Key Deal Stats:
- Raising Platform: WeFunder
- Implied Valuation: $8M
- Security: Future Equity (SAFE)
- 2018 Est. Revenue: $2.4M
- At Time of Publication, April 20, LoveSeat had raised $116K surpassing its $50K minimum
In our latest discussion we sit down with Chris Stanchak, half of the couple building the Amazon of vintage furniture. Chris and his wife Jenny are seasoned vets of the startup world. Whether you talk to Jenny who was employee number 7 at Venmo or Chris who was the founder of TicketLeap, both have done their fair share of starting up. And now they are taking that knowledge base and applying it to an industry in need of innovation; That is the vintage furniture market. Chris and Jenny have identified an opportunity to build a hybrid locally driven ecommerce platform to sell vintage furniture in a seamless way. With early signals pointing to product market fit in only one market, the opportunity to grow into a powerhouse national brand seems more than likely. Read more about why they have gone to the crowd for their latest round of equity and how they plan to utilize those funds to grow to over 30 cities in the coming years below…
CL: Chris, you and your wife are both successful entrepreneurs. Be it TicketLeap or Venmo, both of you have made a name for yourself in the world of startups. So what was the genesis for LoveSeat, and why now? CS: When we started out we knew we wanted to start a company together, and the timing was good because at the time I was leaving Ticketleap and she was leaving Venmo. The idea was to start a company together, but the initial thought we had was completely different from what we ended up building. Our original thought was to build a P2P marketplace where you could sell anything to anyone, sort of like a local Ebay. But, we began to look at the space and we saw the competitors that already existed and quickly came to the conclusion that the only way to win would be to focus on a single category. We began to ask ourselves, “What are things that won’t work well at a national level because they are localized opportunities and we ended up narrowing in on the vintage furniture market. As a side note, we both have a passion for vintage furniture.
The Business Model:
CL: For those that don’t know, how do you define LoveSeat as a business? CS: LoveSeat ia a vintage furniture ecosystem, where we sit between the buyer and seller to make the experience seamless for both sides. On the customer side, we are solving the problem of finding high quality furniture for the home at a great price. On the supply side, we are helping folks to get rid of and monetize their old furniture items in their home, so they can get money for it and move on with their lives.
CL: LoveSeat is specifically in the vintage furniture market. Why don’t companies like Amazon, or Wayfair get into this space? CS: The reason Amazon or Wayfair has not entered this space, is because they are focused on shipping items, and it’s super hard to ship something made of solid wood across the country in any sort of cost efficient way. Production cost are also very high for the quality of goods we sell, so it just wouldn’t work for them at mass scale. What we realized is that the vintage furniture market is a localized business. The reality is furniture doesn’t want to move or go far and we’ve discovered a way to buy and sell inventory at scale locally in specific markets where we don’t have to travel far. It’s a completely different model than traditional ecommerce. We think of it as ecommerce 2.0.
CL: Be it in clothing or in more traditional retail, a mix of in-store and online experiences has appeared to be the right mix with consumers for the time being. Why do you think that is? CS: In my background, I’ve helped run e-commerce for companies like Dick’s Sporting Goods and Toys “R” Us, and was Head of ecommerce for Spencer Gifts. What I traditionally saw was a total separation of what’s online versus what’s in store. You rarely see a hybrid experience between store and website. One thing we have aimed to do at LoveSeat is to create a seamless shopping experience between our website, our app and our store. We don’t want customers to have a jolting experience from one medium to the next. For us, we started in what we knew, which is building a website. And then the retail experience just followed. I think that is where the world is going right now. We think that from the ashes of retail can arise the “Phoenix” of retail or retail 2.0. Not everything will be on Amazon. There are types of businesses that only work with physical location. For us, people can interact and literally find where in the warehouse a piece of furniture is from our website or app and then come into the store and go directly to it. But that interaction with the furniture is still highly valued. The technology just makes the process frictionless for the customer, and the store provides the experience.
CL: Since you run a marketplace, what is your vintage furniture sourcing strategy? CS: Initially we had buyers out in the market finding inventory for us. They would go to estate sales and auction houses and find pieces for us. Over time we moved away from that strategy as we’ve built out a “buying robot” that provides a way for people to submit inventory to us and make offers efficiently. Our system also manages sellers scheduled pickups, that way once we decide to buy something that item is now in our system from the moment we have an agreement through to when it is sold. We give sellers a single price for everything to make it a quick and efficient process for the seller. The best part is we are spending nearly nothing to acquire sellers.
CL: What are some of the challenges with managing an in-store warehouse experience mixed with an e-commerce solution? CS: It’s been a learning experience for sure. We have just been taking the traditional startup approach of rapidly iterating and building MVPs until we get it right. We do make sure that whatever we do, we follow the customer and take more of a pull than push method when it comes to building the product. We started small, literally selling furniture out of a garage, but the whole time we have been listening to what it is the customer wants and have adapted the product to what is they are asking and looking for.
