This Type Of Store May Actually Survive The Amazon Era


On a recent Thursday evening, hours after closing, Francine Delarosa pulled up a moving box in the dismantled office of her 4,000-square-foot boutique. She sat down on the makeshift chair for a moment and cried. Then she got up, and continued packing.

“I had a little crying moment about the fear of change,” Delarosa told HuffPost over the phone from her store in North Miami Beach, Florida.

When Delarosa first opened her capacious children’s boutique store, Give Wink, in the early 2000s, the veteran retailer was optimistic about her success ― so much so that she signed a 15-year lease on the space. Like most other store owners at the time, she couldn’t have anticipated how the internet, and Amazon in particular, would upend the entire retail industry.

Today, Delarosa, must scrap and fight for every sale she makes. And just like other small retailers, she’s had to reinvent her brand to keep a steady stream of customers coming through her door and not just online shopping from the couch.

Francine Delarosa, owner of children's store Give Wink, is evolving her business to combat new challenges in the retail space

Francine Delarosa, owner of children’s store Give Wink, is evolving her business to combat new challenges in the retail space. Delarosa is downsizing her store and focusing more on her concierge efforts, which include personal shopping and nursery design.

Delarosa is in the process of downsizing to a 1,000-square-foot space and cutting her staff from 10 people to three. She’ll continue to personally curate every item in the store and on the site, and will soon design and manufacture her own private labels. She’ll also be focusing more of her attention on the concierge piece of her business – nursery design, personal shopping and baby registries, because in the end, her deep-seated knowledge of the industry and hands-on approach is what distinguishes her from other dot-coms that sell children’s products.

“In 2018, the success of the retail brand … isn’t the physical space or even the product selection,” Delarosa told HuffPost. “The reality is, all of that is replicable. What’s not replicable is the relationships and the knowledge, and the way you put all of that together.”

To survive today, retailers have to carve out a niche that makes them indispensable. But what Delarosa’s store and other children’s boutiques may have working in their favor compared to other stores is that parents, especially new ones, are so anxious about getting the big-ticket items right.

Whether shopping for a stroller, car seat, crib or mattress, they’ll make more of an effort to walk into a physical store and talk to a retailer who can field multiple questions and direct them to the products that best suit their needs.

Because new parents are eager to get the best and safest products for their kids, they may be more likely to visit an actual

Because new parents are eager to get the best and safest products for their kids, they may be more likely to visit an actual store to get advice from retailers. 

“For a new baby, safety is a big concern,” said Peter Roberge, store manager of Albee Baby, a New York City-based children’s boutique that’s been around since 1933. “They want to make sure they touch and feel something; they want to make sure they know how to operate the products they’re purchasing and get the product that operates best for them.”

Boutiques, in general, are having something of a moment right now, particularly among young people. According to Forrester, a research and advisory firm, 43 percent of millennials, those who are 25 to 34, say they would rather shop at small local stores, as opposed to big national chains.

Overall, the stores that have the best chance of surviving today are either big, maximum tax-paying and low-leverage retailers ― like Macy’s, Marshalls and Target ― or specialized, experiential and small-scale stores, said Jan Kniffen, a former retail executive who now consults for investors in retail properties.

“People like shopping in these sweet little stores because they like the feeling and the experience,” Kniffen said. “Retail is becoming extraordinarily experiential. Even the big stores are trying to be much more experience-oriented. They’re trying to feel like the little stores.”

It’s one potential bright spot in a very grim period for brick-and-mortar stores.

Retail is becoming extraordinarily experiential. Even the big stores are trying to be much more experience-oriented. They’re trying to feel like the little stores.Jan Kniffen, former retail executive

More retailers closed last year than during the height of the Great Recession. That was due to a number of factors, including growing online sales and consumers’ preference for inexpensive, fast fashion. E-commerce sales accounted for 13 percent of all retail sales last year. A decade ago, that figure was just 5.1 percent.

Parents, however, may be defying some of those trends, which could be good news for owners of children’s stores. According to Cassandra, a trend forecasting, research and brand strategy firm, 78 percent of parents in the United States would rather shop in stores than online.

But they’re not going to shop just anywhere.

Millennials are parents to half of today’s children and make a “significant” contribution to the $1 trillion parents spend yearly on stuff for their kids, according to the National Retail Federation. This demographic also prioritizes good service over convenience, according to NRF. And 44 percent of millennials say they only support brands that align with their political and social views.

For many mom and pop children’s stores, it’s about getting that customer in the door once and showing them what they can gain from shopping in person.

Jessica Rone, 35, a resident of Manhattan and mom to a 1-year-old, told HuffPost that she does most of her research for products and shopping online. At any given time, she’ll have “1,000 tabs open” on her computer, investigating the best items to buy for her son.

On a Friday afternoon earlier this month, Rone ventured into Albee Baby on the Upper West Side for the first time because she had a gift certificate that was expiring. She said she was surprised by what she was able to learn there.

“I’m shocked by how much stuff they have,” she said. “There are so many things here I didn’t know existed.”

For others, there are elements of nostalgia and doing the right thing. On that same day, Bart and Joan Auerbach were also shopping in Albee Baby for bath toys and other knickknacks for their granddaughter. The last time they were in the store was 40 years earlier when they were shopping for their own son.

“It’s a famous store,” Joan Auerbach said. “A lot of stores are closing in our neighborhood. It’s really a loss for the neighborhood.”

But while many parents and grandparents may appreciate picking the brains of veteran retailers, that doesn’t necessarily translate into sales, which is one of the most frustrating challenges retailers face.

Francine Delarosa, owner of children's boutique Give Wink, said at the root of her business, are the close relationships she

Francine Delarosa, owner of children’s boutique Give Wink, said at the root of her business, are the close relationships she developments with customers. According to Cassandra, a trend forecasting, research and brand strategy firm, 78 percent of parents in the United States would rather shop in stores than online.

“We get customers who use our knowledge, allow us the opportunity to show them aspects of various different products,” Roberge said. “But when they’re ready to pull the trigger, that may happen while they’re sitting at their desk at work or at 3 a.m. while they’re on their laptop.”

