[Step by Step] How Can I Successfully Sell My Business?

Phillip: [00:00:02] Welcome back to Step by Step, a five part series from Future Commerce. In this last episode of our series, we'll be walking you through all the things that you need to know to round out your worldview on how to launch and grow a successful retail business. In Step by Step Season one, we're talking about funding. And if you're jumping in midway through, I suggest that you go right back to the very beginning and listen to all five episodes in order. This is episode five of a five part series, and no five part series about retail funding would be complete unless we talked to a founder themselves. And Brian, who is the founder, that is joining us today?

Brian: [00:00:37] Today we have Michelle Cordeiro Grant, from Lively, who has a powerful story about taking retail funding and turning that around, growing her business and then selling it. This is an unusual story because of the timeline in which Michelle was able to accomplish this. And so I love having Michelle on our show. This is her second time. And I'm very excited about the insight that she gets to bring to this side of the business.

Phillip: [00:01:05] I also thought one thing that was really stand out to me was how she was talking about building a business from the ground up, whether you're building for scale or building for exit and how to really architect the business from your investment partners and from your equity partners from day one going forward to be able to do exactly that. And she goes into very interesting detail about how she accomplished her own exit when they eventually sold to Wacoal in early 2019. I know you're going to love this, and it's going to be such an awesome ride listening to her journey. And I suggest that you share this with a friend, sit it out, and tell them to go listen to Step by Step if they're beginning their retail venture. Without any further ado, let's get into the interview.

Michelle: [00:01:50] So Lively, first and foremost, is a brand and a community whose sole purpose is to really inspire women to live passionately, purposefully and confidently. We do so today with products such as bras, undies, swimwear and even more importantly, or equally as importantly, with the community of very engaged ambassadors across the United States, now totaling eighty five thousand women and growing. My background is, you know, I grew up in the rural area of Pennsylvania with two Indian immigrant parents who were so amazing and wonderful. But I really wanted to see what else I could do besides being a doctor or a lawyer or an investment banker and found my way into fashion and just really fell in love with the idea of concept to customer, and ultimately, the power of brand. I spent the tenure of my career with big retailers like Federated, creating private labels for Macy's and Bloomingdales, building brands with VF Corporation, like Nautica and Kipling, but really found my stride at Victoria's Secret, which was one of the biggest direct to consumer brands, and still is today, with their multi-billion dollar digital platform and also a company that has double digit market share in a 13 billion dollar industry in the United States alone. So what better place to learn about the power of brand cohesiveness discipline while having 20 plus percent operating income at the time that I was there?

Phillip: [00:03:23] Wow. And so then fast forward to the Lively founding story. You decided... You covered this once before on the show... But you decided that there was something that was missing in that world and creating a community, and so you started Lively. You know, part of this journey on this series that we're doing is talking about obtaining capital and bringing your vision to life by partnering with others. Could you give us a little bit of an idea of what that process was like as a founder to approach venture capital? And how did you even start in that direction?

Michelle: [00:04:01] Sure, sure. So my story is a little backwards to most. I left Victoria's Secret with this idea, this passion, and this ignorance, really, that I could start a brand by having community and, you know, by community at that time, I mean social using Facebook and Instagram to build a brand versus a company building a brand. And because I was gonna go all in on brand and community, I really needed supply chain to be not just taken care of, but to be beyond taken care of. So my strategy was actually to partner with an investor that was a manufacturer prior to launching my company so that my supply chain would be extremely flexible. I could cut to order and I could really grow with what the consumer wanted, not what I put as a plan on a spreadsheet. So I did a million five convertible note with my manufacturer, Gelmart, who is the largest manufacturer in lingerie for Walmart, for example, and has over 70 years of experience in the category. And especially when I have a product that has 25 to 40 components in one bra alone, having that type of support from the get go really set me up for success.

Phillip: [00:05:23] For sure.

Brian: [00:05:25] Yeah.

Michelle: [00:05:25] And then you couple that with size range, right? You know, while I launched with 13 styles, those styles came in a size range of 32A through 38D. That's a lot of bras.

Phillip: [00:05:38] Right.

