During our planning stage, we argued long and hard about having a physical retail outlet, that we could expand upon as the website grew. We finally came to the conclusion that it made the best strategic sense to launch a physical shop alongside the website and then branch out into further fixed locations as the business grew.
To us, it makes perfect sense to support a growing number of retail outlets with a national online brand. Much more sense, in fact, that relying on a local shop to drive a national web brand, as so many ‘traditional’ retailers have done over the last few years.
Added to this, staff working in the phyiscal shops can contribute content to the website, enhancing the offering and further integrating them into the company. If a proportion of the overall companies profitability is re-invested in the physical stores, in terms of brand advertising and higher than average salaries, you end up with a fairly neat solution to problems like staff turnover, vertical promotion, etc.
Opinion on this strategy has been divided with most of the people we’ve spoken to. I’d love to hear what others think about this. I personally think that this model will be adopted more and more as the online / offline markets mature.
You have heard from James, so I reckon it’s time to introduce myself. I guess you could describe me as one of the outdoor bods :) I’m going to be helping James and the rest of the toggers by telling them about what clothes and gear I use whilst strolling & camping in the hills of Britain. I’ll also be reporting back to this blog the walks and trips I take along with my thoughts on the gear I am using.
I was fairly nervous reading the post on how James came to decide on selling outdoor clothes, as I figured he might blame it all on me if anything went wrong! I was also pretty pleased though as nothing else has given me greater pleasure in my life than hill walking and scrambling. I have been passionate about the outdoors since just after University. I started to head outdoors again after getting tired of city living and began recalling fond memories of my parents taking me for for walks on Dartmoor as a kid. I’d describe myself as a pretty novice scrambler and relatively experienced hillwalker. I try to spend as much time as possible in the hills that living and working in London will allow me to.
All in all I am really excited by the prototypes of the website I have seen, and I am blown away but how user friendly and good it looks. I also find it auspicious that the year webtogs launches is the 75th anniversary of the trespass on Kinder which has had a massive impact on how we access moor and hill land in the UK. As a city dweller, I find great peace and tranquility in the wild places of our land. Roy Hattersleys article on the trespass points out that the original protesters were working class folks from the Mills of Sheffield. It worries me that so many people in inner cities today see the outdoors and our countryside as something that does not belong to them, but rather to other people. Just as the original protesters changed how we view access to land, so I hope todays city dwellers will see the benefits of getting out more in to our beautiful countryside, and what it can do for them.
Anyhow, enough babbling and time for me to dry me tent out from last weekend, more about that another time though…..
Lots of great blogs and websites are out there already, covering the capital raising exercise each new company has to go through, so I wonâ€™t go into this in minute detail. However, for what itâ€™s worth, hereâ€™s my experience of raising money (on previous startups).
There are several ways you can do it, the main ones being: Private money, Banks, Angel Investors, Venture Capital and Private Equity.
This is obviously great, if youâ€™re in the situation where you can go down this route. Either your own cash, or a good friend or relative. My only advice here, is make sure you have a good written agreement, if the funds are being put in by relatives or friends. Itâ€™s tempting to wing it, but this has led to big problems later on for me in the past.
Banks in this country donâ€™t tend to make speculative investments in startups, unless there are exceptional circumstances surrounding the business or team. Banks will lend startups on a secured basis. This tends to mean you provide shares, bonds, or a house as security. If you donâ€™t have security, itâ€™s worth looking at the Small Firms Loan Guarantee scheme, which is effectively a DTI back loan from the bank. The banks all subscribe, but donâ€™t tend to tell you about this, as the government fixes the interest they can charge!, although itâ€™s been a while since Iâ€™ve looked into this.
Iâ€™ve used secured facilities with the banks for just about every business Iâ€™ve been involved with. The biggest trick to getting banks on your side is to keep them in the loop and make sure they realise you are good at running the cash flow of your business (more on this in a later post).
Iâ€™ve been very lucky on this front, and had a brilliant relationship with several private investors in the past. So much of this is about the chemistry between you and the investor. Itâ€™s very tempting to take money from the first person that offers it, but this can lead to big problems down the line. My advice:
- Never give control (i.e more than 50%) of the equity, unless you have no other choice
- Try and pick an investor who can help the business in other ways (contacts, advice, experience, etc)
- Be 100% sure that you know your plan inside out (twice!) before you approach anyone, you should be able to pull any figure they want from memory.
- Be very clear about how they will make a return on their investment. As an average, most private investors want a 10x return on their money.
- Be as clear as you can about the risks to their investment and discuss these at the outset.
- Try very hard to ensure that the investor canâ€™t sell their equity to a 3rd party, unless itâ€™s an agreed exit strategy.
- Donâ€™t over exaggerate your performance figures. It will come back to bite you.
My first business venture was backed by a private investor. It was a total disaster and nearly wiped me out completely. My investor lost his money. But, Iâ€™d been honest all the way through and kept him in the loop, asking his advice on various issues that came up. As a result, he invested money in my next business.
Venture Capital & Private Equity
Iâ€™ve not had direct experience of this. VC firms tend to look for technology companies that will carve out a new niche, via new technology that can be protected.
They invest in management teams as much as the idea itself and tend to take a large percentage of the company for their involvement. Most VC firms tend to have a minimum investment criteria of around Â£1M or higher. There is a growing trend towards funds that specialise in smaller investments for startup or very early stage companies, which I think is great. I canâ€™t comment on strategies for getting venture funding, as Iâ€™ve never done it. Private Equity is largely the same scenario, often for larger sums again.
