Idea To Invalidation In < 3 Months
How it all started
Ever since I quit my full-time job in February 2020, I’ve kept an eye out for opportunities to work on new business ideas with other people. I was very vocal about this with my friends, acquaintances and mentors.
In late August 2020, an acquaintance of mine introduced me to two experienced entrepreneurs who had an idea for a marketplace in the e-commerce space. They were looking for an early collaborator to join them to validate the idea and build the business.
Here is a summary of the overall project:
Diving into a new industry I knew very little about (fashion e-commerce) sounded like a great learning opportunity for me. So, dive I did.
I spent the first few weeks doing the following activities:
- Learning about fashion, e-commerce, supply-chain and dropshipping through online research
- Connecting with and speaking to individuals in the fashion e-commerce space
- Studying the Shopify platform
- Browsing fashion e-commerce brands on Shopify
- Developing a target customer persona
- Discussing an early product concept
- Analyzing existing competitors
- Compiling a list of fashion e-commerce brands to reach out to for preliminary interviews
Once I felt that I’d performed enough resource loading (as my boyfriend likes to call it), it was time to start scheduling customer discovery interviews.
We determined that like most marketplaces, ours would be supply-constrained. So, we began by focusing on the supply (fashion e-commerce brands.)
We decided to start by targeting smaller fashion e-commerce brands since we figured they would be easier to get in touch with compared to large fashion e-commerce brands.
The Dreaded Cold Outreach
Both my partners had a few contacts in the fashion e-commerce industry that we reached out to but we needed to find many more customers to interview. I spent a month or so trying to book meetings with additional target customers through different cold outreach techniques. Being new to the industry, it took a few attempts (eight to be exact) to figure out how to get in front of these customers.
Attempt #1: A very short email
To start, I performed a Google search for the term “women’s fashion powered by Shopify”, which returned a list of fashion e-commerce brands in North America that were on the Shopify platform. I emailed them using the contact information provided on their website.
I had recently read To Get More Replies, Say Less by Greg Kogan in which he found that cutting down the length of an email by 90% resulted in a 700% increase in reply rates. I decided to give this technique a shot and fired off a few extremely short emails.
Out of about 20 emails, I got one confused response. No dice.
My emails were probably a little too short and didn’t provide the necessary context to the recipients. Greg Kogan’s experiment was specific to a company’s welcome email, in which case the context of the email had already been established since the recipients of the email had already signed up for the company’s services and were well aware of what the company did.
Attempt #2: Small fashion e-commerce brands on LinkedIn
Next, I decided to target smaller fashion e-commerce brand owners on LinkedIn. However, many of them either had no LinkedIn presence or were sporting what looked like very inactive LinkedIn profiles.
I sent a few connection requests but got no responses.
Attempt #3: Large fashion e-commerce brands on LinkedIn (the cookie angle)
While searching for owners of smaller fashion e-commerce brands, I noticed that individuals working at large fashion e-commerce brands did live on LinkedIn. Some of them were even quite active. I decided to be bold and target them.
While brushing up on LinkedIn prospecting techniques, I came across A How-To Guide: LinkedIn Lead Generation by Lead Cookie. On page 14 of their free ebook, they recommend adding a short non-salesy note to each LinkedIn connection request to maximize the chances of prospects accepting the connection requests.
Since I was still in discovery mode and didn’t even have a product built that I could pitch, this would be a good way to start some conversations.
I reached out to Owners, Founders, CEOs, Sales leaders and E-commerce leaders at large fashion e-commerce brands in North America and included the following note in each connection request:
Approximately 20% of my connection requests were accepted so I was able to start a few conversations. I didn’t want to come off to sales-y so I kept my questions quite general. Unfortunately most of my conversations fizzled out and I wasn’t able to book any meetings.
I suspect that the general questions did not pique enough interest and instead left my prospects wondering what it was that I wanted from them (if anything.) How awkward.
With so few connection requests accepted, I wondered how many of these prospects regularly used LinkedIn and whether it would be better to target them over email.
Attempt #4: Back to email cold outreach
While doing some research into email prospecting, I discovered a sales automation tool called Seamless.AI. The free version has access to a Chrome extension that let me easily find the email of any individual on LinkedIn:
I found the emails of another 50 Owners, Founders, CEOs, Sales leaders and E-commerce leaders at larger fashion e-commerce brands in North America. I researched every prospect and brand for five to fifteen minutes before sending semi-personalized emails. I also installed a free trial of Yesware to track my email open rates and clicks.
My open rates were around 20% (which is quite low) and I didn’t get a single reply. How frustrating!
Attempt #5: A field trip
One sunny Friday in October, I was tired of sitting behind a computer screen so I put on my backpack and went on a field trip to W 4th Ave in Kitsilano in Vancouver (a small shopping district close to my apartment.) I walked into 12 stores and spoke with the store owners and floor staff at brands like Ray Rickburn, The Latest Scoop, Reigning Champ and Swimco.
