The proliferation of fashion startups has allowed more women to elbow their way into the tech industry. But will the male investment community “get” them?
BaubleBar's Daniella Yacobovsky and Amy Jain.
Image by Macey Foronda for BuzzFeed
Amy Jain and Daniella Yacobovsky met more than a decade ago when they were working in investment banking together in New York. After four years of the grueling and unfulfilling — if lucrative — work in finance, they both went to Harvard Business School, where they remained close friends. They share the same birthday, which gave them one of many excuses to party together. Their relationship changed significantly the summer between their first and second year at school, when they went shopping for shoes and had a lightbulb moment that would make them business partners.
"We noticed we didn't buy fashion jewelry with the frequency that we wanted to," said Yacobovsky, her bouncy shoulder-length brown hair skimming her shiny statement necklace in her and Jain's glossy Manhattan office. The two women reasoned that if they weren't comfortable spending $100 on a trendy necklace from a department store like Bloomingdale's, other women probably weren't either.
The markup on jewelry you find in stores like Anthropologie comes from its label. It's the same reason Christian Louboutin can charge $800 for his shoes — the brand and those iconic red soles are worth that much to his customers. But, Jain and Yacobovsky wondered, is jewelry the same? With jewelry, "Women are brand agnostic at purchase," said Yacobovsky, noting that jewelry doesn't typically come riddled with logos or other brand iconography.
Realizing they might be onto something, Jain and Yacobovsky started researching. Using their own savings, they threw themselves into the idea of creating an internet-based private-label jewelry business, free from the markups of brand-name jewelry. They met with 550 suppliers and manufacturers over the course of their second year at business school. They signed up for a field study course to pursue the project, allowing them to get academic credit and professor feedback for their work.
Eventually, the project progressed, jewelry was acquired, and Jain's apartment hallway filled with stuff — boxes, baubles, tissue paper, tags. They created a website and launched it in June 2010 under the name 816, in honor of their shared birthday, Aug. 16. Sales and repeat business were so good that Jain and Yacobovsky seriously reconsidered their decision to return to investment banking after school.
One path offered security but no sizzle. "In banking you just keep showing up and they just keep giving you more money. You don't even really have to do anything of value," Jain said.
The other path offered no security but the satisfaction of knowing that they would know how their seemingly great idea turned out — a lot of sizzle if they proved successful: "I don't think either of us went to school expecting to start a business," Jain continued. But, she said, "We felt like we had done so much homework at that point that we would always wonder."
So they quit banking and changed the name of the site from 816 to BaubleBar. In November 2010, they raised $1.1 million in seed funding. In April 2012, they closed on another $4.5 million in venture capital. Their projected revenue for 2012 (BaubleBar declined to disclose earnings) was $11 million. They now have an office of more than 50 employees in Manhattan and are seeing an increase of sales volume by 24% month over month. Jain still seems surprised by their success: "We never envisioned we would get to where we are today this quickly."
Jain, Yacobovsky, and their business do not fit the stereotypical image of "tech." BaubleBar's Manhattan headquarters off Madison Square Park is feminine and glossy, the way you might envision the office of a fun fashion company that employs the protagonist of a romantic comedy. Everything is white and cheerful, the walls bear yellow stripes, and everywhere you look glitters with jewelry. When I visited Jain and Yacobovsky in BaubleBar's in-office shop, which customers can visit by appointment and serves as a non-digital way for the company to observe purchasing behavior, the glass cases lining the walls and trays placed on tabletops sparkled with baubles. Though I felt like I was drowning in jewelry, Jain and Yacobovsky kept assuring me the store normally had a lot more stock in it — it just so happened that a lot had gone out to their pop-up shop a dozen blocks away, where more data would be collected on physical purchases that BaubleBar can put toward its forthcoming redesign.
"People say it's so hard to launch a brand online," Jain said. "But you get so much data in real time. If you put something up and your customers don't like it, you know — it just allows you to build so much faster."
