Investor updates for early stage startup

I’ve invested in about 30 companies over the last 6 years and received a lot of different investor updates. Some companies send few, sporadic (often too detailed), updates whereas others send updates with a fixed structure and on a predictable schedule.

I think the sweet spot for many micro vcs with a portfolio is quarterly updates which arrive on a predictable schedule - e.g. 2 Mondays after the end of Quarter. Founders who update investors on a predictable schedule generally build better companies, in my experience, as there is a correlation with discipline and organization.

Here is my suggested template for sending updates, although this is not meant to be prescriptive and more to summarize the bases covered:

Many startups often miss the ‘Metrics’ section and I think this is the area where most could benefit for improving their reporting.

Template (Quarterly)

Summary

  • Key milestones hit/missed
  • Important takeaways

Highlights

  • Limit to <5 bullet points
  • New customers, product wins, critical hires, geographical expansion

Lowlights

  • Limit to <5 bullet points
  • Lost customers, product failures, lost employees

Metrics

  • Consumer: DAU/MAU, Revenue, Retention/Churn Metric, Employees, Cash, and Burn Rate
  • Enterprise: # of customers, Revenue, New customers, Sales pipeline, Employees, Cash and Burn Rate
  • I recommend showing the same metrics in a table Quarterly and then highlighting YoY and QoQ growth
Blog_Post__Investor_Updates__Raba__-_Google_Docs.png

Product

  • New features or products shipped and a short summary of their impact / future impact

Team

  • New hires / team changes

Other

  • Anything that is not covered by the sections above e.g. Press coverage

Fundraising

  • If fundraising add this section to show progress / any key milestones
  • Also useful for converting existing investors for additional funding

Help

  • Specific intros to investors or potential customers generally yield the best results

I know some founders feel like these updates don’t do noticed but I read every single once of the updates I get from founders, even when I don’t reply.

New Remittance Products

The current business model for remittances will become obsolete in the long term - margins from transfer fees and fx is going to decrease as both the underlying payment rails get cheaper, competition intensifies and new technology (e.g. blockchain) creates new mediums for international money transfer (e.g. Telgram ICOSureremt RMT tokens)

Customers are price sensitive and not loyal - if cheaper, faster, secure alternatives emerge and gain consumer trust, these customers will switch to new services

Existing remittance businesses are not going to cover operational costs at super thin margins and entrants like messaging apps with no customer acquisition cost and no requirement for profit beyond retention in their apps (Whatsapp, Wechat) will kill all small remittance startups as well as inefficient, expensive incumbents (e.g. Moneygram, Western Union)

In order to grow revenue existing remittance firms will need to leverage their unique knowledge of the sender->receiver relationship to retain their customers better, and make higher margins per dollar transferred. I think this will require significant product innovation - e.g.

  • Bill Pay - will drive customer retention because of the monthly payment cadence for bills, will improve monetisation as receiving companies (e.g. tv company or water company) will often pay a commission of a few % and the remittance provider can also batch transactions to pay many bills at the same time reducing the cost of each transaction
  • Credit - remittance companies can use historical remittance data to lever up a remittance in shock - e.g. family death or a medical bill, and then the sender can pay the remittance business back over time vs. the receiver who would not qualify or credit or get credit on much worse terms (note: this requires lots of new licenses which is the largest barrier)
  • Savings - if remittance companies know what receivers are going to buy and when they plan to buy the product, they can monetize it through referrals or asset finance

The remittance companies that are best placed to execute on this already have users in their platform. They will need to track retention of customers to make sure they are not losing these customers to alternatives, and then invest in new products and transfer methods to drive retention and better monetization.

Kenya - entrepreneurship, funding, and technology

Note: I wrote this in 2015 after spending most of the year living and working in Nairobi. I have had enough people express interest in reading my notes that I thought I would share broadly.

