F Cubed hosted a fireside chat with Hadley Harris of Eniac Ventures and Lara Crystal + Lindsey Andrews of Minibar on Tuesday, March 10th at Lowenstein Sandler LLP. It was a rainy evening but we had an engaged crowd of investors, entrepreneurs, students, journalists and others in attendance.
What makes mobile on-demand so attractive and what sectors are ripe for disintermediation + value-creation via mobile on-demand?
Sectors that have been disrupted via mobile on-demand marketplaces provide commoditized services that consumers need anytime and quickly. Services that require specific supply (e.g., women’s haircuts), do not lend themselves to on-demand marketplaces. The possibilities for on-demand disintermediation and value creation are endless, so long as the markets provide services that possess commodity-like qualities.
As 2-sided platforms, marketplaces need to also be able to successfully match up liquidity on both sides. This is a significant operational challenge that requires a strong management team, particularly in tech. Without these market- and company-specific dynamics, value-creation via mobile on-demand is not possible.
What type of research is done to identify markets that are inefficient?
Lara + Lindsey leveraged user surveys to identify how their target users were shopping for consumables. They found that individual consumers were shopping for wine + spirits on their way home from work. This represented a significant opportunity for disintermediation via mobile on-demand.
How did Minibar create a direct-to-consumer brand, and how did Lara + Lindsey’s prior career experience at Rent the Runway and Quidsi help to build the brand? How important is the customer experience to Minibar’s growth and strategy?
At the outset, Minibar utilized unpaid, non-scalable channels, including PR partnerships and social media, to develop their direct-to-consumer brand. Many of these tactics were adopted from Lara’s experience at Rent the Runway. Growth hacking is a term that is used a lot but non-scalable activities can be used that have a significant impact too.
Renting is a naturally social behavior, as is alcohol consumption. Making this a pleasant experience is important to sustaining the value of the brand and the service. Customer experience is vital to Minibar’s success, which is another strategy adopted from prior experience.
Minibar has amplified the growth of wine + spirits retailers as well. How has Minibar enhanced the revenue of its partner stores?
Retailers are key to Minibar’s operations. Lara + Lindsey have found that the Minibar partnership enhances revenues for its retailers. It is illegal to own more than one liquor store in NY, making the market highly fragmented by definition. Minibar gives retailers the voice and the ability to access demand previously unknown.
Further, for most wine + spirits stores, wine represents the majority of the inventory. The bulk of Minibar’s orders include wine because, when first setting out to partner with retailers, Lara + Lindsey focused on enhancing wine sales for its partners, listing wine first on the Minibar menu. These tactics have further enhanced Minibar’s retailer relationships.
What metrics are most important to investors in mobile on-demand companies? Does growth matter more than unit economics?
Key metrics include repeat rate per customer + month-over-month retention. Given Eniac is a seed stage investor, they prefer companies to focus on growth as opposed to optimizing unit economics per user. Most mobile on-demand companies operate in “winner take all” categories. Focusing on market share is thus more important than unit economics at an early stage.
What metrics drive Minibar’s decision-making processes? How does Minibar evaluate opportunities (for example to expand into a new market/city)?
Besides COA and LTV, repeat rate of customers is also very important. Minibar is focused on targeting one market and getting that one right before expanding into another market.
Each city is evaluated based on a variety of criteria, and expansion is determined based on this ranking. When entering a market, supply and demand need to be matched up first. Often, the supply is there first, as there is no cost associated with signing a retail partner. The learning curve of the city by city model is very steep at the outset, but with increased scale, repeating the process becomes easier.
Challenges include: navigating the legal landscape, scaling customer service, finding great talent. It is hard to do several things well, so Minibar has chosen to focus on its strengths.
Lara + Lindsey, how did you find the fundraising process?
When raising its seed round, Minibar raised more than they initially were targeting and found female role models in the ecosystem to add support.
Overall, Eniac and Minibar believe that building a great business relies on building a great product. Big outcomes require great branding, network effects, partnerships and exclusives.