Boticca, the world’s luxury bazaar of fashion accessories, just raised $4 million in a series A round from a number of high net worth individuals around the world and UK-based fund, MMC Ventures. Back in 2011, it took us just three months to raise our $2.3 million seed round, at a stage where the company was barely making any revenue.
Roughly two years on, it took us nine months to raise our series A, at a stage where unlike most e-commerce startups we had profitable user economics with a cost of acquisition recouped on the first purchase and more than four times lower than our Customer Lifetime Value. The fundamentals of our business were and still are very strong, yet the path to series A presented an array of unexpected challenges.
This sounds counterintuitive, doesn’t it? It certainly did to us. However, looking back, we’ve learned more about what happened, what we did wrong, how the environment affected us and how other companies can avoid making the same mistakes.
Don’t Waste Your Time: Engage With the Right People
When we started thinking about fundraising in December 2012, we were told by many around us, including our own investors, how terrible the fundraising climate was in the US and even more so in Europe. Thus, we decided to reach out to a lot of potential investors. Both my co-founder and I come from a venture capital and a private equity background so we have always had access to many investors. This coupled with the introductions from our existing seed investors gave us a full list of potential people to talk to.
Had we done more research prior to these meetings, we could have saved ourselves countless useless conversations.
However, we began reaching out to investors without properly considering their fit (surprising, considering how much fit comes into our hiring process). For countless reasons, our list included the wrong people: some no longer invested in series A rounds, preferring to invest either in seed rounds or later rounds (the series A crunch effect). Some were at the end of their funds while others were too long on e-commerce investments that hadn’t yet had any good outcomes. Had we done more research prior to these meetings, we could have saved ourselves countless useless conversations. It is not just about the number of investors you engage with — you need to get face time with a lot of investors — but more importantly, you need to find the right ones for your business.
Don’t Put All Your Eggs In One Basket
We made three big mistakes: we trusted too quickly, became too confident and let ourselves be wooed by one main investor. As we were sifting through the large funnel of potential investors, we opened serious discussions with one main European fund, which will remain unnamed. They started doing in depth due diligence before any signed term sheet. This required an incredible amount of time on our end and because of it we stopped or stalled conversations with most other investors. We were confident this would be a success: Our interaction with the fund was extremely positive, we were transparent about our operations and our economics were (and still are) solid.
However, we did not realize that this fund had internal operational constraints, which led them to pull out at the 11th hour. We were left with hardly anyone else to fall back on and only three months of cash left in the bank. Learn from our mistake: No matter how well things are going, keep your options open until a term sheet is signed.
The following two months were incredibly difficult. They were filled with sleepless nights and stress. However at no point in time did my co-founder or I give up. We had a very healthy business on our hands, a great team, and a huge opportunity. Knowing at all times that we were both in it together and neither one of us would rest until we made it right was a huge factor in our ultimate success.
Set Your Ego Aside
Many extremely successful entrepreneurs have had near-death experiences, though these experiences rarely come to light. What makes the papers is the final outcome, the end success. But often, the road to success is a rocky one for entrepreneurs.
When my co-founder and I were faced with three months of cash left in the bank and no tangible fallback option, one of my close friends, Rupert Shaw, co-founder of Pioneer Point Partners, impressed on me the fact that this was the time to set egos aside and reach out to as many people as possible. So that’s exactly what we did.
The amount of support that we received and the number of advocates and evangelists we discovered in them was humbling.
We started reaching out to our network of friends, family, mentors, and former colleagues, which includes successful entrepreneurs, business men and women, and investors. We shared the hard facts and were very candid about our dire funding situation. The amount of support that we received and the number of advocates and evangelists we discovered in them was humbling.
To my surprise, we weren’t alone. I sat down with numerous successful entrepreneurs who had experienced similar situations multiple times and openly shared them with me. These ended up being the people who either invested in our series A or made the introductions to our series A investors. Each of these candid conversations led to as many as three immediate introductions to great potential investors. In no time, we went from near-death to being oversubscribed in our series A.
Do Not Give Up: Create Options For Yourself
If you have a strong business, with the right fundamentals, do not give up. My co-founder and I created multiple options and also envisaged the worst. We covered all sorts of actionable scenarios to allow us to keep the team intact (some were more attractive than others). Believing in the possibilities of these alternatives is what kept us going.
One scenario involved creating a last-resort plan with our existing lead seed investor, ISAI, who was and continues to be supportive. They believed in the business, however, because of the smaller size of their fund and the amount they had already committed to the business, they could not justify bank rolling our series A with an up round. The terms we discussed with them were only ones we were going to agree to as a last resort. Another involved forgoing our own salaries and taking out personal loans to buy time. We also crafted two different plans for the business, one in which we raised $2 million, half of what we had originally planned but enough to get us to profitability with slower growth and a smaller business, and one in which we raised the original $4 million. We envisaged only raising from angels, though that would have meant a lot of coordination and would not have been the best signal for our next round.
We realized we had far more options than we’d originally considered. This enabled us to go into meetings with confidence without allowing investors to smell blood.
