When Scott Gabrielson completed his MBA program at the University of Oxford in the U.K., his options were limitless. He also carried a bachelor’s degree in finance and marketing from the University of Minnesota and four years of work experience as an investment banker, which meant companies were clamoring to recruit him. However, Gabrielson saw a different path for himself than the typical management consulting or senior investment banking roles expected of an MBA graduate. Instead, Gabrielson fantasized about starting his own Ecommerce business and moving to Silicon Valley like many ambitious founders.
Of course, reality struck as Gabrielson searched for an apartment in San Francisco where rent prices are at near criminal levels — due in large part to the flush tech scene and strict zoning ordinances and regulations. Research from apartment finder platform Zumper shows that San Francisco has one of the “most expensive rental rates in the nation” with one bedroom units going for $3,590 a month. Two bedroom units cost an alarming $4,870. The ridiculous cost of living in SF alone can be discouraging for any would-be entrepreneur, and it was an especially sensitive topic for Gabrielson whose yearlong MBA program at Oxford cost him nearly $85,000 out-of-pocket (~$65,000 for tuition and ~$20,000 in living costs). With a big chunk of his savings gone, Gabrielson knew he had to be strategic with his next move; he expected his latest venture would take several months to go-to-market and then additional time to prove the business model before he could even think about raising funding (both are common prerequisites for securing seed money and venture capital for first-time founders).
Money in the Midwest
Despite his inability to raise capital from private investors, Gabrielson was determined to find alternative sources of funding to fuel his business’ growth and mitigate his personal risk. So, he sought a bank loan. For TIME, credit and financing expert Gerri Detweiler reports, “The banks [Gabrielson] met with were supportive, he says, but were reluctant to lend for an online retail startup with no collateral.”
At this point, Gabrielson’s options were incredibly limited. His idea to launch Oliver Cabell, a high-end fashion accessories brand, would most likely have to be self-funded. And for entrepreneurs with a day job, those costs are easy to swallow. Yet, Gabrielson was all-in on the venture and without a steady income and with dwindling personal savings he had to find money elsewhere. In her article, Detweiler writes, “Through a referral from another business owner who had secured a small business grant, [Gabrielson] found the answer in a program called Innovate ND, a program that helps grow small businesses in North Dakota. Though he had incorporated Oliver Cabell in Delaware, Gabrielson established a presence in North Dakota to handle product fulfillment, which made him eligible for the program. In addition to becoming a source of capital, the location offered other advantages, including lower wages and a geographically central location that he expects will make it easier to ship product around the country.”
And so of all places, Gabrielson decided to start his business back in his home state of North Dakota where he managed to secure $78,500 in mixed public funding, tells Gabrielson. Of that total, $50,000 came as a microloan with a 6% annual interest rate — a bargain for a business with no credit — and $28,500 was provided as grants — which do not have to be repaid.
How other Ecommerce companies can get funded to grow their ideas
Across the nation, there are numerous programs like Innovate ND that offer mentorship, networking, and financing for promising would-be entrepreneurs. A few popular examples include:
- Amplify LA (Los Angeles)
- Capital Innovators (St. Louis)
- MassChallenge (Boston)
- New Venture Challenge (Chicago)
- Techstars (Various locations)
- The Brandery (Cincinnati)
- Y Combinator (Mountain View)
Many even consider and accept out-of-state applicants. Alternatively, you can go abroad to participate in programs such as SPH Plug & Play (Singapore), Start-Up Chile (Santiago), The Junction (Tel Aviv), and Wayra (Buenos Aires).
A year in production purgatory
Before Oliver Cabell was a full-fledged business, Gabrielson spent months networking with factory owners in Fermo, Italy, which is regarded by many as the premier manufacturing hub for high-end fashion products. Gabrielson shares, “We didn’t know this right away, but Italian bag workshops [in Fermo] are the most guarded factories in the world. It took us almost a year to get the proper introductions to the factories we really wanted to partner with.” He adds, “They speak little English. They don’t have a website. They get so much demand.” And with already-established accounts with many of the high-end retail brands around the world, Gabrielson knew securing these coveted manufacturing commitments would be no small feat.