Brian: [00:05:39] You started there. It was a great place to start. Sounds like a really interesting take on how to get going. At what point did you say, you know, I need to get additional funding? And how did you go about doing that and what were your expectations going into that? And then what did you see as kind of what actually happened?

Michelle: [00:05:57] Sure. So we launched our brand around April 1st. Well, technically, that was our first transaction, and we launched organically without paid media. After forty five days, we saw that we were able to ship to every state in the United States, and that's where we knew profoundly we had something. Additionally, we sold out of all of our inventory within two weeks, but were able to replenish based on our factory capabilities. And so literally two months after launching, when our results basically captured what we planned to do that year... "It's time to fundraise. We've got something. And we want to really seize this moment and grow." And my initial strategy, to be frank, was not to go after venture capital money, but to really just pool Angels and strategic. So my strategic was already my supplier. I then went and used my network to find an Angel who ended up being Harvey Sanders, who built and sold Nautica to VF corporation and sits on the board of Under Armour pre IPO with Kevin Plank. Then I started getting emails from the VC's because... I'd love to say it was because we were so beautiful, and they were just all attracted to us. But I have to imagine there's some credit card data and all sorts of things going around that helped them pick up on us and on our growth. And I was basically saying, you know what, I'm not ready for VC's. I really want to wait till my series A. But one person in particular emailed me, Robin Lee. And said, look, while I work for a venture capital firm, I am also a Lively customer, and I have been from the beginning. And this is about three and a half, four months since launch. And I looked her up in our customer database, and there she was. And she had been consistently, you know, purchasing Lively. And she just knew so much about our process, our brand, our experience. And said, "Sure, I mean, you're part of a firm that is a growth company, Alibaba, Slack, etc. You really are coming with a consumer lens. That's really interesting. And I'm sure you want to partner with us well down the road from today." She flew in from the West Coast on a Wednesday. We had an incredible conversation. Hans Tung flew in the next day on Thursday night. We had an even more profound conversation, and within a week it was a term sheet.

Phillip: [00:08:23] Wow.

Brian: [00:08:23] Wow.

Michelle: [00:08:23] We just knew that was the match for us. We didn't even talk to any other firms. That's how organic our process was. It just was meant to be.

Phillip: [00:08:35] Do you think that that's an abnormal story now or do you think that's becoming more common? Where part and parcel of being in the venture capital world sounds like it's tapping into the Zeit Geist and trying to find be a maven of consumer brands and, you know, having the ear the ground is that is the advantage in venture capital. It sounds like. But yeah, from from your perspective, as a founder, you weren't seeking this out. Did did you feel like this was a door opening or or was there any trepidation on your part? Like trepidation on your part, I should say. Like ask the right direction for me. Tell us a little bit about that struggle if there was an internal one.

Michelle: [00:09:15] Yeah. Oh, yeah. I mean, super transparently, I was terrified. You know, I heard, you know, being in New York City around startups was not always the best ending, but a lot of times the binary outcomes or, because I took so much capital, I was forced to grow this quickly and I self-imploded. So I was really worried about expectation. And so when we met, I said, look, this is a consumer brand that we're building that's a long term play. You know, everyone imagines the graph of a Saas company, which is literally just an uphill line. Right. But in retail, you really have to look at it like a roller coaster because you're going to be you know, there's a lot of highs and lows as you're learning about How to build this with structure and what I call with responsible growth. But Robin and Hons didn't flinch at that. And so that was a really exciting thing for me to see, is that they perhaps would be patient. And while they're always gonna push me to grow as hard and responsibly as I could, I had a voice at the table to say, no. We got to slow down or yeah, we got to pull back to really preserve long term growth. I would use statistics like failure rates, you know, after five years, maybe 50 to 60 percent and 90 percent don't even make it to 10. And our goal is to be well past 10. So if you're in for that ride, let's do it politely. Understand.

[00:10:47] You took this money and you started building a strategy with Robin and Hons. And how did you go about thinking through what you would do with the capital? Like you have a very clear plan. Even, you know, it sounds like this all happened very quickly. So you didn't necessarily have like a plan for all of this capital before you started raising it. So, yeah. Tell me about order of events here. Like how do you how did you did that money just playing to current plans or did you make plans as a result?