Make Them Dream and Call The Shots
One of my closest friends and a very successful entrepreneur, Alexander Asseily, (co-founder of Jawbone and now State.com) sat down with me early on through this process and gave me two extremely valuable pieces of advice:
Make the investors dream. Every investor wants to believe that the business they are investing in will change its industry if not the world, and will make them very rich. Therefore do not play down your dream. Share your passion and vision.
Call the shots. You have a good business, you know the environment, so don’t ask for terms and a valuation. Put a deal together and let the investors know that this is it. If they are serious you will know immediately, if they want to negotiate that’s fine. At that point they will have shown real interest.
We did both things. We changed our pitch, the deck, and how we delivered it to make it more passionate and true to our vision, explaining how Boticca is disrupting its industry and enabling brands that didn’t have access to distribution before develop very successful businesses.
As a result, we were determined, transparent about the situation and confident in the meetings we had.
We also put a term sheet together that we felt comfortable with. We priced it attractively, where we knew that anyone who believed in us or understood the industry and the growth of our business would seriously consider the investment. We could easily justify the pricing with comparable examples, while being comfortable with its valuation. As a result, we were determined, transparent about the situation and confident in the meetings we had.
It must be said that none of this would have been possible without a sound underlying business. But if your business is built on solid fundamentals, you will be able to cope with adversity. If you’ve built a strong business, yet still find yourself on the brink of near-death, know that with preparation and perseverance, you will be able to overcome even the most daunting challenges. I’ve written this post as candidly as possible in order to allow others who may find themselves in similar situations to learn from my experiences and realize that it is all part of the journey.
Branding is often seen as a fluffy subject. It’s de-prioritized because it is neither tangible, nor easily measurable and belongs more to the creative types than left-brain entrepreneurs. But dismissing the importance of branding is a big mistake, especially for consumer facing companies. Branding is critical to the success of any business, both externally and internally and creating a solid brand platform will make it easier to execute all your other tasks with clarity.
Understanding Branding Is Vital
Last summer, my cofounder and I realized we had to do a proper brand review. At two years old we had evolved in our direction, in the understanding of who we were and we had doubled the size of our team. Everything had happened organically, but we had never taken a step back to communicate the changes to the team or even between each other. We were lacking a clearly defined vision, a common language and an authentic identity. Though we knew branding mattered, we didn’t fully grasp the importance of developing a strong brand platform.
What We Did Wrong
“What we hadn’t realized is that real branding also requires a certain set of tools, a framework to work with and a third party to act as the conductor.”
We de-prioritized our branding review. We thought we did not have the time or resources and ultimately, it took us a year to complete. We then had a failed attempt when we thought we could do it ourselves without any proper tools and outside help. We gathered the team together and did two sessions, one full day and one half day. Though these sessions sparked great discussions, we’ve since learned that we didn’t know which questions and exercises could help us reach a successful conclusion. Furthermore, we didn’t know how to proceed with the results of these sessions. What we hadn’t realized is that real branding also requires a certain set of tools, a framework to work with and a third party to act as the conductor.
Getting It Right
This summer, we finally did it correctly. We enlisted the help of Alexandra Sprung and Kevin Meade, two of the founders of a great European branding agency, L’Agence Simone. They’ve worked with clients like Diptyque, Champagne Perrier-Jouet and more, and provided invaluable guidance throughout this process. Here, I’ve detailed what we learned from this experience, including some of the process and tools we used, to give you an idea of what needs to be done.
In preparation:
Conduct a customer survey to make sure you understand your customer.
Spend time upfront with the agency to walk them through the internal and external questions as well as challenges to address.
Ask your team to send you specific questions they want to discuss.
Buy multiple copies of magazines in your industry or aimed at your target audience.
Dedicate one full day to the brand discussion — all calendars must be cleared (no exceptions!)
During the branding session:
Share the results of the customer survey.
The agency introduces itself and its expertise.
The agency then walks the team through their framework. In the case of Simone, it is what they call their Global Mindscape, which is a two-by-two matrix of the world of brands split into brands whose essence is based in recognition, progress, status and entertainment.
Each of the quadrants is explained with examples of brands. The team is asked to give examples of competitors and indicate where they would fall on that matrix.
The team must then discuss where the brand is today and where it wants to be tomorrow and place it on the matrix. This is a challenging and enlightening discussion.
Once this is decided, the teams split into groups of roughly five to six people who are given the task to illustrate, through a collage of images taken from magazines, what they think the brand is today and what they want it to be tomorrow.
The completed collages are taped to a wall, side by side. Each team then presents their two collages. This is a great way to visualize the team’s ideas and their common trends.
Finally, the agency records the words expressed when discussing the collages that illustrate Boticca’s future.
After the branding session:
The agency sends its summary and recommendations.
Based on these documented recommendations, the founders must work with the agency to translate the results into the brand platform, which should include: vision, mission, brand statement, values, style/aesthetics, and a lifestyle statement. Limit the number of people in this session to no more than four. This session should unify all opinions.