Some customers may have no intention of ever buying from the store and just lap up all the information they can get. Then, once they decide on a product, they’ll hunt down the best price on the internet.

We get customers who use our knowledge … but when they’re ready to pull the trigger, that may happen while they’re sitting at their desk at work or at 3 a.m. while they’re on their laptop.Peter Roberge, store manager of Albee Baby in New York City

One way Albee Baby has tried to solve this problem is by building up its web presence, considered a venerable force in the industry. The company offers competitive pricing and has enough inventory in its warehouse to “fill a stadium,” Roberge said.

The store itself also offers a warm, welcoming feel that a website can’t. Staff members dole out treats to pets who come through. Breastfeeding moms stretch out on the comfortable gliders in the back of the store and feed their babies.

Delarosa faces the very same problem and said she’s moving toward only housing products in her store that “support” her business ― those that strictly enforce “map pricing,” for example. (That’s a minimum price resellers agree they won’t sell below.)

While children’s stores may have a slight advantage over other retailers, they’re not necessarily safer. Gymboree, a major children’s clothing brand, filed for bankruptcy in 2017 due to growing competition, mounting debt and the demand for cheaper prices, CNBC reported. The company underwent a rebranding and relaunched in July. Children’s Place, another mainstream retailer, will close 300 stores by 2020 and will also expand its presence on Amazon.

In 2017, Gymboree, a major children's retailer, filed for bankruptcy. The company rebranded and relaunched in July. 

In 2017, Gymboree, a major children’s retailer, filed for bankruptcy. The company rebranded and relaunched in July. 

Smaller-scale children’s stores are not immune to the risks, either. Giggle, a specialty children’s boutique that had stores in San Francisco, New York City and Denver, was considered a leader in the industry and one that Delarosa looked up to, she said. Without much warning, the stores suddenly closed in 2017.

“If Giggle, who was the most solid specialty store name in our industry, went under, any of us can go under,” Delarosa said. “If we don’t change, none of us will survive.”

The children’s stores that will make it, according to Kniffen, are those that assiduously listen to customers and cater to and respond to their needs.

“The children’s stores that have survived a long time, they have treated every customer like their kid is the most important person in the world,” Kniffen said. “As the times changed, they walked right alongside that customer, they figured out what was important to that customer, and they altered their store to reflect that. The ones that don’t, they go broke.”

This is part of our six-story series spotlighting the current state of retail in America.

The real reasons why a VC passed on your startup


You’re more likely hear about the companies that venture capitalists said “yes” to — the big funding rounds, the success stories, and the unicorns. But the day-to-day reality of being a VC is that we spend ~99% of our time saying “no.” It’s a core competency of any VC. Or at least it should be.

Receiving that “no” as a startup founder is often hard. It’s not fun for us either, though. We’re empathic to how difficult it is to build a business and the effort and belief it takes. It can be painful to tell the human being you’ve just spent time with why something they’re building is not a fit for you or your firm.

Most of the time VCs have one or more discrete reasons for saying “no.” Although it would be ideal if we relayed them to founders clearly and openly, we sometimes feel pressure to take the less confrontational path and say vague things “this is too early for us” when the truth is more difficult to hear. VCs have a code around rejection language that often leaves founders scratching their heads to interpret, but candor is usually better for both parties long-term. Truthfully, the reason for the “no” often has little to do with the founder or the details of the business, but lots to do with that VC’s personal interests, portfolio, or history.

Below I’ve listed the most common “no’s” I’ve seen. I describe them through the lens of early-stage technology venture because that’s what I do. “Early stage” for this purpose means pre-seed, seed, and Series A. If you’re a founder and you’ve gotten one of these reasons, my aim is to expand on what motivations or thoughts may underlie each. And if you’ve heard one that I’ve missed, I’m curious to know.

There’s one caveat to almost all of these reasons for passing, though: VCs will make exceptions to every one of them when we think the founders are absolutely incredible. This bar is extremely high and is based on our personal experience with them, their track record, or both.

Market-related reasons

“The opportunity’s not big enough”

VCs want to invest in companies that can grow to become massive. We strive for 10x, 100x, even 1000x returns. You’re building something that might be a great, sustainable business, but we don’t see it being venture-scale. E.g., you make software for US-based entertainment lawyers who focus on celebrity endorsements, and you’re charging a SaaS subscription of $100/month. There might be a thousand of those lawyers in the US, and even if you got all of them to sign up and had zero marketing and 100% margins (which you won’t), you’re making $1.2M per year. That’s too small for venture capital.

“You’re too early to market”

The investor may like your idea but thinks it’ll take significant time for the market to come around and recognize its value. Funding the company now means that it’ll take a few checks to keep it alive until the world realizes it needs to pay for the product or wants to use it. Imagine fundraising for a mobile gaming startup in 2004 when the iPhone didn’t launch until 2007: even if the founders are visionary and know that mobile gaming will be big, how will they cover expenses for the 3+ years it’ll take for that to happen?

“No (or weak) competitive differentiator”

Someone else could come along and build this exact thing easily. Even if you’re the first to market, competition could cut down your position and your ability to command a high price whenever they choose to. We often say this about startups that don’t have a strong technical element to them. The less technical an idea is, the simpler it is to copy. Having a unique brand may feel like a competitive differentiator — and some of the most successful companies have built themselves up on brand — but a bad PR scandal or well-executed knockoffs can derail that fast.

“Unfavorable macroeconomic or regulatory trends”

It feels like the wrong time to start this business, whether because of shifts in technology, behavior, or regulation. For example, Apple announcing they were dropping the headphone jack was bad news for companies making non-Bluetooth headphones, whereas Apple switching to USB-C charging cables was great for companies who had already embraced that standard. A regulation that bans facial recognition scanning in retail stores would be tough on a company selling those systems to malls.

“An existing, more established company could do it easily”

Big companies with tons of product lines, employees, and resources can quickly release products that encompass a startup’s entire concept. Building something that falls in the realm of one of these companies’ roadmaps — think Amazon, Google, and Facebook — can instill fear in VCs. Sure, it makes you a potential acquisition target, but most investors want you to aim to create a large, sustainable, standalone business first. They’re more valuable. For example, if I meet a startup that creates animated avatars for augmented reality, I’m wondering whether Snap is going to roll out the same capability next week.

