Sramana Mitra: What has been your inventory strategy starting from the beginning to where you’re now doing private label. Can you step us through how the inventory strategy has evolved over time?
Ilana Stern: The brands that we launched with are special occasion dress brands that are all made to order. Essentially, it’s a non-inventory business because the dresses are produced for the specific customer. What’s special about that is there’s a tremendous amount of variety that we’re able to offer a bride with the made-to-order model. We have dresses that come in up to 50 colors. It works for her because, on an average in the US, a woman gets engaged 12 to 15 months before her wedding. She’s coming to Weddington Way about 11 to 12 months before her wedding. The lead time on our made-to-order dresses is around 8 to 12 weeks. She’s able to get exactly what she’s looking for.
For our private label, we’ve taken a different approach. It’s a smaller, focused collection. Right now, we have six dresses that come in six colors. We do carry inventory on those dresses. What we’re able to do there that is different from the rest of our assortment is that it gives the ability to offer our customer something different, which is the ability to try on, return, and exchange. We’re able to accommodate shorter lead time needs as well as the desire to try on a dress, and be able to return and exchange.
Sramana Mitra: Also, it’s a higher margin economic.
Ilana Stern: Yes, private label is definitely higher margin. The primary driver behind that collection is looking back to the customer and what she’s asking for, realizing a hole in our assortment, and filling that need.
Sramana Mitra: It’s the return and exchange capability. That’s the issue.
Ilana Stern: Yes. For the bride who wants to be able to try a dress on, we’re able to offer that to her easily with our Weddington Way collection.
Sramana Mitra: Let’s talk about your financing strategy. How much did you raise in convertible notes from your classmates? How has the financing evolved from there on?
Ilana Stern: I raised $300,000 on a convertible note from classmates. That gave us the ability to bootstrap. It was me and one other person, who was a former employee from Bloomingdale’s, who worked full time in the first year. We were able to operate really lean out of my living room with no salary to get the business off the ground. What we were proving in the early days was that there was something about our solution that was compelling and that customers were willing to buy from us. After that beta, we raised an institutional round. We raised a seed round. It was a $2.5 million seed round with three venture capitalists backing us.
Sramana Mitra: Who were those venture capitalists?
Ilana Stern: Battery Ventures, Trinity Ventures, and Felicis Ventures. That gave us the drive to really invest in growing the business. We brought on a Head of Marketing, Product Manager, and engineers in-house and built out this custom platform. The Weddington Way that exists today online is completely different than what it first was. We’re now a custom platform built on Ruby On Rails. We brought a rich custom shopping experience.
After we raised that $2.5 million in the summer of 2011, we focused on building out the team, building out a new version of the site, and driving growth. Last summer, I raised another $1.7 million. That was on a convertible note. All of our existing investors followed on. We had the opportunity to bring on some new angels. A couple of my former professors from Stanford invested and some entrepreneurs with relevant experience invested at that point. We’re at a really interesting inflection point in our growth as we’re gearing up for a $10 million run rate.