You must get the first big decisions right to have a chance to win.

Photo by byron hardy from FreeImages

Through the lifetime of my companies, I have taken thousands of decisions. But only a handful of these decisions were crucial to their success.

As an operating leader who loves the different facets of business, I would often have my fingerprints in all parts of the companies. Particularly when we are launching a new company and we seriously lack resources micro decisions, such as working on the location of a call-to-action or the details of the FAQ, are a good thing. However, the reality is that only a handful of decisions of the many thousands taken truly matters, and most of these decisions are taken before we even get started.

To illustrate this point, let’s take the two companies I led, and subsequently had to close and, and the most successful I will analyze the initial decisions made that doomed some of the companies from the start and primed the other company for success.  At the end of the analysis I will create the guidelines of I will use before starting a new company. was a private flash sale model for luxury brands in Brazil. This company was similar to in the US. The company launched online in March 2009. By September, we were doing $1M in monthly revenue and growing by over 75K new members every month. While we were doing our best to operate a fast-growing business, the reality was that the management was inexperienced, and we committed a lot of mistakes. Perhaps, we made more wrong decisions than correct ones, but it did not matter as we had the core decisions right.

In terms of location and timing, we could not have been luckier. Brazil was going through an economic boom in 2009. It was one of the last countries to enter the recession, and one of the first to leave it. Furthermore, it experienced a commodity boom, where a vast amount of its population of 200M had disposable income for the first time. We arrived with a model that relied 100 percent on disposable income and we sold luxury items at affordable prices that could be flaunted as status symbols of newly gained wealth.

The growth of the Brazilian economy, 7.5 percent in 2010 compared to 2.5 percent of the US, and the rapidly expanding startup ecosystem attracted a lot of investors who were worried about missing the boat on emerging markets. This created an access to capital not seen since the dotcom bubble era and made capital intensive businesses like viable.

In addition, on the supply side, outlets in Brazil were poorly developed at the time. Brands found us a welcome solution to take care of their overstock. On the demand side, performance marketing simply did not exist at the time. Coming with what would be considered basic marketing today enabled us to dominate the SEM market, paying $1 per lead and $14 per paying lead.

The accumulation of those elements meant rapid growth, which, in turn, meant that most of our mistakes would be swept under the rug.

Thanks largely to picking the right business model, in the right country and at the right time, ended selling for over $50M to Naspers in 2012. was a Brazilian women’s shoes brand whose business model was to offer a discount on shoes in exchange for a monthly subscription. This company was similar to and in the US. The company launched in June 2011 and was immediately lauded by the media. On paper, this company was a clear winner.

Shoedazzle was the darling of e-commerce, having raised $40M in May of 2011 from Andreessen Horowitz, giving us a lot of attention. The business model hype, the excitement of emerging market for investors, being an American entrepreneur with a track record (brandsclub) in the country, and attached to an incubator loved by VC, we were able to secure funding at seed from Redpoint Ventures and Accel Partners. Furthermore, we were able to gather a team of co-founders of exceptional caliber. We had the hottest business of the moment, the best backers, an amazing team, and the media loved us.

So what could go wrong?

I made two fundamental mistakes that doomed the business virtually from the beginning. My understanding of the fashion industry and the business model choice. Interestingly, those mistakes were made worldwide by tons of incredibly smart entrepreneurs and VCs as similar businesses launched throughout the world, and all of them suffered the same fate as Shoes4you.

To illustrate the first problem, most of the CEOs on subscription fashion came from retail e-commerce or consulting firms that help retailers, and we set up our business like one. In retail, you are selling other people’s brands. They basically sell themselves. What you really need to worry about is your markup, logistics, customer service, and ease of use of your website.

Being a brand itself, Shoes4you’s margin would be bigger, so I really focused on logistics and technology. We had not sold a single pair of shoes, yet we could deliver in 24h in Sao Paulo and 72h anywhere in Brazil. The website had been A/B tested every which way before launch. However, the same could not be said on branding.

I knew that branding drove conversion rate. To cover that topic, we got a celebrity to become our partner, hired an expensive fashion PR company, and called it a day. I had assumed that the conversion rate would be 2–4x lower than with existing brands. I had completely misunderstood the magnitude of the difference. It was over 10x lower! This drove our Customer Acquisition Cost (CAC) through the roof, and despite the amazing economics of subscription business, we could never get close to the fabled Lifetime Value (LTV) of 3x our CAC.