“This is a crowded space”

The VC thinks there are too many competitors already working on this problem. Break it down further, though, and it could suggest a few nuances. Maybe the investor is worried about your sales and marketing abilities to stand out from the crowd. Maybe they think you’re not the one to bet on in this group. In any case, competition is fierce and the thought of having to battle for visibility, users, ad space, and market share is making the investor wary. Instead of joining a competitive space, VCs would rather you start a new industry from scratch or heavily disrupt an existing one.


“Founder or team dynamics”

This reason can be uncomfortable to explain to a founder, but it’s a frequent one for VCs. These negative dynamics can take many forms, but at their core, they signal that the team either isn’t meshing well today or won’t in the future. Examples include:

  • A dominant founder who belittles and speaks over the others, who appear frustrated
  • Too many co-founders (usually more than three), whose job titles and expertise appear to intrude on each others’; e.g., a COO, CEO, CSO, and CFO is far too many non-technical founding members at an early stage startup
  • Having both a CEO and a President, which suggests that there are two egos and neither wants to look “lesser” than the other
  • A married or dating founding team (not always a red flag, but many VCs consider it to be one)
  • Multiple co-founders from academia who aren’t involved in the business day-to-day
  • A very seasoned founding team from big corporations or consultancies that doesn’t have any startup experience
  • Any other palpable tension, awkwardness, or discomfort between the founders that seems abnormal

“Missing a key person”

This is a chicken-and-egg problem: founders raise money to hire great people for their teams, but having great people on their teams is what enables them to fundraise, especially at the very early stages when they don’t have much product or traction. Sometimes we see a founding team that’s missing a skillset that’s so key to that business that we have to pass. E.g., you have an autonomous vehicle startup with a business model that requires you to integrate your system with car manufacturers, and your team is all technical and doesn’t have any business development ability. Not having a business-focused founder, especially one who’s worked with auto OEMs, is problematic.

“Founders aren’t mission-driven”

This is another way of saying that the founders just don’t seem that into the idea. They should care deeply about the problem they’re building the company to solve, and ideally have experienced it themselves. They may reference the draw of making money, which is never the right reason to found a company; not even an absurdly high salary will keep people fighting during the inevitable dark periods that startups have to face. Or they refer to doing something else in a few years and don’t see this company as long-term. E.g., the past few months VCs have been seeing a lot of “blockchain for X” pitches where the founders don’t seem to have a great reason for including blockchain, other than other people’s hype.

“Lack of focus”

The VC thinks you’re trying to do too many things at once. This could apply to several spots in the business, including product (you’re trying to build too many things), go-to-market (you’re trying to sell to an array of customers without understanding which one’s truly best), business model (e.g., you have freemium, paid with multiple pricing tiers, and enterprise sales, but you haven’t sold anything yet), team (multiple part-time people who should be full time, including founders who haven’t quit their day jobs yet) or operations (e.g., you have a time-consuming services studio in addition to the startup business).

“Personality/behavioral red flags”

This is another one that VCs may not tell you directly unless you press them on the reason why they passed. It’s uncomfortable. But there are cases when a founder comes in and displays sexist, racist, rude, or otherwise negative behavior that makes us write off backing that person. Things I’ve seen: men only engaging with male investors and not with female investors present in the same meeting (that includes speaking, hand-shaking, and eye contact); people who are obnoxious to office support staff or waiters; narcissistic people taking 45 minutes of an hour-long meeting rambling about their bios; and spouting off sexist or racist opinions. VCs are gauging whether you’re the right person to lead a team and provide those people with a safe workplace that’ll act as a second home. We don’t want to entrust that to you — at least not with our capital — if you’re an asshole.


An investment means a relationship that spans years, even decades. Honest, open communication is critical. If VCs think that founders are lying to us, we’re out. There’s intellectual dishonesty, where founders aren’t honest with themselves or investors about how things are going; they will minimize problems and play up successes, making it difficult for investors to help them and shocking when the true status of the company becomes clear. Then there’s run-of-the-mill dishonesty where founders lie outright about facts. Examples I’ve seen include inflated metrics (“we’re growing 50% month over month” when they’re not), manufactured advisors (saying that high-profile Silicon Valley CEOs are advisors when they aren’t), and exaggeration of product readiness (claiming that a platform is fully automated artificial intelligence when it’s really just humans on the backend).

“Distributed team”

Most VCs view a distributed founding team where people don’t work out of the same physical location as a negative. It can work, but typically only after the company started in one place and then expanded to multiple offices as it grew. Exceptions include crypto investments where a decentralized platform and business model lend themselves to a decentralized team, and very early companies who outsource their development teams to countries with cheaper workers.

“Negative references”

Someone the VC trusts had something bad to say about one or more of the founders or a key person on the team. VCs don’t stick to the list of references you provide; we’ll also look through LinkedIn and talk to people you’ve worked with but didn’t mention to us. There isn’t much you can do in this situation because the VC most likely won’t divulge the person who made the comment. Be thoughtful about the LinkedIn connections you have and delete or don’t accept those with people who you don’t truly know well.

“CEO or founder isn’t compelling”

The founder who will assume the most public-facing role should strike an investor as exceptional and special. There has to be something about them that is moving, a je ne sais quoi that compels people to listen and to care. This same presence will be what allows them to raise money, convince employees to work for them when they have lots of other options, sell customers, build partnerships, give great press interviews, and more. There is not one right way to come off as special; the extroverted salesperson CEO often comes to mind, but the introverted technical genius who breaks down complicated architecture into simple quips fills that role too. “I’m just not that into you” is perhaps the most difficult-to-articulate reason to pass on a startup, but one of the most common.

Individual investor or firm-related

“Not in our geographic area”

Most VCs have geographies in which they do and don’t invest. Pay attention to the VC’s current portfolio: where are those companies located? Where are they relative to the investor’s offices? Most firms will put their preferred geographies on their websites or social media accounts. Don’t waste your time pitching your UK-based company to a US firm that only invests in the US and Canada.

