Are DNVBs the new Startups? What Are These Startups? And How To Invest in Them?
First, let’s define what i mean by DNVB startups.
If you have a product that is not technology based, or is based on tech that is well founded in the market (>10 years, with healthy adoption rates), than this can qualify as a DNVB startup or product.
I am focusing in the article on fashion and lifestyle simply because its what i’ve witnessed most frequently when it comes to product categories, it can also be applied to musicians, filmmakers, producers, consultants, but i felt that these categories were already defined and operate as startups or freelancers for quite some time, and i am more interested in the opportunistic people who choose to create a product that is their own defined art, but because they want to sell it, it becomes a product.
Or in general, what is the product strategy that the Gig economy and sites like Fiverr, Mechanical Turk, TaskRabbit, and dozens of other marketplace for dedicated professionals — behind these business endeavours.
I asked Shiran Kadar, the owner of brilliant conceptual art director behind some of the biggest campaigns and brands in Israel and abroad, and of course Shiranka, if she agrees with me on how i see these new “startups”
“I’ve seen so many people, especially young ones learning to accept that what they create and how they see the world is ok, and it’s even more ok to share it” Shiran said. “If anything, i grew up thinking that some things are never to be shown or discussed let alone promote, and today people make it their own unique approach to anything they do, whether it’s fashion, lifestyle, food, art or even just helping others”.
On the subject of tech and where it is today and how it’s being used as a facilitator and accelerator for new ideas and marketing she thinks: “Definitely tech and all the platforms have made it, first — easy to start sharing and forming your own identity in this world and connect with like minded individuals and second — you can with minimal budget and resources to start something”
Shiran (33) has spent the last decade building and refining the brand she represents and it is always a work in progress because the world and life are a work in progress.
Everybody wants to be unique, and everybody wants their own identity when it comes to the easiest non-verbal communication form to control — appearance.
It’s relatively easy to create a basic clothing brand, like t-shirts and shorts today as you can easily source the materials online through Asian manufacturers, work with a designer to create your own unique language (which later will be part of your brand identity), and finally relatively easily setup an eCommerce platform and accept payment from all over the world.
That simple process makes dreamers that much closer to making it a reality, or at least try without risking the farm.
Also, clothing is an easy thing and a right product to make into a “startup”. It’s easy because a t0-shirt is a t-shirt and if you dont go to crazy and make it about the fabric, graphics, special gimmicks, the “sell” is on your brand identity and not the fact that it’s a t-shirt, and that makes it a right product to start with, people will evaluate your work based on your uniqueness (which is why you started this thing) and not based on your choices in shapes of clothing.
Arts and Crafts
This is an expansion of the clothing lines. Need i remind Etsy to anyone reading here? But with Arts and Crafts you literally have limitless possibilities when it comes to choosing/creating a product.
It can be a little animal deigned to decorate your mantle, or some fancy soup spoon that will truly show how much you love Star Wars.
Etsy is a great example because what it did was create a niche destination or marketplace for people who want exactly these Arts and Crafts and anyone can identify with something there. And again as with clothing it’s relatively easy (thought a bit harder than clothes) to setup a product like that.
First, when it comes to these to in 2018 you have to look also at the way they started. In 2010 for example, it wasn't that hard to submit a project to a crowdfunding site and have enough exposure to get some funding or interest. In fact it was demand > supply, and thats amazing on it’s own, because Kickstarted and Indiegogo made us patrons of stuff we liked and made us part of the process with all theses ‘Thank you backers!’ announcement and pride.
Actually when i think about it, crowdfunding in general was the first execution of the development of niche products and that created what i am trying to describe in this post. It brought the idea that all you need is an idea, and if people liked it they can be part of it directly and fund it, and when you add the internet to it — you get global exposure in one place. free (almost).
The Rise of Marketplaces
You know what i love about the general idea of a marketplace? the more niche and targeted it is, the easier (ad cheaper) it will be to succeed.
In today’s internet, where all the boundaries between industries and market are phasing, it’s easy to get lost and be charmed by affiliates, publishers, brands and others to expand sometimes, that is when a marketplace is getting lost on me. Don’t get me wrong, I’m all about product evolution and that is often related to business evolutions (and board demands) but with marketplaces, when the buyers are having a harder time to find what they need or lose the believe that they can discover new items in the same space — thats when they dont return and lose interest.
Realistically, today, if you’re staring a new product from scratch i would highly highly recommend you start super niche, that will make it easier for you potential buyers to understand what you’re selling and for you to stick out in a sea of distractions.
Evangelists (Vloggers, Bloggers)
YouTube (Vloggers) is a must mention for me for one reason:
Youtube completely phased the boarders between industries, and is the culmination of consumer behavior for new products
Example: if you’re a carpenter and you start a youtube channel you can:
- Start how-to videos to share with your audience to build credibility and to attract traffic to your other online outlets
- Partner with other brands (local or international) to gain (ride) exposure
- Collaborate with other web creators who complete your product (design a wooden artifact)
- Create content that is behind what you do, keeping in the world on wood let’s say
All these are just examples for how video is where you can showcase the attributes of your products that are beyond rational consumer behavior, and all it takes is a smartphone and something to say.
