Tag Archives: start-ups

‘Please Mr. Postman’ Bring Me a New Wardrobe/Makeup/Pet Item/Toy

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Delivery

The masses were familiar with hearing “Avon calling” at the doorstep in the 1950s and 1960s as employees of the skincare company went door-to-door offering samples and direct sales of makeup products.

Fast forward to today and the person bringing makeup samples, clothing, luxury products, wine and other items is the postal worker, delivering subscription boxes full of goodies.

The service gained popularity a few years ago with companies such as Birchbox, which delivers high-end skincare and makeup samples monthly for $10. Numerous other companies have followed suit with monthly subscriptions or on-demand services. The services run the gamut from specialty pet items to STEM-related toys for kids to disposable razors and meal kits, to name a few. (There are 2,500 companies that sell subscription boxes, according to a 2016 Bloomberg article).

But what are the benefits of these services, and are they sustainable business models?

We all probably have an anecdote about someone telling us about the service they subscribe to (I can think of two: one of my co-workers subscribes to monthly makeup samples through IPSY; another has tried Hello Fresh as an easy and quick way to get a foolproof homecooked meal on the table on busy evenings).

And I’m quick to recommend my own experience with personal styling company StitchFix. As someone who would never initiate or pay for a personal stylists’ services at a department store, I absolutely love being able to have the service delivered to my doorstep. Not one to follow fashion trends (and at 6-feet tall), the company sends me five pieces tailored to my size, shape and style preferences for a $20 styling fee. I keep what I want (the $20 comes off the top of the price of clothing) and send back the rest for free.

There are a few reasons these services are popular, one being they are personalized experiences with the convenience of not leaving your home. There’s also the anticipation factor – you don’t know what you’re going to get until you’re opening the box and pulling back tissue paper.

But can the practice sustain? Particularly as large companies begin to capitalize on the idea, can start-ups survive stiff competition?

This Forbes article gives a good in-depth look at growth in the industry, demographics of the targeted audiences and up-and-coming companies, as well as the major challengers getting into the subscription box game.

Scaling niche businesses is also a challenge. How do you keep the products personalized and quality high when you start marketing to a broader audience in order to grow? And with the highly-personalized nature of these services, can automation ever play a role in the manufacturing process?

Bloomberg recently focused on meal delivery company Blue Apron, which went public earlier this year. The article notes company shares have fallen by half in about two months’ time.

Five-year-old Blue Apron, which raised close to $200 million in venture capital before its IPO, has warned it may never be consistently profitable. And that isn’t just a Blue Apron problem: The business model for subscription boxes turns out to be much tougher than it sounds, because of the high costs of getting and keeping customers. “You’re coming into an area where margins have always been thin, which makes turning a profit a huge task,” says James Wester, an analyst at researcher IDC. “Just applying new technology on top of traditional industries doesn’t work.”

About 2,500 companies sell different kinds of subscription boxes in the U.S. alone, with the top handful generating nine-figure annual revenue. Profitability, however, is a different matter, and the past year has been littered with box companies that couldn’t work it out. The recently shuttered services have names like Treatsie (for high-end candy and other sweets), Fair Treasure (jewelry and other accessories), and Blush Box (beauty products, lingerie, and sex toys).

Now that Blue Apron has gone public, its numbers are more transparent than most. In pre-IPO filings, the company said it had spent an average of $94 in the past three years to acquire each subscriber, that each was paying an average of $236 a quarter for about 24 meals’ worth of preportioned ingredients, and that those numbers had dipped slightly since 2016. Counterintuitively, scale hurts subscription-­box makers, because getting big means they have to spend way more on marketing. (Blue Apron spent $144 million on marketing in 2016, a 182 percent increase from the year before.) Among subscription boxes in general, “the pricing is not smart given the price of acquisition being so high,” says Ross Blankenship, a venture capitalist at Angel Kings.

As with any relatively new service or company, only time will tell if this section of the retail industry can last. Until then, tell us about your experience (in the comments section) with subscription box services.

Start-up Founder Laments Simple “For-Profit” Approach

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Start-up cofounder Rand Fishkin has an interesting post on his blog about how simple "for-profit" thinking may not be optimal if the view is just short-term. I'd argue some start-ups aren't profit-focused enough sometimes, but his general outlook is worth noting and he makes some valid points about the nature of doing business today.

Apple as a whole may be worth more, but Google’s trendline, particularly the past 6 months, is far more favorable. Fred’s assertion is that this stems from investors’ sophisticated understanding that Google controls so much of the data, software, and ecosystem around computing. Google’s mission isn’t to make as much money as possible, certainly not in the short term anyway. Google is aiming for total domination of their (ever-expanding) areas of focus. Revenue and profits are merely a helpful side-effect of these efforts.

Later in the week, courtesy of Dan Ariely, I watched this video about Hancock Bank’s remarkable $1.4Billion growth following Hurricane Katrina (it’s worth watching all the way through, but if you don’t have 6 full minutes, start at the 3:44 mark).