“It’s just not something I can get excited about”

VCs are people with individual tastes and interests. Not every startup idea thrills every VC. And that’s okay — as a founder, your best investor match is with someone who really loves and understands what you’re trying to do. Sometimes VCs do take pitch meetings with companies that don’t interest us on paper, but we’re hoping the founder’s enthusiasm will be contagious. That can happen, but it’s more likely that a VC who’s already excited about a certain industry will get it, as opposed to converting one into a believer who isn’t.

“Too capital-intensive for us”

In non-VC jargon, this means that we think it’s going to take a ton of money to get this business to work. Different firms have different comfort thresholds with capital-intensive startups; bigger funds are often better suited for them. If you’re starting a virtual reality headset company — a complicated hardware play — don’t expect a $50M pre-seed fund to be a great match. Certain industries, like cybersecurity and hardware, tend to need more funding to reach product-market fit than others, like consumer mobile apps or SaaS platforms. They’ll need a VC who understands that it’ll take a few checks (and years) to get it off the ground.

“Too early for us” / “too late”

All VCs have a stage or range in which they invest. That stage considers how far along the product is, who and how many people are on the team, how much funding they’ve raised, what amount they’re seeking to raise and at what valuation, their industry, and more. If a firm mainly invests in Seed and Series A companies, one that’s just at the idea stage with nothing built and that’s seeking $50k in funding is too early. One that has 200 people and is seeking a $50M Series C round is too late. Not aligning within a VC’s investment stage(s) is one of the most common reasons for a pass. Some VCs make personal angel investments in companies that are too early for their firm but that they love and want to stay close to as they grow.

“Too small a round” / “too big a round”

Like with company stage, VCs have round sizes in which they prefer to participate. Many VCs are conscious of ownership and seek to buy a certain percentage of a company when they invest. For example, Accomplice looks to put in $1M-$2.5M first checks for between 10 and 20% of a company. If a founder is raising a $15M round, our investment won’t make up a significant enough piece of it to hit our desired ownership. But as with stage (too early or too late), VCs will sometimes make exceptions to their model to have a small ownership percentage of a company that they think has huge potential.

“I couldn’t convince my partnership”

The individual investor you’ve been working with loves you and the idea, but either one of their influential partners or the partnership as a whole vetoed it. If you’ve been talking to an associate who can’t write a check without a senior partner’s approval, it’s probably the senior partner that they work most closely with who’s saying “no.” If you’ve been talking to a senior partner, it’s probably that person’s equal at the firm (like one general partner talking to another). Another possibility is that the VCs are knowingly using each other as scapegoats to avoid giving a real reason for passing and preserve standing with you (“it’s not me; it’s that other person”). One of the benefits of a partnership is absorbing the fall for each other in situations like these.

“I’ve seen a similar company try this and fail”

VCs have scar tissue from the companies we’ve backed that haven’t worked out. Even indirect knowledge of a startup’s failure can dissuade a VC from investing in a similar company. This pass reason is more about the VC’s personal baggage than the founder to whom they’re saying it.

“Unreasonable expectations around the VC’s role”

Some founders (wrongly) expect VCs to help the company where it’s weak, but far beyond what’s normal or useful for an investor. I’ve seen founders who have a company with a very minor tech component built to date ask tech VCs to join “so you can help us build the software.” That is not our job. If you want a tech VC to back you, the tech should exist or come from you in the future. We’ll help where we can, but you shouldn’t want us involved in the minutiae of the business because it’s not the best use of our time for either of us. Of course, good VCs help with a wide range of things across a company’s lifecycle: recruiting, product testing, conflict resolution, marketing launches, strategic vision, equity and compensation, etc. But we aren’t employees, and we aren’t your crutch for essential parts of the company that need to come from you.

“Competitive with a portfolio company”

If you’re a founder in a certain industry, it’s smart to pitch VCs who have already made investments in that industry as long as it’s broadly defined. If you get too specific with the similarities, though, you risk the VC telling you that your company is competitive with one of their existing investments. E.g., if I’m on the board of Niantic, which made Pokemon Go, I would pass if you pitched me a new company’s idea for “Pokemon Go but for kittens” (even though someone should make that). But a mobile gaming company in general may be a good fit.


“Problematic cap table”

VCs will ask to see your cap table, especially as they get more serious about the investment. Short for “capitalization table,” it’s a spreadsheet showing which people and firms have ownership in the company and its financing rounds. Problematic cap tables may have format issues (like being out of date, not reflecting recent funding rounds or equity grants, broken models, or mispriced option grants), ownership issues (like angels who got way too much of the company for a small amount of money, not having employees on a vesting schedule, advisors who think they have equity but aren’t on the cap table, or confusing agreements like warrants or verbal promises that don’t show up in the document), or both.

“Bad presentation materials”

This is another pass reason that is awkward for VCs to say, so just because you don’t hear it doesn’t mean it doesn’t apply to you. Ask someone you trust to be straightforward with you about your pitch deck. It doesn’t have to be a design marvel, but egregiously ugly decks are distracting and make VCs worry that you don’t prioritize aesthetics now and won’t in your product later. The same goes for spelling, grammar, and legibility: be precise and clear. Communication matters. If you make these kinds of mistakes in your pitch deck where you’re aiming to put your best foot forward, it suggests you’ll be even more negligent about the rest of your business.

“Valuation issues”

Usually this means that the VCs think your valuation is too high. A high valuation means that the VC will get a smaller ownership piece for the same amount of funding, plus you’ll have to raise your next round on an even higher valuation. That’s tough: you’ll have to hit lots of milestones and execute flawlessly, and that’s never guaranteed. Depending on how much higher your desired valuation is than what the VC thinks is reasonable, you may also risk appearing overconfident and out of touch with reality. Too low a valuation is also a negative signal: it suggests a lack of sophistication around fundraising, the market, and the value of what you’ve built.

“Undesirable terms”

There’s a long list of possible issues that could go wrong in negotiating a term sheet — it’s outside the scope of this article — so you should push a VC to give you specifics. Some of the most contentious areas include classes of stock, pro rata rights, liquidation preferences, founder vesting, the board makeup, employee stock options, drag along rights, information rights, and voting rights.