[00:11:19] Yeah. So what was interesting with our first round was we raised four million dollars and our intent was to raise two with our three really excited partners, GGV, our manufacturer Gomaa and Harbi. The excitement was there. And you know what we were like. We're going to we're going to fund this well so we can really take the runway of what this is and where we were going to invest was. You know, luckily, I have, you know, my undergrad and finance. So it's really clear on the PNL. And we were also creating a company that had very steady KPI eyes, meaning our key performance indicators would ripple too much because we weren't doing sales markdowns. We have one price point for Broz, one price point for undies. And so our AOB are you peaty? And our conversion rates and levers were so steady that we can really understand what to do next. Now, that's not something that a lot of entreprenuers do. So they're constantly trying to figure out what's going on and where to put the capital where for us. We had a really clear perspective of what was coming. We just needed to continue to build brand awareness, you know, and drive growth. So we knew exactly where to put the money. It was team marketing and inventory.

[00:12:37] It was that simple. Wow. So this is really like revolutionary for me. The idea of like simplifying business model for financial transparency and and like an easy, thoughtful expectations. It's not just about customers. It's about investment. It's about planning your business as well. What an interesting concept.

[00:12:59] I find it interesting, just as an aside, Brian, and I don't know if this makes it into the final show, but, you know, this I think is more closer to the definition, Michel. Of the vertical integration. Right. Like being vertically integrated and being, you know, you own your fate from the beginning, from supply chain down to delivery and in store. Could you talk a bit about why that was? You talked about the financial benefits of why that was important. But do you think that there are other benefits outside of just being able to produce on demand, being able to have cost control? Give us a little bit more about what the outcome is for the customer. Sure.

Michelle: [00:13:35] You know what? Number one for us was quality. Right. And we did not want to compromise on quality. And to the degree that our manufacturer and investor, you know, the CEO glance, it looked like, see the product that you're you're going after your rates combining athleisure with lingerie and swimwear. That's very different from what's on the factory lines right now overseas. I'm actually going to build you a factory instead because of your quality, you know, expectations. And so essentially our first run was peaceful quality, which nobody knows. They were getting a handmade bra from lightweight for $35 for the first six months, but they allowed us to understand how to build the next factory. Now we have a factory in the Philippines with over 100, 80 percent women creating our products. So that's obviously, you know, benefit. No one benefit. Number two is cash flow flexibility. Because what? Because our main factor was our investors ire. We also had no benefit of terms. We weren't having to put out all of the raw material costs upfront. We were getting net terms right, which is huge in terms of how to manage your cash. You're much closer on buying that inventory and selling it to the customer. And then I would say lastly and most importantly is being, you know, innovative because again, they're they have skin in. Game if a customer, you know, is consistently saying across trend lines like I need a busty bralette, I need to know why strapless. That doesn't exist right now. They're going to spend the time to make it with us, even though it's not the fifty thousand unified that they want today. They can see that we will get to the fifty thousand unified Tomago.

[00:15:19] Do you think then you basically leverage your race to help prove that you're a manufacturer, that you you had the, you know, the roadmap for that kind of volume?

Michelle: [00:15:31] Absolutely. Because we were able to grow by 300 percent from year one to year two. Wow. Game on. We were blowing out capacity at our factory within the first year. So that was a clear, clear indicator. The other thing that I'll say to which I think is different from how we operated compared to other startups was we always looked at our company as if we were a public company because I had worked for these big public companies. So we never set expectations that we couldn't meet and more importantly, exceed, which is very different from how a lot of entrepreneurs go at it, especially when they're raising institutional capital because they want to put together this beautiful picture of growth. Right. And so for us, the way that we thought about it is we weren't worried about the valuation as much on the ground we were currently raising. We were more worried about what the next round would be. So we never wanted to have a down round. So our concern was like, how what number do we want to put out there that we're going to crush so that when we go to raise the next round, everyone is rallied again. And that allowed our investors, our three investors, to invest in all three rounds of our company's fundraising history. We never took additional investor.

