People ask me this a lot, here's the email I sent internally explaining:
"Wine is often produced and auctioned in batches, or Lots, and auctions are sold in Lots. Why 18? Well, 18 is a significant number in many cultures - it’s a homonym for “lucky purchase” in Cantonese and the number represents “life” in Hebrew and other Middle Eastern cultures.
Most importantly, Lot18 is about curation and the excitement of buying something great at a great price. Curation means procuring the best offers and giving them a unique spotlight, and the excitement is reminiscent of shopping at auction".
Startups have so many things going against them - no money, no brand, no recognition and worse. It can be hard to convince the best people to join, to leave their cushy jobs to take a pay cut, and come work for a company with a highly uncertain future. It's no wonder that the urban myth that 9 out of 10 fail within the first year persists.
I'd always advocated that a startup, lacking in so many things most companies has, has to use what it does have: we're nimble, with no fear of failure, there's no downside to retreating from a bold move, we can offer equity and we can move fast. In the same way, we're always looking to leverage the other advantages we have: for example we're in NYC, not Silicon Valley. That has its disadvantages, but we're right in the heart of 5 world class industries: finance, publishing, fashion, retail and advertising. We make damn sure that we leverage our proximity to that.
So when we heard that the new cool startup Custora was looking for office space in NYC, we jumped at the chance to give them room to work. We have a large office so its easy to spare a few desks. They are building SaaS software to help ecommerce companies (like us) identify and retain their best members (something thats important to us), so it was a no brainer.
We'll do this more, so if there are any young startups, especially in industries complementary to what we're building at any of the Gramercy Labs companies that want office space, just reach out and let me know.
I was at a seminar recently when I first heard the phrase "Courageous Conversations". The speaker used the words to explain the difficulty in facing up to and in having certain conversations. For example, it would be hard to say "I'm in the country illegally, and would like to apply for legal residency" or for someone to finally tell their spouse "I had an affair five years ago."
I started this blog to...well, actually, I don't think I was ever really sure. I knew I'd learned a few things along the way, I knew that writing about ideas helps clarify them for me, and I wanted to make it easy for others to get the benefit of what little knowledge I'd manage to accumulate.
I've read a few posts recently that I've found really helpful and refreshing in their honesty:
- Ben Pieratt, Founder and CEO of Svpply, a NYC based social shopping site, wrote a post that Business Insider called the "Best Blog Post" written by an Entrepreneur that they'd read. Read his post here.
These posts are raw and open.
Ben's post, which starts out by saying "I truly have very little understanding of what I am doing", is about the abyss founders stare into every day, when they get up, walk to work, and then realize that they havent got a clue how to do what's in front of them. Every Founder faces this regularly, but most of us are too scared, or too caught up in the Great Man Theory, to ever admit any weakness.
Michael's post systematically breaks down his recent fund raising process, in which he calls out a lot of the bait and switch tactics VCs are famous for. Quote: "Many firms will throw awesome terms at you – a high valuation, more management options, founder-friendly preferences (I'll explain those later) – only to come back a month later and change them, or, better yet, pull out all together." This happens all the time, and its endlessly frustrating to entrepreneurs who have to crawl, hat in hand, to omnipotent VCs every year or so, and then spend months on a process (basically an elaborate game of chess) which is totally orthogonal to actually building the business. Problem is, as much as we all hate it, if you don't do it, the company will run out of money and die.
Both pieces are excellent examples of Courageous Conversations, and you should read them.
I'd like to have such conversations on this blog myself, but telling the world that you are scared, or in the case of the VC expose, biting the hand that feeds you, isn't easy.
I remember reading this post about Jerry Yang way back when I first started Snooth: Being CEO is a lonely job. It was the fall of 2007, and Snooth had launched about 4 months ago. We had us 2 founders as well as 2 contractors back then, and we'd only recently moved out of Mark's (Snooth co-founder) kitchen and into some shared office space. I had no client meetings, we had no revenue and we were working out way through the $300,000 seed round that we'd scraped together earlier that year.
