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Consumer startups that said no to investor money

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Re: Consumer startups that said no to investor money

#31

Post by aero- »

This headline is misleading.

Native raised venture capital, it wasn't disclosed but there's plenty of PR surrounding it.

Tuft and Needle was started by engineers that had a good bit of personal cash saved in the bank, then later borrowed $500,000.

MVNT raised Money.

It's not like these companies didn't raise a bunch of money, they just didn't use VC $$ supposedly.

The common denominator here is the direct to consumer model with the use of growth hacking via social media campaigns and the rise of such social media platforms.

I.E. Make product that people want to buy and market it efficiently on social channels.

Re: Consumer startups that said no to investor money

#32

Post by ikeboy »

I met the native guy recently at a conference. He's seriously one of the most impressive stories I've ever heard - 2 years, 1 product, only sold on their site, 100M exit, vast majority going to him. He talked about testing a ton of variations (over 100 overall) of their product by selling batches of a couple thousand and tracking return rate, reviews, and reorder rate. Get the best product after extensive customer testing, get the best ads after extensive a/b ad testing, scale up profitable ad spend.

Re: Consumer startups that said no to investor money

#33

Post by bsder »

aero- wrote: post #31

This headline is misleading. Native raised venture capital, it wasn't disclosed but there's plenty of PR surrounding it. Tuft and Needle was started by engineers that had a good bit of personal cash saved in the bank, then later borrowed $500,000. MVNT raised Money. It's not like these companies didn't raise a bunch of money, they just didn't use VC $$ supposedly. The common denominator here is the direct to consumer…

I don't really consider these companies to be "startups" because they don't have to solve some technical problem. These kinds of consumer "cosmetics" companies have always run like this. They are about marketing, not product.

If you want an education, go to the MD&M West show and sit on the parking shuttle bus and listen. There are a zillion of these kinds of companies all hawking almost exactly the same products looking for some marketing and sales "edge". None of them are solving "we're actually technically better".

Kudos to these companies for finding that marketing and sales edge, but I don't really consider that to be a "startup".

Re: Consumer startups that said no to investor money

#34

Post by jtmarino »

aero- wrote: post #31

This headline is misleading. Native raised venture capital, it wasn't disclosed but there's plenty of PR surrounding it. Tuft and Needle was started by engineers that had a good bit of personal cash saved in the bank, then later borrowed $500,000. MVNT raised Money. It's not like these companies didn't raise a bunch of money, they just didn't use VC $$ supposedly. The common denominator here is the direct to consumer…

Hey there, JT, Co-founder of Tuft & Needle. To clarify, Daehee and I started with $6k in 2012 and have raised no investments to date. We took a loan in 2016 of $500k for our SF retail store (that year our revenues were around $40mm) but did not use it and paid it right back. To be honest, we were wanting to learn how to leverage debt for growth but immediately decided that it wasn't needed and didn't make sense for us at that time. We've been fully unfunded and profitable every year.

Re: Consumer startups that said no to investor money

#35

Post by jtmarino »

bsder wrote: post #33
aero- wrote: post #31

This headline is misleading. Native raised venture capital, it wasn't disclosed but there's plenty of PR surrounding it. Tuft and Needle was started by engineers that had a good bit of personal cash saved in the bank, then later borrowed $500,000. MVNT raised Money. It's not like these companies didn't raise a bunch of money, they just didn't use VC $$ supposedly. The common denominator here is the direct to consumer…

I don't really consider these companies to be "startups" because they don't have to solve some technical problem. These kinds of consumer "cosmetics" companies have always run like this. They are about marketing, not product. If you want an education, go to the MD&M West show and sit on the parking shuttle bus and listen . There are a zillion of these kinds of companies all hawking almost exactly the same products lo…

Not all disruption is purely technical. In the mattress industry the disruption is more around process. Direct to consumer, service, product iteration with direct customer feedback, more vertical. There are technical innovations (foam chemistry) but that's not something that I would consider disruptive.

Historically, mattress manufacturers (the big brands) sell direct to retailers with little to no customer feedback or service. The stores resell (middlemen adding to the customer cost) with little to no customer feedback passed back to the brands. The supply chain was very difficult to break into because it was guarded from new direct to consumer entrants.

Re: Consumer startups that said no to investor money

#36

Post by aero- »

jtmarino wrote: post #34
aero- wrote: post #31

This headline is misleading. Native raised venture capital, it wasn't disclosed but there's plenty of PR surrounding it. Tuft and Needle was started by engineers that had a good bit of personal cash saved in the bank, then later borrowed $500,000. MVNT raised Money. It's not like these companies didn't raise a bunch of money, they just didn't use VC $$ supposedly. The common denominator here is the direct to consumer…

Hey there, JT, Co-founder of Tuft & Needle. To clarify, Daehee and I started with $6k in 2012 and have raised no investments to date. We took a loan in 2016 of $500k for our SF retail store (that year our revenues were around $40mm) but did not use it and paid it right back. To be honest, we were wanting to learn how to leverage debt for growth but immediately decided that it wasn't needed and didn't make sense for u…

Hey JT,

That seems incredible. I guess I just don't understand how you could custom brand and design a physical product, find manufacturers and fulfill their MOQ's, store all of your product and market it for $6,000. Either way, I understand you approached this sector with a technology first mindset, and it's been a really impressive business model.

I've approached similar D2C products in different markets using your method but the initial costs just to get a product to market before advertising is usually close to about 10 times higher.

