy program, Mr. Barbouth was urged to shift his focus from expansion to boosting standards for product quality as well as sustainability, he said. Since completing the course, Nuchas has used more ingredients from local farmers to minimize its carbon footprint.

He also pared down expansion plans—a development he hadn’t foreseen, he said.

Mr. Barbouth is betting that customers will pay a premium for a more thoughtfully produced bite. Competitors’ empanadas may cost as little as 60 cents; a Nuchas empanada costs $3 and up. He said the program strengthened his conviction that “I don’t want to be the cheap empanada”—a sentiment he is working to better communicate through marketing.

Others Good Work alums said they aren’t braking on growth plans.

“We never had the intention of being just a mom-and-pop shop,” saidAgatha Kulaga, co-founder of Brooklyn-based bakery Ovenly. She plans to open at least two new retail locations by the end of the year, steps toward eventually achieving “national scale,” she said.

Ms. Kulaga said the program reaffirmed her goal to expand without compromising the company’s efforts toward environmental sustainability and community outreach, which include hiring more than a third of its workers from programs for political refugees and other at-risk groups.

Mr. Barbouth recently joined her at a conference geared toward businesses interested in hiring formerly incarcerated people. He is now considering a similar hiring pipeline at Nuchas, he said.

“It’s not that we stopped growing,” he said. “It’s about figuring out who we want to grow with.”

Write to Lindsay Gellman at Lindsay.Gellman@wsj.com