A young gentleman at Reigning Champ kindly referred me to someone in their main office and even gave me their email address. I had been very transparent about what I was trying to do so I think he genuinely wanted to help me out.
The field trip gave me good background information on the fashion industry in general and a better idea of the types of roles and departments I should be reaching out to.
Attempt #6: Discovering the wholesale world
In late October, a woman I co-mentor with at entrepreneurship@UBC took me to Fashion Exchange Vancouver. She had a lot of wholesale contacts there from having run a fashion accessories business in the past.
Due to COVID-19, most trade-shows were cancelled this year. So these wholesale distributors were struggling to find new customers and the future of their business was in question. When I told them about what I was working on, they said they were willing to start dropshipping if it meant they could get more customers.
Unfortunately, they were not my target customers. The platform we were looking to build was targeted at fashion brands that were already selling direct-to-consumer on the Shopify platform. I felt sad that I couldn’t help them get more business.
Overall, my visit to Fashion Exchange Vancouver taught me even more about the fashion industry and the problems adjacent to the one I was trying to solve. I also made some new connections.
Attempt #7: Niching down to baby products
In mid-October, one of my partners identified an independent online retailer that was interested in sourcing quality baby products using our platform. If we could find a few fashion e-commerce brands in the baby category that were willing to do business with this independent online retailer through our platform, we had the start of a business.
We quickly pivoted our approach and started focusing on the baby category as a niche.
By now, we had accepted the fact that getting early customers was a numbers-game. We made it our goal to reach out to 300+ fashion e-commerce brands in the baby category.
Two full days of scouring the internet for baby brands on Shopify got me a list of just 100 leads. Within a few hours, I had emailed all 100 leads.
I couldn’t bear the idea of spending another several days generating leads again when I had other important tasks on my plate like crafting compelling email copy, refining messaging and competitive analysis.
Attempt #8: Outsourcing lead generation and the numbers-game (success!)
I created a profile on Upwork and hired a freelancer to provide me with a list of 500 North American baby brands on the Shopify platform, complete with social links and contact information. Two days later, I had 500 new leads. It was definitely worth it in my opinion.
While doing more research into email prospecting, I came across the concept of email drip campaigns. Apparently they are common practice in sales and tend to work better than one-time emails.
So I downloaded an email automation tool called Mixmax and set up a few different email sequences for my new leads. I paid for the tool in order to get access to the ability to personalize emails for every prospect.
My open rates jumped up to 40–60%, especially for the second email in the sequence. I finally got some replies and managed to book meetings with target customers!
I think the following factors contributed to my success:
- I was more familiar with the industry’s language at this point and likely came across as more credible in my emails.
- I was simply reaching out to more leads (it’s a numbers-game.)
- I was using an email sequence (the second email in a drip sequence often earns a higher reply rate than the very first email.)
However, solving one problem just opened the door to more problems. By now, we were in late October.
Finally, some customer interviews
It’s true, I was finally booking calls with customers. But I wasn’t really liking what I was hearing. Below were my findings:
Only very small brands were interested
The fashion e-commerce brands that had shown interest were typically very small in size. They only had about $100k-$500k in annual revenue and 500–2000 followers on Instagram. We needed at least a few brands that would be able to bring in more volume to the platform.
They were not aware of existing alternatives
Many of these very small fashion e-commerce brands were not aware of existing players in the market like Modalyst, Spocket, and BrandBoom. Perhaps increasing reach for their products through independent online retailers wasn’t a significant pain for them since they were not actively searching for a solution.
Medium-sized brands weren’t desperate to increase reach for their products
The medium-sized brands didn’t seem to have a pain around increasing reach for their products. They already had additional stockists for their products and were happily paying sales reps a 10–15% commission to find new stockists.
Brands were not that willing to dropship on behalf of independent retailers
Very few brands were willing to dropship on behalf of independent retailers for two reasons.
First, the extra labour involved in packing and shipping individual orders for dropshipping was expensive and a hassle. Wholesale was a more stable and reliable channel for them as it didn’t require them to change their existing process and they got paid upfront for large orders.
Second, dropshipping meant losing control of the end-customer experience because they had to rely on independent online retailers for it. Some were willing to dropship but only for large retailers like Wayfair or Target because of the massive distribution opportunities and the fact that they could trust them with good customer experience.
Medium to large-sized brands were already on Faire and really liked it
I learned that many medium to large-sized brands were already on a wholesale platform called Faire that gave them access to 100,000 independent retailers. The platform took a 15–28% commission, which was worth the increased distribution and spectacular UX according to the brands I interviewed.
We realized that what we had initially envisioned our platform to be was actually a dropshipping version of the Faire platform: a platform for quality fashion and lifestyle brands with exceptional UX and an AI-powered algorithm that displays relevant products to users.
The brands interested were “willing to give it a try”
That’s the response that I got from the very few brands that were interested in our solution. They just saw our solution as another channel that might bring in some incremental revenue. But for most brands, this additional channel was not worth the risk and hassle.
None of this was very motivating feedback.
What’s more, out of the 500 leads that I had sent various email drip campaigns to, less than 1% were interested in our solution.
