For anyone who has ever dreamed of starting and growing a business, By Invitation Only: How We Built Gilt and Changed the Way Millions Shop, by Alexis Maybank and Alexandra Wilkis Wilson is an absolute must-read. Their story, from how they met at Harvard Business School to their billion dollar business, is a page turner filled with real world insights and lessons every entrepreneur can profit from.
Without further ado, here is a conversation with Alexis and Alexandra.
Gilt Groupe took both the fashion and e-commerce industries by storm with such a seemingly simple idea. Where did your idea for the company came from?
We were inspired by the popularity of New York’s designer sample sales, and we wanted to make this popular local pastime available online to customers throughout the U.S. and offer highly coveted fashion labels at insider prices to a passionate group of consumers.
In just 4 years you attracted 5 million members and earned a $1 billion valuation. This is hardly the norm for a start-up company. What is it that sets Gilt Groupe apart?
The most critical success factor was probably our founding team. But a number of other things made us different. We enlisted leading and coveted brands to sell on our site. We curated the best of a season or collection rather than feature everything. We tapped cutting edge viral and social marketing techniques to scale the customer base quickly. And we used the best creative talent we could find to help us cultivate an online luxury brand.
Common advice is to never go into business with friends or family, but you have turned that on its head. Why has it worked for you and what advice would you give to someone thinking of going into business with friends?
In a startup, it is absolutely critical to be able to trust and rely on your co-founders and/or team. If you are considering going into business with a friend or family member, you are likely to put a lot on the line. It is important to communicate. Lay out any potential issues or concerns on the table and talk about them in detail. We did this because, people told us to have these discussions, but we were never all that concerned about working together. It is important to think about the context of your friendship. In our case, we were friends from Harvard Business School, so we had seen each other’s work ethic and drive in action, and we were familiar with each other’s basic business acumen. Most important, we each had seen the other at her best and worst and knew we would not encounter any surprises as we hit the inevitable highs and lows any start-up faces as it grows. Our confidence and trust in each other was absolute.
You talk about relationships and execution being key to the success of your business. What is it about these two factors that are so important?
Our relationships with the fashion community were necessary in convincing brands to sell their wares on Gilt. Our relationships with friends were important because they helped to form our early base of members and customers of the site. Our relationships also enabled us to find and recruit top talent in all functional areas, from merchandising to marketing to operations technology and finance. Execution is key; ideas are cheap. We knew that we needed to execute our vision better than our competitors, and we started having competitors enter our industry very quickly.
Gilt Groupe’s success was largely built during the recession. With a sleepy economy still very much a reality, many people are eager to start their own business. What advice do you have for someone dreaming of starting their own business now?
There is no better time than now to pursue an idea you are deeply passionate about, and in fact there are many sources of financing available now to would-be-entrepreneurs. If you have an idea, here are some things that you might consider in determining if now is the right time to pursue it. First, the idea should be easy for you to explain in one sentence to a friend or colleague. Second, does this concept exist in any shape or form already? Why or why not? Take an honest look at the marketplace. Who else is out there? Has someone already tried this and failed-and if so, why? Have times changed? Sometimes an idea can be too ahead of its time and advanced for the market. Can you test your idea before over-investing, just to make sure? These days the best way to make sure that the time is right for your idea is to get it out there and see what people think. Getting customer feedback from the start will help you build a better product, one that will maximize your investment.
In your book you discuss the importance of naysayers, especially early on, in building the company. Can you explain that?
Don’t get discouraged by the people who tell you your idea will never work. Instead listen to them and see if you can apply any of their thinking into refining and improving your strategy. If you can anticipate pitfalls and those hard questions you will get from investors and partners alike in advance and more importantly be ready with great, Well-thought-through answers, then you will be better equipped for the challenges ahead.
With the tech industry still being predominantly male, what are some of the unique challenges you faced getting started? How can women make their gender an advantage?
