The simplest of ideas has gone from start to $1B in 5 years. This at a time when e-commerce has been going through ups and downs.
E-commerce is one of our three focus areas at SurePath. So, we have followed this company with interest. Here are my top 7 lessons from this runaway success. Some of them are counter to prevailing investor wisdom and how to win in e-ecommerce.
1. Start with a simple, killer value proposition
Razor blades delivered to your door every month for $1. It doesn’t get simpler than that. As a guy, I get it. When I first saw their cheeky intro video I wanted to sign up immediately (of course, they didn’t ship to Canada). Buying razor blades the old school way is a rip off. DSC knew that and exploited it.
2. Your business need not be defensible as long as it’s scaling like c#$p
Anyone with access to supply, a website and some moxy could have started this business. Once the idea was validated, anyone (including incumbents – if they were willing to disrupt their existing ridiculously high margin business), could have entered the market.
Great execution fueled by strong demand kept DSC in the lead. Traction forgives all sins – including the complete and utter lack of barriers to entry for competition (apparently).
3. Yes, you can compete with Amazon
Conventional wisdom says it’s a bad idea to compete with Amazon. Most of the time that’s true. Amazon sells blades along with tons of other consumer packaged goods. Yet, that didn’t bother DSC one bit.
4. E-commerce is a business of scale
When you operate on low margins (generally the case for resale of 3rd party goods, especially so for basic consumer goods), and you need to find customers online – you need lots of customers to make the math work. DSC raised $160M and scaled to 120 employees on its way to $1B.
5. Technology is everywhere. That means buyers can come from anywhere
Unilever was founded in 1929. It has no e-commerce presence and wasn’t even in this product category. Boom! they put down $1B. This just shows the ability of new businesses and business models to completely disrupt old school incubments. They old folks know this. Expect to see them as more frequent buyers.
6. It is possible to get premium valuations in e-commerce
In Mark Suster’s state of venture capital presentation, ecom companies were trading at a median 2.4x revenue. DSC pulled of an estimated 4.2x forward revenue in this sale.
7. While premium outcomes are possible, sell before the decline
There are many, many examples of once high-flying commerce companies that bit the dust. Anyone remember bluefly? Still around but got recapped for pennies on the dollar.
We will never know what would have happened if DSC kept going alone. But my sense is they absolutely did the right thing selling now.