Image credit: JONATHAN ERNST/Reuters/Landov
In every debate this campaign season, Mitt Romney has been hammered by his Republican rivals for essentially teaching companies how to ship jobs overseas during his days at Bain. Romney almost always responds by saying he actually created jobs, and helped start Staples. Did Romney really have a hand in creating an office supply giant?
He did. More accurately, he convinced a bunch of people with a lot of money that Staples' business model would work. He also put in a few shifts at the first store.
Let’s start at the beginning.
In 1984, Romney left consulting firm Bain & Company to co-found their new private equity investment firm, Bain Capital. Not long after, supermarket executive Thomas G. Stemberg approached Bain with an idea. According to Staples company lore, Stemberg was working on a business proposal over a holiday weekend when his printer ribbon broke. "After driving from store to store and not finding the correct ribbon," Staples.com explains, "Tom came to a realization: The world needed a supermarket for office products."
When Stemberg went looking for a venture capital, he got laughed out of offices all over Boston. The problem, as most investors saw it, was that the customers Stemberg was trying to draw weren’t used to going to a store to shop for office supplies. For the longest time, they’d ordered pens from one vendor, paper from another, and had everything delivered. No way was a retail startup going to change this deeply ingrained consumer behavior.
The True Cost of Pens
When Stemberg took the idea to Bain, Romney was intrigued, but his colleagues were uneasy. Romney decided to do a little research and the firm began surveying small businesses in the area. They found that business managers often thought they were spending very little on supplies, and believed it would cost more to send someone to a store to buy them. When they talked to accountants at the same businesses, though, they often found the places were spending as much as five times more than management thought. Romney figured the savings Stemberg’s store could provide justified someone having to actually go there. He took his survey results to his partners and convinced them that Stemberg’s model could work. They agreed, and gave Stemberg the initial funding for what would eventually become the Staples chain.
Romney’s role didn’t end there. He was very involved with the first Staples store when it opened. Stemberg was short on hands, so the Bain Capital guys helped out, picking out the computer system and stocking shelves for the first few weeks it was open.
Romney didn’t stock printers for long, but he did sit on the Staples board for years. Even out of the store, he put in hard work, though. In his VC days, Romney reportedly got so stressed out and exerted himself so much that he regularly sweat through his dress shirts.