Get everyone excited.

boo.com's prototype website created a "wow" experience. You could even model the clothes on a mannequin fitting your body measurements and twirl it in 3D. © & ©

Get everyone excited. Is this the key skill of an entrepreneur? One of my main takeaways from Boo Hoo, a book I recently posted about, is that it's important to get everyone excited, and then for this excitement to infect other people - at least enough for them to part with large sums of their money.

Although there are a lot of setbacks that Ernst Malmsten, the lead entrepreneur and author of the book, as well as the other founders experienced - I could not help but notice the excitement that they generated. While at first most investors and suppliers were interested, once a few became excited, other soon followed. So what helped create this excitement?

Experience. Ernst Malmsten and one of the other founders, Kajsa Leander, had a previously started a successful online book retailer called bokus.com and then sold it. This was crucial to persuading JP Morgan that they could make boo.com a success. The success of their earlier venture meant that (at the time) they were one of the few entrepreneurs with Internet experience. Who better to make boo.com a reality?

Timing. JP Morgan, feeling a little late to the dot com investment party, could not help but be enthralled by the opportunity of boo.com when it was presented to them. Large IPOs were becoming common place for dot coms. For JP Morgan, and some of the suppliers that came on board, the opportunity came at the right time: they were already a bit hungry.

Buzz. The first press article publicizing boo.com appeared in Womans Wear Daily, a trade magazine read by fashion suppliers. After the article was published, suppliers such as Benetton got excited and became ready to come on board. This first article also got them into more exclusive fashion magazines, such as Vogue. Interestingly, Womans Wear Daily did not write the article to publicize boo.com. They were interested in the story from the angle of LVMH investing in boo.com, rather than the boo.com venture itself. Still, this was enough expose boo.com to the world to get others excited it.

A "WOW" experience. The key reason that boo.com got further in making online e-tailing a reality, comparative to other similar clothes retailing startups at the time, is because they got the suppliers on board. Suppliers were wary of the Internet and in some senses wanted to protect the effect it would have on the bricks and mortar retailers they sold to. However, once one of the suppliers began to let boo.com sell their goods, other followed. Some investors and some suppliers were easier to persuade to come on board once other investors and suppliers were already on board. They simply did not want to take the lead. A key persuaders was a fantastic prototype site that made everyone that looked at it go "wow" and call over others to share the experience.

Belief. The founders were also persistent in trying again and again to get the support of investors and suppliers. They all had unwavering belief in the concept and were determined to go incredible lengths to get the support they needed to make it happen. Patrik Hedelin, the third founder, for example continued to woo Benetton as an investor long after many had given up hope.

When Google Is Not Enough

This picture describes the Invisible Web, the deep layers of the web that search engines such as Google can not reach. ©

Flickr produces much better image search results than Google. YouTube produces much better video search results than Google. Twitter produces much better search on real time conversation than Google. There are numerous special cases where Google just does not produce the best results possible. Why is this?

Historically the Internet has been random web pages scattered across the world. Search engines, such as Google, have always excelled at organizing such random and unstructured information and making it meaningful for people doing searches. However, the unstructured nature of information across different web sites has meant there is always a boundary to how much the quality can be improved. How does Google determine the meaning of a picture on one site compared to the next? Should it use the words surrounding the picture? Should it give meaning to the filename of the picture? The Semantic Web is an initiative to provide structure to the information on the Internet. Though promising, after many years it still has yet to gain any traction.

Flickr, YouTube and Twitter - within their local spaces - have delivered on the promise of what a Semantic Web could be. They have made it easy to search through difficult to find photos, videos and conversational threads. They have done this by owning all the data they search through. In a radical departure from searching through random and unstructured web pages, because each of these three services owns the data they store - they can collect and structure the information exactly as they need to. For photos, Flickr enables users to tag parts of pictures with labels. YouTube requests people uploading videos to add details such as artist, title and other information. Twitter has immediate access to all twitter messages within its own databases - making real time search of Internet conversations possible - it does not need to crawl the Internet to update it's search results. By owning all the data, each of Flickr, YouTube and Twitter have explicitly structured the data to produce better results for users searching for photos, videos and through conversations.

