Imagine you’ve gone out to a bar. You’ve taken off your new coat – let’s say it’s winter, and it’s a Canada Goose you paid half your book budget for – and hung it over the back of your chair. You go to the bathroom. When you come back your fantastic coat has disappeared, and your friends didn’t see anyone take it. As if to spite you, there’s a single stray feather on the seat of the chair that once held your coat.
Incidents such as this occur often at entertainment establishments, and propelled Indiana University business student Derek Pacque to launch a company that would take him through the Shark Tank and beyond.
During business school, Pacque had heard friends complaining over and over again that the bars and clubs they went to lacked coat checks. This, says, Pacque, was a “pain point” – a problem afflicting many people, with no ready solution. And a pain point is a market opportunity. “Any company that’s really blown up has found a pain, and they’ve just gotten rid of it,” says Pacque, 26, who has moved his company, Chexology, to New York City from Indiana, raised $1.2 million in financing, and now operates in 50 New York City venues plus 15 more outside New York. Customers include Chase Bank, the Lincoln Center, JetBlue, the U.S. Open, and the New York Times.
A GUY WALKS INTO A BAR
Originally, Pacque is from Baltimore, although he spent six years as a child in Mali, West Africa. Back in the U.S. during high school in Virginia, he focused on business. “Growing up, I wanted to be an inventor,” he says. Pacque has come a long way from Baltimore, and Bamako, and McLean, Virginia, and from Bloomington, Indiana where he received his BS in Management, Corporate Innovation, and Entrepreneurship in 2011 at the Kelley School. And Chexology has come a long way from Hoosier Coat Check, its first iteration.
Pacque started Hoosier Coat Check in 2010, during his third year of his BS in management, corporate innovation, and entrepreneurship. The idea arose out of a class: students were asked to write down 10 consumer pain points. “The first thing I wrote down was, ‘Bars in Bloomington need coat checks.” Pacque gave a presentation to the class on the coat-check pain point. His peers pushed him to address it with a coat-check business, telling him, “Derek, go talk to the bar owners,” he says. He dropped in at a bar on a Thursday evening. It took him two beers before he mustered up the courage to approach the owner about the absence of a coat check. “We should have one, shouldn’t we?” the man said. “Do you want to start one? Can you get started by Saturday?”
Pacque had two days to make a business out of an idea. He sought help from Kelley professors, who ran him through the steps of founding a company. He opened a business bank account. He registered the company as an LLC. One prof helped him write the service agreement. Pacque borrowed $500 from his parents to buy racks and hangars. He was in business, sort of: to determine a price point, he started by offering the service for free.
That first night, Pacque took in 250 coats. He made no income from fees – but he hauled in $500 in tips, which suggested people would be willing to pay for the service. The next time, he charged $1, and took in the same number of coats. He tried $2, then $3, then $4. The last figure was too high: it would be $3 per coat. After six months, the company had grown to 16 employees and kept 50% profit margins, Pacque says.
JUST TELL US WHERE IT HURTS
As with many businesses, the solution to the pain point also had a pain point. Bar patrons loved the coat checks, but they hated the claim checks. Pacque was going to have to go mobile. The world, and his customer market especially, was leaving paper – faxes, newspapers, coat-check chits – behind. In the spring of 2011, he wrote the business plan that would transform Hoosier Coat Check into the new, digital CoatChex.