Ember Sparks
Ember Sparks
A series of very focused views into common critical developments that we are seeing across our community. It's not just about describing the issue, it's about going a little deeper to understand it and adding context and insight.
ISSUE XIII 9.19.2024
from the desk of Paul Blum
Is Planning Still Worth it?
With So Many Variables to consider in today’s Consumer marketplace, is it worth spending valuable time Planning?
At Ember, we take annual and seasonal planning seriously. We help our clients focus on Q4 during August and annual planning during September/October. This helps eliminate distraction and the tendency for teams to overreact to unforeseen variables rather than stay the course with a sound plan in place. Of course, we leave room for adjustments but the trick is to identify productive iteration vs. overreaction. This year, it’s been particularly hard for several very specific reasons.
The run up to the Elections and the ever-growing but unknown cost of customer acquisition around BFCM will surely make the social media landscape highly volatile. I find it ironic that the Platforms ( Meta and Google ) are pushing out talking points to their agency collaborators to get final budgets and plans from their clients; though they are NOT telling them what ad costs will be.....how can a responsible marketer who actually cares about efficiency and profitability sign on to a plan without knowing the cost?
Also, in general, the consumer has been increasingly promotionally driven this year. This is not a new thing, it’s just the default strategy of brands straining for unrealistic growth expectations, and platforms are glad to take their money to help drive “eye popping” growth. The about face of investors now talking “profitable growth“ is a positive sign but that just makes the job that much harder. How do we plan for profitable growth in such an unstable environment, especially as many brands are planning to launch BFCM as early as October?
This is precisely why strategic planning is more important than ever. Since consumer distraction levels and acquisition costs are impossible to quantify, the other elements–the things you can control–are much more important. And it just so happens that those things require planning to do it properly.
Product strategy and flow is the first critical issue. Consumers still want new exciting things;especially from brands they love. Of course this takes time and planning. Is your team ready for this turbulent marketplace? Do you have the right people in place, the right financial controls, operational process, access to capital and communication culture to react to this Marketplace?
Have you built the other, more predictable marketing capabilities like customer retention (email, SMS, and customer service), affiliates, influencers, organic posting, wholesale partners and brand collaborations? Again, these things take advance planning to execute well; especially since the data flow and returns are more difficult to quantify. One of the biggest benefits to planning is the confidence it instills in your team as they watch the execution unfold and others who are less prepared overreact to changing market conditions, and more often than not, follow the herd towards an unproductive outcome.
So, the more volatile the market, the more you have to plan the things you CAN control and design your team and process to communicate frequently and effectively in order to capitalize on the craziness to come.
ISSUE XII 7.2.2024
from the desk of Mike Gilvary
The Fireside Event Recap: Navigating Growth and Fundraising in Today’s Environment
On May 29th, the Ember Company in partnership with Crowell and Moring and Melanie Platt from Pitchhackers hosted its inaugural event, “The Fireside: Consumer Insights: Strategies for Growth in Today's Fundraising Environment.” The gathering brought together a diverse group of founders and investors who shared their stories and insights, providing a roadmap for navigating the current fundraising landscape. Below are some of the takeaways from the event.
The Beginning of a New Tradition
This event was the first of its kind, designed to foster deep, meaningful conversations rather than the typical surface-level exchanges. The format was unique: instead of a traditional panel discussion, founders were invited to speak individually with the host, Michael Gilvary from the Ember Company, allowing for a more personalized and in-depth exploration of their experiences and insights.
Balancing Act: Growth vs. Profitability
Paul Blum, a veteran business leader and partner at Ember, kicked off the evening by addressing a fundamental issue every founder faces: the balance between growth and profitability. Paul emphasized the importance of not getting swept up in market trends that swing between prioritizing top-line growth and bottom-line profitability. Paul advocated for a balanced approach, focusing on building a strong team, developing a robust strategy, creating quality products, and executing effectively. His message was clear: sustainable success comes from maintaining this balance, regardless of external pressures.
The Struggles and Rewards of Bootstrapping
The story took an inspiring turn with Seph Skerritt, founder of Proper Cloth, who shared his journey of bootstrapping his custom clothing company. In an era where venture capital is often seen as the golden ticket, Seph’s decision to bootstrap was both bold and enlightening. He spoke about the freedom and control it afforded him, allowing space for long-term decision-making. Despite the initial hardships, his experience underscored that patience and resilience could lead to significant rewards, painting a picture of an alternative path to success.
