In Canada, there are few successful e-commerce startups, most likely because the market is too small to help a home-grown player establish itself. There are, however, exceptions to the rule such as Beyond the Rack and, most recently, Frank & Oak, which has quickly become one of the fastest-growing online menswear retailers.
The Montreal-based company’s success has seen it attract nearly 200,000 registered users since it launched eight months ago. And today, it unveiled a $5-million series A round from Lightbank (the VC created by Groupon co-founders Eric Lefkofsky and Brad Keywell), Berterlsmann Digital Media Investment, Rho Canada Ventures, and Real Ventures.
I chatted with Ethan Song, Frank & Oak’s CEO, about the company’s growth, the financing process, and the goal to soon have one million users.
What’s been the key to Frank & Oak’s success?
I would say first and foremost, we got tremendous traction because we really understand the user. We felt there was an opportunity in the market for a successful menswear product so we created a model to deliver to the market. Right away, people converted to buyers because they have been waiting for product like it. We are really solving a problem for guys to make shopping easier so they don’t have to worry about what they will buy next. They know it is curated, simple, relative and affordable.
There’s no lack of competition. What did Frank & Oak see in the marketplace?
I saw a variety of opportunities. I thought most offerings were too expensive for men. If you look at the Trunk Club or Mr. Porter, they catering to a small high-end bracket of the market. At the price point we are offering, we offer premium service and premium product, which has created a demand because the everyday guy can feel stylish about himself. It has been created through community, world of mouth and the virality around the business.
What were some of the key lessons you learned during this financing process?
I would say the first and foremost, what I have learned about the process is having strong product and good traction. We were approached early on by us VCs, and we were good at managing the whole relationship and maintaining the traction around the product. We were lucky to select our investors. We thought Lifebank and Rho were great partners with deep expertise in consumer business and scaling up a large e-commerce company. Bertelsmann is an interesting play because they typically invest in more media oriented and ad-tech companies relevant to their core business. But I think they approached us because they were doing a lot of things around content to shopping and creating a personalized shopping experience.
So, was it an easy process?
I can’t say in our case it was a difficult process. It took longer than expected but it always does. We were oversubscribed on this round so we thought it was right to go for this number. We are generating pretty consistent margins and revenue. Our goal is to be the number one player in men’s fashion online.
What’s the plan for the $5-million?
We are focused on three areas: further deepen our entire experience with curation and content, more R&D and technology, and growing our content themes. We also want to go into more product categories. Our vision is to dress the man in all categories. The last focus is to drive acquisition and grow membership. We will be at 200,000 members by the end of the month, and we’re adding 60,000 to 70,000 members each month. Our target is one million users.
What lessons would you pass on to other startups looking to raise a Series A round?
First and foremost, you need to have a solid product. That is an easy answer but the two things people think about is traction and product. As you raise capital, you have to make sure traction accelerates. A lot of startups are focused on solving problems in markets that are too small. They are not thinking about building $100 million businesses. They are focused on areas that are not VC-friendly and don’t have enough growth potential. These are the two tips that founders have to focus on.