But before his luxury backpacks and weekender bags could be produced, Gabrielson had to negotiate terms with factory owners who were used to getting asked to produce thousands of units at a time. Short on cash and eager to get his product-to-market, he had to be creative in his sales pitch. Gabrielson sold his manufacturing counterparts on three strategic pillars for his vision:
- To provide direct-to-consumer product online (in a world where legacy brick-and-mortar shops are shutting their doors)
- To offer a premium product at a fair markup with full transparency (generally below a 50% margin)
- To consistently manufacture in Italy (when margin-conscious retailers are increasingly outsourcing production to Asia)
The driving force behind Oliver Cabell was a desire to upend traditional retail which Gabrielson felt was exploitative of customers and many manufacturing workers. He recalls, “I was working in business development when I first learned of the realities facing the fashion industry. In 2013, the Rana Plaza building collapsed in Bangladesh, killing over 1,100 people, and it put everything I had assumed about how fashion operated into question.” A visit to facilities in Asia wasn’t very encouraging for Gabrielson either. “I saw cramped female workers, earning $7 a day to quickly glue and sew designer bags and accessories to cut costs and hurry the production process. One of the bags being made in this facility cost under $100 to make and sold for over $1,200 just down the road, clearly lacking the craftsmanship that you would expect from a high-end designer brand. That’s why I decided to launch Oliver Cabell. Our bags are created in Italy from start to finish with high-quality materials time-honored traditions and techniques that have been reserved for only the best made accessories on the market today.”
Oliver Cabell’s ethics and mission instilled faith among the factory owners who lowered their usual 1,000 unit minimum order expectations to 250, allowing the company to stock ample inventory for its launch. Six months post-launch, Gabrielson’s relationship with his manufacturing partners has evolved and with a newly streamlined supply chain, he notes, “We’re now able to push out new styles at a more rapid pace, and [the Fermo factory owners] are giving us a break on minimums for those.” And for a bootstrapped Ecommerce business like Oliver Cabell, this is huge since the company can test more products with less capital and less risk.
Capitalizing on cost-free marketing
Though securing nearly $80,000 in financing was a huge win for this small company, it was just enough to fund startup operations, which meant there was little room to budget for marketing-related costs. Yet, in under six months, Oliver Cabell has managed to garner an audience of more than 40,000 email subscribers and 24,000 Instagram followers while spending virtually nothing on advertising. Gabrielson attributes this success to two primary marketing channels:
- Public relations
- Word-of-mouth marketing
When his business launched, Gabrielson already had the ear of editors and journalists at Cool Hunting, Fast Company, Inc., and WWD who were hopeful about the brand’s future in a fiercely competitive retail environment. This led to widespread coverage of Oliver Cabell’s mission to bring fair prices, quality and transparency to luxury consumer goods. What’s more impressive is Gabrielson did this without prior press relationships, an entourage of A-list investors or a pricey PR firm (typical PR retainers cost anywhere from $5,000 to $25,000 a month).
He states, “We’ve taken a systematic approach to outreach,” which includes targeting writers based on three criteria:
- They are writers whose work Gabrielson admires
- They have written about stories that similar to Oliver Cabell’s or have authored articles that are in the same niche (e.g. menswear, fashion, retail, etc.)
- They cover broader business-based trends (such as entrepreneurship and innovation) and may seem interested in the company’s story (which includes editors who don’t typically write about fashion)
Oliver Cabell has been especially popular with writers in the latter category thanks to its “David versus Goliath” style story where the brand aims to disrupt high-end fashion with its direct-to-consumer model and transparent pricing.
