Bootstrap First, Raise Money Later: Joe Speiser, CEO of Little Things (Part 4)

Sramana Mitra: Not all categories of e-commerce have very slim margins. We’ve got great stories of bootstrapped e-commerce companies. I think in your case, pet foods doesn’t have a lot of margin.

Joe Speiser: It doesn’t. When we started, the gross margins on pet food were actually very high. But it’s the shipping that takes away most of it. Then, you also have incidental things like materials and software to run the warehouse. Before you know it, there’s a re-haul and you take a big step back. There’s a lot of things that go into it.

That being said, we knew that we wanted to scale this business fast and we needed more money for advertising to do it. We raised a round with Lightspeed Ventures in 2011. I think it was July. With that money, we were able to bring on additional help. We hired Mike. He’s now our President. He’s been promoted multiple times throughout the last few years.

When you talk about learning from other people’s experiences, we were really good digital guys. We understood how to build a sales funnel. What we did not understand was logistics and the infrastructure. We assumed it was easy. While we did figure it out, it came at a cost. The cost was mistakes and mistakes aren’t free. You pay for that learning. We realized that we were paying too much for it so we hired someone to take over as President of the organization. It took a lot of stress and pressure off our shoulders and reduced the mistakes pretty quickly, which was nice to see.

We haven’t taken any institutional money since 2011. PetFlow has been chugging along and doing great. I think we’re serving a real need. People treat their pets like their kids. They’re very close with their dogs and cats. There’s a very special bond there. Making sure they have the right food at the right time is extremely important to them.

Sramana Mitra: So what is Little Things?

Joe Speiser: Getting back to what I kept mentioning around our strategy and our experience around how to get customers, we did the same thing for PetFlow. We built up this massive social audience on PetFlow. It worked phenomenally well. We got a ton of customers each year from Facebook. We had the highest engagement of any retailer fan page on Facebook – more than Walmart or Amazon. We focused all of our energy on it. We ignored every other social channel. No Twitter. No Instagram.

We knew we were a small startup. We had to pick a place and make a bet. We got big on Facebook. Over the years, we built this great audience of people who purchased from PetFlow and people who were friends with those people who would most likely purchase from PetFlow. They were a super engaged and loyal crowd.

When we were looking at our business in late 2013, we were very close to profitability. We said, “How do we get there? We’re tired of seeing red ink. How do we get to the black?” We looked over our assets. We said, “We have this great audience on Facebook. What else could we be doing with them?” We realized that if we start sharing with them, not just dog and cat content, but uplifting content in general and instead of sending all the traffic to PetFlow – we modified it with Google – we could actually make more money and take that money and go buy SEM for PetFlow. The leverage was there. It made sense.

This segment is part 4 in the series : Bootstrap First, Raise Money Later: Joe Speiser, CEO of Little Things
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