After working with startups for 10 years, I’m getting into the check writing game!
150+ startups.
That’s how many founders I have taught, mentored or worked with.
Today I’m getting out my checkbook to invest in one.
It’s not a significant amount compared to institutional investors but it’s significant to me.
Translation: I got approval from my wife to avoid a “Wait, you bought what?” conversation.
Here is why I’m investing $25,000 in Bala.
First, what’s Bala?
Bala is a D2C brand that makes shoes for nurses. Founded by ex-Nike employees, Bala has pre-sold 10,000 shoes in 2 weeks with zero ad dollars. For comparison, their launch outperformed Allbirds by 5x.
Here is the Bala launch video that showcases their flagship product, the Twelves.
Fun fact: everyone in this video is an actual nurse.
THE PROS:
What I like about Bala:
Riches in Niches:
Three of the fastest growing D2C startups I have worked with had one thing in common: niches. They served a “niche” community that was painfully underserved despite their high-intent for a quality product. Here are some examples of current brands I work with that have had insane growth on the back of niche communities.
- Universal Standard served women that wore a 10+ size.
- Kreyol Essence makes beauty products for black women.
- Dear Cleo serves millennial brides.
All three consumers were proactive in looking for a solution to their problem or need.
With Bala, nurses are on their feet for 12 hours at a time and are desperate for high quality footwear. They spoke with 1,000 nurses and surveyed 40,000 nurses to validate they were solving a real problem.
My D2C Checklist:
After working with 60 D2C brands, I have created a D2C checklist outlining what I look for in a brand with high-growth potential. The main characteristics include:
- Product is a Painkiller (and not a vitamin)
- Not marketing to everyone (Know their persona)
- Proactive buyer (not passive)
- Community with high referral potential (Beauty = yes, Viagra = no)
- High AOV
- High Repeat purchase (surprisingly, this one is better than I thought)
Not Dependent on Ads for Growth:
This team has done over $1M in sales in two weeks with essentially no ad spend. Their growth was on the back of nursing communities, influencers and word of mouth. Yes, they will need an ad budget to grow but it will compliment the growth strategy and not be the strategy. Plus, their Instagram account (specifically the stories) is a masterclass on social media marketing.
Bonus points to the team for creating a partnership with one of the top influencers in nursing to build their initial audience.
It’s a Validated Product:
Did I mention they already pre-sold 10,000 pairs of shoes? In the first 5 days, they did over 5,500 pairs and $750K in sales. For context AllBirds did 1,100 pairs in their pre-sale.
There are so many “cool ideas” that people like but never actually buy. The true test of product market fit is the swipe test: will people support you with their credit cards? 10,000 people said yes with their wallets.
Rockstar Team:
Nike. Under Armour. A traveling nurse. They know the category and they have the pedigree. More importantly, they can generate momentum. Every time I speak with Brian (co-founder) they are making strides and getting results. A bias towards action is everything with startups and they have proven they can move quickly and get results in a short time frame.
As a bonus, I like the creative moves they have made like (1) launching on the back of one nursing community and (2) making investments in brand (like this video) because they didn’t need money for ad dollars. Again, they hit $1M in sales with no ads.
My MBA in Investing:
After college, I studied for the GMAT and started looking at MBA programs but quickly realized it was not for me. Why pay 6 figures to learn about business when I could start a business and make money while learning?
Starting a business has been the best B-school for the way I learn. (Note: my path isn’t for everyone.) In the past year, I became a board member of an 8 figure business and that has been an amazing way to learn about running a business that’s bigger than my own.
Next, I want to make small angel investments to continue to learn by doing.
THE CONS:
My Concerns about Bala:
Alright, There are a million reasons this company can fail. In general, 90% of startups fail and this is a startup. Plus, if this works I likely won’t see any ROI on this investment for 7+ years. In addition to the general risks that come with early stage investing, here are some of my concern:
- Product Quality: The first 10,000 pairs of shoes arrive from China during a pandemic. They have been unable to have their own people on the ground to inspect the shoes.
- New Brand: Bala is doing everything for the first time and they have no trust from customers. Plus, they’re going head to head against big brands with big budgets.
- P&L Concerns: On average, the shoe industry has a high return rate of 20%. How will these guys fair? This business is very heavy on working capital and mismanagement of cash flows can kill growth and a business.
- Consumer Growth: Can they diversify their audience from the NurseLifeRN partnership and find scalable channels that are ROI positive? Repeatable and scalable growth only gets more and more expensive as companies get bigger.
- Team: This team has no startup experience. Can they handle “the unknown unknowns” while working in a remote world? We shall see.
Summary:
Whether this works or not, it’ll be fun to be along for the journey with real skin in the game. Plus, I can come back in the next few years and see why I made the decision that I did. Maybe I look like an idiot or a visionary. Who knows? But, call this my public decision journal. I’ll continue to do this with any big investments or business decisions I make.