Mastering Your Own Marketing in Challenging Times
Adrian Solgaard, founder of Solgaard, addressed the intricacies of marketing in an environment of rising costs. He emphasized the need for marketing efficiency and a diversified approach to customer acquisition. Solgaard’s strategy, which included traditional TV ads and leveraging a compelling founder story, showcased his creativity and adaptability. His emphasis on sustainability wasn’t just a trend but a core part of his brand’s identity, which resonates deeply with consumers.
Authentic Fundraising: The Real Story
Michelle Bacharach, CEO of FindMine, captivated everyone with her honest account of raising $10 million in venture capital. Her story wasn’t just about the success but the journey—marked by authenticity and transparency. Bacharach shared how being genuine with investors helped build trust, crucial for securing investment. Her approach to running a structured fundraising process and being open about both successes and challenges offered a real, relatable perspective on what it takes to succeed in the competitive world of fundraising.
The Road to a Successful Exit
Mariah Chase, former CEO of Eloquii, brought a different flavor to the conversation with her tale of turning a distressed asset into a thriving business, ultimately acquired by Walmart. Chase emphasized the importance of building relationships with potential buyers early on. Her advice on focusing on unit economics and setting the right pricing from the start was practical and grounded, providing a clear roadmap for founders aiming for successful exits. Her story was a testament to the power of resilience and strategic thinking.
Investor Insights: A Broader Perspective
The event concluded with a panel of investors who provided a broader view of the fundraising landscape. Matt Jung of Ember highlighted the spectrum of alternative funding options, many of which have emerged over the past few years. Sarah Foley of SWAT discussed the current challenges in consumer sector fundraising, emphasizing the need for efficiency in all aspects of business operations. Melanie Platt, VC Fundraiser turned consultant (and our co-host!), highlighted the importance of seeking diverse funding sources, including international investors. Teddie Townsend from CG Sawaya Partners underscored the necessity of a strong foundational strategy and a diversified marketing mix to attract investment. Their collective insights painted a comprehensive picture of what investors are looking for in today’s market.
Key Takeaways
Balance Growth and Profitability: Every company follows a different path to success but an “all-in” focus on execution with the right mix of strategy, team and product were key to the case studies discussed.
Explore Alternative Growth Strategies: Bootstrapping is certainly not an option for everyone but the hardship, lessons learned and perseverance are often rewarded with long-term control and lifestyle flexibility. Consider a range of diverse funding sources, including international and non-traditional investors.
Prioritize Marketing Efficiency: Use diverse channels and leverage strong, authentic stories to engage and retain customers.
Be Authentic and Build Relationships Early: Build trust with investors through transparency, and establish connections with potential buyers and stakeholders well before planning an exit.
Final Thoughts
“The Fireside: Strategies for Growth in Today's Fundraising Environment" event provided invaluable lessons, blending personal stories with practical advice. It reinforced the importance of balancing growth with profitability, the power of authentic storytelling, and the necessity of efficient marketing strategies. Founders were encouraged to stay persistent, focus on fundamentals, and build strong, lasting relationships with strategic partners and investors.
Stay tuned for more insights and events from The Fireside, where we continue to foster meaningful conversations and connections about growth strategy and investment. Stay tuned for information on our next event in September!
Special thanks to Matt Moison of Crowell, Melanie Platt and Carli Casteel for supporting this event at every turn - in every way possible. It wouldn’t have been possible without you!
ISSUE XI 4.30.2024
from the desk of Adrian Solgaard
Embracing Circularity: It’s Easier Than You Might Think
As Earth Month comes to a close, we wanted to highlight an example of actuating sustainability practices for everyday business. Who better to speak on this than Adrian Solgaard, the founder of Solgaard and a champion of circularity:
There's a new mountain range in the Atacama Desert that goes as far as the eye can see. The ocean floor is reshaping in ways our sea creatures could never have imagined. This version of “terraforming,” however, isn’t what mother nature intended. These vast new land masses are made entirely of plastic.
