Welcome to Step by Step, a 5-part series from Future Commerce to help walk you through how to launch and grow a successful business. This season, we're talking about funding. Today is episode 5. Phillip & Brian are joined by Michelle Cordeiro Grant, Founder of Lively to chat about her experience working with Venture Capital from a founder's perspective.
- Michelle Cordeiro Grant from Lively is back again to walk us through successfully selling your business.
- A strong operation foundation and consistent production costs can help identify where to apply raise capital.
- What are the factors that indicate that your brand is ready for an exit?
- Breaking through the noise of digital may require physical presence, so how can you achieve this with your brand?
Lively and Michelle: Some Quick Backstory:
- Lively is a brand and a community whose sole purpose is to inspire women to live passionately, purposefully, and confidently.
- Michelle grew up in a rural area of Pennsylvania and wanted to see what she could do with her life instead of more typically expected career choices.
- She eventually found her way into fashion and fell in love with the idea of concept-to-customer and the power of brand.
- Eventually, she wound up at Victoria's Secret that led her to decide that there was something missing in the lingerie community which ended up with the creation of Lively.
Pursuing Capital: A Founder's Perspective:
- With a story backward to most, Michelle left Victoria's secret with the idea that she could start a brand by having a community to build the brand instead of a company building it.
- She knew that she needed to have her supply chain completely under control so her strategy was to partner with an investor that was a manufacturer prior to launching her company.
- This allowed her to scale with what her customers wanted as opposed to what was written on a spreadsheet.
- Michelle did a $1.5 million convertible note with her manufacturer Gelmart and having the support and experience of a manufacturer in her industry set Lively up for success.
The Next Step: The Need for More Capital:
- Lively launched organically without paid media and after 45 days saw that they were able to ship to every state in the United States.
- Two months after launch, Lively had captured results that they had planned to do within the first year, which indicated that it was time to fundraise.
- Michelle's initial strategy was not to go after Venture Capital money, but rather to pool angel investors, but eventually started getting contact from Venture Capitalist firms.
- She wanted to wait for her Series A, but one email in particular from Robin Lee from GGV Capital (who worked for a VC but was also a Lively customer) changed her mind on VC and within a week of conversations, Michelle knew they had found their match.
The Struggles and The Victories: Accepting Venture Capital:
- Michelle was very worried about the expectations of her brand before she accepted the term sheet with Robin.
- In retail, a brand's growth charts like a roller coaster in regards to its trajectory and Michelle didn't want to be pressured for unrealistic growth.
- While her VC was always pushing her forward, Michelle was happy to discover that she had a voice and she could adjust her strategy to favor long-term growth.
- How can you preserve your visions of growth when an investor is now sitting with you at the head of your brand?
A Stable Foundation: Knowing Where to Spend Capital:
- Lively raised $4 million in its first round when they only set out to raise $2 million so the extra capital fueled the excitement for the brand's growth.
- Due to the fact that most monetary aspects of the business were so steady (such as a single price point for products and consistent production costs), Lively was able to clearly decide what to do next.
- A clear perspective of what was coming from an operations and a cashflow perspective allowed Lively to easily put the money towards marketing and inventory.
- How can you solidify your operations to help pinpoint where to spend your raised capital?
Vertical Integration: The Power of Structure:
- Quality was a goal from the outset and Gelmart helped Lively to create a custom manufacturing solution that allowed them to deliver consistently high-quality products.
- Because their manufacturer was both their investor and supplier, Lively also had the benefit of getting net terms and was a huge boon when it comes to handling your cash.
- Vertical Integration also allows you to be innovative by allowing you to directly address customer needs as opposed to serving just a bottom line.
- Lively grew by 300% from year 1 to year 2, so they were able to continually prove that they had the roadmap to success.
The Sale: Building Up to the Exit:
- The intent was not to sell Lively in 2019, but the continual success of the brand and the sturdy foundation from the get-go led to Lively's acquisition by Wacoal.
- One of the factors that made Lively such a desirable acquisition was its clean board of three investors that raised enough capital without becoming too diluted.
- Lively's clean KPIs and financials were a huge benefit to getting through the diligence of the acquisition.
- What were the factors that led to Lively's brick and mortar strategy?
Seven Year Cycles: The Digital Deluge:
- Are customer acquisition costs for digital marketing forcing brands to adopt local strategies in order to grow their brand?
- Digital marketing channels are so saturated that brands need physical presence to break through the noise of digital advertising.
- Pure digital brands like Everlane are increasing their physical presence because it is becoming more and more clear that you cannot only do digital in order to succeed.
- Generation Z has been raised on screens and is looking for in-person experiences to really connect with brands.
Beyond the Dollar: Further Benefits of Capital:
- GGV introduced Michelle to a lot of other founders that were 2-3 years ahead of her in their brand development which gave her a strong group to help answer questions and give advice.
- What went wrong is just as important as what went right when it comes to growing your brand.
- Conferences like Shoptalk allowed Wacoal to get to know who Michelle and Lively were even before there was any interest in the acquisition.
- Michelle would not have been comfortable taking the risks she did without the experience-based knowledge from GGV.
Adversity Along the Way: Not All that Glimmers is Gold:
- There was only one person doing customer service with over 2000 customers, so macros had to be designed to alleviate the most common questions being asked by customers.
- There was so much time spent on each component of the bras that some of the luxury components led to unforeseen complications.
- In October of 2017, Lively rebuilt their site and realized after launch that Google was doing a recrawl that required a rebuild of their organic traffic.
- What are some of the obstacles that inevitably led to positive changes for your brand?
Brands Mentioned In This Episode:
As always: We want to hear what our listeners think! Are you ready to raise capital to grow your brand? Does Venture Capital or Private Equity sound like a better fit for your brand?
Have any questions or comments about the show? You can reach out to us at email@example.com or any of our social channels, we love hearing from our listeners!
Retail Tech is moving fast, but Future Commerce is moving faster.