How Karl Chong pandemic-proofed his new business in New York
A keen focus on purpose, strategy and leadership have helped entrepreneur Karl Chong overcome pandemic-related challenges in starting his new business in New York
Karl Chong is the kind of entrepreneur who likes a challenge. But when he established his latest business in New York, smack bang in the middle of the COVID-19 pandemic, he feared he had bitten off more than he could chew.
After graduating from UNSW in 2005 with a double degree (Bachelor of Commerce and Laws), Mr. Chong carved out a successful career in finance and investment banking with companies including Proctor & Gamble, UBS and Macquarie Bank. He then struck out on his own as Co-Founder and CEO of Southeast Asia’s first group-buying site, Beeconomic – which was subsequently acquired by global group-buying giant Groupon in the space of less than a year. Mr. Chong retained the role of CEO for Groupon in Singapore, growing the company to more than 160 staff over three years and steering it to become the most successful e-commerce site for the country, surpassing Amazon and eBay with more than US$65 million (A$85 million) in annual sales.
The conception of Cocoon
Mr. Chong – a self-described finance geek turned entrepreneur, then moved to New York with his growing young family and saw an opportunity for like-minded families looking for help and support at an important stage of their lives. Together with three other founders, Mr. Chong co-founded Cocoon, a social and learning club for families which he describes as a “second home” for families in New York City. Cocoon takes a community-based approach to helping new and young families through a suite of holistic programs and events with the support of an expert-led community.
Cocoon was “very much inspired” by travels across Asia and Scandinavia, says Mr. Chong, who observed significant levels of systemic family, community and even government support for new parents and growing families. “Whereas in the United States, it’s amazing that as a first-world country we don’t have federally mandated maternity leave; you have to negotiate that with your employer, when it should be a right.”
“As soon as you deliver a baby and leave the hospital, you’re left with inadequate, ongoing support, at a time when support seems essential. As a dad of three children, I experienced the lack of support on many levels. So, we built Cocoon to help make a change here in the United States, and guide the parenting journey from the moment you’re thinking about conceiving, through to after the birth – and we provide a community space in which you can experience family life in a more elevated and connected manner,” he says.
"One thing that allowed us to define the path we would take more clearly was our company’s mission: to support parents and help build community"- KARL CHONG
The business model of Cocoon
Cocoon is a members-only space purpose-built for the pandemic, with 18,000 square feet of space across two floors of a conveniently located building in the heart of Tribeca, New York City. This space is central to Cocoon’s reason for being, says Mr. Chong: “the beautiful part about this space is that it truly feels like a home for families, that’s comfortable for both kids and parents. We think of the space as 18,000 square feet that you can add to your apartment” he says.
The space consists of a 10,000 square foot open-ended, nature-inspired play space (called “the yard”) for children (the largest of its kind in New York) and Mr. Chong says careful thought has also been given to the kind of play equipment available for children, which is a reflection of Cocoon’s Montessori-based education philosophy. Rather than buying traditional slides which can only be used in one way, for example, there is a strong focus on using open-ended, real materials such as rubber tires and planks of wood.
“Kids get to feel the texture of these materials, they get to build and design their own slides, and they get to collaborate with one another to figure out solutions on their own,” he says.
"During a pandemic when everyone went into isolation, it felt even more important to create Cocoon for the local neighbourhood"- KARL CHONG
Cocoon also offers a 4000 square foot parkour gym, 2000 square foot outdoor patio, work booths for parents, a music and dance studio, nursery for mothers and their newborns (staffed by experienced doulas), La Colombe coffee on tap for parents, as well as private, bookable rooms (called “nests”) for snacking and hosting learning pods with other families.
A range of classrooms are also available with curated courses run by both internal and external experts, teaching children from birth through to eight-years-old everything from Spanish language and movement classes, through to art, dance and even prenatal courses for parents-to-be. “We also offer sensory, open-ended classes which are very Montessori-based, so it’s less about the result and outcome and more about the process and the collaboration that can happen between children.”
Mr. Chong says a lot of thought, time and effort went into the creation of Cocoon, but when the pandemic struck, this threw a rather large spanner in the launch plans – as physical space is critical to Cocoon’s raison d’etre. So when the business opened its doors in November 2020, it was not without a degree of trepidation on the part of Mr. Chong, his co-founders and Cocoon’s investors. With lockdowns and heavy government restrictions such as social distancing in place, opening a business that requires people to come together was “definitely very challenging”, he says.
