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.
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:
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 firstname.lastname@example.org or any of our social channels, we love hearing from our listeners!
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