Plastic was an amazing invention - it is the reason that our modern healthcare, food storage and more, are safe. The cost to our planet, however, has been devastating. As a society, we have prescribed no value to that cost. 75% of plastic ever produced has become waste. There's over 2,000 pounds of plastic per person that exists in this world. Our planet has no more room to store this waste - we have to start viewing plastic as a limited resource, as a raw material in itself. Aluminum already provides a great example of how society acts when they know a resource is limited. 85% of aluminum ever made since the 1800s is still in use today.
What if we took the same approach to plastic? Good News: we already are and can continue to do so at an immense scale. Circularity has been discussed as a far off, far future thing, but the solution is actually available today. Take backpacks. Typically, a backpack's made from dozens of materials: polyethylene, polyurethanes, EVA foams, Nylons, ABS and more. At the last two TED conferences, Solgaard has provided conference-goers with 100% mono material backpacks. They are exclusively made from PET, which means that at the end of their useful lives, they can be thrown into a recycling machine and mechanically recycled as easily as a plastic water bottle. Our products have won a Red Dot Design Award and been recognized as a Time Magazine Best Invention showing we don’t have to sacrifice quality, function or aesthetics to achieve this.
Along the way we have pulled over 1 Million Tons of plastic from oceans, rivers and mangroves in Asia. We are just getting started and as a society, we can demand this level of circularity from our preferred consumer brands. For those that say it is too costly, we have done this with less than $3 million of total funding for our business, while supporting non-profit activities to clean-up the ecosystems that we operate in. The time to act is now and possibilities are endless.
ISSUE X 3.21.2024
from the desk of Paul Blum
Re-Programming Marketing
Modern Marketing is not even close to being a stable static system; it’s constantly evolving and requires frequent evaluation and reprogramming; automation works well but autopilot does not. It takes real strategic evaluation on a regular basis to capitalize on new technology developments as well as defending against deteriorating platform performance in a hyper competitive environment - competitive for both platform distribution and consumer attention. It also takes intentional reprogramming of how marketing operates. Here are our key recommendations on how to start this process:
Stop misusing platform ROAS metrics and complex attribution data. There is nothing inherently wrong with this valuable data. In the right hands, it can help skilled marketers target their media investments within a certain platform. It should not be used as a way to evaluate the strength of a brand,as a direct guide to marketing dollar allocation, or an accurate indication of potential profitability.
Use MER as a unifying metric that everyone can understand and track. MER ( marketing efficiency ratio) is a customized and strategic metric; It should be calculated and communicated in a way that helps a company achieve specific revenue and profitability goals. As part of the Ember Strategic planning process, we work with our clients to arrive at this important balanced metric. We recommend Investors and Finance team members use this metric to evaluate the MONTHLY marketing efficiency of the organization….not as a daily or weekly activity ROI guide. Of course, the marketing team should be using this metric, plus ROAS to adjust daily activities in order to test and adjust marketing strategies in the appropriate time frame.
Use First Party Data and personalized, well timed and delivered experiences to acquire and retain customers. Your segmented customer e-mail/sms list and engaged followers are the foundation of marketing efficiency across all platforms. How well you leverage new technologies to deliver relevant and profitable content is a critical competency that all brands must develop. This will enable brands to connect with shoppers in the channels they prefer with the content and products that resonate with them…personally.
Learn to capture and evaluate Quantified Behavioral Metrics. Start integrating consumer behavior based on non-platform activities like Influencer, PR and brand collaboration activities. For example, sales results can be planned for and calculated before or after a specific Influencer posting; Affiliate ROI can also be calculated and factored into the total marketing budget. These areas are driving significant revenue and acquisition results; how can they be ignored when developing an efficient marketing strategy?
Don’t minimize the importance of Product in creating Marketing Efficiency. Merchandising - the science of designing, planning and producing products that the customer will want, when they want it - remains a critical part of the marketing strategy. It’s easy to separate this since the product tends to be on a longer timeframe with a different calendar. Coordination between product and marketing activities is the true key to profitable revenue creation.
So, taking these initial strategic steps and creating the operating and communication culture around them, should be significant factors in building a solid path to profitability and enterprise value.
