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Friday 24th April
What we cover this week: future-gazing with a VC, how to stay sane while sharing a workspace, profitable pivots from around the world and a deep-dive on sustainable fashion.
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How to fast-forward a product launch
Bleach originally planned to launch its salon-grade, virtual, interactive tutorials and chat functionality in June, to coincide with a new salon opening in LA. But on 18th March, the London-based hair salon decided to de-couple that strategy – and a week later, its custom-built chat interface for customers to diagnose their hair status went live. Communicating via the usual channels (Slack, Zoom), and with a delivery manager leading daily stand-ups outlining progress, a six-member tech team has broken down a 14-week build schedule into chunks, releasing features on a weekly cadence. So far this has included chat functionality, a live interface for hosting VIP hair parties and online tutorials. It's led to all departments, including marketing, creative, operations and data, working to the same weekly sprint schedule, ‘in lockstep with the dev team,’ according to chief marketing officer Ellie Howard. Strategy has been release first, refine later – or as Ellie puts it, ‘we’re building a car whilst we’re driving it’. Code has been rewritten to make it more robust after release with Ellie admitting ‘there’s a tension between getting stuff out the door and building processes that are scalable.’ With an immediate upturn in sales – Bleach is trading at 8x target, with conversion rate up by 4x – the next challenge is to ‘pick the best bits and scale,’ she says.
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How businesses around the world are adapting and evolving.
Melbourne. Vaughan and Nathan Mossop, founders of design studio Neighbourhood Creative, have launched Take Away, a cookbook series that gives restaurants and chefs a way to earn much-needed cash.
Amsterdam. Sick of your couch? Amid plunging occupancy rates, hotel brand Zoku has launched 'Private WorkLofts’ – for €50 you get a kitted-out workspace for the day, plus room-service lunch, stationary and supplies.
London. Knitwear brand Country of Origin has teamed up with design agency IYA Studio to launch Hande – an organic, alcohol-based hand sanitiser brand. The operation was set up in two weeks at an industrial space in Peckham; those out of work because of the crisis are being hired and paid a living wage.
Boulder. Trident Booksellers and Cafe has launched a ‘mystery bags’ delivery service. For $50, it will arrange and hand-deliver bags with four to six books chosen by staff – plus a bag of coffee or tea.
Berlin. Jan Horeis of Studio Horeis Florist has teamed up with restaurant The Hidden to create ‘DIY dinner with flowers’, a package with prepared food ingredients and flowers. And for couples stuck indoors, Jan also does interior design consultations for date nights.
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‘Take a deep breath and stay the course’
Paul Murphy, venture capitalist
London
A general partner at venture capital firm Northzone, Paul previously worked at Microsoft and was founder and CEO of the mobile games company Dots, in NYC.
What are VCs doing right now?
I’ve spoken to quite a few investors over the past month, and 95% of them are focused on their existing portfolio. It’s been stressful because you want to focus on your family and health, but you've got great companies that could blow up. I’ve probably worked more this month than any month in the past year.
So you’ve been working with your portfolio rather than hunting for deals?
Yeah, 100%. I was straightforward with the companies I was talking to and said, ‘I can't focus. I want to fall in love with a company but I can’t develop that emotional attachment right now’. Only recently are we starting to have great conversations with founders again.
Will the winning companies be those with the biggest cash runway?
Be more conservative on burn rate, just in case [the crisis] lasts a bit longer than everyone plans. Of course, there are some areas where more capital gives you a strategic advantage. But for most software startups, for example, where there’s a high gross margin and most of the burn is in people or engineering costs, I don’t think capital will necessarily be a competitive advantage.
You were once a founder. What kind of founder will survive this?
The ones that had really strong discipline pre-pandemic.
Post-pandemic, will VCs become more important than ever or will founders bootstrap more?
There’s a subset of founders who view the endgame as a big splashy financing round. But if you've been there before, the dopamine hit will last 10 minutes. Then you have the burden of all this capital, really high investor expectations and maybe some exits are off the table, which could have made you incredibly wealthy but are no longer appealing to your new investors. On top of that, any founder that needs to raise capital now will see the effect of dilution and potentially some punitive terms. Some founders will come out of this and say, ‘I don't want to be dependent on raising a Series C, D or E. I want to build a business that's profitable and then opportunistically raise capital to put fuel on the fire instead of doing it just to survive.’
Will DTC companies with a super high cost per acquisition soon find themselves completely screwed?
Selling something at a slight loss today with the hopes that margins will improve in the future isn't a great strategy. That being said, people aren’t leaving their homes so they're buying more online. And second, big advertisers have cooled down their ad spend, so there’s a suppression across the board in ad auctions and on marketplaces like Facebook and Google. Many of these DTC companies are seeing their customer acquisition costs go down at a time when people are buying more. So there may actually be a sort of short-term surge for some of these companies.
Any final words of advice for founders?
See this as an opportunity to regroup. If you're in a heavily competitive dynamic, know that all of your competitors are also regrouping. Take a deep breath, think about what you really need and stay the course.
To hear the full conversation, listen to yesterday’s episode of Courier Daily.