We launched a business initially targeting female customers; in fact we were precisely the target demographic. This was very clearly an advantage as we understood the consumer mindset better than anyone. Beyond that it can be more challenging raising money as a woman. Women led 28 percent of all US. businesses in 2002. Yet female entrepreneurs historically receive less of the invested dollars coming from venture capital firms, estimates are as little as four to nine percent. So while this is clearly a challenge, keep in mind that as a female you are more likely to be a more memorable party pitching the partnership as there are not as many Women to walk through there doors to begin with!
Entrepreneurs think that venture capitalists invest in ideas, but you argue they really invest in people. So what makes them want to invest in someone? Are there any key qualities that stand out?
Because there’s so little due diligence that can be done on most new start-ups, it’s natural that VCs concentrate most on the team involved. Many investors like to see a track record of success and will use this to guide them. Drive, ambition, leadership potential, integrity and the ability to motivate others are also important traits for an entrepreneur. You need to focus on the background and skill sets of the key team members in order to convince investors that you are the right team to back.
You’ve expanded beyond fashion with sister sites such as Jetsetter.com for travel and GiltCity.com for local deals and finds. Was this always part of the plan? How did you decide when and how it was time to grow?
We’ve always been close to our customers. We both spend a lot of time with our members, listening to their perspective and ideas and responding to their feedback, as well as investing in regular customer research. Our members communicated clearly that they were not only interested in fashion and decorative items, but they lived or aspired to live a luxury lifestyle which included travel, local experiences, food and wine. We incorporated this feedback into our business and our offerings.
Growth and a healthy business are something all entrepreneurs and small business owners work towards, but sometimes growing too quickly can be detrimental. How can this be avoided?
There are two areas where you see companies suffer when growing too rapidly. The first is not anticipating the right type of people they will need to lead various teams or functions, hiring them too late or making the wrong choices in hiring. Hire fast enough, but do not over-hire, and invest in recruiting the right talent so you do not have to rehire later, which is often a time consuming and sometimes costly mistake. Second, if you grow too rapidly and aren’t investing enough in making sure your business infrastructure is strong enough then you can find yourself ground to a halt when the site crashes, the orders outpace what you can ship out in an acceptable time, or your accounting systems fail and lead to detrimental errors in expense reporting or others. Try to anticipate what could “break” next and get rigorous as a team in shifting focus fast enough to address these problems.
As a company grows, the culture of the company can often change, too. What are some tips you can share to help people maintain and preserve their corporate culture?
It’s not always easy to maintain a corporate culture as a company grows, but it is important and is absolutely worth the investment. Establishing a vision and a mission and regularly communicating them to the employee base and to potential hires is important. Think about company culture when hiring. The cultural fit for a candidate is just as important, and sometimes even more important, than the candidate’s skill set. The best way to select individuals who fit your company’s culture is to include employees in the hiring process who embody the culture and are really good at vetting for certain values in the hiring process. Make sure they are involved in training new hires, too. You can even do something as simple as hosting lunch or after-work socials. No matter what, though, the company’s culture will always be a reflection of the leader or leadership. So you must lead based on what you value culturally. Any disconnect will lead to a shift, even if not intended.
What advice can you offer for how to spot a trend that could reinvent an industry?
There are no simple formulas here. However if you are intimately familiar with an industry or a customer group, and you recognize a really tough problem that is universally faced or a so-called pain point that confronts all, and you have a pretty good solution that you could introduce or build better than the existing alternatives, then you are probably on to something important. Some of these problems could have been left for dead or abandoned, and sometimes people need to just take a fresh look at them.
How can anyone transform a personal passion, like shopping, into a business?
Not all personal passions should be businesses! But if you think that your passion has a viable market, then explore it, and perhaps find someone who could join you in your venture. We believe doing a start-up with someone you trust is so much more rewarding and fun than going at a business alone.
Anything new in the pipeline you can give OPEN readers a sneak peak at?
The final chapters of Gilt Groupe have yet to be written, and we are still just at the beginning. We’re watching dramatic shifts in our business as more customers shop through mobile devices. That shapes how we sell our products and services. As a quarter of our revenue come in through a mobile device we are launching new apps and new formats for shopping. We want to be right there with customers, at the forefront of social shopping, letting our members shop on their terms.
Reprinted from my OPEN column.
