I scaled my startup from bootstrapped to venture backed. I'm the founder of Kids on 45th – Elise WorthyFeatured

Hi, I’m Elise Worthy, Founder of Kids on 45th, where we sell boxes of nearly new kids clothes priced at 70-90% less than retail (cheaper than Goodwill and Walmart)Just over a year ago, I launched out of my local children’s consignment store with the goal of helping parents conveniently get clothes on their kids without having to spend time shopping around, and at a price that is truly affordable to the average U.S. family (average price per item is $3.29). To date, we’ve processed over a half-million garments, shipped boxes to every U.S. state and have raised $3.3 Million to continue growing our operations.Previously, I founded Seattle’s Ada Developers Academy, an intensive year-long software developer training program exclusively for women. The Academy is still running today and has graduated 250 women into careers in software. Before that, I worked in software and marketing jobs at tech companies like LivingSocial and Amazon.Ask me anything about women in software, ecommerce, the Seattle startup community, scaling a lifestyle business into a venture-scale startup, the clothing-resale industry, and balancing founder life and family life.
Thanks so much for joining us, Elise!Elise will be answering your questions this Thursday, so please post them before then. She may not have time to answer every question, so please upvote the ones you're most interested in having her answer.
Thank you @cadran! Appreciate all your work with Elpha and excited to answer questions.
How did you know to go from bootstrap to VC? And why not Non-Profit?
That’s a great question. After running the Seattle store for 6 months, I knew I wasn’t going to be able to finance the business on my credit cards much longer so going further bootstrapping was out. I have two small kids so bootstrapping a business on our family savings beyond the initial stage was too big of a risk for me (however I am CRAZY impressed by those who choose to do that). Having already founded a nonprofit at Ada Developers Academy, I saw some of the limitations of the nonprofit business structure that inhibited the growth and progression of the organization. I knew that while I’m a mission-driven person to the core, I didn’t want to have Kids on 45th limited by the financial and regulatory aspects of a nonprofit - so that’s why Kids on 45th is for-profit. I have never regretted that decision. Now that I've done both, I would encourage any new founders to evaluate whether for-profit is a better option for their idea - it just gives you more options in the long run, and you don't have to sacrifice your values if they're important to you.
Love what you're doing! Thanks for doing this! How did you think about customer acquisition at the earliest stages of growing Kids on 45th?
This is an embarrassing admission as a marketer, but we really built the business on one Facebook ad. It was done in one take in the store before opening time; a time lapse of me unpacking a box. I hadn’t even showered, it it has been viewed over a million times - whoops messy bun. We didn’t work on diverse customer acquisition early on because the ad just *worked* (thankfully) and we needed to focus on other things like ops and supply. That being said, we were intent on understanding who our purchasers were (and, more importantly, who they were not) and after purchase would reach out to customers to learn more about them and their families to help refine the product.
Love this! Now I’m dying to see this time lapse!!
What was your motivation for starting kids of 45th and ultimately leaving Ada Developers Academy? With regard to bootstrap to venture, what was the most surprising change you had to make in your company operations when switching?
I love Ada Developers Academy and am so proud of being involved in the inception of such an important organization that has continued to grow since my departure. The team made the decision early on that we’d be able to serve our graduates best as a nonprofit. It allowed us to partner with the likes of Microsoft, Expedia, and Amazon to help fund or students’ education and career transition, which has been so valuable. Ultimately, I moved on because I missed the startup/tech side - running a nonprofit is a very different skillset, and we found an amazing Executive Director to take the reins when the startup mode had passed. After I left Ada, I did some contracting and then found Kids on 45th (see background in my first answer above :) ). The biggest change we made operationally was the realization that we couldn’t replicate the classic consignment model online (take in clothes from customer, then sell to another customer and share in profit) because the supply and demand were too difficult to match up. We ended up completely shifting to finding our own supply through partners and then efficiently sort through them and send them off to our customer’s doorstep.
Thanks so much for replying, I really appreciate your reason for leaving Ada and understand your want to stay in the start up/tech world!
What do you wish you'd known when you were in the early stages of your companies, prior to having consistent-ish revenue?
I met with one VC before we had really launched, and he gave advice that I wish every early founder got: you must prove traction. An idea is just an idea until it’s been validated by its potential customers, so the best thing to do is get something, _anything_ out there, and start getting customers to buy it, give feedback on it, and shape its course. Don’t spend time perfecting a product before it had been handled liberally by the people who would buy it - if *you* are the target customer, you only have an audience of one.
Hey Elsie, thank you for doing this and congratulations on the success🥂I have a couple of questions: 1. Who mentored you and how did you approach him/her?2. What do you wish you'd known things about marketing, negotiation, and the right way to approach the investors in your early days of business?3. Last, if I may ask, things you were cautious about spending on (personal/business) while bootstrapping.
1. Who mentored you and how did you approach him/her?I had never had a ‘real’ mentor before my lead investor Maveron (who is amazing). I have had a lot of champions (people that held the door open for opportunities) and I think finding those people as you go along in your career are important. The common thing between my best champions has been that they took a risk on me - helping me into a position that would have otherwise been out of reach. They may not have time or interest in grabbing coffee regularly, but they are senior people who earnestly help others, with no personal gain needed. These people typically have track records of helping so get to know people that have opened doors for others - and then ask for help. 2. What do you wish you'd known things about marketing, negotiation, and the right way to approach the investors in your early days of business?Marketing: it is *always* about the value proposition. Be able to articulate a strong value proposition in 1 sentence. Negotiation: I think about what the relationship is going to be afterward. Is it someone you’re going to work with for a long time? If so, be firm on your needs so you don’t seem like a pushover but also don’t be a jerk for the sake of getting everything your way. Approaching investors: My style is to always look for the best person to work with, then work on getting to know them until they want to work with me. I don’t like doing a high volume of pitches to investors that won’t have much interest or experience in my business. I’d rather save my efforts in working with people who will love the business and will be a benefit.3. Last, if I may ask, things you were cautious about spending on (personal/business) while bootstrapping.YES! I am *so* cheap. I still am, even now that we have venture funding.
Thank you so much for answering, Elise! :)
Thank you for sharing! Do you have to be profitable? If so, how do you manage that?
Venture-backed startups in general are not meant to be profitable early on - they take on capital to grow the business to be large first, and then ultimately sustainable. We are very tight on our financial metrics, however, and manage the money we spend closely.
Can you tell us a bit about how you marketed and grew your business in the early days? How did you create brand awareness and build a community? Did you use Facebook, Twitter, Ads, SEO, blogs, etc?
Our main ad channel in the early days was Facebook ads. We shot one time lapse video, and that became our marketing focus because it (very luckily) worked. Aside from driving our earliest customers, our early success with Facebook ads also showed us that there was a place for a product like ours - that moms were looking for another way to buy affordable clothes that let them get a range of brands and spared them from the hassle of shopping clearance racks, hunting down online sales and sifting through thrift racks.We still advertise on Facebook and digital channels, but we also see a lot of word of mouth growth which is great, and necessary for a business at scale.
Via Twitter:How do you project revenue numbers 5 years ahead of time when you're unsure of the business model? How do you convince investors about the "scale" potential of the idea?
I used a similar public company’s IPO data to benchmark our growth metrics when building our first forecast. Those reports are treasure troves! Then, I looked at all revenue data for our large competitors to see the scale of those businesses (all public companies have annual reports you can dig through). In aggregate, I used those number as the total available market (TAM).
I'm very curious to learn about the operating a brick and mortar store. What was your decision-making process to launch Kids on 45th in a physical store first? And what were some of your lessons learned running the store?