[00:16:50] Wow. And looking ahead to sort of the next part of the story, the ultimate sale, I feel like you were able to sell at a very rapid pace and maybe maybe even earlier than you were thinking that originally it didn't feel like that. But, you know, looking at other startup stories, did you think that this methodology allows you to get to the point where I mean, graduation's, by the way, on the sale where you have to sell in a faster fashion than you maybe some of other startups have had to go through?

Michelle: [00:17:25] Yes. I mean, absolutely never did. I think our company would have exited this quickly. So, yes, the answer, one of your questions. Our intent was not to sell lively in twenty nineteen. We were just really gifted with this opportunity of having what Cole, you know, really appreciate what we feel and where they see the opportunity ahead. Now what made us an optimal acquisition was a couple of things. One, we had a clean board, right. Three investors who really helped us along the way. And our strategy really was to not raise too big, but raise what we needed and more often. Right. So in a three, two and a half year period, we raised fifteen million dollars. But outside of our convertible note, we raised three additional rounds pretty quickly with the same group. And as a founder, that was important to me to hit, result and also maintain levels of dilution so that when we did exit, you know, there was still a good amount of ownership. Now, the thing that made our business easy to acquire was back to that earlier point. We had a very clean KPI. We had very clean financials. And when you're going through diligence, especially when a strategic is buying you and is fundamentally trying to understand your business model, that is a huge benefit of getting through that process. So absolutely, we were positioned well, I can't tell you how much of it was purposeful. It just ended up being very strategically advantageous at the end.

[00:19:03] I have a bunch of questions that sort of falls between, you know, the order of events here. So at what point did you see that a brick and mortar boutique sort of strategy would play into your growth? And how instrumental is that strategy in the next phase under you know, under Rockhole? Sure.

Michelle: [00:19:24] We because we were built by community and community started digitally. Once we saw how important that community was to our brand, we felt that we owed it to them to have physical interactions. And so we would bring women together for succulent classes, entrepreneurship panels, et cetera. These spaces and in the background, we would have our bras and we would notice that after every event people were like, Oh, I really love this, but I want to buy that or not. So then we started doing very small pop ups, you know, 10 day activations, one in New York, one in Dallas, one in Nashville. And the KPI's were incredible. We are ROI positive all these 10 day. Nations 10 was marketing impressions to be to be honest, at the beginning. We kept saying that people wanted to buy more and more of our product. We kept bringing in more and more inventory. And then finally we did a six month start up pop up in Soho. And it just was phenomenal that we now have a five year, you know, store in Soho, one in Chicago, one in Austin and another one opening next month. And the profitability and PNL of those are what are PNL is like when we first started eCom, beautiful, profitable in a matter of months because we do what we call flexible retail. We don't spend a lot of it. We don't spend six figures on opening these stores and we'll take down a lease that's, you know, 12 months with flexibility to extend for three to five years so that we can beina our way to the right stores at the right spaces. I think that combination allows us to be more profitable faster than most. We're investing 6 and 7 figures into a space.

[00:21:00] Do you think the customer acquisition costs through digital are like force forcing brands now to reconsider, you know, getting into physical or in such a local strategy? Yeah, absolutely.

Michelle: [00:21:16] Absolutely. The digital marketing channels are so saturated right now, driving up costs to the degree that people need physical to balance out and create that other impression and billboard and experience. Because in our category specifically, people want to try on still. Right. Especially with a bra. I think, you know, at one point in 2011/12, everything swing to it like it's everything's digital, etc. But it was this open pasture that now has been filled up and, you know, everything started to normalize.

[00:21:47] So seven year cycles, you also see that, you know, all those, you know, pure digital brands that it's said that, you know, that they were seeing, you know, that they were doing everything they could possibly do in digital. I mean, not to name names, but everyone is kind of everywhere now to their brick and mortar. They're Nordstrom. They're on record as saying, you know, you can't do digital, only self. I think everybody has that expectation of like even a customer has the expectation of you that that's, you know, eventually they'll be able to walk in and try something on. I think that the interesting.

[00:22:23] I also think you have to couple that with, you know, a generation of, you know, Jonze's coming up who had been born on screens and they're going to be looking for interactions physically. Right. Because they want that differentiation. They want to have human connection and impact off of their own screens.

