Whiteboard: converting eCommerce metrics to investor-speak
Today’s top article on The Laws of Retail Physics is an important article. There is truth and clarity in it, even if there are a few points that I’d contend. Warby Parker ($115M raised) has fewer exit opportunities than most. Casper is at the cusp ($56M raised) of the same sorts of limitation and Bonobos has blown past them both with ($128M raised).
One of the laws of retail physics that we observe in the startup world’s second tier markets like Vegas, New Orleans, Columbus, Dallas, Atlanta, Louisville is that you should raise as little as possible. This typically means that achieving cash flow positive must be in the cards, early on, to be a sustaining business.
In between the two American coasts, DNVB’s have to operate for short-term profitability. Series A and Series B rounds are raised to achieve this goal. This is often done by reverse engineering investor metrics into workable, efficient eCommerce marketing and branding plans. Data driven brand managers / CMO’s are rare but they exist at the healthiest eCommerce brands.
“The CEOs of DNVBs obsess over creating the perfect Facebook ad featuring photogenic models, but they really need to spend more time honing their financial model in Excel.” ~ Micah Rosenbloom, Partner Founder Collective
This is probably the most important quote. It’s what a few companies have done really well. Often, the ones that do have raised < $10M in total capital and have 60+% gross margins with a financial model that leans upon omni-channel, Net Promoter-driven organic sales, and a honed-in digital ad strategy that drives quarterly growth with minimal risk. These are the few that will achieve a 3-4x multiple at exit.
See more of the issue here.