Welcome to Problem: Solution, a new department in which entrepreneurs share the stories of what they did to overcome a big obstacle in facing their business.
In this installation: Lisa Delorme, CEO of Toronto-headquartered Rent frock Repeat, a retailer and e-tailer specializing in designer dress and accessories rental, which she co-founded with Kristy Wieber (the company’s president) in 2010.
Delorme and Wieber bootstrapped the business for the first few years, but as demand—and their ambitions—grew, they realized they’d need external investors to help them scale up. That proved to be easier said than done for a niche retail business, but the pair made it happen: this week, Rent frock Repeat announced a $1.15 million round of angel funding led by Coralie Lalonde and Caroline Somers of Capital Angel Network. Here, Delorme tells PROFITguide.com what it took to make the deal happen.
“Rent frock Repeat is an ecommerce site that services women across Canada. Women visit the site, choose a designer dress and add some accessories, if they like. We send it all to them with a prepaid return envelope so they can mail it back. We also have a big offline retail presence: they can come to our showroom, try on some dresses and literally plan what they’ll wear to their next year of special events. They can save their dresses to a profile and manage it online. So it really is a hybrid retail model.
“From a long-term, strategic perspective we feel there are more products, categories and markets we can go after using our model. We never wanted to be a Toronto boutique that rented out dresses; we’ve always wanted to reach out across Canada.
“When we launched, we knew that the rental model had picked up a lot of traction in the U.S. and the U.K. We know there were a few boutiques doing it in Canada on a smaller scale, but we felt from looking at successful companies around the world that those that really gained traction in their markets were those who did something on a bigger scale.
We knew we were building a woman-led business, in retail, in Canada, so getting investor money was probably going to be a challenge. We braced ourselves for that
“We bootstrapped at the start, for a lot of reasons, but we knew from the outset that we’d get to a point at which we’d have to look at getting outside investors. But we also knew we were building a woman-led business, in retail, in Canada, so getting investor money was probably going to be a challenge. We braced ourselves for that. We felt we had to really show some great traction here in Toronto before we’d get anywhere with investors.
“Still, we started talking to people. We went to event after event to network and get introductions. We became clients at MaRS. As we were talking to our mentor from MaRS one day in a coffee shop one day, a guy beside us said I couldn’t help but overhear. I know someone; would you like an introduction?’ That got us in front of our first angel group. We went on to pitch several more.
“By that point, we’d shown some traction; we had a solid user base of 20,000 members (we have 53,000 today), and we were very upfront about this in our pitches. That was a pleasant surprise for many of the investors. We’d meet, we’d get very good feedback. Our name was getting out there in the investment community, and we thought as long as kept getting in front of people, it would eventually pay off. We got a lot of practice working our pitch.
“We’d feel like we were getting momentum, but then it would just fall flat; it wouldn’t go anywhere. Most investors were used to investing in tech or real estate; retail wasn’t familiar to them. We got a lot of we like what you’re doing, but something doesn’t sit right.’ They were very nice about it, but there wasn’t always an understanding of the space we were in.
“At this point, pitching investors was it was taking up a lot of time. Kristy and I started to wonder whether we should stop focusing on getting investment for a while and start focusing on the business. So we took a step back and concentrated on paying our bills and growing our revenue. Things were getting better every month, and we started to ask whether we might be able to sustain ourselves and grow organically.
“Then, in March 2014, we set up a pop-up shop in Ottawa for two weeks. We rented some space, brought up our inventory, did some networking and PR and built up some buzz. As we normally do, we did some research on the people who’d booked appointment sto get a sense of who they are and where they came from. We saw that one of the women who’d booked an appointment, Coralie Lalonde, was also an angel investor. So I said to Kristy, let me work with her. This might lead to some interesting conversations.’
“Coralie came in to the pop-up shop completely flustered, like a Tazmanian devil. As I brought her some dresses, she said I’ll be honest; I almost cancelled this appointment. Shopping to me is like going to the dentist.’ She really reflected our target market. We have clients who love fashion and shopping, but we also have a huge market of women who absolutely hate it, who have to dress up for events because their careers call for it.
“She saw the problem we were trying to solve at once; it spoke to her directly. At the end of her hour-long fitting, we sat down over a cup of tea and talked more about the business. Because we’d shown traction, and because we could clearly explain our bottom line, our five-year plan and our scalability—things we’d had to do in all our previous pitches—she started to get excited.
“Within two days we were meeting with other investors she’d brought in, including Caroline Somers. Together Coralie and Caroline did some due diligence so that they could bring it to other investors having already vetted us. They could just say here’s the term sheet’ then talk about the problem we were solving. Coralie would tell prospective investors I’m investing in this because, selfishly, I want this service to exist.’ It was so helpful to have two lead investors; when one or two are in, the others kind of fall into place.
“We ended up with a pool of 15 investors, eight of whom are women. What’s very nice about having investors in our target demographic is that they’re not only investors, they’re also introducing us to more people in our market through their networks.
“What I’ve learned through the whole process is the importance of focusing on more than just the Excel spreadsheets and the five-year plans. The emotional piece is as important. Some investors really do invest in what they personally believe in or respond to.
The emotional piece is important: some investors really do invest in what they personally believe in or respond to
“For all the challenges we had in the first three years and all the people we pitched, it couldn’t have turned out better. We found investors who really understand what we were doing. It was very fortunate happenstance, and, certainly, the deal wouldn’t have happened if we weren’t prepared with all our numbers and our pitch when the opportunity came up. But I’ve learned that storytelling—being able to dig deep into the emotional part of the problem you’re solving—is as important as being prepared with the financials. Knowing your numbers is only half the battle.”
Have you recently solved a problem—big or small, strategic or tactical—in your business? Care to share your story? Email us with the details.