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Q: One of your biggest challenges was raising money. Why couldn't you convince venture capitalists your idea was scalable? A: The fundamental issue was the fact that this was both a brand new category and a brand new product. It required two big changes on the part of consumers -- the way they shop and the way they cook. The VCs were concerned about what it would take to educate the market. The newer and more different your product is, the more money it's going to take, the more time it's going to take, and the more running room you need to prove your concept. Q: Was there also more resistance on the part of consumers than you expected? A: Yes. I guess it's just like getting used to buying anything over the Internet -- it takes time. And buying food is not as comfortable for people as buying, say, books. On a list of things people are totally comfortable buying on the Web, food is five or six rungs down. Then they buy from restaurants they already know. We were one rung below that. A very important rung. Q: Limited funding left you with a small marketing budget. How did you make the most of it? A: We did some direct mail targeted to people we knew were cooking enthusiasts, such as subscribers to cooking magazines. It came down to controlling the cost of acquiring new customers. If you use a targeted list, you lower your acquisition costs and raise your response rate. Q: How successful was it? A: Moderately successful. Ultimately, educating our audience required more information than one postcard could allow. TV would have been ideal to tell our story, but it's expensive. Also we weren't able to test target audiences to see who would be the most appropriate, so we guessed. Testing is a key aspect of direct marketing. Q: Why did you wait until you were virtually out of money to start an aggressive fundraising mission? A: Our original plan was crawl before you walk before you run. We decided to wait until we launched our national overnight service before going after more money so we could show that we could execute a national plan. Everything was planned like clockwork. We needed to close a round of funding in three months. We spent 20 hours a day attacking every avenue we had. But we realized after the first month that VCs need to do several months of due diligence, and we were not going to get the mythical deal done. We'd put new irons in the fire to mitigate the risk. We didn't have one to pull out in the end. |