In our case, the webtogs project was being 100% privately funded. The biggest decision was how much of a gamble do we take. After much thought and discussion, we decided to expand the launch offering into camping and walking. We set the budget for Webtogs at Â£100,000.00, with the possibility of further investment, once the site was live and sales were coming in.
Having decided that Mattâ€™s :) idea to launch with Equestrian products was flawed, we started running through our options.
The basic plan hadnâ€™t changed, we wanted to scale the site up to ultimately cover everything outdoors and adventure sports related. What we didnâ€™t have was an area to launch the site in.
It was never going to be practical to cover everything on day one. For one thing, we couldnâ€™t afford to buy that amount of stock in one go, for another, we needed to have a resident â€˜expertâ€™ for each discipline, as in our mind there’s nothing worse than a company (on or offline) that knows next to nothing about what they sell.
As a team, we all spend time outdoors. Each of us had ideas about different areas to launch in, including skiing, climbing, diving (scuba!), biking, etc. A friend of ours, Gareth, spends most of his free time walking all over Britain and wild camping whenever he can. I was chatting to him about our dilemma, and he couldnâ€™t understand why we didnâ€™t start with walking and camping.
Weâ€™d discussed this in the past and dismissed it as it was too broad a range of gear to stock financially, and we didnâ€™t have the depth of knowledge on tents, packs, etc. that we needed.
Gareth sent me a mail the next day, effectively saying: â€œIf you find the extra cash to launch with a broader range than the original plan, Iâ€™ll be the expert.â€
I did some research on the general outdoor market, looking at major players like Blacks and Cotswold Outdoor, as well as getting hold of industry data, online research into outdoor clothing and equipment and online shopping trends for the sector.
With a market size of just over Â£1bn in the UK and year on year growth of around 6%, it looked perfect. Added to this, a big part of the outdoor gear market is clothing and footwear, which suited our previous research brilliantly. Market segmentation was also good, with lots of smaller players (under Â£20m turnover) and only one major player (over Â£100m).
The problem now was cashâ€¦ How much of a risk was I willing to take.
So, Webtogs would take over the world, one outdoor activity at a time, starting with horses (or equestrian wear, to be more accurate). We looked at a few equestrian websites, talked at length to my wife Mandy, as the resident expert and I even did a mock-up design:
My mock-up proved 2 things; 1. Horses were not going to be easy, layout wise and 2. I should never be let near a copy of Photoshop again!
As luck would have it, the largest indoor equestrian clothing and gear show, Beta International, was only a week away, at the NEC in Birmingham. Alex was already going, as in exhibition hall B, they had a big shoe show on. We would go to the NEC, get the Webtogs brand out a bit and talk to suppliers about stocking their kit.
As the show approached, I did some more research, discovering lots of relevant stuff about the equestrian market, including its lack of size (about Â£22m in the uk), poor demographics for Internet usage, highly specialist nature and that itâ€™s dominated by a small number of well respected retailers. I spoke to several active people in the industry, who all told me, for different reasons, that we were nuts!
Matt (bless him), was never really behind the idea, and came up with ever inventive ways to make fun of the whole situation, including my favourite, the â€˜togShitâ€™ logo, that appeared on my desktop!
My trepidation grew, but I thought weâ€™d do the show and see what happens. Proudly sporting my â€˜Webtogsâ€™ badge, I walked up to a major equestrian brand and started chatting to the rep. The conversation went something like this:
rep: â€œWebtogs, sounds cool. Do you have shop?â€
me: â€œNot yet, weâ€™re building it. Should be finished in the summer next yearâ€
rep: â€œAh, youâ€™re building a shop from scratch. Whereabouts?â€
me: (starting to get confused) â€œer, on the Internet.â€
rep: â€œI see, do you have an actual S H O Pâ€
me: â€œas in high street?â€
me: â€œNo, weâ€™re planning to launch the website first and thenâ€¦â€
rep: â€œWe donâ€™t supply Internet companies, ever. Under any circumstancesâ€
This trend continued, unabated, throughout the day. On the odd occasion I got far enough to ask why, â€œcompany policyâ€ seemed the normal answer. To be fair, a few of the players were cool with it, but most of the â€˜must haveâ€™ equestrian brands couldnâ€™t get rid of us fast enough. The fact that we had a definate strategy to open fixed retail stores alongside the website seemed to make little difference.
Mattâ€™s togShit logo was beginning to appear before my eyesâ€¦
The naming process for us was long and painful. Right from the outset, we decided that the name must have a complete set of free domain names, or ones we could buy cheaply. Matt wrote a quick script that took our text files and checked them against the registry, saving us a lot of time. In addition to this, we had the following thoughts:
- Must be generic enough to allow later expansion
- Should avoid terms like â€˜netâ€™ or â€˜webâ€™ !!
- Must be short, i.e. under 8 characters
- Should be â€˜catchyâ€™ and easily remembered
- Easy to spell
We then found a tool on the net, called nameRazor, which was actually quite useful. It didnâ€™t come up with the name in the end, but it definitely helped us get there.
For 5 days or so, we would leave work and come back the next day with at least five new names each. Most of them were total rubbish, but somewhere in the middle of this, we hit upon â€˜togsâ€™, as in â€˜clothesâ€™ or â€˜gearâ€™. This really stuck for some reason, and whenever we tried to leave it behind, it would return into the mix.
In the end, after lots of different plays on â€˜togsâ€™ we agreed on â€˜webtogsâ€™, we had originally stipulated that we didnâ€™t want any Internet terms in the name, but this one stuck!
Some of the others that lasted longer than 10 seconds: outsidekit, countrysports, tog360, outsidein, outdoornet, getoutdoors, getout