Bootstrapping a Perishable Meat Business To Significant Scale: ButcherBox CEO Mike Salguero (Part 2)

Sramana Mitra: What were the business metrics with that $500,000 and with that $1.2 million? How was the business moving?

Mike Salguero: When we first bought the website, it was a subscription business where the maker would pay an annual fee to be on the website. We scaled it pretty well. We had a whole team of salespeople and had all these leads.

That business worked, but we decided that we wanted to grow the business. The most alluring thing about custommade.com was that the site has been around since 1996. When you talk to these makers who have been on the site for a long time, they say that they got all their business from that website.

If you type in custom-made bookshelf or custom-made dining room table, it’s the first link that you’d get. The amount of search engine traffic was just huge. The allure was always, “Look at this million people a month coming to the site.” If we built an awesome experience that helped that person describe what they want to be custom made, we would be able to stand in between the transaction.

Sramana Mitra: When you raised your round, was the business model mainly listing fee?

Mike Salguero: Yes, we were doing around $4 million in subscription revenue. We were pretty close to break even, but we really wanted to grow out the team. There were some early metrics to suggest that we should raise more and grow. 

Sramana Mitra: At what point did you make the shift to commission on the volume of transaction or the amount of the bids? How did that business model change?

Mike Salguero: Good question. We basically started taking a percentage of the transaction when we did our first institutional round in 2011. Google invested in us, and First Round Capital invested in us.

The idea was, we were going to pivot to a marketplace where we took a fee. We kept growing. We raised $1.9 million. Then we raised $4 million the next year, and then $18 million the year later.

Sramana Mitra: When you raised $18 million, what kind of metrics did you have? That’s a lot of money to raise.

Mike Salguero: To be honest, less metrics than the first round. It was just a momentum thing. People wanted to be involved in our deal. There was very little actual deep diligence. 

Sramana Mitra: Was it a good idea to raise that much money?

Mike Salguero: It was a horrible idea. With ButcherBox, I haven’t raised any money mainly because of how burned we got and how bad it was for everybody. The outcome wasn’t good.

Our business didn’t require the amount of capital that we thought it did. The business could have been really interesting as a smaller business focused on subscription revenue instead of trying to build out an amazing marketplace.

It could have been an amazing marketplace. You’re taking a consumer and you’re saying that you can get anything custom, but the consumer doesn’t know how to describe what they want. It didn’t work.

This segment is part 2 in the series : Bootstrapping a Perishable Meat Business To Significant Scale: ButcherBox CEO Mike Salguero
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