Summary

  • I lived Kenya over the last 6 months and left feeling inspired. I believe there is tremendous opportunity for awesome entrepreneurs to build products for the East African market. In particular, I would be well suited to focus on something that bridges the gap between the West and Africa 
  • There is a lot of raw talent, fundamental problems that need solving, and plenty of enthusiasm and excitement around building technology companies
  • There are few excellent company builders / focused executors and a lack of a proper seed/venture firm or decent incubator. ‘A’ level entrepreneurs (silicon valley, local or elsewhere) who have built a successful business are sparse
  • Access to seed and early stage capital is difficult and the fundraising process is suboptimal due to the lack of proper local vc funds which leads to entrepreneurs chasing short term revenue and lack of focus on the long term objective - funding/focus is a chicken/egg problem

Startups and Entrepreneurs

  • Entrepreneurs are hungry, have lots of enthusiasm and there is a plenty of excitement in young talent who want to build something awesome.
  • Startups are solving fundamental issues vs. incremental issues in the west -  access to good education, electricity, health care and phone/internet. There are opportunities to build on top of these solutions or provide additional products and services that are already mainstream in the west - I’m particularly excited about financial services.
  • Entrepreneurs often have their fingers in lots of pies, can be distracted by too many ventures, and seem to be doing too much with too little capital and too few people. This leads to lots of half-formed businesses versus a few well built ones
    • Chasing (short term) revenue is required to grow businesses here due to lack of access to capital for early stage businesses
    • This is partly due to the opportunistic nature of working in Kenya, and more commonplace with local entrepreneurs
  • Entrepreneurs lack role models in the community that they can get mentorship from who can help them with product strategy, marketing, assembling the right team, raising funding, and scaling the business. Some missing pieces:
    • Best in class experience - understanding of what ‘great’ looks like
    • Successful Kenyan technology entrepreneurs - groups of people who have built and exited an excellent businesses in Kenya (or East Africa)
  • Foreign entrepreneurs are met with mixed feelings especially when it’s believed that they are only in Kenya for a fixed period of time. I believe that foreign entrepreneurs can add a lot of value by mentoring local talent especially if they have best in class global experience and hire local teams

Investment - Venture Capital / Incubators

  • Local funds either have very little capital to deploy or strict mandates about where they can deploy their capital because of conditions stipulated by their LPs - leads to defocusing in startups
  • Entrepreneurs looking to raise small seed rounds have a few options:
    • Raise capital from local angels who are not often sophisticated investors and often don’t understand what they are signing up for
    • Raise money as grants or from funds (with LPs who have strict investment criteria) and these come with conditions that often result in unnecessary/unhelpful changes in strategy
    • Go on long (many month) investment trips across Europe and USA which are also usually an uphill battle and often result in small ticket angels vs. larger funds
  • This current fundraising process feels inefficient and distracts entrepreneurs from focusing on their product and company from both a time and strategy perspective
  • Local incubators have unfriendly terms for entrepreneurs and are not run by successful entrepreneurs or investors
    • Incubators typically have many companies vs. a few companies with lots of mentorship and focus
    • $25k investment for 15-25% of the company plus terms which are not founder friendly e.g. ratchets, clawbacks, pushing to early exit
    • Many incubators have shut down their program as they could not find enough quality companies - I think this is in part due to the fact that they were going for scale vs. focused set of companies
  • Grant funding can be disruptive and distracting - companies are incentivised to abandon their vision in the ‘short term’ (to get the grant) and end up building a frankenstein company with multiple focuses which is hurtful in the long term