Similarities to startups
If we’re assuming that any startup starts from the idea or ideation stage, let’s see how that process usually works.
- What is the need/problem/pain/opportunity?
with DNVBs, let’s be honest here, for most there aren't really pains or problems they solve, but more of needs and opportunities.
- MVP (what’s that?)
How can i get the first batch of product the fastest and cheapest?
In which markets will i sell this? Which territories? At what cost? what are my strategic partnerships? CAC, LTV, Churn,
- Business model
break even point, sustainability, OPEX. we need to know how much are we going to make if we want to make it lasts (let alone make it profitable)
Vest the market, evaluate competition, evaluate pricing points, barriers of entry, scalability and scaling costs, etc. the more we know about our target market the smarter we can design our go-to-market strategy
- Lean, Agile
We want to be able to release a first version of our product and see what people are saying and use that feedback to iterate the next release of the product
- Funding, or lack there of
Mmmm, yes in the tech startups world funding is usually the way to go, but i dont know many angle investors who will invest in something that is clearly measured only in real life market success, one that cannot be argued or easily dismissed.
Where it’s better than tech startups
- Less risk
If you had come to me now with a lifestyle kitchenware product you want to produce and market, i would say ~$2,000 is a good place to get what you need to realize if this has something real in it. You can argue with me but eventually i would: invest in let’s say 3D printing a mockup, spend some cash on professional consulting from an industry leader, and create some professional (lean) online presence, and also source the costs of production and initial distribution/marketing. Accept that these types of products while unique are drowning in a sea of other unique-one-of-a-kind products, and you are competing with irrational consumers most of the time. The only way to validate this is to do it.
- If say, money is injected (investment) — less risk
You can get the initial funding for your idea from FFF (friends, family and fools) or from the bank or from many other entrepreneurial vehicles like dedicated workspaces for creators and designer who offer great marketing and network features. But if you get some smart money here, like a family friend who works in that industry, then you get a very good shortcut in your go-to-market plan
- Easily evolve according to the right KPIs (real ones)
As with any startup you can pivot if things are clearing up as you go along. In any product development process you learn more things and identify new problems or opportunities as you go along. sometime you have a great strategic opportunity that can save you a lot of resources in marketing or sales, but you need to make some adjustments to you product — all is faster with these kinds of startups — they require real and honest adoption or interest or sense making to be regarded as successful
How to do it:
- Product process
The main difference in the product process for the DNVBs segment i guess is that you don't always really address a pain or a problem. Even if you you think you're product is life-changing, the fact is that humanity still survives without it today. That means that this product process should be business viable, it needs to make sense business and numbers’ wise, unless you have unlimited capital to test, market and iterate the product until you reach profitability.
Source and vet your products by similarities, learn the stats of similar or close products, or products targeting the same audience or cohorts
- Network your way
See if you can spark interest in someone that might be your target audience. Start with friends so you can expand the feedback if you need, but also try to expand your reach, say over Facebook or Linkedin, or any other social circle you have. This way you can save time and quickly learn and identify new opportunities you may have otherwise never thought of.
If it’s a physical product (clothing, arts, accessories, gimmicks, etc.) than you need to either buy it (stock) or manufacture it. Manufacturing is hard and never treat it lightly, however the information you need to start is out there, and you can initiate conversation with people that can help you better determine what costs are you looking at.
keeping with the startup tone and comparison of this post, i wanted to also shed some light on what i’ve seen when it comes to investment and how they due diligence these deals.
First, about 60% of DNVB startups DO use external funding, some (about 20%–30% from what i’ve seen) fundraise from external investors.
Second, almost 90% of these investors are Strategic to the product, and this is a big fact not to be easily overlooked.
Third, investors can more transparently perform a relatively quick due diligence because if the product is good, it will show, it's not like esoteric tech metrics that we can manipulate to fit our story straight.
It’s a good investment if you know how to move product, that can be an intro, a foot-in-the-door, or actual work, but it is work for investors here.
Returns are what they are in every pre-seed or seed tech company, even though it looks promising, in 2018 startups are ever more dependent on the people executing any idea. But returns (or dividends) are more known and frequent, as this is run like an actual business and not one with heavy R&D.
I’ve been in tech for almost 20 years (first eBay store in 2003) and consumer products and services is what i’ve been most involved with, and i believe retail and consumerism is what drive most economies (or at least the principals of it) so i see these new “startup” as a natural evolution.
Since the boom of 2001 and then the crisis of 2008, it’s been 10 years since startups, or tech startups are “cool”. It’s been done, it’s nothing new, most first time tech entrepreneurs will only create a small iteration of an existing product (smart actually) and will not innovate or disrupt anything, maybe it’s time we disrupt ourselves with what we think the role of tech or consumer tech is in our lives, it can be what it is like it’s 2010, things changes, we changed.
You’ve made it here, wow! Read on :)