Not that you'd have been able to get me to admit it at the time, but we didn't have much of a business back then.
I read the post then and it made no sense to me. Mark and I were, and still are, great friends, we'd faced no tough business decisions at that point, had no bad employees and we were still dressing in scruffy tshirts and coming into work when we felt like it. We'd hang out at night, play video games on the weekend, and work whenever we had the time to do so.
Jerry talks about the tough calls CEOs have to make, and although I can't find the transcript, and will paraphrase here, he says something to the effect of when he became CEO that recruiters stopped calling him, his team mates stopped chatting to him and, in turn, he no longer had colleagues he could confide in.
Because Lot18 grew faster than expected, we shot through that formation stage 12 months quicker than most companies would. There wasn't a lot of time to enjoy the catalysis of formation. With 60 employees at Lot, we have around 90 employees in total at Gramercy Labs, and these days processes like compensation committee's, quarterly reviews and lines of reporting separate us founders from much of the camaraderie. Having the power to set someone's salary, or to fire or layer them makes it hard to truly become friends with someone. There's too much of an imbalance of power.
I'm skipping over all the great things about running a rapidly growing company here, and there are many, but I've come to learn that when I enter a conversation in the office, the dynamic changes - people start talking about work, and not how drunk they were the night before. Sort of like the Observer Effect in physics, where the act of observing something, changes the thing being observed. I miss it, but I can't "hang" with the team like I could when the companies were just getting started.
We have Wine Fridays, movie nights, we go to dinner, wine bars, pubs and even take overnight trips as a group. We hang out, and we all get on, but I'm still the boss, and its different. I've found myself thinking I should leave sometimes just to let the rest of the team relax amongst themselves.
Founding a company has a lot of ups and downs, and that support network is vital, its why people will always say that the right number of founders in a company is always greater than 1. Having a co-founder, means you have someone that you can turn to when you're facing a difficult decision, and its someone who will always call you out when you are doing something stupid. Its a critical counterbalance, and works best when you both have dissimilar skills. That way you can each focus on different areas of the business and get twice as much done.
So, we just announced that Lot18 raised its Series B financing. We raised $10m in total, with NEA as our lead investor. FirstMark Capital, our Series A lead, participated in this round. We added Tom Grossi from NEA, and Amish Jani from FirstMark to the Board, and Tony Florence also of NEA is now a board observer. Thats all from the press release announcing the funding.
We're very happy to have this done - suddenly my monday's are freer. NEA is a world class company, with deep ecommerce experience, especially via its notable and early investments in Diapers.com and Groupon. They are also the worlds largest VC, with $11bn, and are consistently named a top 5 VC globally. Tom and Tony are wicked smart, Tony was the partner on the Diapers.com investment and best of all, we've really enjoyed working with them through the process.
I don't remember when the last time a wine company raised 8-figures was, but it was probably one of wine.com's financings 5-6 years ago.
Cue bubble 2.0 talks.
This is the wine category after all, and its seen more than its share of carnage. Well over $100m was invested in Virtual Vineyards, Wine Shopper and Wine.com, those companies then coalesced into Wine.com and New Vine Logistics, who have raised more money, and the latter also went bankrupt around a year ago. Fun times. Its why we started out our VC pitches with a slide showing a graveyard. Always better to face the problems head on.
Thats also why our second slide talked about the regulatory environment.
Fundamentally things are different in 2011 than they were in 1996. Most importantly the laws are different, there's also been an ecommerce revival and people shop differently, thanks to a host of SaaS, logistics and other vendors there's now an infrastructure in place that makes scaling a business like ours easier, and there are more people drinking wine, and just being online now.
I'd learned from Snooth that it was possible to create a large community around wine online (Snooth has over 750,000 registered members now), and Lot18 is helping such people find and enjoy better wines.
We now have a team of 60, and we're growing very rapidly, we look forward to the increased visibility, praise and criticism that this money will provide. Roosevelt put it best in his "Man in the Arena" speech:
"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know."