Of course, Gabrielson also employs technology — automation software, follow-up tools and reminders — to manage all of his warm media relationships. For instance, he uses MailButler to deliver email pitches and follow-ups at opportune times when open rates are historically high, along with a later note-to-self if the recipient doesn’t respond.
Countless customer referrals
When it comes to purchasing product, Gabrielson believes there are three primary considerations:
- Design. If the customer is attracted to the product, they’ll purchase it.
- Price. If the product meets the buyer’s budgetary limitations they’ll surely own it.
- Social factors and attitude. This, according to Gabrielson, is a brand play which relies heavily on a company’s ability to craft and tell a compelling narrative and demonstrate likable values.
Though a vast majority complete purchasing decisions based solely on design and price, consumers are increasingly drawn to products that have a significant social impact and to businesses that share the same values. In an interview with Inc. contributor Kenny Kline, Gabrielson explains, “Because we’re such a new brand, consumers can’t rely on our reputation [to make their purchasing decisions]. Our transparency is how we prove ourselves. By opening our doors from a production standpoint and a price standpoint, it allows us to prove to our consumers that we can substantiate the claim of being a high-quality product.”
And due to Oliver Cabell’s minimalist design, affordable pricing and strong business ethics, the company’s customers and fans have been generously vocal evangelists who refer their acquaintances, friends and family members. Gabrielson proudly says, “I started Oliver Cabell with the lofty goal of creating an honest alternative. By being online only, partnering directly with our factories in Italy, and bypassing traditional markups, we’re able to provide higher quality goods at a fraction of the price. We also believe that everyone deserves to know the story behind the goods they buy so we reveal it all, including what it costs to make them.”
Also, one secret to the startup’s success was its pre-launch referral marketing campaign. Before Oliver Cabell’s luxury backpacks and weekender bags went on sale, Gabrielson set up a landing page that prompted consumers to offer their email in exchange for access to Oliver Cabell’s online store ahead of its scheduled launch date. Subscribers were also encouraged to refer their friends; referral rewards included sneak previews of the company’s first batch of products and some very active advocates even earned a free bag. The sign-up page went viral and before Oliver Cabell formally promoted its first product, it had already amassed a list of 10,000 interested customers.
When grooming company Harry’s was planning to launch, it had feared the news might fall on deaf ears. And so the team decided to initiate a similar pre-launch referral marketing campaign which turned out to be a huge success; Harry’s collected 90,000 real emails from shoppers who were excited about getting a better shave.
How Oliver Cabell plans to grow and what other Ecommerce entrepreneurs can learn too
To grow the business further, Oliver Cabell recently introduced its Arcata travel kit. And the company expects to consistently ship new products moving forward allowing Gabrielson to increase his average customer lifetime value as shoppers return to his online store and buy every new item on the virtual shelf. In recent months, Oliver Cabell has also partnered with likeminded retail startups such as AYR, Need Supply Co. and The Arrivals to exchange customers and share marketing resources. Moving forward, Gabrielson expects to launch a few product collaborations too.
Despite having limited access to capital, Gabrielson has been incredibly scrappy and strategic with his resources. And he has cleverly leveraged relationships (in manufacturing, media and marketing) to lay the foundation for what could easily be a very successful business.
Lastly, for aspiring and current Ecommerce entrepreneurs, I’ll leave you with this food-for-thought. When Yahoo! Style asked the first-time founder, “If you could offer just one piece of advice for someone looking to start their own fashion company, what would it be?” Gabrielson answered, “Ask yourself what value your company and product provides to consumers. If your product isn’t enriching lives in some way, you’re going to have a tough time surviving in this ultra-competitive market.”
Danny Wong is the co-founder of Blank Label, an award-winning luxury menswear company. He also leads marketing for Conversio, an all-in-one ecommerce marketing dashboard, and Tenfold, a modern phone intelligence platform. To connect, tweet him @dannywong1190 or message him on LinkedIn. For more of his clips, visit his portfolio.