Startups could find far worse sources of advice than UK ‘scaleup’ MADE.COM.
MADE.COM launched in London with four founders in 2010. Six years later it has 160 employees and operates in seven countries, with a growth rate of 50 percent last year, according to cofounder Ning Li.
The company has a simple pitch. It allows people to buy attractive, niche furniture online at much lower cost than usual as goods are sourced directly from the manufacturer, thus cutting out the middle man and a great deal of expense. It’s an idea which Li says he originally devised.
“Initially when we first started, selling this sort of stuff online was pretty new. Today it’s a given,” he says.
However it hasn’t all been smooth sailing. From funding to expanding abroad, the team have had to take some significant risks.
“Companies like M&S have a lot of experience and expertise, yet when they tried to go to France they failed. It’s certainly no easier for a smaller startup,” Li says.
Despite the risks, MADE.COM had a number of advantages: the fact it is online only, can pursue an agile ‘test and see how it goes’ strategy and has a diverse, international team, according to Li.
It has now successfully broadened its reach from the UK to include Ireland, France, Italy, Germany, Belgium and the Netherlands.
One of the main barriers to expansion abroad is not language but culture, in his view. However Li believes culture is becoming increasingly homogenised among the customers MADE.COM targets.
“We target an increasingly globalised population. People who shop on MADE.COM are urban, affluent professionals who use iPhones, go to Starbucks, Zara, use Facebook and so on. Taste and cultural behaviour are getting more similar across countries. It’s great for us as it means we can sell the same products everywhere,” he says.
Barriers to ‘scaling up’
One issue MADE.COM has faced is the difficulty involved in ‘scaling up’ startups in Europe, especially compared to the US.
“VCs get a lot of value from scaling up a business rather than betting on another startup. Any successful startup has to scale up eventually,” Li says.
So why is ‘scaling up’ rarer in Europe than the US? It’s mainly down to people and mindset, according to Li.
“In the US there’s an ecosystem of companies that have grown rapidly and successfully and quickly become billion dollar businesses. People then leave a business – be it Uber, Facebook, Google – and set up their own businesses.
“In Europe we’re bound more into hiring people with existing experience in the traditional retail industry. They’re capable but they don’t’ have the growth mindset from tech startups or the scale which the US has,” he says.
Initially MADE.COM survived through a combination of the founders injecting their own funds (Li already set up and sold off one other startup called MyFab) and organic sales growth.
After two years the team decided to seek external funding, partly to help pay for the costly and extensive marketing needed to successfully expand abroad. They got £2.5 million in initial seed funding, Li says.
Then, in 2012 they raised £6 million in a Series B funding round from a combination of three sources: Level Equity, Maximus and PROfounders Capital, a venture capital firm which MADE.COM cofounder Brent Hoberman also chaired.
The next and latest funding round in July 2015 raised £38 million to help accelerate European growth. It was led by Paris-based VC fund Partech Ventures with Fidelity Investments (since renamed Eight Roads Ventures) and Level Equity also participating.
Li is particularly positive about Partech. He says partner Bruno Crémel brought “not just money to the table, but invaluable retail expertise.”
“Plus we got on along well with them and that’s important. It’s like a marriage. You want to be able to spend time together and they need to be able to challenge decisions respectfully. They were real pros,” he adds.
The main purpose for raising these funds was to try to build a consumer brand, according to Li.
“It’s quite hard to launch a consumer brand without investing significant sums into marketing. It was quite obvious when we did a business plan that we needed funding for that,” he explains.
However just because a startup needs cash does not mean they should negotiate away all their bargaining power: you should choose the investor as much as they choose you, Li advises.
“You have to choose a partner you are aligned with. A lot comes down to whether you think they will be on the same page, have a long-term view and an understanding of the business, rather than just an opportunistic investor looking to make a quick buck,” he says.
Read next: How to scale up your startup