Harbus sits down with FashionStake co-founders Vivian Weng (OH) and Daniel Gulati (OJ) to discuss their recent company launch in New York, raising a venture round and what they’ve learned about startups and entrepreneurship.
There are several things you can do with your summer: go hostel hopping across Europe, hit the beach and work on a wicked tan, perfect your grilling skills… or you could change the landscape of an entire industry. That’s precisely the task HBS ECs Vivian Weng and Daniel Gulati took on for the summer of 2010 as they worked to launched FashionStake.com.
FashionStake follows the well-worn path of HBS students launching online fashion companies. Alexis Maybank and Alexandra Wilkis Wilson (both MBA 2004) launched Gilt Groupe, a luxury-flash sales site expected to get to $500m in revenue this year. Charlie Graham (MBA 2006) launched popular personal shopper site Shop it to Me and most recently, Jennifer Hyman and Jennifer Carter Fleiss (both MBA 2009) founded Rent the Runway, which now boasts over 450,000 members.
In a nutshell, FashionStake allows anyone to support a fashion designer and receive privileges like discounted merchandise, upside from collection sales and front-row tickets to Fashion Week. The company raised their first round from Battery Ventures and a handful of fashion industry angels, and launched on 1st September.
Tell us about how you both met and started working on the idea.
VW: Daniel and I met through the HBS Luxury Goods Club last September. We were both interested in the intersection of fashion/luxury goods and web 2.0. I had a background in both fashion and finance, and Daniel had founded a couple of companies prior to HBS, so we felt like we could work well as a founding team for a business like FashionStake.
How did the HBS ecosystem help you as you were building the company?
VW: The HBS environment is pretty valuable if you’re thinking of starting a company before or soon after you graduate. As RCs, we leveraged many Rock Center resources- such as meeting space, the EiR program and the Business Plan Competition. In addition, our Professors and classmates were amazingly helpful! In particular, my TEM instructor Professor Tom Eisenmann kindly donated his time to advise us through the Business Plan Competition, and we’re working with him this year on a follow-on field study.
How did you think about financing the company?
DG: After much back and forth, we decided to raise a venture round back in April this year. We did consider the other options- bootstrapping, self-funding and doing a small angel round- but the VC route gave us more credibility with potential employees and business partners, which means alot in this industry.
After meeting with a handful of east and west coast VCs, we were fortunate enough to receive a few term sheets and eventually signed with Battery Ventures. We used two basic criteria to decide which VC to partner with. The first was how entrepreneurially-friendly they were- not just in terms of the immediate deal, but how we saw them run their business more generally. Did they work closely with entrepreneurs? Did they lead follow-on rounds of financing? That sort of thing. The second was evaluating the actual Partner we’d be working with from the VC side- their individual experience, skillset and personality fit. Because we were an early-stage deal, the whole process from initial meetings to signing was around three weeks.
What were some of the biggest challenges leading up to launching the site?
DG: There were three big challenges we faced. The first was hiring engineering talent. Because Vivian and I aren’t engineers, we needed to learn what to look for when hiring developers, in particular, how to test for technical skill. We used our CTO contacts in New York to help us with interviewing. Even post-funding, finding technical talent is tough. Every startup I know of is looking for great lead developers.
Secondly, there were some challenges around building the two-sided marketplace. As you’ll learn in TEM and several EC courses, overcoming the classic ‘chicken-and-egg’ problem is tough, and we’re definitely still in the process of tackling it. We had to convince designers to produce exclusive collections for us without having a live website or initial set of customers. That took some effort.
Finally, and this is a big one, we had to sacrifice large chunks of our time in RC year to build the company. This meant that we couldn’t see as much of our friends, sectionmates and partners as much as we would have liked. It probably also meant skimping on cases a little. These are definitely trade-offs to consider seriously, especially given that we only have two short years at this amazing place.
What have you learned so far about entrepreneurship and what advice would you give your classmates?
VW: Whatever I say here is going to sound cliché, but I really do think our main lesson is about staying tenacious. The startup world can be brutal- you have a million business priorities, you’re trying to raise money, you’re pitching potential employees and designers- there’s just many moving parts that need to come together. Having the ability to cope with bumps in the road is something we definitely learned early on- failure and rejection are just two inevitable challenges you’ll face regularly as a founder. Luckily, there are plenty of great rewards for those that play the game!