How a Convicted Felon Built a $3 Million Startup Straight Out of Prison

How a Convicted Felon Built a $3 Million Startup Straight Out of Prison

Frederick Hutson looked like he had everything going for him: he had a clean record, built some businesses, served in the U.S. Air Force and had been discharged honorably. However, things took a major turn for the worse in 2007, when at a mere 21 years of age, Hutson was caught trafficking marijuana with his friends and sentenced to more than four years in prison.

October 9, 2014
Frederick Hutson looked like he had everything going for him: he had a clean record, built some businesses, served in the U.S. Air Force and had been discharged honorably. However, things took a major turn for the worse in 2007, when at a mere 24 years of age, Hutson was caught trafficking marijuana with his friends and sentenced to more than four years in prison.
During his 51-month prison stint, Hutson recognized that there were huge inefficiencies in the prison system when it came to prisoners keeping in contact with their loved ones. From there, he came up with Pigeonly, a photo-sharing service that prints photos uploaded from a cell phone, computer or tablet and then ships them to any prison in the world. Pricing is set at an affordable 50 cents per photo and shipping is free. Having raised $2 million in seed funding from Silicon Valley investors, Pigeonly is set to have $1 million in revenue in only its first year since being accepted into an accelerator, mostly through its sub-brands Fotopigeon and Telepigeon, according to Forbes.
So, not only did Hutson incredibly spend four years in prison, he also managed to quickly build a company upon his release, raised millions of dollars in funding for it and now has it on track to being profitable in an age when most startups have no clue how they’re even going to make money. Needless to say, there are some valuable lessons to be learned here. After reading his story, I knew I had to track Frederick Hutson down for an interview.
I recently had the pleasure of speaking with Frederick via phone. Hold on to your seats, kids, as this man is going to drop some sage knowledge that all entrepreneurs should hear.
Tell us what it was like being sentenced to four years in prison after having such a clean record.

“I was so naive, because when I went to court I figured it would be a slap on the wrist being that I didn’t have a previous record and it wouldn’t be a big deal. When I heard the sentence come down, I was shocked even though the sentence was relatively short for what most people in federal prison have. I think the average time for federal is between 5-10, so I was slightly under 5 years. At the time, I couldn’t even wrap my brain around being in prison for that long. I couldn’t fathom what it was like to be somewhere away from your family, away from everyone you know, you go into this environment and you know that you can’t leave for a certain period of time. Even today, I don’t even know what I’m going to be doing five years from now.”

What did you do during prison to stay abreast of all the technological advancements and trends in the business world?

“I read everything I could get my hands on. Anytime I could get my hands on an Inc. magazine or Entrepreneur magazine, Enterprise. Wall Street Journal’s technology section was very helpful; it always talked about companies that were doing things, and a lot of times they talked about companies that were further along and not just startups. So all those things I started reading about, even though I was in the sidelines it got my brain to think a certain way and allowed me to really see what was possible through technology and what could be done through software. From there, I just started thinking about what problems I could solve. The low hanging fruit was a problem I was personally experiencing during that time. So I thought, ‘Well, the problems I’m experiencing right now are all based around communication and things just being inefficient.’ This is what technology does; it helps make things more efficient. So why not leverage that and build something that can automate processes in an environment where everything is typically manually done?”

What types of people did you meet in prison? Were you able to find a group of entrepreneurial thinkers like yourself?

“Absolutely, that’s all that’s there! You have two types of guys in prison: You have the guy who is just doing his time and he’s just waiting for the day for him to come to leave. He probably makes up about 10 percent, maybe a little less than that, between 5-10 percent of the population. The 90-95 percent are all entrepreneurial thinkers. When I say entrepreneurial thinkers, I’m talking about the type of people who see opportunity in a lot of things they look at, whether they direct it in a positive or negative way — most of it was in a negative way, which is why they’re in prison in the first place. But they saw an opportunity to have some sort of financial gain and they took it, whether it was right or wrong. So it wasn’t just guys on the street corners, there was also guys who were doing things closer to what I was doing, moving tons of drugs from one place to another. Then you have guys from white collar crimes, some of them CEOs and lawyers of Fortune 500 companies. So you had a wide range of people that you came across in federal prison, from the white collar guys who are worth $100 million to the guys in the street corners who didn’t graduate high school.

Most of the conversations I had with the guys were their business ideas, whether it was a barbershop, or a technology company, or some sort of a platform for fitness. It’s a gamut of ideas all over the map from guys who are thinking of another way to ‘hustle’ once they’re released that they won’t wind them back in prison. I think the big disconnect is there’s really no mechanism to transform the idea into something tangible. I think that’s where most people fall by the wayside and end up going back to the same things that they did before that got them in prison. I was lucky enough to figure out things like what an accelerator was, learning how important your network is, and refining my raw ideas into something that can be turned into a viable business model.”

How did you get potential investors to look past your background when you were raising your first round of funding?

“I joined the NewME accelerator and one thing that was different about them was that you were around people building businesses who looked just like you. It was just a different environment. One of the things that we talked about a lot was that the same things that might count against you in an ecosystem where most people don’t understand your background or the problems you want to solve because it reflects your life experiences, that also becomes your strength. The fact that I did go to prison, that made me the best person to build the business I was building because I had a level of understanding that nobody else would have because they didn’t experience what I did. So it actually turned into a strength.

