VarageSale — building on PASSION

Last week, Montreal born VarageSale announced a US$34M in growth funding led by two leading Valley VCs (Sequoia Capital and LightSpeed Venture Partners) along with existing investors (iNovia Capital, Real Ventures and VersionOne). Their story is an interesting one on many fronts and I want to share some insights that could benefit other tech entrepreneurs.

VarageSale (short for Virtual Garage Sale) started like many startups do: they saw a problem and were eager to find a better way. Tami Zuckerman was a Montreal teacher, wife and mother: she and her friends bought and sold used household items on social networks and classified ad web sites. The process was time-consuming: managing multiple postings, answering questions and coordinating with buyers. To Tami and her friends, the sites used were far from ideal. Every woman knows that Craiglist is full of scary people (see recent news) and Kijiji wasn’t ideal for back-and-forth communication. More importantly, neither Craigslist nor Kijiji offered transparency around the identity of the seller and buyer. For Tami and her mommy friends, safety was a preoccupation.

Tami had a clear vision of a service — an app where friends could buy and sell goods in a fun, trustworthy and social way like no other service out there could offer. The vision was fuelled by a deep personal need, and the concept behind VarageSale was born. Driven by passion and need, Tami and her tech-savvy husband, Carl Mercier, set out to build something to solve the problem, but had to admit it was only a hobby at first. After a short time, they saw the rise of activity and knew they were on to something. Week after week, month after month, the amount of interest and level of engagement of the user base was astonishing.

This year they extended the service to cities in every Canadian province and 42 U.S. states. Half the millions of members who use the app at least monthly check it once a day said one of founders in a recent Bloomberg article. Even more impressive is that all this growth has been viral, since day one.

The tale of VarageSale’s journey can help other entrepreneurs in their quest to success. Below are some of the taken of the highlights I saw:

1- Build based on passion and interest. These founders started with a personal need and interest to find a better way. Having passion for what you do will keep you moving forward when the going gets tough.

2- Start small, think big — VarageSale started very lean and built an MVP. They attracted a few thousand users on their own, listened to those users and did tons of iterating (A/B testing), constantly adapting. But what really caught our attention when we invested back in 2013 was that Tami and Carl had a clear vision of where they wanted to go.

3- As a startup don’t outsource your tech. Admittedly Tami was lucky, her husband knew how to code but finding someone as passionate as you are to technically bring your vision to life is key.

4- Have something to show — When iNovia met VarageSale, those few thousand users and functional app made a difference. As a matter a fact, I tested it during due-dil and within 24 hours I had sold an old BlackBerry. Needleless to say, I was pretty convinced.

5- Traction removes doubt– Retention, usage and viral growth spoke very strongly of the positive direction the business was heading. We also knew that more money would go to acceleration rather than exploration. Traction in a way is everything. And VarageSale had so much that.

6- Build relationships — As investors, we got to know the team well and liked the experience they brought to the table. Carl had run a successful web business before (and sold it) and Tami had a deep understanding of user needs. After all, she was one of them.

7- Be unique– Building a marketplace is super hard because of the chicken and egg factor and many other startups have tried to disrupt Kijiji and Graigslist in the past but failed. We knew VarageSale was on to something because of the way they were doing it. one community at a time.

8- Create Momentum — Six months after that initial seed investment, all the metrics pointed in the right direction. UP and fast! The company was not raising more money at the time but investors wanted to add more fuel to the fire. A matter a fact, they wanted to invest more than the company needed at the time. The money did come in handy shortly after as the company needed to expand once again.

9- Never stop learning & iterating — With the new injection of cash, VarageSale remained focused on iterating, improving, and acquiring more users. Not to say they didn’t have challenges — they did. At one point the system couldn’t handle the hourly volume of pictures uploaded. As a result they had to throttle back uploads for an entire weekend until they could implement a solution. This is when a tech co-founder is critical, and when paired with a charming user-facing co-founder, it makes for a perfect team. The company suffered little disruption and no user backlash.

10-Attract smart connected capital — To the founders, funding was not just about the money it was about the contribution those writing the checks could make. A few months after the second funding, investors spoke to and introduced the founders to a few later stage Valley investors in anticipation of a mega growth round of funding. One thing led to another and a US $34M growth round from Sequoia Capital, LightSpeed Ventures and existing investors including iNovia Capital was a done deal.

We are looking forward to seeing VarageSale become a huge Company, and the team share their experience with next generation entrepreneurs.

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