ISSUE IX 1.17.2024
from the desk of Matt Jung
2024 Marketing Strategy: Emphasize the HOW
The general marketing playbook over the past decade or so for emerging brands has been relatively straightforward: find the right WHO (agencies or internal team), target the appropriate WHAT in unsaturated emerging media channels (Meta, Google, TikTok, etc.), test, iterate, and achieve your WHY with a 3x+ ROAS. Get investor and board approval, rinse, and repeat knowing those investors and board members are repeating something similar with other companies.
As more competition came to market with new entrants and deep-pocketed corporate incumbents, which drove marketing costs up, this formula was no longer effective and left many teams asking themselves: HOW do we adjust?
We started Ember Advisory because we have seen a similar cycle play out many times over the years, often with disastrous outcomes: Inspiring new brands and founders addressing real market needs that get caught up in the “strategy wave” of the times and aren’t prepared for what happens after the crest.
This has happened with:
Domestic manufacturing → Globalization
Distributors, Wholesale and PR → Decline of department stores
Specialty Retail → Mid-tier mall/retail decline
And now DTC → Saturation of digital media
Each time, the supply and demand fundamentals shifted, markets became saturated, and superficial strategies became over-utilized. However, those who were prepared thrived and achieved long-term success by pursuing their own “against the herd” path.
The solution? Develop a comprehensive HOW. So many times we have heard advisors and boards superficially discussing WHAT to do– ex., “let’s try influencer marketing, we need a Meta strategy, etc.” without a fully thought out comprehensive marketing and distribution plan, HOW do you integrate influencer or Meta into a broader marketing and brand strategy? And how does that further integrate into the overall business value chain?
Today’s competitive dynamics require brands to think about every marketing content and sales distribution channel in a holistic way that provides maximum flexibility to ensure standout results. It’s vital for leadership to address the hard, multi-layered questions and find deeper insights and answers to those questions, including:
How do we build a flexible marketing infrastructure so we can quickly deploy content, technology, resources, and dollars in and out of the most effective strategies that bring us closer to our consumer? How do we adapt when everyone starts to do the same thing?
How do we ensure our inventory, merchandising and product mix is appropriately planned?
How do we need to adjust our operations to accommodate?
How is the team and agency ecosystem incentivized to identify and act on the issues and opportunities before it’s too late?
How do our data capabilities and management reporting empower us to make quick and informed decisions?
How should we be capitalized to function well in a more fluid environment?
The late Charlie Munger once said “Mimicking the herd invites regression to the mean.” What worked for several years prior is now the “mean” so it’s time to stand-out: don’t be average and chart your own path to success.
ISSUE VIII 10.19.2023
from the desk of Paul Blum
The October Window
October is an important (and often overlooked) month in the annual business calendar.
It's the true beginning of the 4th quarter that includes fall and winter seasonal product launches as well as the massive holiday marketing events happening in all retail channels. It's so important to stay present and involved with your weekly team meetings to be prepared for the necessary feedback and quick decisions that will have to be made. This is not the time for auto-drive.....it's the time to be extra engaged and aware of how your critical marketing dollars are being spent and how your creative content is resonating with the customer.
It's also the best time to develop the following year's Strategic and Financial Plan. It's doubtful that you or your team will have a lot of time to commit to this process once the Holiday season starts to heat up in November. Also, depending on the length of your supply cycle, you are most likely committing resources to next year....how can you do that without a good plan? Finally, you've had enough experience with the year to begin the process of envisioning success in the future as well as the things the business will need to achieve that success.
After the annual plan is complete, it's then a good time to start focusing on the first ( and maybe second) quarter. This year is going to end with a highly promotional period that will probably last well into January and maybe February. It's so important to follow this up with compelling and energetic new creative and product messaging. It's a big mistake to go quiet after a sale....you have to show the customer that your brand has value beyond a promotional deal.
We work closely with our clients to plan and execute during this busy period. If you and your team would like to better understand how we can be helpful in building your strategy for next year, please reach out to mike@embercompany.co.
ISSUE VII 9.14.2023
from the desk of Michael Gilvary
Fractional Executives Require a Comprehensive Strategy
Fractional executives and partners have become a significant and growing part of the economy. After these past few years we all have a better understanding of fractional work, but often we hear about the benefits to the worker…flexibility, remote work, multiple income streams, etc. Perhaps it's time to take a closer look at the benefits to the business and how to maximize the effectiveness of a fractional engagement.
