What BirchBox founders learned at Harvard Business School: Buy Joliebox

Last week Birchbox the US sample-box subscription service acquired the European based Joliebox. Time to tell you the succesful story of two young female founders and to understand their growth strategy.

Rolemodels for the new generation of female founders, Hayley Barna and Katia Beauchamp (photo), graduated from Harvard Business School in 2010, and started the company right after that, so the company is not yet 3 years old! With Birchbook they hit the newest coolest thing: e-commerce online subbscription service

In building & growing Birchbox, Hayley & Katia put in practice some valuable theory learned at Harvard: build, borrow or buy?

First they defined their brand, this is their elevator pitch:

Launched in 2010, Birchbox is the discovery commerce platform redefining the retail process by offering consumers a personalized way to discover, sample, shop and learn about the best products and brands available. Birchbox members have first-touch experiences with products each month and access to educational content to help them get the most out of their products.

Then they started to make some turnover right away, a great way to get investors interested.

Turnover was 2 years after launch some 7 million dollars. It's great to have some cashflow in your company, so you can really build a team and do some marketing from the start.

Then they were able to attract some first class investors.

Accel Partners gave them money & an address book for the future. They started with 1,4 milion dollars in seed funding in 2010 and an amount of 10.4 million dollars of Series A in 2011. Besides Accel Partners, Hayley and Katia attracted funds from a number of high profile angel investors, and so got access to great address books. This is the list:

Sam Lessin
Dave Morin
Michael Dearing
Kirsten Green
Gary Vaynerchuk
Lerer Ventures

Series A,
Accel Partners
Harrison Metal Capital
First Round Capital
Forerunner Ventures
Lerer Ventures
Sam Lessin

The founders understand that their business is a tech business, so they appointed a CTO.

LIz Crawford came on board in 2012, she is a serial CTO with a PhD in computer science.

And then they wanted to expand of course, so the question was:

Build, Borrow or Buy?

As Hayley and Katia may have learned at HBS, a company can grow in 3 ways:

  1. By building the company and growng organically;
  2. By partnering with other companies
  3. By acquiring companies (i.e. competitors for example)

In each path, margins differ, costs to set up business differ and the control mechanisms are different.

So how did they decide?

Build? To grow Birch box in the US is something different than to grow a company in all those different countries in Europe, with their different languages, habits, culture and cashflow. If Birchbox would have chosen to set that up themselves, the costs would have been really high, they would have to negotiate all new partnerships with European brands, while they would have to get people to subscribe to their own brand. Mission impossible? Maybe.

Borrow? The JolieBox, which is already succesful in a couple of countries in Europe, opens the door for Birchbox to thousands of european subscribers and moreover, partnerships with over 200 French and international cosmetic brands. But why would Joliebox partner with Birchbox, they were already succesful, and to keep 2 brands in the air is not easy? So effective partnering here was not easy.

Buy? As Accel Partners has provided BirchBox in the last years with more than 11 million of funding, there was acquisition capital to some purchases. So the decision to buy the competitor was an economic one. And with the acquisition, Birchbox acquires a European team, 200 French and international cosmetic brands, and a huge list of subscribers. So a broad and deep relationship.

Question of course is, what's next in Europe?

Jolieboc covers some countries already, such as France, Spain and the UK, but Europe is easier to conquer by acquisitions, than to start each country yourself.

So what's out there for Birchbox to expand even more in Europe?

In the Netherlands for example there is Glossybox  and Trulyyours. So we are curious to know how excited these companies are that they may be acquired soon?

In the Netherlands there's also : www.beautybox.nl

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