Share the brand platform with a few additional people on the team (perhaps one person in each department) for any final inputs. If you have an editor or writer on your team, have this person work with your platform to make it more engaging.
In addition to the brand platform, for each department, create a second document (we called this the brand springboard) that indicates how they can apply the recommendations to their daily execution. Include some ideas, but the main purpose is for each sub team to use it as a springboard to develop their own strategy.
Call a meeting to share the agency’s recommendations, the new brand platform and the brand springboard with the entire team. Be open to any comments where the team feels strongly. It is important for everyone to be aligned and believe in the common vision at the end of this session.
Ask the sub teams to work on the springboard documents and give them a week to develop their new strategies.
“The process allowed the various team members to better understand each other and move forward with a common understanding and willingness.”
Though we are still implementing our findings, the results of this process have already been tremendously beneficial. The process allowed the various team members to better understand each other and move forward with a common understanding and willingness. This team dynamic and buy-in is invaluable. We now all know what we want Boticca to be. Therefore, each team can take the results of this branding exercise and incorporate them into their own daily work. Because we all share the same vision, mission and values, we are also able to communicate externally in a stronger way, thus making our USP much stronger and differentiating ourselves to our audience.
Yes, it took some time, effort, resources and coordination, but the results are already worth it. All that remains to be done is what we do every day, to execute, but this time we can do it with clarity and in unison.
“Out of all the classes I took at Stanford, none has influenced my career to a greater and more positive degree.” – Albert Hsu
This is how Albert Hsu feels about his experience in the Mayfield Fellows Program, in which he participated in 2005. Offered through the Stanford Technology Ventures Program, the Mayfield Fellows Program (MFP) is a nine-month, life-changing entrepreneurship journey that takes its participants through a rich combination of intense study and real-world technology venture experience.
For 2011, the program is currently accepting applications from Stanford juniors, seniors, and co-terminal students. On average, the competitive program accepts only 12 students each year; and with applications due by noon on February 4, interested applicants have just a few more weeks to apply. MFP information sessions will be held at STVP’s offices in the Huang Engineering Center on January 20 and 26, from 5:30 to 7:00 p.m.
MFP was founded at Stanford University in 1996, to provide students with exposure to entrepreneurial leadership in the high-technology sector. MFP is taught by STVP Co-Director Dr. Tom Byers and STVP Executive Director Dr. Tina Seelig. According to Seelig, the program impacts students’ lives well beyond the nine-month session. “The students who come through MFP develop innovative ways of seeing problems as real opportunities, a skill they can use to their benefit for the rest of their lives.”
[quote_right]”I learned that being innovative and entrepreneurial doesn’t necessarily mean starting your own company. It is a state of mind and a framework for solving problems.”
— Sandy Yu, MFP alum[/quote_right]During the spring quarter, Mayfield Fellows study entrepreneurship issues related to the areas of people, products, and resources. As most of the issues examined in the spring overlap more than one of these areas, this period of research highlights the engaging and complex decisions faced by technology entrepreneurs. With guidance from professors and industry professionals, MFP students also investigate business models and case studies to discover examples of both success and missteps by startup organizations.
During the summer quarter, students take a paid internship at one of a number of emerging companies in Silicon Valley. Over the years, Mayfield Fellows have been placed at a variety of firms, such as Facebook, Google, Plaxo, IDEO, Atheros, and Hara. Beyond working at a company that might go on to change the world, Mayfield Fellows gain access to mentorship from many of the visionary leaders and thinkers who start, and work at, these firms.
In fact, sometimes the relationship is so positive, students end up finding a home to start their careers. Alex Liu, a 2001 Mayfield Fellow, is a perfect example, having stayed with Atheros for the 10 years since his Mayfield placement. “Without MFP, I never would have had the platform of visibility, confidence, and scope that allowed me to start these projects. I am immensely grateful to MFP for my present success and satisfaction in work and life,” says Liu.
In the fall quarter, students return to Stanford to reflect on their experiences and share what they have learned with the other Mayfield Fellows. The students compare what they experienced during summer against the models and concepts they evaluated during the previous spring. As many unexpected events can occur during the summer job placements (product launches, IPOs, mergers), the fall quarter is also a time for students to appreciate that the paths of entrepreneurial leaders will not always follow a pre-determined plan, and are often altered by new challenges requiring a willingness to take risks.
With each subsequent year of the MFP, Dr. Byers continues to be impressed with each group of fellows. “Every spring, we are fortunate to begin with 12 exceptional Stanford students, who possess intelligence and poise. And over the course of the program, I am continually impressed by their growth and insights.”
In December, the 2010 class of Mayfield Fellows took part in a graduation ceremony at Stanford’s Huang Engineering Center. Surrounded by family, friends, summer employers, and professors, each of the graduates shared insights and memories from their Mayfield Fellows experience. Each one articulated how fortunate they were to take part in the program, but each also noted the priceless connections they built with their fellow classmates. The positive camaraderie, mixed with this unique entrepreneurship experience, continues to make the Mayfield Fellows Program such an attractive opportunity for a select group of Stanford students.