Working in Kenya - personal learnings

  • Talent gap still pretty significant (orders of magnitude worse than Silicon Valley, which is not surprising) although there is thirst for learning and a no lack of young people who are not afraid to work very hard
  • Mid-Skill workers care more about job protection than innovating and often see change/removing things from their plate as scary - will they lose their job, or not be good at the new thing we need them to do
  • Micromanagement is necessary to make progress - you can’t just email people and expect stuff to get done. There is constant checking in and auditing of people’s work. The level of trust still does not exist at the same level as working with ‘A’ level talent in a place like San Francisco
  • My decision point is between spending my time training, teaching and mentoring in East Africa or or serve this market from abroad (with an already high performing team) and travel back and forth as needed
  • Local:
    • Pros: Close to market - context, people, can really help mentor, market changing fast, partnerships easier
    • Cons: spending time on micromanagement v.s solving hard problems, personal life issues, quality of life
  • Foreign:
    • Pros: Better team quality, valuations, exit options, potential to build global business
    • Cons: not close to customers, coordination overhead, travel burden, missing important things

A better way to bank and invest?

Almost everyone I know has too much of their assets in cash sitting in bank accounts relative to their risk profile. It’s generally hard to figure out how to get started as an investor and most people just don’t know how to go about it. Financial advisors are typically fairly expensive (2% management fees) and it’s fairly complex for people without proper finance training to buy a range of assets (stock, bonds, currency, commodities, natural resources etc). Banks benefit greatly from this, as they take savings from your bank account and invest them making 5-10% returns on your money and pay you a fraction of this in interest (0.5%).

I really like what Wealthfront has done to simplify the process of investing - they make it very easy for you to assess your risk tolerance and then automatically allocate your funds into different assets. They’ve built technology to automatically reallocate when it makes sense and built other tools for investors to optimise their tax burden (tax loss harvesting being the main one). I think this is a great start, but it still requires you to decide how much you are comfortable investing in public markets.

What if we had a new kind of online bank that took in your cash and got you to set your risk profile, and then allocated your investments based on this profile and your liquidity preference? It’s basically a combination ofWealthfront and an online bank like Simple. You could then manage all your finances from one account, figure out how much you want to keep as a cash buffer, how much to invest in fully liquid investments, and how much to invest in illiquid investments.

A system like this gets rid of a lot of middlemen and unnecessary costs like bank branches, financial advisor middlemen, and gives me better overall return on my assets with much less hassle. I hope banking evolves into something like this soon.

Future of Wearables

I don’t really like the current set of wearable offerings. I’ve used the Nike Fuel Band, Jawbone Up and the Basis. Initially, the novelty is cool, but in the end they all fall short as none of them are really accurate enough or fully featured enough to be anything more than a gimmick.

In the future, I think wearables should make the assumption that you already have a smartphone in your pocket, and so they can communicate with the smartphone directly for the majority of the day. This way, design of the wearable can focus on capturing information that a smartphone can’t capture as well (like movement or heart rate). The wearable can then send this data to the phone to do the number crunching and ultimately display the results on the device. A more extreme version could rely on the phone’s internet connection, allowing more hardcore processing to happen on a server somewhere.

The one health tracking tool I actually really like is the Withings scale. I like having a historical view of my weight and how it wirelessly syncs to a server somewhere so I never have to think about inputting the data, but can access it and use it in conjunction with other apps such as Lose It as I find useful. I think it does a good job of focusing on being a sensor and a display for weight without trying to do too much.

Once we improve the quality of the data from wearables and increase the number of types of sensors (breathing, heart rate, sleep, movement, weight, food intake etc) then we’ll be able to draw really awesome insight by combining information from lots of different sources to get a better picture of overall health and track changes over time.

It could be interesting if my doctor had a dashboard with all the inputs from my wearables and can see long term trends as well as use this information to help diagnose current or future conditions based on what’s happened in between visits.

Mobile software technology (primarily OS)

I spent some time writing down some of the things that bother me about using my mobile phone, and thought I would share some improvements that I think would make using my phone even better. Apple’s IOS 8 and Google’s Kit Kat are addressing much of it.