Done correctly, fractional partners can have a meaningful impact…at…well…a fraction of the cost, and often times, in an abbreviated time frame. Some of the most profitable brands we work with are being run by a lean team and a carefully selected group of well-placed fractional employees and agencies. At Ember, we actively engage with our portfolio of companies on the growth strategy and execution on a daily basis. This role puts us in a unique position to be able to recognize trends and get a feel for what is working…and what’s not.
What's working?
Have a Strategy: Having a clear strategy for the business is a critical component for success and will help you identify the specific areas where you’ll need the most help.
Be Specific: Know what you need and go find someone with that expertise.
Drive Alignment: Put systems in place to maintain clear communication of the strategy across the entire team, full-time and fractional partners, while leaving space for ideas and innovation to occur!
What’s not working?
Mis-timing Fractional Work: Hiring a well-intentioned fractional resource without a clear direction often leads to poor results.
Vague Expectations: Oftentimes expectations differ from reality as to how fractional workers spend their time and resources. Be crystal clear on objectives, availability and accountability.
Old Tactics: Many fractional executives have deep experience, but often provide “cookie-cutter” advice that is not effective for your business. Understand the nuances of your business, industry and of course, strategy.
Often, especially in the growth phase, founders and CEOs are looking for utility players that can adapt to a changing environment. Fractional work is an opportunity to be more precise. Look for fractional partners that have a specific skill set that is tied to a specific need i.e. digital marketing or brand marketing vs. general marketing. Knowing these needs is a byproduct of your strategy work.
It’s critical to have an organized business strategy with a central message that can be clearly communicated to the entire team. Executing before developing a well-defined strategy is expensive, time-consuming and ineffective. Fractional work will only compound that issue if not integrated according to your overall strategy. Since you are sharing the costs with other businesses, fractional partners (in theory) are more experienced in their specialty than what you would have hired as a full-time employee. Expect these people to have a lot of ideas and opinions about the direction of the business. This is a good thing - that’s why you chose them! We don’t want to discourage these ideas by being too rigid or controlling, but we do need alignment to execute effectively.
The more thoughtful and clear the strategy and business goals, the easier it will be to communicate those goals and the more effective the team will be at achieving them. To maximize effectiveness during execution, we recommend putting systems in place to maintain focus and alignment on the strategy. Create a process that encourages disruption, new ideas and innovation, but not at the expense of making progress on your intended strategy. With clear communication comes alignment, collaboration and in the long run…a better result.
ISSUE VI 7.19.2023
from the desk of Tom Masters
Are You Proud or Not? Post-Pride Reflections for Brands, Founders, and Funders
June is over; companies quietly scrub rainbow-hued logos from their socials, and Pride merchandise floods the sales rack. Job well done. Marketing teams agree that next year will be even better but table discussions until the spring.
In the wake of various, well-publicized corporate blunders, perhaps it is time for brands to rethink their Pride Month strategies, or abandon them altogether. Consumers are more wary of rainbow-washing than ever, and performative allyship does not work. In fact, per Influential, “just 14% of Gen Z looked favorably on rainbow flag campaigns.” If inclusivity truly is an integral part of your brand–and it should be–engaging your LGBTQ+ customers must be authentic and ongoing, not a box to check every June. As Ember Executive Chairman Paul Blum puts it, “relegating marketing to the LGBTQ community for only one month is bad marketing practice on so many levels.”
So what’s the alternative?
For brands, decide whether integrating LGBTQ+ messaging into your marketing is truly authentic, and if so, commit to it throughout the year . Think strategically about your editorial and copy, your advertising channels, and your influencer partners. These are all avenues through which a company can continually show support. However, it is imperative to understand that the Queer community is not a monolith, intersectional representation is important, and there is no one-size-fits-all approach. And if you are not willing to stand by and show up for your partners when faced with backlash (*cough*), don’t bother in the first place. This is all not to say that you shouldn’t celebrate Pride next year, just do so in a way that is meaningful and genuine. Leverage your platform to spotlight voices and support organizations that are doing real work for the community. Some of my favorites are The Ali Forney Center, The Trevor Project, and Rainbow Railroad. Lastly–and this is important–hire Queer people! Evidence shows that more diverse companies make better decisions. From your freelancers to your C-Suite, make sure your organization is representative of the consumers you are trying to reach.