Re: Consumer startups that said no to investor money

#37

Post by Gibbon1 »

cardine wrote: post #8
lilbobbytables wrote: post #7

Earlier quoted context omitted.

Do you believe it's worth taking on investors to bring in people that have both connections and input that will be helpful for growing your product?

Get a business coach and extensively network - or just focus on product market fit and the connections will come. I guarantee you that will be far cheaper than the millions of dollars worth of equity you would be giving up. I agree with the parent, raise VC money only if you absolutely need money.

Notable there is a tendency for VC's to start staffing up your company with their overpaid and under performing associates. Since you no longer have full ownership you can't fire them either. Often those guys real job is to serve as place holders for when the VC's push out you and your senior managers. So when the company is acquired they are the ones that get the retention bonuses not you.

Re: Consumer startups that said no to investor money

#38

Post by aero- »

jtmarino wrote: post #35
bsder wrote: post #33

Earlier quoted context omitted.

I don't really consider these companies to be "startups" because they don't have to solve some technical problem. These kinds of consumer "cosmetics" companies have always run like this. They are about marketing, not product. If you want an education, go to the MD&M West show and sit on the parking shuttle bus and listen . There are a zillion of these kinds of companies all hawking almost exactly the same products lo…

Not all disruption is purely technical. In the mattress industry the disruption is more around process. Direct to consumer, service, product iteration with direct customer feedback, more vertical. There are technical innovations (foam chemistry) but that's not something that I would consider disruptive. Historically, mattress manufacturers (the big brands) sell direct to retailers with little to no customer feedback…

I read an article recently on the behind the scenes lawsuits with these paid bloggers in the mattress review industry.

https://www.fastcompany.com/3065928/sleepopolis-casper-blogg...

It seems like these guys generated a tremendous amount of money for themselves and orders for the businesses based on which company they gave the OK to.

You guys seemed to stay out all that, which I really respect, but it looked like some competitors really went to lengths to get that "edge" in this product category.

Re: Consumer startups that said no to investor money

#39

Post by jtmarino »

aero- wrote: post #36
jtmarino wrote: post #34

Earlier quoted context omitted.

Hey there, JT, Co-founder of Tuft & Needle. To clarify, Daehee and I started with $6k in 2012 and have raised no investments to date. We took a loan in 2016 of $500k for our SF retail store (that year our revenues were around $40mm) but did not use it and paid it right back. To be honest, we were wanting to learn how to leverage debt for growth but immediately decided that it wasn't needed and didn't make sense for u…

Hey JT, That seems incredible. I guess I just don't understand how you could custom brand and design a physical product, find manufacturers and fulfill their MOQ's, store all of your product and market it for $6,000. Either way, I understand you approached this sector with a technology first mindset, and it's been a really impressive business model. I've approached similar D2C products in different markets using your…

Thx! We were definitely a special circumstance. We found a tiny mom & pop manufacturer who had the equipment and had capacity. We negotiated 30 net terms (this was hard to get) allowing us to fund with negative working capital... customers buy the product, we paid mfgt 30 days later.

My co-founder and I also have engineering/design/product backgrounds so we didn't need to hire anyone to build our initial dotcom or product. We ran it all for the first 1.5yrs before we could afford to hire our first customer service team member in 2014.

Marketing expense was also kept to almost zero, branded search primarily, until around 2014.. we had to rely on word of mouth/organic. This forced us to build in such a way to keep costs low while ratcheting up the value prop which has translated into an efficient process we still have now. Our spend of advertising as a % of net rev is estimated at less than half of our next heavily funded competitor.

Re: Consumer startups that said no to investor money

#40

Post by jtmarino »

aero- wrote: post #38
jtmarino wrote: post #35

Earlier quoted context omitted.

Not all disruption is purely technical. In the mattress industry the disruption is more around process. Direct to consumer, service, product iteration with direct customer feedback, more vertical. There are technical innovations (foam chemistry) but that's not something that I would consider disruptive. Historically, mattress manufacturers (the big brands) sell direct to retailers with little to no customer feedback…

I read an article recently on the behind the scenes lawsuits with these paid bloggers in the mattress review industry. https://www.fastcompany.com/3065928/sleepopolis-casper-blogg... It seems like these guys generated a tremendous amount of money for themselves and orders for the businesses based on which company they gave the OK to. You guys seemed to stay out all that, which I really respect, but it looked like som…

Thank you! But I'm afraid/embarrassed we were part of the reason they exist.

It's very frustrating because so many people fall for the reviewers as "experts". I remember when the first of them, a blogger, called me to interview us. "I'm writing an article about you guys and btw you should setup affiliate links because more bloggers will write about you".. we setup links naively and had no idea what was about to happen. The blogger then wrote about a competitor, and then another, rebranded as an "expert mattress review site" and before we knew it we aided in launching a digital version of a mattress salesman who is paid commission. Later several other expert site clones popped up. They are SEOd to the max and I don't see them going away for awhile. We shut down our affiliate links realizing it made zero sense and was a mistake/incongruent with our values and mission. We were downgraded in the reviews the next week.

What I found really interesting was that some of the new look-alike brands that paid big kick backs leveraged the reviewers to speed track their growth without needing to rely on adwords/organic word of mouth.

I've yet to see any of the affiliates actually use real science/data or ASTM testing methods. It's "opinion based." We just ignore them knowing we'll lose some % of traffic and just stay focused on the customer.

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