Get VC out of Ecom
It doesnt work. Stop trying.
Why VC dollars die in ecom and consumer
We are rehashing my favorite talking point.
Lets talk about scale.
Thrasio promised to build the next great holdco.
A portfolio bigger and more diverse than VF or LVMH.
VF corp owns 13 brands and does 12 billion a year.
LVMH owns 75 brands and does 65 billion year.
You need an asset to push enough revenue to support an army of people to defend it.
Thrasio bought 200 brands in 4 years.
They are running ecom like a fucking franchise.
It doesnt work.
The truth is, until you are doing 100m+ a year, your business is one bad decision away from sinking.
One bad order, one marketing change, one trend miss- you are dead.
Because you arent big enough to survive off LTV.
And you dont have brand awareness to influence sales from diverse channels/word of mouth.
And what gets a brand to 100m?
No one fucking knows.
It is equal parts product and magic.
Its ops and marketing meeting trend and zeitgeist.
Its truly and utterly unpredictable.
Its why multiples suck below 100m and there are less acquirers.
More risk.
You are literally in the trenches.
Tech doesnt fix it.
VCs like bits, not bolts.
So they see an inefficient insane industry and think
“we can fix this with software”
But they cant.
Custom tech in ecom is a massive detriment.
Bonobos and Glossier had to build their own platform.
Both wasted millions and years doing it.
Tech doesnt make you better in ecom.
Product does. Marketing does. Passion does.
Passion wins. Every time.
There was one person who was passionate about Glow City, it was the person who founded it.
When it gets packaged and sold as a commodity, it begins to look like a commodity.
The problem here is that some analyst looking at a spreadsheet and some intern running PPC for the first time, dont know how or why Glow City became successful.
There wont be product dev, there wont be brand, there wont be someone staying up at night SWEATING about how to win glow up basketball market share.
And to be clear, Glow City wouldnt have been a 100m brand.
But it will be sloppily mismanaged until it goes from an amazon cashflow business to a toxic asset.
Because no one care enough to stop that from happening.
“We got 200 other brands to care about”.
But the reality is no one cares about those 200 brands either.
In defense of Thrasio
I am not trying to shit on them.
And I dont actually hate Miami Keith for blocking me lol
I respect the hell out of his career and DRIP.
I just want to highlight how and why I think ecom is too messy for venture scale bets.
The aggregator experiment gave an offramp to a lot of first time founders.
Amazon and Facebook made us millionaires, Miami Keith just signed the check.
They saw arbitrage in a booming industry.
And they seized it.
The problem is that valuations change.
Businesses change.
Warehouses are harder than financial models.
When you have to switch excel for packing tape, you realize you might be in the wrong business.
They bought something for less than it would trade for, but 12 months later and there is no one left to trade with.
SEAN POV:
Holdcos are real. But no one can hold 100 separate, small businesses.
Holdcos should be homegrown. Buying assets with cashflow guarantees you know how to cashflow
The fever broke. No one is coming to buy your 2m a year amazon business
Sure some will sell, but you are looking at 2-4x earnings. And earn outs.
No one should raise venture capital to build a brand.
You wont have a venture scale outcome.
You wont learn how to run a brand correctly.
Shared resources are more of a promise than a reality
Sure you can have an accounting team and an HR team
But “the benefits of synergy are theoretical, the benefits of focus are immediate”
I cant remember who said that quote
Shared creative teams sounds like a slow death coming
Anything requiring warehouse employees shouldn’t scale fast and break things
If you are a brand trying to raise VC, I wish you luck.
I hope you prove me wrong.
But I think you are better off moving slow, raising angel money, and working towards a meaningful exit where you own 80% of a 100m biz.
Instead of 20% of a 1b+ biz.
You can control and build the 100m biz by pure brute force.
The 1b outcome requires more luck.