Bimbos or Billionaires?

Susan Feldman and Alison Pincus are not considered billionaires….yet.  But, just by taking a fast look at their company’s balance sheet, it’s easy to tell there much closer to billionaire rather than bimbo status.  So how did the 2 co-founders of incredibly successful One Kings Lane meet up you ask?

As Susan Feldman waited outside the Southwest Airlines arrivals terminal at Los Angeles International Airport in October 2008, she had a nervous feeling in her stomach, which she compares to blind date jitters.

Except this wasn’t your traditional blind date.  Feldman was meeting Ali Pincus, her soon-to-be co-founder, for the first time.  They had spoken over the phone after a mutual friend set them up to discuss the overlap of e-commerce and home goods, but they hadn’t met face-to-face.  Feldman and Pincus both recall feeling a combination of nervousness and excitement.

This wasn’t your typical founder story, but four years later, their brainchild, One Kings Lane, would become a business with over 4 million members, with expectations of over $200 million in revenue for this year.

Feldman first started exploring the idea of applying flash sales to the home retail space in 2007.  As a merchandiser, she was working in retail and observing the emergence of a flash-sale distribution model, pioneered by Vente Privee, and adopted by others, including Gilt. At the time, the model was mainly a vertical play in apparel, but she saw an opportunity to bring this to home goods.

As Feldman further explored the idea of flash-sale meets home decor, she realized the need for a more tech-savvy co-founder.  Linda Stone, founder of BlogHer, set her up with Pincus in 2008, which brings us back to Feldman waiting at Arrivals outside of LAX.

From Strangers To Founders

Pincus says she couldn’t stop talking in their initial conversations about the possibility of starting the company because she saw how disruptive a company like One Kings Lane could be.  And Feldman’s background in merchandising and creative seemed like the perfect complement to her business development and digital media skills.

The pair quickly found a good attorney, wrote a business plan, figured out who would host the website, hired designers to actually build the site, and then started taking meetings with vendors.  Pincus and Feldman started pitching them in December 2008, and found that these companies were eager for ways to distribute inventory.

As the economy continued to implode, consumers tucked away their wallets, leaving retailers and brands with massive amounts of excess inventory.  OKL was pitched as a channel where they could possibly sell these goods, but also maintain a luxury brand value.

This wasn’t going to be an Overstock or Walmart.  Feldman realized that these brands wanted to move inventory quickly and discreetly, so that a brand wasn’t going to be featured on the website for weeks and months at a discounted price.  That’s one of the reasons the site launched as a members-only platform initially.  As Pincus tells me, it was about being at the right place at the right time.

From the start, OKL operated at warp speed for a startup.  Pincus says her husband, Zynga founder Mark Pincus, gave her and Feldman advice that is still part of the OKL product culture.  Mark advised his wife and her co-founder to be quick and nimble in seizing the opportunity.  Feldman recalls that Pincus told her the first to market will win, the second will do well, and it will be tough for anyone after that.  In other words, they needed to move fast.

They took Mark’s advice to heart.  The fledgling startup outsourced all design, and web management so if it didn’t work they could just walk away.  In 2008, funding wasn’t easy to raise, so they negotiated deals with partners.  For example, the photographer who initially took photos of products for the site was paid with office space.  They put thought into each meeting with vendors, bringing gifts like candles and always sending handwritten thank you notes afterwards.

At launch in April 2009, OKL had exactly 5,000 members.  The startup was then featured in email newsletter Daily Candy and went up to 25,000 members in a day. At the time, I sent the URL to my mom, an interior design junkie, who immediately called me with excitement about how she’d never seen Ralph Lauren candles and accessories with such deep discounts.  My mom wasn’t alone in her enthusiasm.  OKL immediately scaled a loyal user base and now has over 4 million members.

Curating Commerce And Attracting Investment

Along the way, Feldman and Pincus’ baby began to catch the eye of investors looking to get in on the flash sales e-commerce model. But as Pincus explains, pitching VCs on a niche e-commerce site was sometimes challenging, especially when it came to selling the Silicon Valley elite on the power of a site that sold candles, rugs, furniture and more.  And it was powerful. “If investors didn’t get it, their wives definitely did,” Pincus recalls.  In fact, Greylock partner James Slavet, who lead the firm’s investment in OKL in 2011, says he found out about the site through his wife.

Finding Focus Beyond Minimum Viable Product

One of the strengths of OKL is its niche focus and brand.  Feldman explains that the site’s target is a woman, who loves her home, loves decorating and entertaining and tends to be in her early thirties to late fifties.  Think of Feldman and Pincus as the bookends for their customer base.

“From the very beginning, OKL has been about product and merchandising.  We don’t just take anything that comes our way. We vet out every product, and vendor personally,” says Feldman. To date, the site has worked with a total of 2,000 vendors, says Feldman.

Even niche businesses draw competitors, especially when they’re on to something.  And challenges have come in many forms for One Kings Lane.  In the site’s early days, Feldman and Pincus outsourced web management, fulfillment and more.  Then two years ago, they realized that it made more sense to create and manage these operations in-house.  The company had to migrate from its vendors onto the newly-built platform, and create the infrastructure to support operations and the web platform in-house.  When the company eventually switched over to the new platform a few years ago, they braced themselves for a drop in sales, downtime and more.  But OKL managed to plug along as usual.

Gilt has been aggressively expanding into home;  recently revamping the vertical with an acquisition as well as a complete redesign focused also on curated content and commerce.  Fab, a flash sales site focused on design, is exploding and RueLaLa, HauteLook, Beyond The Rack and many others feature daily sales on home items as well.

In the fall on 2011, One Kings Lane raised $40 million in new funding from Tiger Global Management, Institutional Venture Partners, Kleiner and Greylock, bringing the total amount raised to over $65 million.  The site was valued at $440 million post-investment.  Greylock’s Slavet brings the startup’s success back to Pincus and Feldman. “In this generation of e-commerce companies, the ones that have been successful have been those where the product sensibility emanates from the founders.”  Pincus and Feldman are these founders.

But beyond their product and merchandising instincts, they have an enviable founder relationship that they describe as sisterly, more than collegial.

Since the day Feldman waited anxiously outside of LAX for her future business-partner, she and Pincus have not only been able to convert their passion into a highly-successful business, but also build a team that shares their love for merchandising and curation.  Future entrepreneurs will learn from OKL’s product, but moreover, they’ll learn from its story.