Plus a few takeaways from our shared journey to date
As we congratulate Weee! on its Series C, iFly.vc’s founding partner Han Shen reflects on the journey so far.
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Weee! (www.sayweee.com/en), the largest and fastest-growing Asian e-grocer in North America, today announced the successful close of the Series C round of financing led by DST Global. This round brings the total capital raised by the company since launch to over $100 million.
Headquartered in the San Francisco Bay Area, Weee! currently operates in eight key regions. Through Weee!, customers have access to thousands of products and get free deliveries for a low order minimum. The company has been cash-flow positive and turned profitable while growing 600% year over year.
As the sole investor in a prior investment round in December 2018 and board member, I would like to congratulate Larry Liu, Weee!’s founder and CEO, and his entire team on achieving another big milestone. Meanwhile, I hope it would be helpful to share the takeaways from our observation of Weee!’s journey with other founders who also aspire to serve the underserved demographics.
Underserved demographics present huge market potential
At iFly.vc, we’re excited by founders who focus on underserved demographics in the US (e.g., ethnic minorities, immigrants, residents in remote communities, etc.), especially across the daily purchasing needs. For instance, ethnic grocery needs have been overlooked for too long by mainstream grocery stores, which tend to cater to more Americanized palates. The Asian grocery business in the US represents a $60 billion annual spend, but traditional Asian grocery stores have underperformed due to low product quality, lack of variety, and inconvenient access for shoppers. When the incumbents aren’t incentivized to improve their services, unconventional and audacious businesses like Weee! are exactly the kinds of startups that iFly loves to back.
Weee!’s differentiation in online grocery is multi-dimensional across the entire end-to-end process
Weee! runs 100% of the operations on its own from merchandising to delivery without the involvement of third parties. Over time, Weee! has developed proprietary, tech-enabled tools to manage the end-to-end process very efficiently and profitably. For example:
- Merchandising: Weee!’s team of experienced buyers brings thousands of exciting products to customers each year. 1/3 of those products cannot be found at most brick-and-mortar shops.
- Marketing: Weee! has developed a highly effective growth engine that utilizes the social graph and data analytics to drive user acquisition with a CAC 70–80% less than those of e-commerce peers.
- Inventory management: Weee!’s inventory turn is much higher than the industry average, which contributes to a near 0% spoilage rate and subsequently a strong contribution margin.
- Delivery: Weee! has developed a very efficient delivery network which allows the company to offer customers free delivery for a quite low order minimum without subsidizing the cost.
The net result is that Weee! has achieved industry-leading customer retention and operational efficiency, which leads to a double-digit contribution margin after all the variable cost (including delivery) is accounted for. In our view, it is the combination of all these factors that contributes to Weee!’s differentiation and success.
The success of a founder requires passion, resilience, and sound judgment
When talking about Weee!’s business, Larry doesn’t use fancy jargon, but instead, he loves talking about his passion for the retail business and sees Sam Walton, founder of Walmart and Sam’s Club, as his role model. Larry told me that he learns something new each time he re-reads Mr. Walton’s autobiography Made in America. Since the outbreak of Covid-19, Larry and his colleagues’ passion has grown even stronger as they recognized the positive impact of Weee!’s service on so many households.
Passion itself isn’t enough, though. In the early years, Larry and his team experienced quite a bit of trial and error.
When I first met Larry in spring 2016, the business already took off, but it had an entirely different operational model that relied on local neighborhood leaders to organize group-buying and to handle logistics. Though I must admit I was impressed by all the metrics given the company’s stage at the time, I was concerned with the scalability of this model, because it heavily relies on the quality of each group leader to provide a smooth user experience. This meant that Weee! was one step removed from the end customer. Although I passed on the investment, Weee! still successfully raised capital.
In 2017, Weee!’s “group leader” model hit a wall. The company found itself on the edge of running out of cash and to make matters even worse, Larry was injured with four broken bones in an accident during a fundraising trip. Nevertheless, the team refused to give up, and none of the core team members quit. They put their limited savings to work and kept pushing forward.
More importantly, Larry didn’t put his self-pride ahead of making sound judgments. He recognized the fundamental flaws in the “group leader” model and pivoted to what is Weee! today, a merchandising-driven, vertically integrated business with efficient operation and healthy financials.
In 2018, Weee!’s pivot proved to be successful, and the business started growing again. Larry and I met again in the fall. After spending four years following the grocery space, I loved the way Larry thought about the paradigm shift in running an online grocery shop and was impressed by his quality of leadership. (And neither of us felt any bitterness toward each other due to my decision to pass in 2016.)
In December 2018, we followed our conviction to become the sole investor of the round, and I was honored to join the board. Since then, Larry and I have had numerous conversations to exchange ideas on a variety of topics covering strategy, partnership, recruiting, fundraising, and so on. Some of our meetings involved some of iFly’s LPs who are highly successful entrepreneurs. Larry seeks input from all those whom he sees as formal or informal advisors to arrive at his final judgments, sometimes including killing his own ideas.
Team growth is a key step to de-bottleneck a start-up’s growth
Since our investment was made, I have continued to be impressed by Larry’s growth as a leader. He is passionate about building the e-tailer business. His insights continued getting deeper and at the same time, he has been hungry to acquire knowledge and skills to lead the team.
As Weee! quickly grew out of its early-stage phase, Larry recognized the importance of hiring the right people at this critical inflection point. Larry invested a considerable amount of time in upgrading the management team and the team leaders of various functions (HR, finance, product, etc.). Tom Dillon, former COO of Netflix, joined the board earlier this year and brings vast operational experience. I was gladly involved in the recruitment process for the key roles and was pleased by how the team retains the culture as it expands rapidly.
The new hires have added significant contributions to the company’s growth. Opportunity favors the prepared. When Covid-19 broke out, Weee! faced a variety of challenges, but the team adapted quickly, expanded the capacity, and added new services.
One of the new services is “bundle box”, which offers customers a box of 10–12 fixed items for vegetables, fruits, meat, and/or sauces. For each kind of “bundle box”, customers cannot pick or choose the individual selection, but they’re expected to be happy with at least 9 out of the 10 selections based on the historical data. Bundle box took Weee! only 3 days from ideation to launch, and another 4 weeks to grow the new business to the sales volume of a typical grocery store.
We look forward to the continued shared journey in the years to come
This month marks the fifth anniversary of Weee!. As Weee! expands to other metro areas, the team is also committed to serving more ethnic minorities and bringing more exciting products to them. After the Series C round, iFly.vc remains the second largest shareholder of Weee!. Meanwhile, iFly.vc declined all the inbound requests for buying our shares via secondary transactions, because we’re bullish about Weee!. We will continue to support Weee!’s future growth together.
iFly.vc Founding Partner