These are not women in Mark Zuckerberg's hoodies, wiling away the hours in a dark room with a computer. Nor are they the editors changing four times a day for street-style photographers at fashion week. Rather, they are something in between: They spend half their time working on website optimization and the other half on building a covetable fashion brand. They're not a coding geniuses, but they understand how to use technology to build businesses that solve problems male tech founders haven't — and probably wouldn't have — thought of solving. With their rapid success, women like Jain and Yacobovsky have become a whole new face of tech.
Three companies — Gilt Groupe, Rent the Runway, and Birchbox — helped lay the foundation for this new sort of tech-company founder. All three businesses were founded by women, are run by women, and are aimed at women. And they have been incredibly successful: Gilt Groupe has attained a $1 billion evaluation and plans for an IPO in 2014, Rent the Runway has raised a total of $55.4 million and plans to go public this year, and Birchbox has raised nearly $12 million and begun buying up competitors abroad in its mission to go global.
Those companies in particular have proved incredibly influential in the online fashion space because they expertly and quite lucratively solved key problems millions of women face. Gilt, which hosts flash sales of discounted designer goods, figured out how to use the internet to bring the thrill of sample sales to women outside of New York and L.A., where the vast majority of them are held. Rent the Runway, which rents designer apparel, uses the internet to bring fashionable special-occasion dressing to the masses for a fraction of retail prices. And Birchbox, which sends samples of beauty products to subscribers in the mail each month, figured out a way to let consumers try beauty products before buying them online for the first time.
These companies and the dozens of others we haven't even seen yet stand to make heaps of money with the rapid growth of online purchasing. A recent survey of more than 3,000 women showed that just about as many of them planned to shop on Black Friday as Cyber Monday, the biggest online shopping day of the year. Last year's Cyber Monday sales reached $1.46 billion, up 17% from the previous year's $1.25 billion. Maureen Lippe, CEO of marketing firm Lippe Taylor, said, "I'd be very concerned if I was a brick-and-mortar store" — because so many websites are offering so much more to shoppers at very competitive prices.
Yet people aspiring to start internet companies that deal with fashion and beauty face the hurdle of explaining to investors how their business model is not only effective but also different from Gilt, Rent the Runway, and Birchbox. One entrepreneur seeking venture capital for a traditional online retail site told me, "The three questions I get asked are, 'Are you a flash sale site?' 'Do you rent?' and, 'Are you sending stuff in a box every month?'" The difficulty many women have pitching their ideas stems from the same challenge Birchbox had to overcome in its early stages — convincing the male-dominated investment community that their female-targeted idea could be huge.
Birchbox founder Katia Beauchamp knows the struggle well. She and her friend Hayley Barna started the company with their own money in 2010, when they were in their second year at Harvard Business School. When they entered HBS's business-plan competition, Beauchamp learned a valuable lesson about the fundraising process. "We quickly realized that one of the most important things is we needed to identify the opportunity in a really simplified way, and in its most basic form," she said. "We were going to be pitching this to [investors] who were not the customers of it, which is hard inherently."
Convincing the HBS business plan contest judges that they had a great idea — giving women a way to try new beauty products without visiting physical stores — was hard: "They definitely didn't get it." But, as anyone who looks forward to their Birchbox package each month knows, they had a great pitch, and Beauchamp sums it up thusly today: "You can research beauty products online and you can replenish beauty products online, but you can't buy beauty products for the first time in the same way." She and Barna had the best pitch of the 85 business plans competing; they won the contest and a cash prize to put toward the company. Yet the problem of explaining their girly idea resurfaced when they started fundraising outside of school. Again, "people really didn't understand," she said.
It hardly takes an expert to understand that successful new kinds of shopping models can reap enormous returns and that women are great at coming up with them. But the fundraising environment inherently works against women. A recent Dow Jones study [PDF] showed that just 6.5% of privately held companies that got venture capital funding from 1997 to 2011 had a female CEO. And a recent study out of Stanford showed that venture capitalists were less likely to invest in tech companies started by women with non-technical backgrounds than those started by men with the same qualifications.