While retailers continue to iterate on their Pride Month strategies, LGBTQ+ founders should absolutely take advantage of these opportunities for broad exposure and a bump to sales. However, brands must not base long-term strategies on the assumption of continued goodwill of massive corporations. Moreover, LGBTQ-led brands have leverage. Retailers want to reach the LGBTQ+ community during Pride, but struggle to do so authentically on their own. If your brand does this uniquely well, you can be selective about who you work with or rigid about the terms of your partnership. If you are an LGBTQ+ founder or thinking of launching, StartOut and Gaingels have some great resources (in addition, of course, to those here at Ember).
Investors also play a role here. Less than 1% of VC funding goes to LGBTQ+ founders, most of whom feel the need to actively conceal their identities from investors. Funds should incorporate LGBTQ-founded companies into the diversity goals of both the portfolio and the investment team. Sponsor or partner with organizations like StartOut or LGBT+ VC or help foster the LGBTQ+ investor community through informal events (I would love an invite!). Send a signal to would-be entrepreneurs that you are proud to support and invest in Queer-founded companies. We need more of them.
As a record number of anti-LGBTQ+ laws are making their way through our legislatures, it is important to remember that Pride is first and foremost a protest, not a marketing event. Developing authentic brand strategies around appealing to Queer identity is challenging, but nobody expects you to get it right every time. Companies must, however, commit to listening to and learning from the LGBTQ+ community so that this segment is better represented and better served.
ISSUE V 6.29.2023
from the desk of Luke Tubergen
Empowering Consumer Brands: Profitability and Alternative Funding
In the dynamic realm of consumer brands, a remarkable transformation is underway as venture capital has shifted its focus from top-line revenue to profitability, paving the way for a new crop of alternative funding options to empower growth for the category.; Aspiring entrepreneurs now have the opportunity to control their own destiny and build sustainable businesses without the inherent pressures of achieving outsized growth..
In the world of consumer brands, profitability is now paramount for success. By prioritizing profitability, you can create enduring value, delight customers, and establish a strong foundation for growth at a pace that tracks more naturally with consumer demand.
Gone are the days when every consumer brand aspired solely to be the next billion-dollar unicorn. Today, the entrepreneurial landscape celebrates the power of diverse consumer brands that solve real-world problems. Investors are seeking out innovative brands that resonate with seemingly niche markets, enabling you to carve your own path to success. Embrace your unique identity, cater to your target audience, and make a meaningful impact in their lives, and often, these niches are significantly larger than the market originally anticipated. Your brand's success is not defined by astronomical valuations but by the genuine connections and value you bring to your customers. Growth and profitability are a by-product of that focus.
In this transformative era, alternative funding options empower consumer brands to flourish. Debt financing, grants, crowdfunding, and bootstrapping offer viable alternatives to traditional equity-based investment. These avenues allow for control over your brand's destiny, allowing you to preserve your vision while accessing the capital you need to fuel growth. Embrace the flexibility and creative opportunities these funding sources provide, aligning your financial strategy with your brand's unique aspirations.
Consumer brands have entered an era of empowerment, driven by profitability and alternative funding options. Capital providers, including venture, now value sustainable business models, allowing consumer brands to thrive beyond top-line revenue. Embrace the uniqueness of your brand, solve real problems, and forge deep connections with your target audience. With alternative funding at your disposal, you have the freedom to chart your own path to success while preserving your brand's vision. Embrace this transformative landscape, ignite your consumer brand's spirit, and step into a future where profitability and purpose converge, creating consumer brands that leave an indelible mark on the world.
ISSUE IV 5.24.2023
from the desk of Matt Jung
Fundraising? Maybe Not Now. Build Your Positive Cash Flow Story Instead.
Many founders just assume without hesitation that they need to raise capital and they need to do so from certain types of investors (angels, VC’s, family offices, alternative lenders, etc). Although this is the case for many companies that require more internal development before generating revenue, there are other business models, particularly those that produce physical products, that have the potential to bootstrap for longer to the point where raising capital becomes a “nice to” instead of a “have to.” Examples include Dell, Patagonia, Tuft & Needle and Wayfair. When this happens, fundraising becomes a process controlled by the founders versus investors and presents the opportunity to optimize capital structure early on, which makes the business even more attractive for future sale or investment. This also allows companies to tell a positive cash flow story that sets them apart from others when they do end up speaking to investors and to help potentially avoid the constant fundraising treadmill all together.