  • Web links over email and text - There should be a way for the OS or browser to detect whether or not an app is installed and try to open up the app (deep linked), resorting to the web view only if opening up the app fails. This would provide a better experience for user as well as an opportunity to increase app engagement, and should become standard very quickly. I think this could work by the browser going to the website and the website creating a custom deep linked url that it tries to open through the app; if it fails, then it goes to the web view. There might be a cleverer way to do it though. It’s surprising to me that apps like LinkedIn don’t work this way - I often get a link to someone’s profile and it’ll never redirect to the app - this should be the defacto, not a crappy mobile web view that requires login, etc.

  • Method of for applications to talk to each other - IOS and Android need to define an app API with a common set of things as well as custom calls that can allow apps to talk to each other in real time and share data. This would allow aggregators to become much more powerful on mobile and other apps that pull in data from multiple apps in real time, and will open up a whole new class of application. This may currently be solvable by creating server APIs, but it’s less easy than apple or google creating a common format that can be shared locally.  An example of a use case would be getting transport from A->B and an aggregator showing me the best option from uber, lyft, taxi, bus etc.

  • Search in-app content - I should be able to search on my home screen for content embedded within apps / over search. I.e., Searching on my phone should be much more powerful and personalized than it is now. It’ll be a little complicated to figure out the balance of showing content that is local vs. online or layering in additional data (e.g. what apps I use most) in the ranking system, but these are likely solvable problems. e.g. I should be able to search for ski trip and the results are a combination of texts, email, evernote, etc. Google is far ahead of Apple here but IOS 8 is starting to bridge the gap

  • Wearables as an input/sensor - The future of wearables is collecting data that your phone is ill suited to collect and then either having its own ability to transmit data to a server or using the phone/internet connection on the phone to crunch the data and transmit data to the user through the wearable in a format that makes sense. The synergy between the 2 devices (phone + wearable) is where I think things get very interesting because then the size of wearables can go vastly down (lower power consumption, less high tech, smaller size).

  • Seamless transfer from web<=>mobile- Products that have websites and apps should have a common backend that allows you to pick up on your app where you left off on your computer and vice versa. Examples are yelp or google maps. Again I think android is far ahead of iOS if you’re a power user of google products.

Founding a Company - When?

I don't think that I am a born entrepreneur. I think that I can see opportunity and potential, and have some ideas but I've not yet taken the plunge to start my own business. The truth is that I am pretty risk averse. I have been interested in technology for a while now, but only been considering the entrepreneurial path for the past 2-3 years.

There are lots of schools of thought about what stage in your personal and professional career to start a venture but I think that the two most important things are:
  • Market Opportunity - You need to have spent some time with your target market and understand where significant gaps lie. Finding a solution for these gaps is the next step, but it's likely that your original idea will evolve significantly as your try and address these gaps. The balance of having a strong vision for your product yet knowing when you need to change direction is a key skill for successful entrepreneurs.
  • Being Ready - You have got to feel like you are ready to start your own company and have faith in your skills and and abilities. And whatever you lack, you need to have the faith that you'll be able to figure it out or surround yourself with people you trust that can figure it out for you..
I have really not felt ready yet, and it's a function of not finding the right market opportunity but also not having enough faith in myself yet. I feel that I need to build a successful product under the guidance of someone who has proven themselves before I do it on my own. 

In the end everyone has their own threshold for risk and when to start a company is a very personal call, but I hope to build some awesome products at my current company (Pocket Gems) which are profitable businesses too. I really hope it works out, but regardless, I'm super excited about the journey.


Socially responsible & for profit capital for emerging markets – a better model?

The inspiration for this post was my Business at the Base of the Pyramid class at Harvard Business School and it’s something that I have been pondering as I consider being an early stage investor in East African technology businesses.

There are two main kinds of capital deployed to emerging markets to stimulate economic activity for small businesses:
  •  Social(Not for Profit) Capital – This kind of capital is usually issued by governments, charitable foundations or entities like the World Bank/IFC and makes up the majority of investment capital to small businesses from abroad
  • For Profit Capital – Investors looking for returns which are as high as possible from emerging markets to compensate them for the high risk of their investments

I think the best model for emerging markets is a hybrid form of for profit capital from socially responsible investors. i.e. Investors who are looking to make a reasonable return on their investment without exploiting the recipients of their capital. 