Now with that being said, most investors I talked to didn’t get it. So out of the 50-60 people I talked to, we ended up having six people in our seed round. The key that I learned early on is that you can’t waste or focus a lot of attention on people who don’t get it; you really need to focus your attention on the few that do. I don’t think that experience is unique to me. I think that that any entrepreneur that’s going to get out there to raise funding will experience the same thing. Everyone is not going to understand what you’re building, but when you do find someone that does, that’s the people you spend your time with and you find more people like them. And typically at worst is, you get that one investor that buys in, he’s going to reach out to investors in his network, and they’re going to buy in themselves. Then it creates momentum and it takes care of itself.”

With the business world still heavily dominated by white men, have you faced challenges because of your race?

“Yeah, I think so. But I don’t hold it against a VC that looks at me and doesn’t feel comfortable, because he’s used to people that might look like him, so I think it’s human nature. For example, when I go to the barber shop and I get my haircut, my barber looks like me. So I have confidence when I sit down in the chair and I know they can cut my type of hair, because I know that’s what they do. Now if I go to Fantastic Sams, I’m not going to be that comfortable because the barber don’t look like me and I’m not sure if they can cut my type of hair. It’s the same exact mindset. So when guys see an entrepreneur that has similar backgrounds with them like the same school, or they look the same, or they come from similar cultural backgrounds, you’re naturally going to feel more comfortable. When you’re raising a seed round, you’re basically running money on faith, and that faith is based on their trust in your team to be able to figure it out. So being at an early stage, you don’t have a lot of traction and ‘proof’ that this is going to work. Most of what you’re raising during a seed round is going to be based solely on trust. With that said, we’re naturally going to trust people that look like us, that come from the same place we come from, people we can identify with. So I don’t necessarily blame them, because I know it’s human nature and we’re all the same way. I think the more entrepreneurs like myself that go out and successfully raise money and build a business, investors will get more comfortable because they’ll have more patterns to match with.”

What do you think is one thing you learned in prison that you can’t learn anywhere else?

“I don’t think there is anything you learn in prison that you can’t learn anywhere else. However, I do think that there are things you learn in prison that you will learn at a speed faster than you will anywhere else. One of those things is respect, and the other is doing what you say you’re going to do. Prison is its own society, it has its own rules, it has its own consequences for rules. Outside of prison, if you bump into someone, there isn’t really a consequence to it. Prison, there is a real consequence to that, you might get hands thrown at you. So what ends up happening is that everyone is respectful because the consequence of being disrespectful is pretty drastic, so you end up learning how to respect people from all different backgrounds and races. Even though you stay in your own circles, there’s still a mutual respect across the board.

The second thing is all you have in prison is your word, so if you say you’re going to do something, you have to do it. If you say you’re going to pay for something, you have to pay for it. It’s not like real life where if you don’t pay your bill, you get a bad mark on your credit score. It’s going to be way more drastic than that in prison. So not only do you have a lot of people here who not only have mutual respect for each other, but also who do what they say they’ll do. So those experiences translate out here to trust in the business world and with your customers. Trust is such a watered-down thing in society, so when you’re someone who respects everyone, is reliable and keeps your word, you’re going to have an edge.”

What do you think separates you from the gazillion other startups unable to raise funding or build a profitable business?

“[laughs] I think the only thing that separates me from others is that I build something to solve a real problem; I didn’t manufacture a problem. A lot of the times what I see people do is they have this idea that will be cool — and there’s nothing wrong with that, there’s a place in the world for those things. However, the fastest way to build a viable business is to solve a real problem for people. When you solve a real problem for people, they’ll gladly pay you for it, and that’s all we’ve done. From the first two weeks of launch, we generated like $13,000. That was only because we create a product that solved a real pain point for people, so it wasn’t hard to get people to sign up and buy. There was no smoke and mirrors, there was a clear problem that we recognized, and we had a very clear-cut solution, and it just worked. I think that the more entrepreneurs that get away from doing things that are just ‘cool’ or ‘fun’ and they look around at the problems they encountered in their everyday life or within their community and they build a product to address that, then I think that you’re going to see a lot more viable business that will take the track to be profitable.”

If you had a choice right now to turn back time and have a scenario where you don’t go to prison, but you won’t retain the current knowledge you have today, would you do it?

“Absolutely not! However, I wouldn’t recommend people to take the same path I did either! But one of the great things that happened while I was there was that when you’re in an environment where you have no distractions, where you’re alone with your thoughts. You have a level of growth that I don’t think you’d get on the outside in the same amount of time. So when you really can learn what your strength is, when you really learn who you are and what you’re good at and when that happens at a very rapid pace, it better equips you to figure out what your place in the world is. It’s like what Mark Twain says: ‘The two most important days in your life are the day you are born and the day you find out why.’ So when that happens, you’re just more focused and effective in everything you do.”

What is success to you? How has it changed over the years?

“Success to me today is freedom. When I say freedom, it is to be in a position where you can do the things that you want to do. I think that’s unique for every person, but to me, it’s having the ability to get up every morning and work on something I choose to work on and I’m just not doing a job to make a living. I get to choose to spend my time how I choose to and that I’m not on anybody else’s program. To me, that’s being successful. Definitely when I was younger, I thought success was the amount of money you have; I think that’s a part of it. But I think more it’s not so much the amount of money you have, but more so the amount of freedom money allows you to have. So it’s changed over time and now I see the difference. I don’t care what kind of car I drive or what clothes I have on, because what I have now is freedom.”

What’s your long-term vision for Pigeonly?

“One of my mentors who was in prison with me — his name is Cameron Lewis — one of the things he always told me was, ‘Frederick, if you want to be successful, build what’s going to be normal five years from now, but build it today.’ So we’re looking at things that are really ahead of the curve for our demographic. We want to bring something we think will commonplace in 5-10 years and build it today.”

Check out Pigeonly.
      Benny Luo

      Benny Luo
      is the founder of NextShark




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