Multi-millionaire entrepreneur, Oodie founder and Shark Tank judge Davie Fogarty has drawn on his years of business and investor experience – including six failed ventures – to provide insights into how Aussie e-commerce startups inadvertently deter investors.
These common mistakes could make the difference in startups being among the 50 per cent that survive their first three years of operation, says Davie, best known for creating the internationally successful Oodie, the oversized wearable blanket. It’s just one of the e-commerce brands this digital-marketing-savvy 28-year-old has nurtured. Together they’ve earned him $500M-plus in revenue.
He says: “Unless you have deep pockets to bootstrap your start-up, you’ll be knocking at investors’ doors to help scale up your business and keep it thriving. Don’t make the same mistakes I did with my ventures that failed and caused hiccups to those that have survived. Experience is an expensive teacher.”
Investors are vital to most startups. About two-thirds of startups try to raise funds beyond bootstrapping, and seven in 10 startups need funding to continue.
For businesses that are among the 70 per cent of startups that need funding to survive, these are the top seven mistakes that could deter would-be investors.
1. Knowing little or nothing about online marketing and technologies: Start-ups need to know marketing, or they risk losing tens of thousands in hard-earned income. One of Davie’s early ventures was a bricks-and-mortar Vietnamese-roll franchise. Despite the long hours he put in, it kept losing money, so he gave away the business. He leveraged his fledgling Instagram marketing skills to go on a ‘learning’ spree, immersing himself in research, photography, videography, and e-commerce skills. Davie ran his own ads, joined communities and networked. Eventually, he understood there was more in-depth and up-to-date info behind paywalls, which allowed him to grow his skills to build his revenue. Davie admits he’s “wasted millions on ‘crap’ marketing agencies”, including losing $40,000 buying a supposed authentic Instagram business from a scammer. Learn from his mistake: verify the agency’s client history, check they have the niche you need (and aren’t generalists), and that you fit in as middle tier into their client deck. Hire slow and fire fast, he advises.
2. Having a hard-to-understand product or service: A brand name and tagline might mean a lot to you, but what about someone with no idea about what you’re offering? Davie recently invested in a product, Fydoo, the world’s first automatic and sustainable pet toilet. To make sense of this unique product, the Fydoo website has explanatory computer-generated videos and reviews on its website. Davie recommends demo videos for products that come with more complicated user instructions to clarify their ease of use for customers and investors.
Another pet product, Pupnaps, a calming dog bed, had to persuade would-be customers they needed the product to support their anxious canine. That’s why the business, a joint venture Davie has with a friend, needed a strong focus on content, social media, customer service and product development to hit sales.
3. Glitches on a product website: Investors prefer businesses with their own website. Depending only on marketplaces can thwart a brand’s recognition and limit its ability to scale, Davie says. However, if a website doesn’t offer a seamless and user-friendly experience, potential customers and investors will notice. Start-ups are best to avoid sites with complex navigation, slow loading times and poor online customer service systems. That’s assuming would-be customers know about your website. Davie recommends start-ups harness search engine optimisation (SEO), and offer consistent, useful and relevant content to help rank the site. He recommends start-ups incorporate AI tools to brainstorm content ideas and stellar headlines that bring in traffic.
4. Not scrutinising your costs: Potential investors need assurance start-ups are running as lean and efficiently as they can. The problem is that micro businesses won’t have all the services they need in-house, and they often find it necessary to outsource some operations in the first couple of years. But, as the business grows, it may be better to see which operations they can bring in-house. For example, a brand Davie recently invested in, Suitor, allows men to rent or rent-to-buy high-quality affordable suits online for special occasions. Set up in a granny flat initially, the business just didn’t have the space to launder the suits, so it outsourced to a dry cleaner. As the business scaled – Suitor now has $1.7M in sales – it had to bring that service into its new, bigger premises, Davie says. Doing laundry inhouse slashed 70 per cent from its total operational costs and allowed greater quality control.
5. Beware of copycats! Brands that offer products should actively search for other ventures copycatting them. Businesses can monitor online marketplaces such as Amazon, Etsy and eBay for lookalike products, urges Davie. If one is found, the infringement can be reported to the platform. Another tips is a reverse-image search, such as Google Images or TinEye’s MatchEngine , where businesses can upload their product images to see if they’re being used elsewhere without their permission. If so, the business can send a cease-and-desist letter. Davie says start-ups might also think about registering their trademark or patent, so they’ll have a legal recourse in the future.
6. Not managing a brand’s reputation: Negative reviews are usually valuable feedback from customers about their pain points with a product or service. Davie recommends businesses be prompt to resolve the issue with grace and transparency. If the business has an adequate basis to conclude that some negative comments are fake, it may be able to tap into a service, such as Removify , to help get them removed. Davie urges businesses be proactive. Consider free trial of social listening tech tools to find the best one for near-real-time feeds about what people are saying online about the brand.
7. Forgetting to leverage partnerships: A start-up developing a high-end beach ‘buggy’ with Bluetooth speakers caught Davie’s eye, so he’s invested a cool $450,000. Called the Burleigh Wagon, it’s attracted domestic and international orders, but lost thousands of dollars every Aussie summer due to stock depletion. The business needed a strategic partner with the right connections to liaise with the 14 factories just for the components that go into the wagon as well as the one that assembles the product. That was Davie, who already had partnerships and vast experience in the global manufacturing. What’s more, Burleigh Wagon is patented, standard-certified as a pram, and can be wheeled over sand.
Davie says he hopes startups might take these insights on board. After all, according to the Australian Bureau of Statistics, the end and the start of the calendar year tends to be the hottest time to for Australians to register new businesses. Just don’t burn your bridges when it comes to attracting investors.