One of the key problems of investing in social (not for profit) enterprises is that it does not create the incentives for these businesses to scale into self-sustaining entities. If businesses are accountable to their investors to yield positive unit economics and positive returns they are less likely to operate in a lean and efficient manner. Commerical enterprises are just better designed to create long term value for their shareholders, employees and (hopefully) customers provided they are ethically run.

I think that initiatives such as Root Capital and the Grass Roots Business Fund are trying some extremely interesting innovative models and hopefully we’ll see some positive results from them.

Figuring out a more effective way to deploy capital to emerging markets is a huge problem and I really hope that such innovations make strides towards solving it.

Alleviating poverty through education and entrepreneurship

I’m a believer in two key methods to alleviate poverty and stimulate long-term economic growth for developing countries:
  •  EducationOut of all children in Kenya about 85% of children attend primary school (but <50% finish), 24% of children attend secondary school, and 2% attend higher institutions. At this level of attrition more than half the population has not even completed primary school, which is typical of developing African countries. Access to knowledge and information is a critical part of opportunity creation for people in Africa.
  • Entrepreneurship – This is Africa's (and Kenya in particular) ticket to stimulating the economy from the ground up. Governments are corrupt and policy is extremely slow and ineffective. Creating and facilitating an entrepreneurial mindset and ecosystem for people in these countries with the drive to create businesses which solve fundamental issues has got to be the way to sustainably get these countries out of poverty.
This is such huge topic and my paragraph above does not really even scratch the surface, but I want to write more often, in bite sized chunks going forward. For each of these issues, work needs to be done at both an infrastructural/country level and at a grass roots level. I believe that we will see quicker more effective results through bottom up initiatives so long as we are able to find and fund the scaleable and effective solutions at this level.

Next post will be about what type of investment could work for developing countries at this level.



Kenya - Silicon Safari

San Francisco has Silicon Valley, New York has Silicon Alley, London has Silicon Round and Tel-Aviv has Silicon Wadi. I think Kenya could have Silicon Safari*, and I'd love to be part of making that happen.

I never really thought I would go back to Kenya, but when I was back home this summer I had a strong feeling that it could be the forefront of innovation and entrepreneurship in Africa.

A little about where Kenya is today...
Kenya has about 30M people and a GDP per capita of $1,600 ppp Kenya is a leader in mobile innovation in the developing world. Kenya currently has a mobile penetration rate of ~ 50% and is forecasted to hit 90%+ by 2013. M-Pesa (mobile-to-mobile money transfer through text) was created here by Safaricom (part owned by Vodafone) and now almost $30M are transacted every day. This model has been replicated in many emerging markets which look to Kenya as a leader in emerging mobile products - particularly in banking and payments.

In October 2010, Barclays started offering M-Pesa to it's clients and we are not far from a place where mobile phone 'bank accounts' can offer most services provided by traditional banks which have a far lower penetration rate than mobile phones in Kenya. In September 2010, a major carrier (Zain) cut all call costs by 75% and all the other major carriers followed suit. With infrastructure capital costs already paid off, the market is highly competitive and consumers are getting excellent quality of service at constantly decreasing prices.