“When the pandemic hit in March 2020, New York City was the epicentre of the pandemic and, luckily, we had not started construction on Cocoon. The pandemic caused us to think twice about whether or not we should open a physical indoor space. But one thing that allowed us to define the path we would take more clearly was our company’s mission: to support parents and help build community. During a pandemic when everyone went into isolation, it felt even more important to create Cocoon for the local neighbourhood.”
Mr. Chong and his co-founders met together with Cocoon’s architect to redesign the entire space from top to bottom so it could be purpose-built for the pandemic: “that was very much our focus and our positioning when we launched,” he says.
“We knocked down as many walls as we could, so that families could safely distance. We also had really unique innovations like providing private spaces that we call nests. These are little spaces that parents can organise playdates with other families. Each space is barriered up with polycarbonate screens, safe from the outside but social on the inside.” The classroom sizes were also doubled (to allow for social distancing) while other measures such as touch free sinks, touchless sanitiser stations and a new HVAC system to circulate fresh air through the space were introduced.
"We were probably one of the very few indoor retail spaces that could actually thrive during the pandemic"- KARL CHONG
Opening for business
When Cocoon opened in November 2020, Mr. Chong says it was “a really harrowing experience” as many families were either locked out of Tribeca or had moved to neighbouring destinations such as New Jersey, Connecticut and Long Island. While this reduced Cocoon’s potential customer base, Mr. Chong says interest remained very strong. “When we opened on 9 November, we were actually able to sell 100 memberships within the first month of launch. Our memberships are US$600 a month, so convincing parents to fork out a meaningful share of their disposable income during a pandemic to be in an indoor space was definitely challenging – but once parents saw that we were purpose-built for the pandemic and we had created very unique experiences that felt safe, parents started signing up,” he says.
“We had great traction, at a time when restaurants and gyms were permanently closing. We were probably one of the very few indoor retail spaces that could actually thrive during the pandemic, and I definitely applaud my team for being able to be really resilient.”
Fast forward five months to April 2021, and Cocoon is growing at 30 per cent month-on-month and has achieved a nearly $2 million dollar annual revenue run rate. As Mr. Chong and his co-founders look to scale and expand, this presents a range of challenges as the business is very dependent on physical location and space – both of which require significant capital investment. “So, we’re looking at more innovative ways of growing our brand… the goal for us is to become a business that is a brand that represents community to families and we want that brand to spread across America,” says Mr. Chong.
Advice for budding entrepreneurs
Having built and run a number of successful ventures, Mr. Chong has some pointed words of wisdom for entrepreneurs: “never give up,” he says. “Never, ever give up.” Starting Beeconomic in Singapore, he remembers well knocking on doors and pitching the business to merchants – who knocked Mr. Chong back more than 80 per cent of the time to start off with, in a bid to get signed agreements.
“It literally took us three months before we got a signed agreement. But if we had given up in those first few months, we would not have been able to create a company that eventually grew to over 160 people and went on to make about US$60 million of revenue a year. It really took that sense of belief in my product and the value that it’s providing,” says Mr. Chong. He recalls thinking that he needed to do a better job at convincing and demonstrating value to potential customers, and this combined with a mentality of not giving up saw him through.
This approach has held him in good stead with the launch of Cocoon, particularly when the pandemic struck. He and his co-founders thought carefully about launching as no money had been spent on construction at the time. “We had the idea of maybe just completely stopping and returning investors’ money,” he says. “But we had the ability to completely pivot to something different… I’m really glad we didn’t give up because now that we have launched we’ve got nearly 200 members who have signed up … so I’m really glad that we continued on with the initial path.”
The value of a strong network
Having started two businesses in new countries, this could have put Mr. Chong at a significant disadvantage in being able to tap into and leverage an established network of contacts. He describes this as “one of the big professional challenges that I’ve faced throughout my career” in moving between Australia, Singapore and the US.
“Now all those moves brought with them a level of uncertainty and lack of familiarity, lack of social networks, lack of professional networks. Those were some large professional challenges,” says Mr. Chong, who adds that this was made easier thanks to UNSW alumni networks. “When I was an alumni living in Singapore, launching what became Groupon Singapore, it was very helpful that UNSW connected me to other business executives, business professionals and founders.
“I was introduced to many startup founders who I later grabbed coffee with. Having that UNSW connection was so strong. It was this a sense of camaraderie [in that] we have UNSW as a shared experience,” he says. “I’ve had many experiences where I’ve met with other UNSW alumni in Singapore and in America that have led to either new business connections or investors in my startups. They’ve been truly helpful. When UNSW leverages its international network, it can really widen the market size for that startup founder, it’s seriously a game-changer.”