[00:22:42] Looking back, pretend for a minute that you decided that even though Robin Lee was an amazing customer and she knew so much about your business and was such a good fit that you really didn't want to take capital. How do you think things would've played out? What would be the difference between that story and the story that you have now?

[00:23:00] There was a lot of that. GGV provided for me on my pathway. That is just, you know.

Michelle: [00:23:09] I'll give you a couple examples. They introduced me to a lot of other founders that were two to three years ahead of me. And so I got a lot of experience based advice that is just so valuable when you're on this rapid path. I mean, it's literally you know, I think I heard a quote from Reid Hoffman, which is it's basically like jumping off a cliff and trying to get a parachute open before you hit the ground. It's like that's wild. And so being able to get experience based advice on what went well, but what went wrong and hopefully avoiding those pitfalls was super helpful. I mean, I even was able to go to China and meet with the founders of incredible companies over there for key to musically, etc.. You know, not a lot to do with my category of business, but have a lot to do with the way that we think about consumers and where their mind is going next and what we can provide in terms of experience. And then I would say that coupled with opportunities such as shop talk and other conferences where you get visibility, you know, even the bankers that represented what cool. You know, they got to see me speak, shop, talk. They got up to feel out who I was with during probably the time when they were looking at opportunities for acquisition. So so that's a big benefit that I don't really know how to put a dollar value on it, but it helps me really navigate, especially as a sole founder. So I don't know that I would been as able to take the risks that I took over those couple of years comfortably without that experience. Base knowledge.

[00:24:52] I'm sure not everything always goes exactly according to plan.

[00:24:56] Tell us a little bit about some of the adversity along the way and and, you know, some of the things that, you know, didn't go exactly as you'd like it to have.

Michelle: [00:25:05] Oh, geez. Which part of the list did I start with? Well, let's start with two months. And I found out I was pregnant with my second child. So I go. I a company pregnant and fundraising. So that was surprising. I would say. But that was a blessing, obviously, with my son, Jack. Definitely changes the game a little bit. But that also happened at a time where we had, you know, two thousand customers with customer service tickets and we have one person running customer service. And it was just a nightmare trying to get through all of these, you know, inquiries to then we solved the problem by meeting up with someone at work at Rent the Runway and led customer service. And she just came in on a consulting assignment and just set up our systems and processes. So it wasn't we thought we needed to hire all these people when in fact we just needed to create macros and process around the consistency of what people are asking and how to answer them more quickly. So that was one. Two was we spent so much time on every component of our bras to the degree that we bought this beautiful strap that was smooth and and sleek, et cetera. Unfortunately, when everyone got it, our straps started slipping because it was too smooth and too shy. You know, it was double the cost of both. And we had to go and swap all of those products. And I would say lastly and probably probably the scariest time for me was in twenty seventeen in October of twenty seventeen, we rebuilt our site to be faster and do all the things. We launched it and realized that Google was doing an entire recrawl, which means essentially for three to four weeks your organic traffic is plummeting because it's resetting from the beginning. I did not know that. And so as you're getting up to holiday, we were basically back in terms of traffic from, you know, maybe even a year ago of having to rebuild.

[00:27:02] I wish that that were less of a common story. I got that. I've heard that one a lot that I went.

[00:27:09] And when community and word of mouth and, you know, local is part of your strategy and people can't find you through organic. That sounds like a big, big problem.

[00:27:19] Is it organically built up?

[00:27:23] Absolutely. Know, it's interesting that the strategy you took firm for building out your community. And when we talked to Robin and Brian from 4Runner and Jeremy over at Lange Capital, we talked a little bit about community first and and and what that meant to them as investors. How do you think that, you know, that played into how appealing you were to Robin and ultimately landed her in your lap in terms of being an investor?