“Co-investor dynamics”

The VC doesn’t like the investors you already have, those you want in the current round, or both. Strategic investors, those associated with corporations, can be especially problematic because they have more complicated incentives beyond just making a return on their investment. They might invest to get a view into a product that they want to build themselves, or to get more information about your company to see if they want to buy it later. They often move slowly, ask for unusual terms stemming from their unique interests, and can create conflicts of interest with their competitors (like if your robotics company takes money from Panasonic, and then Samsung won’t partner with you because they’re worried you’re too close to their competitor). Taking funding from a strategic investors can also signal that you didn’t have interest from “regular” institutional investors. But “regular” VCs can be the problem, too: you never know which individual VCs have feuds with others, or which firms dislike working together. VC firms and individual investors can have long, dramatic histories that founders won’t be aware of. Although co-investor dynamics are largely out of your hands as a founder, you can sometimes get the inside scoop by asking other founders who the VCs you’re meeting with have backed before.

“Fundraising tactics”

The way that founders run their fundraising process reflects a lot about them. There’s a fine line between invoking psychological and sales tactics that keep VCs interested and being unethical. Saying you have multiple term sheets in hand will inflame VCs’ competitive natures, but don’t say it if you don’t. Trying to force scarcity or create a rush to get an offer when there isn’t one is usually obvious and can backfire.

“You need to find a lead”

Some firms do not lead investment rounds or only do in rare cases. If they tell you they want you to find a lead, that lead will not only put in the largest check in that round, but they’ll set the terms that the rest of the syndicate will follow. However, some VCs who don’t have enough conviction around your company will ask you to find a lead as a pretext because they want to hang back and see if you can convince a quality firm or person to join. That removes some of the risk that they’re struggling with.

“Unpersonalized cold pitch”

Sending a cold pitch over email is a bad way to get investors’ attention. I only know of one founder out of hundreds we’ve backed at Accomplice that came in through a cold email (nice work, Mikael from Unsplash). You want the VC to invest in you, so you should invest the time in personalizing your email to them. Taking the extra few minutes to get a warm intro from someone the VC knows well, ideally a founder they’ve backed, is well worth it. If you must do a cold pitch over email, at least make it rise above the crowd. Cold email pitches should:

  • be personalized, explaining why this firm and these partners are a good fit for you and your idea; don’t just copy and paste the same thing to every VC
  • be very brief, with just a high-level idea, who you are, and maybe a link to a slide deck for more info
  • have a reasonable ask for a first meeting (like “do you have 15 minutes for a call?” not “we would like to pitch your entire partnership this Friday”)

Product or tech-related

“Not enough tech”

This “no” is specific to technology investors. What defines “technology” is super broad these days — almost every business has a website or an app — but most tech VC firms have a baseline amount that they need to see. What isn’t technology? Life sciences, medical devices and biotechnologies, simple e-commerce, capital-intensive businesses, pure gaming companies (because success is too dependent on how individual titles perform), editorial content/media, consumer packaged goods, or heavily offline businesses. E.g., “we sell this physical widget online” is not enough if the widget itself doesn’t involve any tech.

“Not enough product”

Some VCs, usually pre-seed or micro VCs, will back startups that are nothing more than an idea. Others require a finished product that’s been researched, tested, and launched.

“Feature, not a product”

The VC may like the idea, but it doesn’t feel significant enough to be a standalone business. This “no” is related to market size: the VC doesn’t think the concept can hook a lot of people, or inspire them to pay or use it frequently. One way to counter this assumption, if you believe it isn’t correct, is that the feature may be the focus today but it’s the first step in a larger product plan.

“Product dysfunction”

Not having any product built is bad if you’re fundraising at a point where an investor expects to see it. But having bad product to show is also, well…bad. If you have a tech demo, make sure it works. Prepare for demoing on different devices and in different settings, from coffee shops to conference rooms. If you’re claiming the product does X, make sure it really does X. It’s better to under-promise and over-deliver than to hype up an investor on everything your product can do and have it flake out. Exaggerating your product capabilities can come off as disingenuous or naive.

“Licensing or IP issues”

Many founders, especially those who are highly technical or academic, seem to think that securing patents is important to VCs. Actually, VCs don’t care much about patent portfolios; they’re expensive, time-consuming, and can distract you from all the other things you need to do to build the business. Instead, intellectual property issues in fundraising usually have more to do with a startup’s questionable use of existing IP. A few examples:

  • The founders spun the technology out of a university but haven’t negotiated rights to use it yet or got a bad deal
  • The founders used a development studio to build an app and now owe the studio a high percentage in royalties forever
  • The founders came from a previous company that has patents protecting a certain thing, and whatever the new startup is building looks dangerously similar to the previous company’s tech; there may be an infringement lawsuit ahead

Business model or progress-related

“Not enough traction”

VCs have a bar for the amount of traction that they’re comfortable with. Depending on the type of company, that could mean users, downloads, paying customers, revenue, partnerships, etc.

“Dislike the business model”

Something about the business model is a red flag. Maybe the VC thinks you’re targeting the wrong customer, or that you don’t understand which customer is the most valuable. Maybe your pricing seems off. Maybe that VC doesn’t have confidence or enthusiasm about that type of business model. Some investors just don’t like e-commerce; others love it and do only that. Maybe the model requires working with many different stakeholders and seems confusing and time-consuming. Ideally the VC tells you exactly what put her off about your model. If not, it’s okay to ask.

“Dislike the go-to-market”

Usually this pass reason means that the VC thinks your go-to-market (GTM) plan is non-existent, not well thought-out (e.g., “we’ll do a launch, and then users will just…find us”), or they don’t think tactics mentioned will work. I’ve seen really high-tech products with ill-fitting, old-school GTMs, like trade shows and direct mailings for a big data company. Or simply saying “we’ll do Facebook ads” for a consumer product doesn’t cut it because they’re competitive and expensive; plus you should have an organic strategy for users to find you without paying for them.

“Supply chain concerns”

Many VCs have horror stories about hardware startups: they tend to be a lot more expensive and take much more time to get to market than anyone expects. Many of these issues relate back to problems with the supply chain. If you’re pitching a hardware business, you or an expert on your team should know exactly how and where you’ll manufacture every component and what it’ll cost.