The mission of making money isn’t just boring and stale. It’s hard to get excited about. It’s hard to get behind. It’s hard to build a fan-base around. It’s hard to hire for. It’s hard to scale. And it’s hard to stick with something through the muck of despair and failure that inevitably occur if you’re not pursuing something bigger than yourselves – bigger than money.

I don’t mean to suggest that those who relentlessly pursue wealth at the cost of all else don’t occassionally succeed. But I would argue that most businesses that have changed the world in the technology age have been pursuing a mission beyond the financial.

Michigan Trying to Build Its Tech Talent

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Technology transfer is a challenge in all but a few locales. New strategies are commonplace. Here’s one from Michigan — a state that I believe will rebound from its historic struggles of recent years.

The $2.4 million Tech Transfer Talent Network includes seven universities and regions with strong research-based technology opportunities or clusters of talent, and in some cases, both. In addition to the University of Michigan (U-M), members are: Wayne State University, Michigan State University, Michigan Technological University, Western Michigan University, Grand Valley State University and Oakland University. Each university is also collaborating with its regional economic development organization to promote increased access to mentors and partnering businesses.

The primary goal of the Tech Transfer Talent Network is to increase the supply of seasoned entrepreneurs and innovators who can lend their expertise to university tech transfer offices. These connections will serve as important bridges to launch technology-based startups or license university inventions to established companies. The program will allow other state universities in the network to share and benefit from the tech transfer resources developed at U-M.

U-M, which had 101 licensing agreements and spun out 11 startups in 2011, consistently ranks in the top 10 U.S. universities in tech transfer performance. In the past decade, the Tech Transfer office has helped launch 92 startups from research that originated in faculty labs, and three-quarters of those are located in Michigan.

To enhance its capabilities, U-M has put in place several talent-related initiatives during the past few years. Through the network, U-M will help other universities implement some of these strategies, including:

  • The Catalyst database, which identifies and tracks experienced entrepreneurs who are willing to serve as experts, mentors, consultants or even co-founders.

  • Mentors-in-Residence, experienced entrepreneurs who work within Tech Transfer for 12- to 18-month rotations, helping to assess new opportunities and mentor new start-up ventures.

  • Tech Transfer Fellows, a program that employs graduate students or other qualified personnel to help assess technology and analyze markets for tech transfer opportunities.

  • A postdoctoral fellowship program to support graduate students and postdoctoral researchers to encourage them to continue within a newly licensed business or a new startup venture.

Job Creation: Obama Turns Eye Toward Start-ups

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Job creation remains a key challenge for American legislators, as well as for President Obama. In an announcement on Tuesday, he contended not enough emphasis is being put on helping start-ups thrive in America. He also promoted his $2 billion Startup America program. What do you think? Beneficial or just government meddling?

President Obama on Tuesday proclaimed November 2011 to be National Entrepreneurship Month, a benign and routine ritual that stroked a favored cause, but nevertheless a timely nod to the heart of the economy’s job creation dilemma.

The president focused his two-page proclamation on business startups (that is, businesses less than a year old) rather than on the innovations of all small businesses, or even the savvy entrepreneurship displayed by the largest, established companies (big companies employ the lion’s share of workers). Why? Because the administration has looked at new studies showing that while small businesses are indeed important for job growth — a canon among politicians — it’s really the startups that are key…

In public policy debates about small businesses and the creation of net new jobs, the question continues to be asked: What works? To spur more startups, does the economy need greater confidence, more capital, more consumers willing to spend, new and innovative ideas, a risk-averse (i.e., younger) population? Yes to all of the above, experts say. But which policies really nurture the dynamics that lead to a net addition of jobs? So far, there are more theories than firm conclusions, and lots of experimentation.

“The world is messy and the data are imperfect, so when you’re trying to create a model . . . there’s so much I can’t control for,” said Brian Headd, a Small Business Administration economist who authored a study in 2010 about hiring and small businesses for the data-centered SBA Office of Advocacy.

“We’re at a point where businesses aren’t expanding at the rate they used to be and startups aren’t occurring at the rate they used to be,” Headd said in an interview. “So some people will say, policy-wise, ‘We need to focus on one or the other — we’ll get a bigger bang for the buck — one or the other.’ I don’t have that answer. I just take the view that we need both, but I don’t know whether throwing $1 billion or $1 million, policy-wise, at one group or another is going to have a big effect. I just don’t know.”

Obama’s proclamation Tuesday listed some of the policies he supports to spur infant businesses, including his $2 billion Startup America program, which he launched in February, designed to improve access to capital, cut paperwork and regulatory burdens, expand business mentoring, and increase information and educational opportunities for entrepreneurs in markets designated as priorities by the government. He also mentioned Startup America collaborations with the private sector and international partners. In Obama’s view, the entire U.S. economy must “become more dynamic and flexible.”