Before convincing yourself you have to raise capital now (or while you are trying), try to incorporate a few of these, often overlooked, tips from Ember’s own portfolio as well as companies that have said “No” to us because they didn’t need the cash. Much of this activity happens in the background and may seem trivial and tedious, but the processes have proven to reveal cash flow opportunities that have helped companies avoid having to raise additional money or even saved them from insolvency.
Meticulous Cash Flow Planning
Goal: Have a clear picture of your cash position everyday
Build a version of the monthly cash flow model that outlines the minimum amount of cash needed to achieve growth and break-even cash flow.
Add a 16 week cash flow that shows the cash movements in (revenue) and out (payroll, vendors, taxes, etc.). Be as precise as possible and review and adjust weekly.
Identify opportunities to improve cash flow. Examples include:
Receivables collection
Better payment terms from vendors
Pre-sales
Crowd-funding
Negotiate Hard
Goal: Get paid before paying
Reach out to all vendors to negotiate better payment terms and potential discounts. It helps to outline the future plans for the business and show them how they will grow as you grow. Don’t be afraid to ask for more. For example, try to ask for 120 day payment terms from manufacturers.
With the uncertainty in the economy, now is an ideal time to negotiate and form deeper relationships with trusted vendors.
Find other vendors that might offer you better terms to provide leverage and optionality.
For wholesale customers, ask to be paid upon shipment.
You can offer exclusives, co-marketing or other incentives.
Find retailers that offer upfront payment. They exist, including certain department stores that offer it for new brands.
Find Potential Working Capital Partners Just In Case
Goal: Have cash available when needed and generate a return on every dollar
Establish relationships with financing sourcing to be ready
Run scenarios where you opportunistically take in additional working capital to see if it can increase cash flow down the road (ex., purchase additional inventory to generate more revenue)
Short-term financing, new forms of credit, including factors, purchase order financing, alternative banks, etc. may be available to you (ex., JOOR Pay, Rho, Shopify Capital , etc).
An Illustration
Below is the cash position of two different companies with the same revenue and expense dollars over 9 months:
Starting cash: $100K
Revenue: $500K
Orders place for inventory: $350K
Marketing Expenses: $135K
The only difference is the terms offered by suppliers:
Company with Terms: 60 days to pay vendors.
Company with No Terms: 50% upfront and 50% upon delivery:
The Company with Terms has $200K of more cash at the end of nine months vs. the Company with no Terms! So, we advise many of our companies to simplify their focus: optimize unit economics, manage marketing spend carefully and create a proactive cash flow strategy as long as possible by accounting for the timing of payments.
ISSUE III 4.12.2023
from the desk of Paul Blum
Should I listen to my investors ?
Is a question I wish we heard more often.
Believe me, I know how important capital investment is during the pre-cash flow and high growth periods of all companies. Plus, often companies get their start with seed capital from family and close friends - people who love and care about your well being - how can you not trust their advice? Fast forward a few years and you’re pitching a Series A round to smart professional investors: how can you not take their advice about market opportunities? And finally, you have a board of directors made up of a hybrid cast of investors with years of diversified experience. Why wouldn’t you lean heavily on their experience and judgment in creating and updating your strategy?
The answer is simple. During all three of these stages, it’s important to do two things: 1) Seek skilled and experienced advice in the areas you need help while 2) questioning and integrating these opinions INTO your strategy, NOT creating a strategy using this advice. Ask yourself whether the person providing the advice has the depth of experience in the matter and probe where the advice came from. Just because they have had success before doesn’t mean that the same insights are relevant today and for you. Try to understand the thought process and the depth of the advice and how it integrates with your strategy. Also, importantly, don’t be a victim to confirmation bias and welcome opposing points of view.
Family and friends care so much about you that they often share advice from their personal experiences or career. This advice can be anachronistic or not relevant. Professional investors (V.C, Growth, or P.E) have their own agenda with their capital and that may color their advice. The same people that implored start-ups to pursue top line growth at any cost are now talking cash flow and “paths to profitability”. Try to understand the investor’s motivation and level of subject matter expertise before incorporating their advice. Good strategy has always been based on solid business fundamentals plus vision, inspiration and understanding your customer.