Interestingly, the challenge of the business drove me further into my comfort zone. I started maniacally optimizing our marketing campaigns. Landing pages were tested and changed on a daily basis. We created tools to optimize our product display based on the sell-through rate. What I did not have was a high impact branding campaign.

The lack of knowledge of the industry created a false expectation on the conversion rate. This led to the wrong prescription to our symptoms and gave us nowhere to go when the business had no future. When the subscription model became less novel and attractive to customers and investors alike, it was clear I had to close down the company. Had we had created a recognizable brand, we could have joined a larger brand, operated as a regular e-commerce company, or partnered with an offline retailer. Instead, we had created a very fast and user-friendly way to deliver shoes that people did not want.

It is not to say the business was an easy one. Every single company that opened with the same model outside the US closed down. Direct to consumer (D2C) businesses that were all the rave for a while started closing or struggling worldwide. Even in the US, the originator of the model, Shoedazzle, ended up selling at a loss. However, deep knowledge and understanding of the industry would have been a complete game-changer., the second to market competitor of Shoedazzle, bucked the first mover advantage, won the shoe club category and acquired Shoedazzle in 2013. The key differentiator of Justfab? They came from Intelligent Beauty Inc., an incubator that specializes in creating fashion brands to sell directly to consumers. Besides starting with an enormous database of women having bought from their other brands, they knew exactly what it took to build a brand.

Closer to my adoptive home, a friend and fellow entrepreneur, Dominique Oliver, launched, a women’s clothing fashion brand. It is an admittedly more difficult business than Shoes4you. With a much better understanding of the fashion industry and excellent execution skills, has been thriving in the perpetually complex Brazilian environment. Nothing exemplifies this better than the fact that Dominique won the GQ Brasil Men of the Year award for fashion.

Home61, my latest venture, was a tech real estate brokerage. It was an efficiency play that did not create a new business model. Instead, it used technology to greatly improve the performance of an existing model; here, a real estate brokerage. Uber, for example, is an efficiency play. The goal of the company was to help the mass market get an unparalleled level of service while enabling our real estate agents to earn more. Launching in 2015 in Miami, the company immediately showed a lot of potential.

The residential market of the US represents $2 Trillion of assets. There are 2.1M real estate agents and $60 Billion of commission generated each year. At the same time, real estate agents are one of the most loathed service providers in the US. The transaction from discovery to funding is archaic, and the industry is data-rich. The market seemed ripe for disruption. At the same time, VCs were hungry for Prop tech and willing to back anything even remotely related to Real Estate.

Miami, as the original city, seemed to make sense. The metrics were perfect—40,000 real estate agents, $25 Billion transacted each year, and a very fragmented market. My senior co-founder lived there, and coincidentally, I could live there for free, thanks to a family home. At a company level, the first tests were returning incredible results, as well.

Our very first lead converted into a paying customer after a single day of showing him homes. Within the first three months, a $1M lead basically barged into our office to buy a home. Our unit economics were positive since the very first month, and we were doing over $40k/month within the first few months with a tiny team and having raised almost no money. But even early on, fundamental issues started appearing.

The first one was our inability to control growth. Our initial research showed the biggest issue realtors had was that they did not have enough leads. This worked well into my skill set. We would generate leads, understand our conversion rate, see that the unit economics were positive, and then simply spend more until we broke even and launched across the US.

This was simple—correct for many businesses, but not for real estate.

In our business, the Real Estate agents’ conversion of leads would vary by a factor of 100x! Some agents would have a 0.1 percent conversion rate, while others would have a conversion rate of 20 percent. Furthermore, agents were naturally not constant throughout the year. This meant I had a part of our funnel that varied, and we had little control over our results. This meant we needed to recruit better agents or improve the people we had. All of a sudden, our company needed to become a sales recruiting and training machine. It was a skill set that no one at the company excelled in.

Not having the right skill set was due to our misunderstanding of what the company would become, which, in turn, meant we did not have the right team to start with. Fresh from the defeat of Shoes4you, I did not want to carry the responsibility of Home61 alone. Luckily, I had a great friend who was a great entrepreneur, super smart and knew a ton about Real Estate. Besides, he had an attention to detail I do not have. It felt like a match made in heaven on paper. He took on the role of COO, but for a long time, it felt he should have been the CEO of the venture due to his deeper knowledge and connection to the industry. Early on, he made it clear he did not want to take care of a sales team.

I did not quite listen.

