In February 2011, I launched an online store — Moda Operandi — with my business partner, Lauren Santo Domingo. Moda Operandi (M’O) was the first of its kind, offering the latest runway styles for immediate pre-order following their presentation at fashion shows in New York, London, Milan and Paris. The site was the result of an idea that I had back in the Fall of 2009 while I was running the premium division at Gilt Groupe: why not allow fashion lovers to buy anything off the runway, in any size offered by the designer, from the comfort and privacy of home? That idea became an obsession that I knew I had to see through to fruition. And I did: Friday last week, M’O announced a Series C round of financing in the amount of $36 million. Investors in the round included venture capital firms RRE, NEA and NAV, as well as strategic investors Condé Nast, LVMH and IMG. Champagne was uncorked. M’O was cemented as a real business.
While celebrating the closing of our latest round, I sat down for coffee with my friend and former McKinsey colleague, Imran Amed, founder of The Business of Fashion. Imran suggested I write a column for BoF about my experience as a founder and CEO of a fashion startup. Our conversation got me thinking about my career, M’O and how it all came to be. Specifically, what are the key requirements for success as an entrepreneur? Why do some start-ups prosper while others fail? How much of it is a result of planning and skill, and how much is just dumb luck?
There is no perfect script for launching a business and I don’t pretend to have all the answers to these questions. But I do hope that sharing my thoughts and experience over the weeks to come can shed some light on the issues that fashion start-ups face and tease out some lessons learned. And, most important, I hope that my story might help others obsessed with an idea to take the plunge to see it through.
1. SOLVE A PROBLEM, EVEN IF OTHERS ARE ALSO PRESENT
You have heard it before and you will hear it again: a start-up that solves a problem, addresses a need and/or fills a void is one that is best positioned for success. The fact that M’O fills a gap in the market has been one of the key factors that has taken us this far. M’O also is unique in that it is the only business specializing in letting consumers pre-order the latest designer runway styles. But if solving a problem is critical to a company’s success, is uniqueness a requirement as well? Absolutely not. Many examples exist of successful companies that were not the first of their kind. In the online fashion space, Gilt Groupe is a good example of this. Gilt took its concept (selling exclusive fashion at a discounted price through limited-time “flash sales”) from a business previously launched in Europe, Vente-Privée, but shaped the concept to address the needs of a US customer base. And Gilt is not alone: flash sale sites have taken the US by storm, delivering discounted goods and services to customers who crave them. The bottom line is that while filling a void is key, being first to do it is not.
2. ACTUALLY, IT’S REALLY ALL ABOUT THE TEAM
When I started thinking about the concept for M’O, I immediately knew that Lauren was the perfect business partner. We had both worked in the fashion industry for a long time and we had complementary skills. My background was steeped in the business side of fashion, having worked as both an investor and consultant to fashion brands. Lauren’s expertise was in the creative side: a long time stylist and editor, she has an exceptional eye for fashion and deep relationships with designers around the world. We knew that technology was our weak spot, so we embarked on the notoriously difficult task of finding a qualified CTO in New York. Once this problem was solved, we knew we had the key skill sets covered. We could then move on to building our initial website with a small, but highly qualified team of passionate people.
The key take-away? Your initial team is everything. Nail down the key people at the get go who are critical to success and then get going with it. Don’t get bogged down with hiring in non-essentials at the early stages. Outsource other needs or just acknowledge to your investors and partners you aren’t wasting time on those areas now and will address them later.
3. PASSION WILL GET YOU FAR
People often ask me what it is like to be a founder and CEO of a start-up and whether this is a path I recommend. My answer is simple: don’t start and run a company unless there is nothing else in the world you want to do. Being the CEO of a start-up is all consuming. You no longer have weekends, holidays or a truly carefree drink after work. You are on constant alert, thinking about the people who work for you, planning out the future of your company, fussing over every small detail that might contribute to the success (or demise) of your business. The ups and downs are real and extreme. So the one thing you absolutely need to keep yourself and your team motivated is complete and utter conviction in and passion for what you are doing. Anything short of that and your team will smell it, your partners will smell it, your customers will smell it and you will fail.
Years ago, while living in London, a business partner and I spent several months researching and developing a concept for a healthy fast food chain. Despite it being a solid business concept that catered to a real need in the market, it just wasn’t my passion. And when things started to get tough, I didn’t have the conviction to keep myself going. M’O, on the other hand, has captivated me from the day I picked up the phone to call Lauren. With that kind of love for our company, I am motivated to wake up every day to nurture and grow the company.
4. LIKE IT OR NOT, CASH IS KING
At the risk of stating the obvious: you might have a wonderful business idea, but unless you are independently wealthy or able to convince someone else to fund your idea, it is unlikely to go much further than the drawing pad. Raising money is like most things in life, an acquired skill that requires practice and dedication. When I moved to New York in 2006, I started an investment company, TSM Capital, with retail legend Marvin Traub. TSM invested in fashion brands, such as Matthew Williamson and Rachel Roy, and I spent a good deal of time (and heartache) raising capital for early stage fashion companies. This was an extraordinarily difficult task, as many investors were not comfortable assessing the competitive advantage of individual fashion brands. I had to hone my fund raising skills by learning the do’s and don’ts of selling brands to investors: what motivates them, what scares them. That learning was critical during M’O’s fund raising process and we have been blessed with the ability to access capital to fund our growth and development, having raised nearly $50 million in under two years. Without this money — and without knowing how to raise money — the beautiful idea behind M’O would have stayed a sketch on the drawing pad.
5. LIFE IS ALL ABOUT TIMING
This lesson is may be the hardest. Timing is everything, too. Some ideas are great but they are just too far ahead of their time and they fail. Some ideas are great but they arrive at the party too late and they fail. This is as true in the online fashion world as anywhere else. Gilt got its timing completely right, launching just when the economy was experiencing a significant downturn and full price luxury sales were suffering heavily. As a result, Gilt’s business, selling discounted fashion merchandise from previous seasons, was an instant success.
At M’O, we knew our time was now. We saw the writing on the wall. Consumers were demanding online access not just to commodity products from Amazon but luxury goods from designers. With the economy rebounding, we worked hard to get to market fast — even at the expense of making mistakes along the way. As a result, M’O has been able to generate the sales and financing required to put the company in a unique place. In short, while you can’t time everything, do your homework to determine the right moment for your idea. Once you see that wave coming, paddle as hard as you can to catch it. There might not be another big one on the horizon for some time.