With the emphasis of the Internet becoming "store everything on The Cloud", I expect the trend of mega-sites owning vast specialized and structured information to continue. You don't use Google to search for a house you want to buy - you use something like propertyfinder.com, which stores all the data on houses available on the housing market. If you want to purchase a book or toy you go to Amazon or eBay and search there. If you want to find out what your friends are doing, you don't ask Google - you ask Facebook instead. Are there other pillars of the Internet where a simple Google search just does not produce good enough results? What is the next opportunity whereby just owning all the data yourself will produce the best results for the user?

This post was inspired by an article by Battelle and a Twitter by Fred Wilson.

The story of a catastrophe.

The founders of boo.com. Top to bottom: Kajsa Leander, Patrik Hedelin and Ernst Malmsten. ©

In my social circle, one of my friends - Ivan - has earned himself the reputation of making bankrupt boo.com, a fashion retailer of the dot com era that grew to 400 staff and burnt through $135million of investment money. Of course he is not really responsible for the bankruptcy, but this local urban myth encouraged me enough to read Boo Hoo, the story of boo.com.

What Ivan did to earn that reputation.
In April 2000, Ivan started raving about boo.com, a new online clothes retailer. He said they were offering £20 money-off gift vouchers on the first purchase every new customer made. boo.com identified a new customer by whether the email address of the customer was already on their system. If you strolled around Ivan's apartment, you would have seen wall-to-wall boo.com delivery boxes. This guy had registered dozens of web email addresses and ordered dozens of goods as a "first customer" on the site. All these goods were priced just a little over £20, perhaps £23 or £22. When boo.com went bankrupt in May of that year, everyone joked that Ivan had sent them bankrupt. So given the nascent stages of my own start-up adventure and this previous encounter with boo.com, when I saw that one of the founders had written a book about the experience, I felt compelled to have a read.

It's about who you know.
Reading the book, I realised that a lot of who the success the founders of boo.com had was through people they knew. Patrik Hedelin, an investment banker and the third founder, introduced them to JP Morgan, a world renowned bank that would seek out investment money for them. Patrick also got Sacks Arms, a world renowned law firm, to work with them. Ernst Malmsten, the lead entrepreneur and CEO, also always seemed to have people who he could call on for advice. These included Salty, an ex-JP Morgan adviser who moved on to a VC firm. Salty advised them on matters such as handling Arab investors. Another adviser was a contact at PWC who has experience in firing senior executives. The experts that Malmsten had to help in him in many scenarios seemed plentiful.

People management.
Malmsten spent a significant amount of time worrying about Patrik Hedelin, the CFO. Hedelin's lack of ability in shaping up the finance department and building a solid financial model for the company kept Malmsten occupied through large parts of the adventure. Later, the CTO, Steve Bennett would give Malmsten further grief. Once that was resolved, even the replacement CFO and even then later the Head of HR would give Malmsten personnel issues to deal with. These seemed to be a constant need to performance manage and replace someone or other.

Managing the technology.
The founders drastically underestimated the complexity of getting the technology working. The approach, as was common at the time, was a big bang release. The release date was delayed further and further. This meant the business was burning through investment money and lacking revenues for longer and longer. The viability of the business model and entire operation itself relied on the technology working.

The bottom line.
There was also no bootstrapping at the company. The boo.com were based in London and made frequent expensive visits to New York, where they stay at the Soho Grand. They hired ex-BCG consultants to open offices around the world. The company expanded very, very fast - burning money. When boo.com realized that the revenue from sales would not sustain them, they had to cull staff - but their overheads were far too much still.

In conclusion...
Boo Hoo is a great book. It would be rare to see that kind of catastrophe happen again. There are a lot of lessons in how to get quite far in building a significant company, although there are systematic failures - such as the lack of attention to the bottom line. On a personal note, I now realize that my friend Ivan had all those clothes subsidized by investors ranging from Arabs to Benetton. How strange it is how money flows.