ScaleVP invests across a broad spectrum of a company’s lifecycle, and sometimes it’s hard to explain what we’re looking for within “in-revenue tech deals in our sectors.” We co-led an investment in BeachMint in June 2011, and that team just earned a new round from Accel, Goldman Sachs, New World, and others in January of this year. Our original investment is a great example of how we work.
First, we focused on emerging ecommerce opportunities in the first half of 2011. We thought that with major product categories coming online at scale, there would be numerous new companies and categories spawned in the next generation of ecommerce. ScaleVP spent months meeting startups and incumbents, companies with mature business models and hypothesized ones, in narrow categories and broad horizontal markets. We studied financial and market share trends. Internet Retailer is a great resource as was our network of industry contacts at eBay, Amazon, Wal*Mart, Guthy-Renker, and in BeachMint’s case, Columbia House and Bertelsman’s subscription businesses.
Throughout our research, a few themes emerged that we wanted to tap into, which are described in more detail here.
- Curation. The value of Web 1.0 e-commerce was availability. Amazon won by having tremendous choice. In many categories, the choice is overwhelming. See The Paradox of Choice
- Subscription business models. This is the part of BeachMint’s story that matured rapidly in the six months between the two rounds.
Of course, we also were keen to find entrepreneurs who were right for the job, and Josh Berman and Diego Berdakin at BeachMint bring a unique combo of access to both celebrity and technical talent. Who else has Joe Green and Joe Simpson on speed-dial?
We invested in BeachMint after their seventh month of revenue. To us, that is early in the “scaling” phase, just our sweet spot when those seven months provide a strong trend. BeachMint showed consistent progress in their metrics. We cared not just about “up and to the right” total revenue, but more about the underlying drivers of long term growth: cost of customer acquisition (CPA) and lifetime value (LTV). Both those were headed sharply in the right direction. Our analysis caused us to pour over their detailed monthly results, and to compare them to industry benchmarks, see this related post. But to really see the LTV, you need more time; since BeachMint sells a subscription; the certainty of “lifetime” value grows every month. By December 2011, they had twice as much information about the value of a subscriber as they did when ScaleVP first invested. That knowledge became incredibly valuable in attracting later stage funding, because the marketing spend and company scaling became much less risky. In a matter of six months, BeachMint jumped from being early in revenue to being a predictable later stage grower.
BeachMint proved another big upside between the two rounds, that they could scale multiple categories. At the time we invested, JewelMint was their only live site, but they had plenty of product in the hopper. They launched StyleMint three months after we invested, then later that fall launched ShoeMint and BeautyMint within a couple of weeks. These new sites launched with strong metrics, leveraging the expertise they’d built on JewelMint.
Josh and Diego not only attracted celebrity talent to build the new “Mints”, they dramatically built out the management team in those six months. New people joined to analyze results, acquire consumers, seek out and secure new “Mints,” build the technology and service the growing customer base. ScaleVP typically invests when key members of management are still to come, but we need to see that the leadership team is going to be a magnet for quality talent across disciplines.
BeachMint’s round ScaleVP led had classic hallmarks of our investment strategy and process:
- We had a “prepared mind” on the space before working on the investment. (Great term from Accel.)
- We’d sought out the team early, before they were raising a round, and had got to know them and their business outside of the intensive investment process.
- We knew what data we needed to make an investment decision, were time efficient for BeachMint, and asked them questions they were just asking themselves. Those analyses later became
ScaleVP is delighted to see BeachMint thrive, along with other portfolio companies we selected through similar processes, including Box, Axcient and uTest. Those founding teams have what it takes to scale.