CL: You boast 67-70% gross margins even in these early days. How do you manage that in a space with such high delivery cost as you have mentioned? CS: Deliveries are paid for by our customers, but since the model is to sell locally shipping prices are reasonable. So on the delivery end, we don’t take a hit on margins. On the product side, we’ve seen that the bigger we get the more inventory that comes our way. This scaling of our inventory allows us to become more selective in what pieces we select and in turn we have gone for higher margin pieces so the economics of our business continue to improve as we scale. We also benefit from the fact that we typically turn our whole inventory over in 2 months, and we are talking about thousands of pieces of inventory.
CL: Who is LoveSeat’s core consumer? CS: Our core consumer is made up of 75 to 80% females, with the majority being young moms in their mid-20s to early 40s. We find that they are savvy consumer who have been through buying cheap pieces of furniture from IKEA in the past and are now looking to step up the quality of their furniture, while still keeping cost low. They recognize and love the treasure hunt aspect of finding a piece that looks like you spent thousands, but only cost you hundreds. Our customers also love the treasure hunt aspect of our business since our inventory is constantly changing, much like the TJ Maxx model. The other aspect of this is that our customers feel like they are doing a good thing for the earth by upcycling furniture instead of having it thrown away. Our authenticity and love for bringing vintage furniture to the market in the way that we are really resonates with our customers. We deliver a great value and treasure hunt experience to our customers.
CL: What cities would you like to expand to next, and which cities fit LoveSeat best for quick scale? CS: Our next market will be Orange County because it’s conveniently located between San Diego and Los Angeles. We have actually already started delivering inventory there, we just don’t have a warehouse there yet. From there, we will continue to enter new geographic markets big enough to make sense. The goal is to be nationwide in more than 30 cities. We have the platform to do it, we just need to continue to streamline the process and execute on our vision.
Investing in The Deal:
CL: Why did you decided to pursue an equity crowdfunding round via WeFunder when you have plenty of traditional fundraising experience? CS: We raised a pre-seed round through a traditional equity round early on through Angellist and angel investors. However, we wanted to skip the traditional seed round and saw a trajectory to expand outside of the markets we are in now with just a bit more capital. WeFunder gave us an opportunity to raise the capital to help get us to where we need to be for our Series A. We also wanted to give our customers a chance to invest. If you look at our Yelp reviews you will see that we get rave reviews and support from our customers so we wanted them to have skin in the game. I think that equity crowdfunding is the next wave for companies like us to be able to raise early capital. With regulations allowing for this type of investing in a responsible way, and with powerful platforms like WeFunder, it really is a no brainer.
CL: As we think about liquidity opportunities down the road, would you see yourselves going the IPO route or is the approach to look more for an acquisition? CS: All options are on the table but we aren’t building it for any of the above. The goal is to just build a great business and the opportunities for liquidity and returns for our investors will follow from that.
CL: To date you have raised over $100K from investors from over 100 investors on WeFunder. What do you think these investors see in LoveSeat, and what has the general response been to the raise? CS: Everyone we have talked to throughout the raise is pumped up about what we are doing. If they get what we are doing then they really get it. We have received a ton of questions on WeFunder asking, “When will you be in my city?” We love that question because it tells us this is going to work as we enter other markets. We have also found valuable individuals through it, that have offered ways to partner and launch in their markets. Though we haven’t cashed in on any of those opportunities just yet, we are excited that those exist, and will definitely utilize them when the time comes.
CL: As a whole how has your experience been raising an equity crowdfunding round and how do you see this capital raising mechanism developing as we move forward? CS: I think it’s been amazing, The way WeFunder has built this platform, I really think it’s the next frontier. There is definitely a place for institutions to invest in the later rounds, but in the seed and preseed world of VC I think we see a continued shift to more crowdfunding. It just makes sense because companies can get to market a whole lot faster. And on the flipside, you are getting customers to invest in a safe way thanks to regulation that prevents people from making bigger bets than they can afford to lose. But having lots of small investors giving you $100 or so is exciting especially when it is done in a safe way. I think as it stands it is really the next frontier for early stage startup funding.
In Summary:
Through a unique blend of localization, in-store and online, and efficient sourcing, LoveSeat is proving that the world of retail and ecommerce can coexist when done right. If this team can continue to execute, the opportunity to invest early will provide a huge opportunity as they forage into new markets with a product that has already proven a great fit for the market. Better yet the unit economics are astounding with 67-70% gross margins. Chris is the kind of individual you quickly get comfortable with backing, and we think they show huge promise, which is why they were our deal of the week on March 26th! Be sure to check out their offering page here.
