Vivino Built the World’s Largest Wine Marketplace From Scratch. Here’s How.
You might say Vivino is another example of a business that got lucky, because they launched at the right time. You would be wrong. When Vivino launched, there were already 1,000 other wine apps available on the app store. Last week I talked to Heini Zachariassen, Co-Founder & CEO of Vivino to find out how they did it.
It all started with a frustration. Heini was one of those wine enthusiasts who liked wine, but was no wine expert. He got frustrated when he bought a bad bottle of wine. After buying enough of them, he decided to solve the problem. Like any other ‘overnight’ success story, it took 10 years. Not because they couldn’t burn more money, but because they wanted to build a sustainable company.
Step 1: Do you truly understand the key problem?
Before Vivino launched, there were already almost 1,000 wine apps available. Many of these apps were run by wine experts who knew the wine market upside down. Of they thought they did. Heini, on the other hand, was no wine expert. He came from the world of software. He knew that in order to strike the cord, he needed to focus on solving the key problem that wine enthusiasts had and stay laser-focused on it. That is why wanted to make sure they focus on the right problem. They asked users and three key areas kept coming up: ratings, price, wine discovery and so on. After they asked enough customers, Heini felt that the key problem people needed to solve was:
“This bottle of wine I have in front of me, is it good or is it not so good?”
Now that he knew what to work on, he need to be honest with himself and ask himself two other fundamental questions: 2) Can you or can you not solve it? 3) Are you persistent enough to not give up half-way?
Heini was confident that they could do it and made a commitment: solving that problem was going to be the sole focus on Vivino and nothing else!
Video 1: Fireside chat with CEO of Vivino, Heini Zachariassen
Step 2: Grinding is an important part of building a sustainable business
The wine market is extremely fragmented and long-tail. Vivino has information on over 10 million wines today. At the beginning they had nothing and played catch-up with what their users needed. It was overwhelming, but it was just about solving the problem for as many people they could, but they knew that it would take a while for them to have sufficient number of reviews on the platform.
Building a marketplace is twice as hard and it took a while. Heini recommends to find ways to hack into growth early on. Vivino needed to see the wine, before providing users with any information. They got as many wine labels as they could find and sent them to India. There people were manually looking at wine labels, researching information about those wines and adding as much information as possible to the app. Sometimes within minutes after a user tried to scan a wine label, they found information about that wine that a user was just searching for and shared it with him/her. When users saw the effort, this would convince them to give Vivino another shot.
They were grinding for 18 months without getting any traction. Then it slowly started to take off. The magic number was two thirds! When about 70% of Vivino scans were successful, Vivino started to see significant uptake in organic growth. Before that they were fighting for every single user.
Step 3: Build the best product, not the perfect product
They knew they were never going to have a perfect, polished product. On such a fragmented market, there would always be wines missing, etc. They made it their goal not to have a perfect product, but to have the best product. They needed to know, how many wines do they need to be relevant for most users. The number was originally estimated by Heini at 20,000 wines, but it just kept growing. Today they have information on 200,000 producers, 10 million wines and 1,3 billion photos of different wine labels in the app.
Heini was lucky that he was not a wine expert, he came from a software world. That gave him a fresh perspective and naivety. Vivino’s objective was to serve users, who were like him — wine enthusiasts, but are no wine professionals. Building a database for every single wine in the world was considered impossible by wine experts. If Heini know how complex the wine world was, he would be overwhelmed and give up.
Step 4: Build on user traction and engagement, don’t dwell on user disappointments
Many startup founders make a mistake to not want to disappoint early users. Heini has a different opinion: “if you have modest traction, don’t worry about disappointing seven users. If you are trying to improve your product and users see the progress, many of them will stay. But you need to me ok with the fact that you may also loose some.” Listening to users helped build traction, as users felt more empowered. Users were also helping Vivino understand, what wines they want to know about. Engaging users was a key element of Vivino’s strategy. Vivino noticed that 20% of wine label scans also generates a review, which was increasing engagement.
Step 5: Identify key missing pieces. The product is never finished.
Users helped identify Vivino key priorities: A) Wine rating and B) Price were elements of the product that were relatively easy to solve. The biggest headache was an element that kept coming up: C) Taste of the wine! For a while Vivino thought they can’t solve this one with an app. But they decided to try anyway and built a machine learning tool that reads all the reviews and puts together a structured description of the wine taste. It was a hit! This feature alone improve their Net Promoter Score (NPS) by 7 points.
Step 6: Fundraising when you are ready. Users will help you.
They didn’t want to wait with fundraising until they have a perfect product. They needed money to build it anyway. Heini decided that they can raise money on user traction and engagement. They knew that there is a link between engagement and willingness to buy wine. They were lucky to find a VC company that bought into their vision. Creandum, one of the best VC companies in the Nordics agreed and decided to invest. They understood how powerful and important Vivino’s user engagement was and believed in their future potential.
Step 7: Solid business model is necessary for long term success!
User traction and engagement is important, but every company needs a solid business model. Heini was very careful with Vivino’s business model. He noticed that a common mistake startups make is to having money-making limit the potential of their product or service. Vivino wanted to make sure this doesn’t happen. Their business model is fairly simple: selling wine through the app. It helps that it doesn’t stand in the way of the product. On the contrary, it improves it. Vivino needs to stay an innovative company and keep innovating. They now look at an additional solid revenue stream: sponsorships.
Logistics are a nightmare in the wine business. The product they sell is heavy, made out of glass and it brakes. Vivino has over 700 suppliers around the world today. It took 2 years to build a global supply chain. They are present in 19 markets now, selling wine through local partners.
Vivino has 50 million downloads, what makes it worth it for them is to see happy users. It already conquered its space as the market leader, being 100 times bigger than the number 2 wine app. But they have a good growth potential and could have hundreds of million of users in the near future.
Video 2: Amazon Video just released a documentary, summarising Vivino’s entrepreneurial journey and Heini’s story, called ‘Disrupting Wine’.
Bonus: Giving back in an important element of successful founders
Vivino company culture can be characterised as people who get stuff done, are entrepreneurial, metric driven, but who also have room for their private life.
An important feature of successful founders is that they are happy to give back. Heini is no exception. Thank you for that!
Heini Zachariassen has a youtube channel, where he shares tips with founders.
Who will we talk to next? We invited the Founder & CEO of Superhuman, Rahul Vohra. He is one of the pioneers of customer on-boarding, a genius way to get to know your customers, make them familiar with your product and answer their questions. This will make your customers happier and more likely to bring other new customers. No wonder Andreessen Horowitz invested in his startup.
Rahul previously founded Rapportive, the first Gmail plugin to scale to millions of users and kickstarted a whole ecosystem of email enhancements (acquired by LinkedIn). Click here for more info.
Originally published at https://www.linkedin.com.