This was data in itself that suggested the concept may not have been that enticing.
Going after the demand-side
In late October, we had also decided to run a small experiment to test the demand-side of the market. Were any independent Shopify retailers willing to pay a premium to get access to quality fashion products to dropship from their store?
I hired a freelancer on Fiverr to build a landing page with a sign-up form in Unbounce and optimize it for conversions. My partner then got an offshore team to run some Google Ads to the landing page.
Here were the findings:
- The conversion rate was 6% (very low.)
- Many signups were from individuals who didn’t yet have a Shopify store and were looking into creating one.
- Those that had existing Shopify stores did not have a lot of traffic.
- Only one customer was willing to pay a premium ($40-$80/month) for access to quality fashion products, while the rest were only willing to pay around $20/month.
It didn’t sound like these types of customers would be able to bring in the transaction volume that would be required to get critical mass for our platform. And with such a low conversion rate, the customer acquisition cost (CAC) through this channel just didn’t make sense.
As a last attempt to find more qualified leads, I sent an email sequence to around 100 independent Shopify retailers in the fashion category.
The response rate was less than 5% and an even smaller percentage converted. I felt defeated.
My weekend of self-doubt
During the weekend of Friday, November 13th, I decided to take a break from execution and think objectively about the next steps for this business idea.
I wondered whether my cold outreach techniques had not been good enough and that’s why the response rates were so low.
Was there a better way to articulate the benefits of the platform?
Maybe I hadn’t spent enough time trying to understand my target customers and what their challenges were.
Or the timing of our outreach was not ideal since the U.S. elections were ongoing and both Remembrance Day and Black Friday were fast-approaching.
Was there something worth exploring further that I had somehow missed?
Making the Call
That Sunday night, I arrived at my conclusion:
I had not identified a painful enough problem to solve or uncovered new market demand that would warrant pursuing this business idea any further.
In my eyes, the only competitive edge that may have enabled us to play in the market was already held by Faire.
If there was indeed an opportunity to pursue this business idea any further, I wasn’t the right person for it because I could not see it and by this point by heart was no longer in it.
That following Thursday, I jumped on a call with my two partners and explained my stance. It turned out that they had arrived at the same conclusion and we agreed to end the project.
The fact that we were all on the same page had further reinforced my conclusion.
Lessons Learned
1. It can take many attempts to get in front of your customers. Keep iterating.
It took me eight attempts before I was able to book calls with my target customers. Your first attempt will likely fail and it’s important that you keep iterating. Try different cold outreach techniques, different mediums, different platforms and even different customer segments. Find out what works and then double down on that.
2. Talk to as many people as possible about your product idea.
This forces you to repeatedly articulate your value proposition and identify the messaging that resonates. Pay attention to the questions people ask and the parts of your idea they struggle to understand. This will help you further refine your pitch.
3. Expert opinion can be useful, but don’t count on it working for your situation.
I sought advice from many cold outreach and sales experts and got a lot of valuable information, but not all of it worked for me. The only way to know whether something is going to work for your situation is to try it. No expert can predict what’s going to work for your particular situation.
4. Avoid paying for things that you can do yourself, at least until you’ve proven that there’s a market need.
In retrospect, I wish we had stuck to the logo, pitch decks and simple landing page that I’d put together myself instead of hiring a designer. It’s not necessary until you’ve proven that there’s market demand. Until then, you can easily create your own artifacts using tools like Canva and Carrd.
5. A lack of response and enthusiasm from target customers is data in itself.
If it’s proving difficult to get customers engaged and excited about what you’re working on despite trying different angles, maybe there’s just no market demand. Learn to read the signs.
6. Working on a product idea where you’re the customer is just so much easier.
Since I’m not an owner of a fashion e-commerce brand, I had to spend a lot of time trying to get into the head of my target customers. If I had been the target customer, most of that time could have been spent moving the business idea forward. Startups are hard as they are. Working on a product idea for which you’re the customer can make things a lot easier.
7. There’s no silver bullet to building a business.
I thought that working on a business idea that originated from two experienced entrepreneurs would somehow better guarantee success. This is wrong. There are no shortcuts to building a successful business. All ideas can fail.
Closing thoughts on the project
Initially after ending the project, I felt a little disappointed. I felt like I’d failed or something. But as I shared the news with my friends, acquaintances and mentors, I discovered that what I had done was actually a big success.
After committing to something for three months, I had been able to walk away after objectively determining that it was not worth pursuing any further.
It is in fact an accomplishment. Although I do think that it was a little easier given that it wasn’t my business idea to begin with. When it’s our own idea, it’s a lot harder to walk away.
What’s next?
Taking from my lessons learned, I’m currently working on a product idea that is my own idea, that I’m the customer for and that is in a space that I’m a subject matter expert in. I feel more passionate about this product idea and am excited to see where it takes me.
👉 You can follow me on LinkedIn or Twitter as I continue to share my entrepreneurial journey transparently.
Originally published at https://www.lenasesardic.com on December 10, 2020.