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Staying sane in a shared space: Remote working is one thing; remote working from a shared space is something else entirely. Ian & Zoë Sanders, co-founders at work-life specialists The Ian Sanders Company, provide some essential tips on how not to kill your living partner.
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1. A group of furloughed advertising executives have banded together to offer free strategic and creative support for small businesses – they’re calling their collective 'Not Fur’ Long’.
2. Search trends influenced by Covid-19 – from ukuleles (+64%) and blue light glasses (+94%) to bidets (+300%) and... cigarette delivery (+507%).
3. Tim Ferris sat down with Buddhist monk and meditation teacher Jack Kornfield for a podcast conversation about cultivating calm in chaos.
4. Semaine launched ‘The Happiness Newspaper’ – featuring words by neuroscientists, philosophers, illustrators and others, along with digital workbooks.
5. Notion has collected this list of free or discounted deals for businesses – from project management and customer support to finance and time-tracking.
6. Small business tools from Instagram – from gift cards, fundraisers and online food orders – plus Pinterest’s new shop for small, sustainable brands affected by the crisis.
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Sustainable fashion was finally gaining momentum. Now what?
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Buffy Reid, co-founder of the London-based sustainable clothing brand & Daughter, wasn’t sure if it was ‘appropriate’ to launch her new nine-piece dress collection during a global health crisis. She had, in fact, considered pressing pause on the business entirely.
But as an independent brand – with a small distribution network she could maintain with social distancing measures in place – she decided the only option was to go ahead. The collection had been over a year in the making, and the brand couldn’t afford to not try to sell it.
Buffy’s hesitation to launch a new product line is understandable. Global clothing sales dropped by over 50% in March, while 20% of the UK’s spending on clothes and accessories is expected to vanish in 2020 – a loss of £11.1bn – according to a new report by analyst firm Global Data.
Independent brands such as & Daughter face cancelled orders from wholesale accounts wary of their inability to shift stock in coming months owing to closed warehouses and flatlining sales. And those labels are already at a financial loss, having to pay the factories for pieces put into production. Customers, too, are wary of spending.
Prior to the pandemic, sustainability was being talked about more than ever before by both consumers and the fashion industry itself. LVMH, the world's biggest luxury group, pledged €10m to protect the Amazon; French brand Veja unveiled sneakers crafted from corn waste; while many luxury brands are using vegan leathers derived from pineapple leaves. And it was about time: fashion is the second most polluting industry after oil.
According to Fflur Roberts, head of luxury at retail analyst firm Euromonitor, in 2019 '$4 trillion was committed to decarbonise companies’ full portfolios’ (when companies shift to carbon-neutral status). Kering, which owns Gucci and Bottega Veneta, has committed to halving its greenhouse gas emissions by 2025. ‘A sustainable revolution was taking place,’ Fflur adds. But as revenues plummet, what now happens to clean consumption and sustainable agendas?
‘I imagine the crisis will continue the deep discounting cycle that retail has been battling with for a long time,’ says Sydney-based Marre Muijs, founder of sustainable footwear label Essen, which offers sleek leather ballet pumps made using renewable energy in Italy. She established the brand in 2016 ‘in response to a fashion cycle that overproduces more than it crafts, and wastes more than it sustains’.
As a small and self-funded label, she recently offered her customers a promotional discount for the first time on made-to-order items. ‘We’re really feeling the [business] slowdown,' says Marre. 'We’re likely to see a lot of business failures. But I hope the industry slows down and changes its ways.’
Wishful thinking, perhaps. Fast fashion brands like Topshop, Zara and Boohoo, which produce and sell huge inventory at rock-bottom prices, will be the ones to suffer the biggest losses during the pandemic. In 2019, Boohoo was worth $3.8bn, peddling going-out gear to teenage consumers. Post-pandemic, it's likely they will look to discount even more to recoup costs.
Still, there are green shoots. The e-commerce platform Farfetch this week unveiled its carbon-reducing delivery initiative, which offsets all of its global emissions for shipping and returns. (With 3,400 independent retailers, it wasn't simple.) The Portuguese company, helmed by Jose Neves, said it never even considered postponing the sustainable launch. ‘If anything, the pandemic has made our company strategy and the sustainable business part of that even more salient,’ says Thomas Berry, the company’s global director of sustainability. ‘An increased level of social and environmental consciousness is maybe the one potential silver lining to the crisis.’
Marre agrees, noting ‘customer sentiment was already shifting towards anti-consumerism before the pandemic.’ While sustainable packaging initiatives are currently affected – with single-use plastics seeing a return – a Euromonitor Lifestyles survey found ‘a quarter of consumers in 2020 [are] buying from purpose-driven brands, and would boycott those that don’t share their values,’ says Fflur. ‘Covid-19 could be the tipping point.’
Early sales of & Daughter’s shirt-style dresses suggest that may be true. ‘It feels weird to say, but we’ve had a really strong six weeks of trading,’ says Reid. ‘They sold better than we even had hoped pre-Covid.’ She says she’s had a record number of first-time customers – and they’re placing ‘slightly bigger orders than normal'.
‘I think it goes along with customers trying to support independents right now, and caring about what you’re buying, and where you’re buying it from,' she continues. If the industry is to recover, now is not the time to let-up. ‘Customers are going to want to buy even less, but buy better.’
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