Another One Bites the Dust
Of course I was expecting more VC funded companies to call it quits- why not, this seems to be the flavor of the month. The demise of this company, Dot & Bo, is especially sad because they have a large number of dedicated fans who were loyal customers and believed in the company’s mission.
The company was founded by Anthony Soohoo, who previously worked at great companies such as Yahoo and Apple. Given his pedigree, you would have expected him to raise tons of VC money and grow his business and finally sell it to some large ecommerce company. Jet.com recently did just that, selling for billions to Walmart. So why did Anthony not sell his company instead of shutting it down ?
I think you know the answer: The VCs, Trinity Ventures and Oak Investment Partners, decided they had had enough. If they call it quits, you know all the other investors will run for the exits. This time they at least tried to sell the business, which is the classic VC exit when things do not work out. They pressure the CEO to sell because they will no longer add money to the kitty. In an interview with Recode, Anthony claims the ecommerce sector is out of favor. He is definitively talking like a VC, and giving up after burning through $20M seems so easy.
I think this is a great example of why you need entrepreneurs who have not entirely bought the VC rhetoric. If your company’s sector is frozen and out of favor, find a way to counter this ridiculous notion. I remember when video games were out of favor after Atari failed in the 80s. Funnily enough, billions were made out of that silly belief. Same for all those great companies that failed when during the year 2000 the dot com bubble burst. Anyway, I am dating myself. A great business remains a great business no matter what the VCs tell you. Also, business cycles do exist and persevering through one will dramatically increase your company’s value because others will just give up and close up shop. Dot & Bo did it.
Anthony is smart, highly educated and perfectly fits the VC prodigy model. He is the bullseye for what the VCs are looking for when they invest the money they manage for others (pension funds, foundations and universities). VCs will tell you that the fives rules of investing are management, management, management- you get the idea. So what went wrong here ?
The fans and users of Dot & Bo are really sad. There are 49,600 followers on Instagram, over 1,000,000 Facebook likes and who knows how many emails they have in the database. This crowd is real and people care about this brand and the mission of the business Anthony was running. Why not raise money from this crowd and this time run an out-of-favor-with-VCs company without the VCs? Anthony, do you really need the approval of VCs ? Why not have your fans tell you how you are doing ? They vote by buying your shares and by buying your products. I like these votes, they are authentic and perfectly aligned with your mission. VCs, on the other hand, do not really care. Just give them a 10X and make them come back for more with your next company. They are just along for the ride on the gravy train. However, your fans are there to stay with you, no matter how out of favor your industry gets. They simply do not care.
Anthony can choose to not give up. I like to use #neverquit in my signature on my emails because, in reality, entrepreneurs only fail if they quit. Seems obvious, but not to them. After being severely beaten up by their investors, they just become discouraged. They forget that money is a commodity and it really does not matter if it comes from a blue chip VC or from a great crowd of fans. You simply need capital to make the changes necessary to find the sweet spot. Then you win.
Dot & Bo should talk to its community and see if they want to invest. If they do, then raise $20M and start fresh with a new perspective and pivot the business to do the one thing fans want you to do: Meet their needs.
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The views and opinions expressed in this article are those of author Howard Marks. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:http://startenginebetadev.s3.amazonaws.com/production/pdfs/Disclaimer.pdf
