This blog first appeared as Steve Wunker’s piece for Forbes
By Steve Wunker
This post is written by my colleague at New Markets Advisors, David Farber:
TechCrunch recently hosted its Boston-based Pitchoff to give eight local startups a chance to compete for national recognition. From the sea of countless applications, these eight startups were chosen as the most promising new ventures that Boston has to offer, with each being given 60 seconds to pitch to a panel of judges. Perhaps surprisingly, the panel of tech journalists and venture capitalists ultimately chose Clique Chic – a members-only site that gives shoppers access to designer clothes and a personal stylist – to move on to the final Disrupt NY competition in May.
So how did this fashion eTailer win out? After all, the competition was fierce, featuring health-focused wearables, gamified education products, social networking apps, and even a company (ORIG3N) that promised to turn a spoonful of blood into a library of cells that would allow pharma and biotech companies to test new drugs and move deeper into the realm of personalized medicine. Well, in part, venture capitalists are known to bet on the person, not the product (though Clique Chic arguably boasts both). With fashion experience from her days at Louis Vuitton and Vogue, online retail experience from her days at eBay, and an MBA to round out the package, Clique Chic’s founder certainly proved that she and the startup have a right to compete on a national stage.
In terms of the product, Clique Chic is offering the fast, personalized service that the company’s target demographic has come to expect in today’s on-demand economy. Moreover, the startup competes in a fragmented online softgoods market where powerhouses such as Amazon have yet to establish themselves as de facto leaders.
But surely Boston’s startup scene offers a host of promising new technologies and credible founders. To see what sets this startup apart, let’s look at a few other areas where Clique Chic stood strong while its competitors slipped.
Avoiding high switching costs. While Clique Chic may change the way in which consumers shop for clothes, it doesn’t seek to change what they’re shopping for. At the end of the day, the startup still helps shoppers look sharp and fashionable in the same way that an upscale brick-and-mortar retailer would. With 24-hour concierge service, next-day shipping, and free shipping and returns, the service alleviates many of the perceived hassles that might give consumers a reason to hesitate when deciding to shift to online clothes shopping.
By contrast, Glyb – a Snapchat-like app that deletes your messages when you leave a location – was criticized for making it hard for users to get started. Messaging apps only reach their full potential when they win over a critical mass from a user’s social group. With the startup duplicating features from many popular existing apps – such as Snapchat, Yik Yak, Facebook Messenger, and iMessage – there was concern that it would be difficult for users to interact with friends instead of just strangers. Furthermore, some were worried that users would be bombarded with offensive messages and images while trying to take advantage of the app’s benefits. Although it’s helpful to give consumers something they’re familiar with, it’s also important to give them a hassle-free and compelling reason to switch.
Broadening a niche market. Even though Clique Chic is targeted at upscale female shoppers, the founder highlighted potential for expansion. In particular, she noted an opportunity to appeal to men looking for gifts for their girlfriends or wives. Additionally, the site could eventually expand down market by finding ways to offer lower-cost access to personalized styles and fashionable products, employing models used by other “high-quality, low-cost” brands, such as Target and Trader Joe’s. On the other hand, Digit – a service that extracts raw data from images of charts – designed a great product for small or medium-sized consulting firms, but struggled to articulate how it might increase sales beyond its initial market. While footholds are important for gaining traction, VCs need to be able to see the potential for fast growth.
Satisfying true jobs to be done. Clique Chic clearly satisfies a number of jobs that consumers are trying to get done in their lives. In particular, the service allows consumers to express their individuality and impress their peers or suitors. At the same time, Dynometrics – a startup building a wearable optical lactate meter – demonstrated an ability to ease the pain associated with measuring lactate levels, but struggled to answer the judges’ questions about why athletes would want to do so. For example, the Dynometrics site highlights that the wearable does not require blood to be drawn, works with every skin type, and delivers measurements in real time. It does not, however, explain why athletes need information about their lactate levels to improve their performance. In a world where so many new products fail, it’s important to recognize that those that succeed do so because they satisfy – and articulate how they satisfy – the root tasks that people are trying to accomplish.
Building a business model, not an exit plan. The points above clearly demonstrate that Clique Chic had given serious thought to the different components of its business model. Another promising contender, Lettuce, may have had judges concerned that the founders were focused too heavily on developing an exit plan. Lettuce – a Tinder-style app for finding the restaurant you want – was voted as the audience’s favorite startup of the night. At the same time, one of the founders noted that the startup was heavily reliant on data from Foursquare and might ultimately just be an add-on to Foursquare’s product line. This likely caused the judges to question the startup’s ability to differentiate itself and succeed over the long term.
TechCrunch’s startup competition gave this group of promising contenders an opportunity to share their vision on a big stage. And while many of these startups may go on to recognize much success, only Clique Chic will be making the next step in New York in May. Clique Chic showed us that winning in the eyes of a VC means not just having a great new solution, but being able to quickly and succinctly articulate how you can win on a few key dimensions. The lessons we get from Clique Chic – including finding low-competition spaces to satisfy latent needs, lowering obstacles to buying and using the solution, and creating a plan for sustainable growth – should act as sound advice for startups, as well as for established businesses looking to venture into new adjacencies. We wish the best of luck to the startup community and those who participated in the TechCrunch event.
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