“Not a scalable model”

Venture-backed companies should be scalable, meaning that they can multiply revenue with minimal incremental cost as they grow. Studio or high-touch service models that need more people to do their work aren’t scalable. Software scales; people do not. Many models start out with heavy reliance on people or slow processes, but they should move to scalability as they evolve.

“Unclear value proposition”

In the investor’s opinion, you’re solving a problem that the world doesn’t have. The solution that the company provides should be essential, not nice-to-have; it’s a painkiller, not a vitamin. Maybe the value proposition is strong, but it’s not coming across because of complicated or confusing messaging.

“Weak metrics/unit economics”

One or more aspects of your unit economics were concerning. Maybe you calculated something wrong (like you report your burn rate as much lower than it really is, or you’re claiming 50% month-over-month user growth but your user numbers don’t support that), you’re presenting something that seems low (e.g., the ratio of your customer acquisition cost to your customer lifetime value is one or below, or your margins only 15% in a software business), or the investor is calculating something additional using the metrics you provided and doesn’t like the result (like using acquisition cost and lifetime to determine that payback period is extremely lengthy). Weak metrics hurt your viability; false metrics hurt your credibility.

I’ve talked about the stated reasons VCs give for passing: those that have to do with the market, founders, individual VC or firm, fundraising process, product or technology, and business model or go-to-market. But sometimes actions (or inactions) speak louder than words. If a VC goes silent on you at any point in the fundraising process, they’re not that interested. It’s poor form and you deserve a reason, but overflowing inboxes, portfolio company emergencies, and unwieldy and unpredictable schedules are the norm in our jobs. VCs will lose interest. Speed kills in venture, so as a founder you should work to create and maintain momentum.

In the spirit of transparency, the two most common reasons why I pass are first, not feeling strongly about the founders, and second, a lack of personal interest in or conviction about in the space. I’ve seen how hard it is to build a successful venture-scale company. It’s riddled with adversity. Pivots and crises are the norm. If I don’t have a real connection with the founders in a space that they are mission-driven to care about immensely, it’s a pass. Success takes a rare combination of exceptional people, timing, and technology. It’s a long, drawn-out battle, and VCs will crawl over broken glass for the founders we’ve chosen to back.

Having conviction in either of these two components (or ideally both) will overcome almost any other reason for passing. VCs make exceptions for people and ideas that we think are truly exceptional.

What’s Really Disrupting Business? It’s Not Technology


If women wanted to shake up their makeup regimen 10 years ago, Sephora was the place to go. Beauty product junkies loved Sephora’s candy store-like display of sample-size face creams, glittery lip glosses, and eyeshadows in every shade imaginable, allowing them to test out new products at non-committal prices.

That is, until Birchbox came along in 2010 with an innovative offer: Pay a monthly fee and receive a curated box of beauty samples by mail.

“They said, ‘We’re going to start off doing this one part of the customer value chain, which is helping you identify the better products, and we’re going to do it more conveniently,’” says Thales S. Teixeira, author of the new book Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption, which debuts tomorrow.


Many established companies lament the disruption they’re facing at the hand of technologically savvy startups. But Teixeira, the Lumry Family Associate Professor of Business Administration, argues that these newcomers simply spotted and served an emerging customer need faster, taking market share from established companies that didn’t see them coming.

Are companies looking at disruption the wrong way?

Danielle Kost: In your book, you argue that technology isn’t the main force hobbling many companies today—it’s changing customer needs and behavior. How did you come to this conclusion?

Thales Teixeira: When I started eight years ago looking into what was going on in certain industries, what came out initially was this idea that it was technology, right? We all talked about Google, Amazon, Facebook, and Apple. But in many industries, both the disrupter and the disrupted had similar technologies and similar amounts of technology.

The common pattern was that the majority of customers in those markets had changing needs and wants, and their behavior was changing.

Kost: Many of the companies you’ve studied gained a foothold in the market by capturing one piece of the customer value chain, or by following the steps a customer takes to select, buy, and consume a product or service. You call these situations “decoupling.” Could you give an example?

Teixeira: A great example of decoupling is an insurance startup called Trov. It’s an app that allows you to quickly insure expensive belongings for short periods of time. If you’re traveling to Rio de Janeiro next week and you just bought a $700 camera that you fear you’ll lose, you can upload some information about the camera to the Trov app, swipe right, and insure it from the moment you embark. One week later, when you come back, you can swipe left and it will stop insuring it.

You don’t have to do all the activities you normally would do with a traditional insurance company. You don’t have to talk to an agent, look at the policies, list the things you own, pay for the policy, use it, and then cancel it.

[Most] insurance companies don’t want to sell you one week of insurance for one product. They have thousands of employees, big budgets, and huge infrastructures, so that they can offer more or all of the activities in the customer value chain.

Kost: Incumbents that survive disruption often embrace it and change their business models to forge new sales channels, revenue streams, and customer segments. Could you give an example?

Teixeira: Incumbents tend to respond to decoupling by gluing back the part of the value chain that was broken. The other alternative is you just live with the fact that it’s broken. That’s called “preemptively decoupling.” Instead of waiting to be disrupted, you just break it.

When Amazon started selling electronics online, it created apps that encouraged customers to go to a store and check out the prices and products, but order them at Amazon. This is called showrooming.

Best Buy initially tried to prevent customers from showrooming. They considered changing the barcodes on products to make them hard to search for online. The company even tried to use signal jammers, like the ones they use to keep prison inmates from using cell phones.

Eventually Best Buy executives realized that Amazon and showrooming are not going away. They decided to charge manufacturers for putting those items on the shelf. When a company like Samsung puts TVs on display at Best Buy, Samsung is benefiting whether you buy it from Best Buy or Amazon. So Best Buy decided to charge for that value they create.

Kost: Many companies obsess about their direct competitors—how to undercut their prices, outpace them in R&D, or steal their talent. You argue that companies should focus on customers and meeting their needs. Why is that so hard?

Teixeira: You have few competitors, so it’s easy to look at what they’re doing and emulate or respond. When Coca-Cola launches a new product or reduces prices, it’s easy for Pepsi to identify that. It’s easy to go to the board or to your boss and say, “Our competitor is doing this. We should respond.”

