EXPECT TO LEARN:

• What working principles Karma’s founding team exercises in their daily work?
• Why did the company decide to pivot, even though they were already successful?
• Why entering a market first might not always be the best option?
• Why an academic approach might be holding you back, and how to fix it?

Purpose drives your business. And in the end, Swedes always win.

Sweden accounts for nearly 10% of Europe’s purpose-driven startups, and the most well-known of them might be Karma.

Founded in 2015, the platform on which restaurants and grocery stores with surplus food connect with consumers, has gone on to raise €16.7M in funding. Besides their home turf in Sweden, Karma now operates in Paris, London, and Brighton.

Co-Founder Elsa Bernadotte is COO, President and interim CTO of Karma. She also seems to be an overall renaissance genius who’s previously served as Karma’s CMO and CFO and has been listed on the Forbes 30 under 30 list of social entrepreneurs.

Elsa now shares her most crucial lessons from along the way, through starting, pivoting, and scaling the circular economy business.

LESSON 1

BE A PRODUCT NERD, BUT NOT AT THE COST OF CUSTOMER OBSESSION

Karma didn’t start off in 2015 as a mission-driven, surplus food business, but as a more generic Groupon-style flash sale discount platform. The team, consisting of ’product nerds’ as Elsa puts it, focused all efforts on perfecting their product – but not in the right direction.

“In our first year, we ended up falling in love with our own product and forgetting the only ones that really matter – the end-users.”

The team realized that if they want to create a meaningful, long-term business, they needed to ’get out there’ more and really obsess over customer needs and experience.

“Since then, our principle has been to put our users first, test everything on the ones that matter, and make data-driven decisions accordingly.”

LESSON 2

THE BIGGEST SOCIETAL PAIN POINTS ARE YOUR BIGGEST OPPORTUNITIES

Data-driven decision making was also what eventually led to Karma’s pivot: While the sales platform itself was moderately successful, Karma’s team was hungry – pun intended – for something more.

“We looked for a point of friction,” Elsa says. “We were searching for the biggest societal issues of our time. The bigger the problem, the bigger the opportunity. Was there perhaps something we could leverage to build something?”

Eventually, they found that point of friction from their own existing data. By studying data from their platform, the team realized that demand from consumers to buy discounted food was huge.

Restaurants were also continuously offering food deals out of their daily surplus. Having overwhelming proof of both supply and demand, the team had found their new focus.

LESSON 3

YOU HAVE TO GET TO MARKET AT THE RIGHT TIME, NOT FIRST

When Karma first decided to focus on surplus food, they actually thought they had a first-mover advantage.

“We were a little naive in thinking that we were the first ones to enter the market. Of course, there had been companies out there.”

The model had indeed been tried before, it just hadn’t been scaled. The reason was probably a combination of factors, Elsa speculates.

Firstly, the necessary technology perhaps wasn’t quite there a few years before Karma came around, or at least, it hadn’t been adopted – people weren’t yet accustomed to using their phones to order food. Secondly, awareness of the food waste issue itself was also in its infancy.

“The market wasn’t interested enough in talking about it yet. Today, we’re more ready as consumers. Technology, too, is ready to enable it. We as a society are more willing and capable to talk about food waste,” Elsa says.

If consumers crave something, the industry will follow.

LESSON 4

YOU CAN’T THINK THE SAME WAY IN ACADEMIA AND ENTREPRENEURSHIP

Everyone in the Karma founding team comes from an academic background. They were trained in academia to use structured approaches that arrive at neat solutions.

What they came to realize was that this methodology doesn’t translate to the complexity of building companies. They had to learn new ways of thinking.

“We had been trained to be organised, structured, process-driven as well as encouraged to think that there is always one perfect solution we should carefully look for.

Entrepreneurship doesn’t work that way. It’s not always perfect and there is rarely only one right way of approaching a certain problem or situation.”

As a result, Karma decided to emphasize speed over perfection in their working culture – a useful tactic in many young companies. Elsa thinks the new focus on speed and flexibility has been decisive in taking the company to its current growth phase.

”We started focusing on what really moves the needle and deprioritizing the tasks that may feel good to get done but don’t necessarily create value. It really accelerated what we were able to achieve within a time frame. Time is one of our most precious assets.”

LESSON 5

WHEN ISSUES ARISE, SEPARATE MANIFESTATIONS AND ROOT CAUSES

If Karma had chosen to forever focus on perfecting their first discount platform instead of listening to the founding team’s need for meaning, they would’ve never made the hugely successful pivot. The philosophy of looking for root causes now sits strong in their everyday work.

“A problem is not necessarily equal to its root cause. If you instantly solve all problems you identify without reflection, you may end up causing more problems, if the root cause remains untouched.”

Instead of solving problems right away, Elsa suggests using problems as cues to get curious, asking ”why?” until you dig deep into the bottom of the issue.

”By fixing root causes early on, we have saved a lot of time and effort. As we say, kill the monster while it’s small.”

LESSON 6

ALWAYS CHALLENGE ABSOLUTE TRUTHS

“Cliche, but it comes from both the Karma journey and my personal one. Absolute truths – should, must, can’t, everyone, always, never – are something that has led us in the wrong direction at times,” Elsa says.

When it comes to entrepreneurship, Elsa and her team have in many cases seen these definitives only being definitives until someone proves otherwise.

Thus, they try to tread carefully when they receive a strong opinion on what Karma must or must not do.

”As a principle, we aim to take a second to step back and question whether it applies to us: our product, our company, our industry, or our team. Maybe it does and then it is fine, but it is dangerous to assume people know the right way for you in a time when so many things constantly change.”