With that, here's a partial list of the press we've received since monday:
Lot18 Raises More Cash to Sell Wine Online
New York Times (Bits)
Mr. James said the company wanted to begin expanding its online selection, which is now largely limited to domestic vintners. The new money will go toward hiring international wine curators to help pick out selections to feature on the site, he said. In addition, the company will begin to sell other wine-related products, like stemware, tickets to wine events and even destination travel packages, to allow the company’s epicurean customers to meet winemakers in Napa, for example.
Wine Bazar, http://www.winebazar.net/lot18-raises-more-cash-to-sell-wine-online/41111
Wine News, http://wine.tweetmeme.com/story/4910374759/lot18-raises-more-cash-to-sell-wine-online-firstmark-capital-new-york-venture-capital-investors-focused-on-early-stage-and-startup-technology-companies
The Daily Start-Up: Lot18 Toasts To $10M Staff
Wall Street Journal (Venture Capital Dispatch)
Flash-sales wine site Lot18 had an appropriate way to celebrate its $10 million Series B round with a case of Veuve Clicquot Rose celebratory champagne. The funding was planned once the six-month-old company, which provides deals on wines for subscribers, hit $1 million in monthly sales, a milestone it reached last month and a full nine months earlier than expected.
Lot18 Scores $10M Series B To Scale Flash-Sales Wine Site
Buoyed by wine lovers' thirst for unusual wines at a discount, flash sales wine site Lot18 has exceeded initial milestones and sealed a $10 million Series B round ahead of schedule. New Enterprise Associates led the round, with participation from existing investor FirstMark Capital, which led the Lot18's $3 million Series A round in November. Valuation was not disclosed.The infusion was planned once the six-month-old company hit $1 million in monthly sales--a milestone it reached last month and a full nine months earlier than expected.
6-Month-Old Startup Lot18 Closes $10 Million Series B Round
Last week we told you New York-based startup Lot18 was already doing $1 million+ in sales. Investors seem to be impressed with that figure, because the wine flash sales site just raised a $10 million Series B round. It took two months to round up the cash; investors include NEA Ventures and FirstMark Capital, which led the Series A round.
SF Chronicle, http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/05/02/businessinsider-lot18-closes-10-million-series-b-round-from-nea-ventures2011-5.DTL
Yahoo! Finance, http://finance.yahoo.com/news/6MonthOld-Startup-Lot18-siliconalley-1240473713.html?x=0
Going Beta, http://www.goingbeta.com/2011/05/02/6-month-old-startup-lot18-closes-10-million-series-b-round-san-francisco-chronicle/
Equity Helpdesk, http://www.equityhelpdesk.com/node/39887/related_links
Wine Resources, http://wine-r.com/bits-lot18-raises-more-cash-to-sell-wine-online/
Lot18 Raises $10 Million for Online Wine Sales
New York startup Lot18—which sells wine in limited-time “flash sales”— is only six months old, but it has already raised a Series B round of funding, according to Business Insider. The company raised $10 million from investors including NEA Ventures and FirstMark Capital.
Lot18 (Offers Exclusive Deals On Wine) Closes $10 Million Series B Round
Lot18 is a membership by invitation website for wine and epicurean products from coveted producers at attractive discounts. Members have access to some of the finest wines and specialty foods, made available in small quantities at extraordinarily low prices. Lot18 evokes the auction lots of old, where savvy consumers were able to bid on fantastic products at incredible values.
Lot18 Completes $10m Series B financing Staff
Lot18, a New York-based invitation-only site that offers deals (of up to 60%) on premium wines, has completed a $10m Series B financing.
The Growing World Of Wine Flash Sales
The High Low
Luxury clothes, luxury vacations — when it comes to flash sales, why not use them for wine as well? The site Lot18 does just that — and it’s about to do more, having just raised another $10 million in Series B funding. After launching last November, the company now boasts about 200,000 members, who receive limited-time access to pre-screened producers selling off small batches of wine.