Michelle: [00:27:55] Yeah, I mean, I think when you're at the basically seed stage of investment, which is what we were at, you have a little bit of data. But at the end of the day, you're investing in the team. Right, which for us was in three other women. But I think what really, you know, captured Robin and Hans was the dynamic that I I had in terms of I had the background of the fundamentals from big brands. Right. Tary secret, et cetera. So I really understood how their bottles worked inside and out. But then my strategy was to take those successful business models and combine it with a new school of marketing community and product to a category that just hadn't been updated in quite some time, which was attractive because of what Warby Kasper, etc. were doing at the time. But now you have someone that can see what could be the omni channel global potential. I think the real selling point, however, was sitting in a room with me and you'll see Nasser, who's the CEO of Gilmor, and see our dynamic and being able to see that supply chain mixed with brand was working so well together because that is usually the Achilles heel of many consumer based companies. It's inventory and you're just well, you may have two million dollars in inventory in your warehouse, a million five and it might be the wrong stuff. And so now, you know, you're just kind of pigeon held to trying to sell the wrong things or market down and dilute your brand.

[00:29:36] Yeah. Wow.

[00:29:38] What's what do you think the next year, two years look like for the Lively's story underwater?

[00:29:46] Sure. Yeah. I mean, being able to partner someone whose core values are very much aligned with ours. When when I met them, their whole thesis around beauty and balance and making women ultimately comfortable so they could be confident, which is exactly what we were saying, just at a completely different tone of voice and channel. Right. So that was really the alignment to begin with. But now you have this company that has amazing product innovation as well. So they're going to inspire us to continue to take our assortments to the next level. And then, you know, most importantly is our ability to now expand eventually globally and distribution wise, we're going to continue to open more stores. We within one year, we've opened for permanent stores and we're really excited about continuing on that path thoughtfully and responsibly as well as, you know, growing with Nordstrom, who we've been partnering with now for over a year and considering where we want to set up shop for our first country, you know, outside of the United States. Our ultimate goal is to have lively be a brand that anytime a woman sees these beautiful letters, they feel passion, purpose and confidence. And hopefully that's across many languages, cultures, locations, et cetera, like the beautiful legacy brands that I grew up with, like Ralph Lauren.

[00:31:14] Amazing. Well, we're wrapping up here. I was wondering, do you have any final advice for the entrepreneurs and even that maybe the venture capital and PE companies that are listening in today?

Michelle: [00:31:25] Sure. Yeah. I mean, when you take an investment, it's really like a professional marriage. So I would say just, you know, spend the time to get to know the people on both sides, whether you're the founder, getting to know the investor, the investor, getting to know the founder, and make sure you see the world the same way so that when things do go wrong, because they ultimately will, that you can get to a place of decision making quickly versus having friction and confrontation. B, the majority of the time spent. And be really honest with what you want. Like, if you're building a company for an exit, say that if you are building a company where you're just super passionate about what it is and you're not sure what the exit is, and that was me, say that, you know, there's no point in not being honest when you're going into a deal because the marriage will ultimately fail. And then the last thing that I would say is both sides should be really clear about what their terms are. I think a lot of times founders, you know, believe they have to take the terms as is and investors feel like they have to deliver the terms that are. This is what a is. This is what B is, et cetera. But if you want a unique result, be flexible to creating unique terms.

[00:32:41] Great advice. Well, thank you so much for coming on the show again, Michelle. It's good to have your your sage wisdom. What a credible story that you have to have have told already and are telling currently. We're excited to see where things are headed. With with with lively and the next chapter of your story.

[00:33:04] Thank you both so much. Appreciate it.

[00:33:06] Thanks, Michel.

[00:33:08] Thanks for listening. Step by step by Future Commerce. If you found step by step valuable or if you're looking for more information about funding your retail venture, drop us a line. Hello. Future Commerce thought of him. Remember, you can subscribe to Future Commerce wherever podcasts are found and we'd like to extend a special thanks to Shopify Plus for making this series possible.

[00:33:27] We also want you to be in the know for all the things that matter in your business. And Future Commerce Insiders is our weekly deep dove into those issues and concerns that matter to you as a founder or as a digital commerce professional. This weekly newsletter touches on topics like deep fakes, the attention economy, Woke, washing, surveillance, capitalism and sustainability. And you can get that every Wednesday at 2:00 p.m. by subscribing at Future Commerce DOT F.M..

‍