14 3 / 2013
When a good product isn’t good enough…
“He’ll be here in a minute.”
I was sitting in the conference room at Lightspeed Ventures nervously bouncing my leg up and down while waiting. I wasn’t really sure what I was supposed to say to a VC.
A couple days prior…
My co-founder Jennifer and I were ecstatic when we received this email:
We had submitted our idea: “ShinyOrb: Kayak for Weddings”. I’d envisioned a one-stop site that aggregated bridesmaid dresses, wedding gowns, shoes, jewelry, invitations…
We launched our site with just bridesmaid dresses. Bridal parties could search for dresses and collaborate on their choices in a virtual “Dressing Room”. Clicking on a dress led to a retailer’s site where you could buy it there. We didn’t deal with any inventory.
From the beginning, people who came to our site and didn’t bounce would spend on average over 10 minutes just browsing dresses. Soon we had around 100 people a day. Though we never found product/market fit, within 3 months, we far exceeded the 40% threshold that Sean Ellis touts as being a good indicator for PM fit. So, I was super excited with our progress when we made it as a finalist for the Lightspeed Summer Fellowship Program.
At Lightspeed
Jeremy Liew, managing director at Lightspeed, walked into the conference room. I was ready to answer questions about our metrics and our product. But, he quickly dove into the business. I explained that we made money per sale we provided retailers.
“How much is the average dress sale?” he asked casually.
“About $100. Maybe more.” I answered.
“And, how much do you make per sale?” he asked.
“We can do anywhere between 4-15% right now. But at scale, that can increase.”
“If a bride goes to a retailer’s site directly. How much would that retailer make on a $100 sale?”
Having never worked in retail before, I honestly had no idea. But, I took a stab at it, “I don’t know, but I would guess about 50%.”
“So that means that your competitors who are trying to get dress sales directly can outspend you at least 2x in marketing, depending on your percentage at scale."
Stop right there. Do you ever have those epiphany moments where you realize you just learned something big? This was one of them for me. I had thought about the lifetime value of each bridal party before. I had thought about how to build a good product. But, I hadn’t thought about how existing competitors could outspend me on marketing all day everyday!
"So, if we were to become a retailer, would this be an interesting business?” I asked.
“I would consider you for the program. But, you should think long and hard to see if that is what you actually want to do. Let us know if it is.”
How to grow?
I left Lightspeed bummed. Thoughts raced through my head. We had a basic product that had solid unit metrics. But, none of that mattered if we couldn’t grow this into a solid business. How big could we become if our existing competitors could just outspend us on customer acquisition? Beyond ads, press/content marketing – they all cost money!
We had a lot to think about. Stay tuned for Part II…
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