It’s very hard to understand your customers because you might have millions of them scattered around the world. It’s hard to see what they’re doing and to understand why they are doing what they’re doing.


Kost: So many executives are trying to predict the next wave of disruption. You recommend that executives look for early signs of behavior change in seven consumer categories. Why?

Teixeira: When I started doing this research, I realized that 90 to 97 percent of consumer spending is concentrated in seven categories. I call them the categories that better consumers, from their point of view: where they live, what they eat, what they wear, how they move, how they heal themselves, how they educate themselves, and how they entertain themselves.

When consumers change their behavior, the first signs can be seen in one of these seven industries, and it quickly multiplies.

Kost: What lessons do you hope executives will take from your book?

Teixeira: That the game has changed. In the past, there were a few big companies competing with each other. Coke versus Pepsi. Airbus versus Boeing. GE and Siemens. Now there are thousands of startups in any market, and they’re competing with the big companies without having the resources.

But in most cases, consumers are disrupting markets, not startups and not technology. Your way out as a business executive requires adapting and evolving your business model.

Danielle Kost is senior editor of Harvard Business School Working Knowledge.

All Things Sales! 16 Mini-Lessons for Startup Founders


As a former CEO and software engineer (Citrix, XenSource, VERITAS, etc.), board member of GitHub (recently acquired by Microsoft), and lecturer in management at the Stanford Graduate School of Busines, a16z general partner Peter Levine is constantly asked “Why sales?” by entrepreneurs and technical founders. He himself used to hold the “engineer-centric” view that if you build a great product, customers will come. But the fact is, all world-class companies must have a strong sales force. So — how do they get there? How does a technical founder begin to build a top tier sales motion?

In this series of snack-sized videos — which you can watch all together, or mix-and-match for your particular questions and needs — Levine distills the fundamentals that every founder should know about sales. The 16 lessons in this “mini-MOOC” offer everything from definitions to concrete guidance for the following:

1. All Things Sales! 16 Mini-Lessons for Startup Founders [Introduction]

2. Understanding and Defining Sales Channels

3. Engaging Sales: How Much to Spend on Marketing vs. Sales?

4. Segmenting Markets for Go-to-Market

5. Why Build a Sales Organization?

6. Building a Sales Org: Who, When, How

7. Setting the Sales Number

8. A Short Coda on (Sales) Quotas

9. Mapping Go-to-Market to Customers: ‘The Coverage Matrix’

10. Managing a Sales Org: Forecasting

11. Managing a Sales Org: Revenue Composition

12. How to Compensate Sales Reps

13. Simplifying Sales Compensation

14. Sales Force Productivity: How Do You Know?

15. Predicting Your Pipeline

16. Takeaways for Technical Founders: How to Think about Sales [conclusion]

Acknowledgements: With thanks to Mark Leslie and Jim Lattin for their contributions to the concepts — including the “sales learning curve” (see this 2006 Harvard Business Review article by Leslie and Charles Holloway) — in this series. Many of these concepts are developed and discussed in an MBA elective course we teach at the Stanford Graduate School of Business, “Building and Managing Professional Sales Organizations”. 

Can Lambda School Become a $100M Business? A Growth Case Study

When I graduated in 2014 with a 4-year marketing degree, I realized how little I learned that was directly applicable to the needs of employers. It wasn’t until spending an entire summer taking online courses that I landed my first job in the tech industry. Since then, I’ve been deeply interested in any novel approaches to education. From MOOCs to coding bootcamps, I knew there must be a better way. That’s why when I recently heard about Lambda School, I was intrigued.

If you haven’t heard of them, Lambda School is essentially a coding bootcamp with a twist: you don’t pay them anything until you land a job bringing in more than $50,000 a year, after which you pay them a portion (17%) of your income for 2 years. This makes a coding education accessible to people with less savings to spare and, more interestingly, makes Lambda fully invested in their students’ success.

It’s an interesting model with a huge potential for impact, sure. But can Lambda really become the next big alternative to higher ed? In this series, I will try to answer that question by deconstructing their potential for growth. Along the way, we’ll determine if Lambda is cut out to be a $100M+ business, see what growth loops could drive the business forward, and dig deep into their funnel.

Part 1: Can Lambda School Become a $100M Business?

To answer this question, I’ll be using Brian Balfour’s “Four Fits” framework, which elegantly breaks down a $100M+ business into four interconnected parts:

  • Product-Market Fit: Does Lambda have a product that a particular market wants?
  • Product-Channel Fit: Does their product fit well with a scalable acquisition channel?
  • Channel-Model Fit: Does their business model enable this acquisition channel?
  • Model-Market Fit: Will their business model combined with their market enable a big business?

Product-Market Fit (PMF)

Let’s start with Lambda’s target customer: people who desire a more lucrative career but lack the financial resources, support, and know-how to get there. Their founder, Austen Allred, claims it is a mixture of people who “got the wrong degree”, abandoned their degree, and never went to college at all. All of these groups share common problems: they’re in low paying jobs and may have debt to pay off. Hence, Lambda’s key value prop of not making you pay a dime until you get a high paying job is very compelling. But only if their curriculum (product) works.

Market Problems Solution
  • Got the wrong degree, abandoned degree, no college
  • Desire a more lucrative career
  • Low paying jobs
  • Debt
  • Coding bootcamp you can take from home
  • Don’t pay until you get a high paying job

Does their product deliver on its promise?

To start, we can look at customer feedback. Bootcamp ranking site Switchup has Lambda School at a 4.92/5 rating and it is among the top 20 coding bootcamps on the site. Not bad. There are also countless reviews like this one:

That’s not to say Lambda isn’t without its detractors (see Reddit), but on the whole, customer sentiment seems very positive. As alluded to by the student above, Lambda seems to be iterating on their product to strengthen PMF. They’ve also taken efforts to improve their filtering of potential students (i.e. refining their target market) which I’ll discuss further in a future post.

Next, we can look at student retention. If they’ve truly built a product that serves this market, a high percentage of students will make it to the end. Austen claims that while in the early days as little as 50% retained (not so good), they’ve increased that to 80-90% (May 2018). That’s much more sustainable. And with curriculum iteration a core part of their playbook, it seems likely they can push it further. Of their graduates, Lambda claims 83% get hiredwithin six months.