Finally, make sure you build a true board of Advisors as you grow. Start with one and grow from there. You should be able to trust these people’s advice comes from a place of real knowledge and experience, not just a desire to help or a financial interest.
ISSUE II 3.15.2023
from the desk of Avani Patel
Fundraising 101…Bring A White Man Into The Room
Does reading the title of this piece make you want to scream WHAT THE F*** - Now imagine having a male investor tell you to your face during a meeting there’s no way you’re going to be able to raise capital as a female founder and you should find a man to bring to your meetings. It’s happened more than once to founders I know. This is just the tip of the iceberg when it comes to the journey for women and underrepresented founders to raise startup capital.
We have all heard the funding stats, women founded startups received only 1.9% of all venture capital funding in 2022 which is down from 2021 when it was a whopping 2.4%. But, let’s dig a little deeper. Let’s put this all into perspective. Women-owned businesses make up 40% of all US businesses, yet only 25% seek financing. Even when they seek funding, women take less capital than men yet deliver more than twice as much per dollar invested according to a study done by BCG. First Round Capital reported that their investments with at least one female founder performed 63% better than investments where all founders were male. And last but not least, a Pitchbook study found that women founded startups scale and exit faster. Women do more with less (partially because we have to, no one is throwing VC dollars our way) and deliver better returns in a shorter period of time.
The bottom line is simple…we build businesses that deliver better results. The logic here would be to give women more funding - why can’t investors see it, are they blind?! Not at all - and that’s the problem. In a Harvard Business Review article a male investor was quoted saying, investors “...are just more comfortable betting on somebody that is more like them, looks like them, talks like them, went to the same schools, eats the same food, goes to the same restaurant, drinks the same wine, goes to the same country club, all these little things.” This is especially true during times of uncertainty and volatility when investors are pulling back as we are experiencing now; because what happens? Human nature is to revert back to what comfortable and what people have perceived has worked in the past; in this case, NOT women. We have to break this cycle and right now is a critical point in the economic cycle to do so.
Well, guess what, to me that means it’s time to build our own Paypal Mafia. Reality is, it’s not just about investing in women and underrepresented founders, it’s about working with the founders and giving them access to knowledge and a network along with capital so they can be more successful and create generational wealth. And those founders will go on to support more people who look like them and help them create generational wealth. And on and on the cycle goes. That’s the only way we change the game and changing the game is what we’re doing at Ember.
If you’re a female or underrepresented founder or you’re interested in investing in and supporting female or underrepresented founders - connect with me here.
ISSUE I 2.15.2023
from the desk of Paul Blum
Marketing is about people; real people.
For the last few years, led by a group of smart performance marketers and cheap and powerful customer acquisition engines ( Facebook and Google), we all got very focused on marketing TO customers. We found whitespace, we identified addressable markets, we built audiences, we analyzed data. Now, AI is going add synthetic content to this system.
I can't believe I'm saying this but we got too focused on the target customer; especially since those acquisition engines became so expensive that they began sucking much needed capital from our income statements. Also, consumers are trusting static digital content less and want to see entertaining videos of real people; especially ones they know and trust.
Today, we have to balance our approach and start marketing THROUGH and WITH our customers (PEOPLE).
We have to look at every customer as a potential influencer. We need to double down on personalized service, use more UGC, loyalty programs, and incentivize people to share their enjoyment of the product and experience. We should be careful not to overuse Bots, automated flows, and now AI content creation. People don’t trust advertising; especially when it’s generated by a computer.
Dynamic and brand centric Email, SMS, and Organic posting (images and especially videos) can become the unifying communication channels to create this new form of viral collaborative marketing. Then, when we discover resonant content, we can deploy it much more effectively on paid channels; creating much needed marketing efficiency.
So, I’m not saying we should go back to the days of pure natural virality and blind un-attributed media. Of course we must leverage new technologies like ChatGPT and Blockchain to enhance the customer experience...
But, I'm saying that marketing is about PEOPLE….real people. So, while we must continue to leverage and use new technologies like AI and data analytics, we have to remember, great stories FROM real people TO, WITH and THROUGH real people will always be the best strategy.