I'm not the only one who sees potential in Kenya... 
(work in progress)
  • Techcrunch, Sarah Lacy in particular, did a piece in August 2010 about the possibilities of mobile in Kenya 
  • Google opened their first non-sales office in Kenya in 2007 and is tasked with figuring out their entire Africa strategy

The Entrepreneurial Ecosystem is underdeveloped...
  • Talent - Classic brain drain coupled with an underdeveloped local education system particularly in for technical talent is a HUGE issue. 
  • Capital - There is little capital for early stage ventures and few investors on the ground who have the appetite and expertise to invest in entrepreneurs. The path to exit is also unclear with underdeveloped capital markets and low M&A volume.
  • Community - We need to build a community for entrepreneurs and investors to find each other and share ideas and best practices. This is starting with initiatives like vc4africa, and Nairobi's IHub but these are still in their very early stages

What I'm hoping to do...
I moved to Silicon Valley to see how the most sophisticated entrepreneurial ecosystem in the world works. I am about to start working for an early stage start up, and am going to try and be as involved in the start-up community as possible. I want to learn as much as I can so when I do go home, I know what could be possible for Kenya.

I don't know exactly what I'm going to do or how I'm going to do it when I do return to Kenya, but what I do know is that I want to build technology businesses as both an entrepreneur and an investor (maybe some sort of hybrid incubation model would work best). The country needs pioneers for the field and I hope to be one of the people to build the bricks of the entrepreneurial ecosystem.


* Silicon Safari is a term that I made up! Hope it catches on :) Silicon Savannah was something else I was toying with..

Digital Sky Technologies - The Mini Exit

Digital Sky Technologies (DST) have created a new class of investment in the western world that has caught both the entrepreneurial community and investment community by surprise. They have purchesed significant minority stakes in extremely high profile pre-IPO technology companies such as Zynga, Facebook and Groupon.

They take long positions on these companies by buying large amounts ($100M+) of common stock at relatively high valuations. Traditional investors (venture capital and private equity) would look to invest for preferential equity, board representation and sometimes controlling stakes but DST seem to be happy to take minority common stock with no board representation. Basically, they trust the market leaders with capital to keep doing what they've been doing and it's working out well for them so far. Their $200M investment in Facebook at a $10Bn valuation is already up by 4x, and their $180M investment in Zynga is probably between 2-3x up as well.

I think that the key benefit they are providing to the founders and early employees of these companies is the option to partially cash out without having to prematurely exit or IPO. This has never really been an option for the founders and early employees of these successful technology businesses and it seems to have been mutually beneficial for both DST and the early stage founders.

Metrics - The Online Advantage

I believe that online businesses have a key edge over offline businesses - they are able to easily gather data on customers, the purchase funnel and conduct iterative A/B testing. Harnessing this data and using it to drive decisions for customer acquisition, product development and generally having excellent management information (MI) is critical to executing a successful internet business.

There are three things that I want to touch on in this post:

Using Metrics to raise financing: While I was working in VC last summer, I encountered many entrepreneurs and it was interesting to see how they all thought about and ran their businesses. It was significantly more impressive and informative when the entrepreneurs understood the right metrics for their business. It allowed them to educate us on the important variables and what the implications were for their business and it also made it easier to compare the business against other models that we were familiar with. I think that it shows professionalism and credibility to be on top of this information and it was definitely something we used to screen entrepreneurs.

Segmenting customer base - yield optimal unit economics: Once the product has been launched and the customer base starts to expand I think it's really important to start to segment the customer base and understand the motivations and unit economics of each segment. I think you should start by understanding what attributes that you can use to segment customers - demographic information, source of click, etc and then measure these attributes against engagement metrics, revenue per user, social metrics etc. This will allow you to identify different user groups, understand what motivates them (potentially through qualitative studies) and plot their evolution over time. This data would be extremely useful to drive product changes as well as acquire specific types of customers.

For example: I was recently talking to Pasha Sadri at Polyvore (a social fashion site where people create sets or outfits which are shared with the community) and a handful of talented "creators" drive 80% of the traffic to the site (approx. 6M monthly users). If they were able to identify patterns about where these creators come from / demographic it would be easier to acquire more creators and they would drive significantly more traffic to the site.