So, it seems like Lambda delivers. But there’s also evidence that they overdeliver. I’m amazed at how much their students advocate for them (Twitter, blogging, etc.) — and this word of mouth is a key growth amplifier for them (more on this later).

Product-Channel Fit

Even if students think Lambda has a great product, they’ll never make it to the big leagues if their product doesn’t fit well with a scalable acquisition channel. They don’t make the rules of the channels, so their product must be designed with one in mind.

Before we assess some potential channels, let’s consider a Lambda customer’s journey to becoming a student:

  1. Interested visitors come to their website
  2. They fill out an application form
  3. Lambda assesses the potential student’s fit
  4. An offer is made and an agreement is signed

Looking at it this way, Lambda has an admissions process similar to a B2B sales funnel. So their goal with an acquisition channel will be to generate student leads.

Given that, let’s consider some commonly used B2B channels.

Outbound sales

In theory, this would work with their product because they could offer a pretty compelling 1:1 sales pitch to students this way. But this would be way too costly and wouldn’t scale.

Content marketing

This definitely has potential. Lambda could create high-quality content (blog posts, etc.) and try to rank for keywords that their audience is searching. There’s a strong fit with their product because the content would demonstrate Lambda’s expertise in web development and build trust with potential students. However, the problem with this channel is that it relies on people having search intent. Many potential students probably don’t even know a career in web development is a possibility for them, and the chances of them searching for a variety of web development terms is probably slim.


Lambda’s best chance at large, affordable audience is paid acquisition. Facebook ads, for example, are a perfect fit for their product for a few reasons:

  1. Facebook’s interest and demographic targeting allows them to reach their latent target audience of lower-income people who desire a career upgrade
  2. Lambda’s “don’t pay until you get a job” pitch makes for a compelling ad, and
  3. Photos and video allow them to deliver this pitch in a captivating way

Where ads could break down in terms of fit is trust. Clicking on an ad and immediately filling out an application for a school you’ve never heard of is a bit weird (when exactly is this company going to steal my identity?).  To prove that they’re the real deal, Lambda needs a way to provide value right away.

How they’ve chosen to solve this problem is a perfect example of adapting your product to fit the channel. Instead of directing ads traffic to an application form, Lambda offers free intro courses so students can test them out. As a bonus, these courses act as an important quality filter to see if incoming leads have the potential to succeed as full-time students.

Channel-Model Fit

Okay, so paid channels sound like a good fit for Lambda. But is spending all that money for leads sustainable? Can their business model support it? Let’s take a look.

This will depend on two things: their average annual revenue per customer (AARPC) and their customer acquisition cost (CAC). Time for some quick math…


  • AARPC = $70,000 (Lambda grad median starting salary) * 17% income share agreement = $11,900
  • This is a sizeable amount of revenue per customer and leaves the door open for more costly acquisition. And it will be costly because getting a student to commit to a 9-month course is not an easy task. As leads come in from ads, they’ll need the hands-on attention of the admissions team not only to help move prospects down the funnel but to ensure these students have a high chance of success.


  • As I alluded to, their CAC is on the high end of the spectrum because of the friction involved:
    1. Bring traffic in with a compelling offer —> Ads ($ for clicks)
    2. Deliver value and assess fit —> Nurture and score mini-bootcamp leads with a CRM ($ for labor)
    3. Close with high potential students —> Schedule phone interviews with admissions staff (more $ for labor)
  • Okay, that’s starting to sound pretty expensive. But here’s where it gets interesting. As mentioned before, Lambda seems to be benefitting from a ton of word of mouth. This means for every customer they pay to acquire, they can expect them to bring in more for free. Every dollar is amplified and their CAC decreases as a result. If they can keep their product quality high, they’ll continue to reap the benefits here.

Given the above, Lambda looks like it has a channel-model fit that can sustainably support their acquisition strategy. However, as they scale they’ll need to be mindful of their cash flow, given their lengthy payback period. From lead to employed software developer is a 12+ month road.

Model-Market Fit

Everything is fitting together well so far, but none of it will matter if there isn’t a sizeable market willing to take the Lambda plunge. So, the question we’ve been waiting for: can they reach $100M? Time for more math…

First, let’s determine how many customers they’d need to reach $100M:

  • $100,000,000/AARPC
  • = $100,000,000/$11,900
  • = 8,403 paying grads needed per year

Now, let’s see how feasible that is:

If students can’t get jobs, Lambda doesn’t get paid, so there needs to be a demand for developers in the future. This one definitely doesn’t seem to be a constraint. We’re good here.

Just a rough estimate

They also need motivated people who can spend time learning to code. That could certainly constrain the market. Time for some more math…

  • There were 20,000 code bootcamp grads in 2018 (US and Canada), coincidentally who paid $11,900 on average. Not a huge market.
  • But — given that the median American household savings account balance is $4,830, traditional code bootcamps have a comparatively teensy market compared to Lambda. The percentage of the population with $12k to spend up front and potentially move to a city for a bootcamp just isn’t that big.
  • So, if 20,000 grads are coming from (I’m being generous) ~10% of the total potential market (200,000), then Lambda is left with the other 90% (180,000). So Lambda only needs to capture ~5% of the market (=9,000 annual paying grads) to have a $100M+ business. Not a cakewalk, but seems doable!

It’s also worth noting that the above analysis only considers their software development bootcamps for the US market. There’s potential to expand into adjacent markets (they’ve already started to do this with design and data science), but this would require assessing all of the four fits again. For example, a data science bootcamp is a new product for a new market (would-be data scientists) and it may require tweaks to their channels (maybe would-be data scientists don’t hang out on Facebook) and business model (the job market could be quite different for data science).

The Answer

Can Lambda School Become a $100M Business? I think so. And I really hope so. Because everything that makes good business sense above also helps students. If they do hit $100M, that’s 9,000 grads who have unlocked a new future and are creating more innovation. That’s pretty cool.

But if Lambda really wants to become the future of education, they’ll need a strong growth engine. Next in the series, I’ll see what growth loops could drive the business forward and dig deeper into their funnel.