My friend was intelligent, the sales team loved him, so I had him take care of the team for a long time. But taking care of the team made him unhappy. So we looked for someone else to take care of the subject. This created new issues.

Suddenly, we had two senior partners whose skills overlapped and neither with the mission critical aspect of the business as a direct responsibility. Worse, because the company was not growing as we had hoped for, it pushed forward our differences. Suddenly, our work styles were working against one another instead of being complementary. After three years of working together, we ended our working relationship, which became one of the hardest moments of my career.

The hardships were accentuated by the choice of Miami as our first city. The plan was to launch in the first city and scale into new locations rapidly. However, with the growth being tamer than planned, we could never really justify the investment of launching in more cities. Worse yet, it made fundraising incredibly difficult. Every investor we met questioned the location. Despite solid metrics in revenue and unit economics at the seed stage, it was harder to raise capital than if we had been outside the US.

The proximity of San Francisco and New York without being there created all forms of doubt that we needed to overcome. We were finally able to raise but at a lower valuation than we would have had in tech hub, and more importantly, after spending a lot more time fundraising. Furthermore, the choice of the city also impacted who we could hire tremendously. In developed ecosystems, larger companies such as Facebook, Google, and established startups have trained a significant percentage of the population to work together and on online/offline projects seamlessly. Working out of Miami meant not only training the teams on their specialty but also on how to work together. It increased the inefficiency in the company and increased the cost of operating.

The lesson I take from my ventures is that there are a few decisions at the beginning of the company that if you get right, they will increase your odds of success tremendously, and if you get wrong, they will spell doom. Below, I compiled my learnings into a practical guidelines I will use before starting my next company.

But firstly, I want to add that getting the macro decisions right will forgive a lot of wrong micro decisions—but only up to a point. Despite having a great momentum and launching in a near-perfect context, closed down a few years after it was sold. The company’s inability to scale its logistics in pace with the growth of sales built a huge logistical and customer service debt. Deliveries that sometimes took months gave an opening to our competitor Privalia, who scaled slower but smarter. Eventually, they passed us, dominated the market, and later sold Veepee for $600M.

What you must get right:

For my next venture, I will answer each of the following points before deciding to launch. I hope you find it useful too!

Understanding of the business and incumbents. Both at Home61 and Shoes4you, I did not know enough about the market and challenges incumbents were facing.

For the next startup, a 3–6 months immersion is necessary. (There will be a blog post about the methodology of the immersion.)

Picking the right partner for the venture. For Home61, I found an amazing person, but both of us refused to take care of sales and overlapped on responsibilities for the rest.

For the next startup, either take a senior partner to cover a mission-critical role I cannot fill or do not take a senior partner.

Understand clearly the location pros and cons. Brazil was an evergreen field with plenty of tech talent but with a complicated HR administration for Brandsclub. Miami made fundraising and talent recruiting very complicated.

For the next startup, the location must have a mature ecosystem, which includes access to capital throughout the different stages, a trained and available workforce, a startup-friendly government, and a sizable market.

Understand timing. Brandsclub benefited from Brazil’s community boom, Shoes4you benefited from the appetite of VCs for Brazilian market, and Home61 benefited from the enthusiasm of VCs for proptech.

For the next startup, understand the availability of cash and markets. Short-term: VC appetite for the category. Mid-term availability of cash due to low/high interest rate. Consolidation in the incumbent market. Risk of a company backed by a Powerball VC on the horizon.

Picking the right business. Both Shoes4you and Home61 hinged on skills that were not my natural strong suit.

For the next startup, understand the founder market fit on top of the business market fit. This is linked to a crystal clear understanding of the business but adds the layer that if the business is understood and is interesting, I should seriously consider not doing it if it requires skills I do not have or things I do not like. For instance, managing a sales team or taking advantage of people (horoscope).

Bonus: Get advisors. In the last year of Home61, I got an advisor in the form of Tim Jackson from Walking Ventures. He was not an advisor for Home61. He was one for me. He helped with everything from the micro to macro. If I had him with me earlier, we might have succeeded with Home61. If I had him before Home61, I might have picked a business that suited me better.

For the next startup, I will surround myself with people who are smarter than me in their category. Work closely with at least 1 advisor for myself, and 1 company advisor who is deeply entrenched in the market with the will to open doors. (There will be a blog post deep diving into the benefits of an advisor.)

Feel free to use the list at your leisure and let me know how you used it, if it benefited you and if you added anything!

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