Product changes - A/B testing: This is a pretty heavily blogged about topic but I think you should use data and metrics to drive and measure incremental product changes. It's especially efficient when you have a suite of products with similar features and you can leverage learnings from one product change and apply it to the family of products. Zynga are especially good at A/B testing and they have learnt best practice in monetisation/virality and roll out their learnings to new and existing social games very effectively.

Fashion 2.0 - Apparel goes digital

Fashion & Apparel is one of the fastest growing online areas and there is a tremendous amount of innovation in the space. The market is large ($150BN in 2011 in the US) of which online spend is likely to make up about 25%. Top-tier Venture Capital firms such as Benchmark, Matrix & IVP have invested in innovative models which are creating shifts in the online fashion & apparel markets.
There are a few areas that I find extremely interesting:

1) Limited Time Sales: using email lists to target buyers of high fashion products in time sensitive sales.
  • Vente Privee in France (almost $1BN Revenue in 2009) pioneered this model for luxury fashion goods in Europe and there has been some great success with US companies emulating this model. 
  • Gilt Groupe have got some great press and have done an awesome job at expanding into new verticals (Fusion, Men, Travel) and Ruelala had a successful $350M exit in 2009 to GSI Commerce.
  • Shopittome has a pretty interesting model where users input large amounts of information about their preferences and receive highly personalised sales. They seem to be doing well and have no venture funding - it would be interesting to see if IP can be created with such innovation to increase the barrier to entry in the space.
I do feel that the major department stores are in a better position than these players as they have pre-existing relationships with the brands, and access to a lot more customer data from their stores - in the long term I think they are going to come out on top...


2) Bridging the gap between online and offline shopping 
  • Image Recognition: People are great at buying stuff they search for, but they have already discovered it offline. Like.com and Modista allow people to specify items they like the look of, but then suggest alternative products which are similar based on image recognition
  • Social Shopping: Social fashion is a fragmented market and no-one has really solved the issue of creating a social platform for people interested in fashion/apparel - this is a cool area to look out for... I really like the idea of using games to drive engagement and try and gauge product/style demand this way. 

3) Crowd sourced content: There are a bunch of companies working on crowd sourcing apparel content and we've studied a bunch of interesting models at HBS (Threadless & Zazzle) which are great and have shown that crowd sourcing of product design is a great way to engage customers and drive sales.
  • Polyvore have built an awesome product which crowd sources editorial/fashion collages (what Vogue and Elle produce). They have pretty amazing usage stats (5M+ monthly actives growing at 10% MoM) which I think makes them the most visited fashion site on the web. I think it's one of the most innovative sites I've seen for browsers to discover new products. For fashionistas out there - it's definitely worth checking out..
4) Men's shopping: Men are rubbish at buying stuff online. As a group, we are not good at sale shopping, buy only stuff that we are familiar with and don't shop that often. There are a couple of cool companies that i've come across to cater to more niche needs - they have built brands online alone and have a small but dedicated following.
  • Bonobos make trousers that fit the modern, younger, and more athletic man (/yuppie) - and I think each customer has bought >1 pair - it's definitely branding itself as a niche product and will be interesting to see if they can maintain this identity as they expand to more products.  
  • Proper Cloth allow men to completely customize every aspect of their shirts - from collar cut to the colour of your cuffs. The barrier to entry for a user to try this is a little high ($120+) but it's definitely a service I would use if I was happy with the first shirt.
5) Rental Models:  Sometimes it's too expensive to buy stuff - especially high fashion items or things you don't wear very often.
  • Avelle (previously Bag, Borrow or Steal) have set up a service where you can rent handbags by subscription and send it back when you are done to get the new hot thing. Great idea but I wonder how women feel about using someone else's bag - I've heard that one can get pretty attached to these bags :)
  • Rent the Runway was founded by a 2009 HBS student and has received venture funding from Bain Cap Ventures. Users can rent ball gowns, tuxedos or other high cost/low wear frequency items. If I were them, I would focus on stuff people already rent, as opposed to high fashion items for the fashionistas. Will be cool to see how they do....