What’s the best thing you can do when you’ve been turned down by investors? Make loads of money!
This is the perfect tale of sticking it to the doubters. The non-believers. The people who scoffed at the idea of ever backing your product, your concept, you. When people don’t invest, they don’t think that it’s going to make any money, and in turn they won’t make any money. So is there are better way at sticking the proverbial middle finger up to them all than by earning an absolute fortune? Business Insider think not…
Thrive Market co-CEOs Gunnar Lovelace and Nick Green were rejected by more than 20 venture-capital firms when they first tried to raise money for their health startup.
The pitch was this: The pair wanted to launch an online organic-food and natural-products marketplace, which would use a membership fee of $60 per year (think Costco) to slash prices 25% to 50%.
“[The venture capitalists] all wanted to just wait and see,” Green tells Business Insider. “No one wanted to invest.”
But now they do.
After 15 months in business, Thrive has hit an annualised run rate of $100 million, and has raised $58 million from the likes of Greycroft Partners and celebrities like John Legend and Demi Moore.
The company says it has over 180,000 paying users, and signed up 600,000 new users in January alone. (There is a 30-day free-trial period.)
On Thursday, Thrive Market launched its first app for iPhone.
The founders say their luck changed when they began to think about Thrive as selling a “lifestyle” instead of just a collection of products. After the string of rejections they endured in Silicon Valley, they went back to the drawing board with Thrive’s two other cofounders, Sasha Siddhartha and Kate Mulling. The team wanted to find investors who understood health the same way.
They built a network of over 200 health and wellness “influencers” to invest in and support Thrive, including Deepak Chopra, Tony Robbins, and Jillian Michaels.
“They were not typical celebrities,” Green says. “They were bloggers and YouTube stars” — people that the community trusted. Thrive got its first $10 million in funding from this group, who also helped promote the business.
The company’s growth after launch was explosive. They outgrew a 40,000-square-foot warehouse in three months, upgrading to over 400,000 square feet of space.
The venture capitalists followed, along with more influencers (“strategic partners”). Now the startup has over 300 of these partners.
How did it grow?
“Silicon Valley isn’t really in touch with the middle class,” Green says. The venture capitalists Thrive pitched to didn’t understand why someone would want to go online to order these types of products instead of just dropping by Whole Foods. But the answer was simple: For many of Thrive’s customers, there’s no Whole Foods nearby.
“Geographically, we are incredibly diverse,” Green says. 70% of Thrive’s users don’t live within driving distance of stores that stock its products, and 85% are moms buying for their families.
Silicon Valley’s lack of focus on the “mom” demographic isn’t new.
It’s something Jessica Alba ran into when trying to drum up interest for her startup, The Honest Company, now valued at $1.7 billion and looking to go public. The Honest Company sells eco-friendly household products like premium diapers and toothpaste.
Alba was rejected by a series of venture capitalists, and couldn’t gain a foothold until LegalZoom cofounder Brian Lee had a kid of his own and revisited the pitch he’d rejected 18 months earlier. Lee, incidentally, is also an investor in Thrive.
But even though the venture capitalists didn’t see it, Green and Lovelace knew there was a market. Lovelace, in particular, says he remembers his single mother’s struggle to find affordable healthy products.
Since its launch, Thrive has had about 60% of its traffic come from mobile, but has only now launched an app for iPhone. The new app is easy to navigate, and lets you sort by things like “values” (gluten-free, paleo, raw, vegan, and so on).
Feeling inspired to prove the doubters wrong? Why not come and nurture you inner-entrepreneur here at The Sheffield College on one of our Business and Enterprise courses? (Don’t forget us when you’re earning loads of money!!!)