The best of everything
The absurd quest to make the “best” razor
The rise of the recommendation site
11 senior citizens on the best products of the past century
The best doesn’t exist. A psychologist explains why we can’t stop searching.
The “best” lipstick probably won’t change your life — but the search for it can
Online reviews will never help you find the “best” product. That doesn’t mean they aren’t useful.
I used all the best stuff for a week and it nearly broke
When the “best” busts: the spectacular rise and fall of smart luggage startup Raden
How a company goes from totally sold-out to totally shuttered in just two years.
By Chavie Lieber
Vox, Dec 12, 2018
The Goods
Part of The best of everything
Allbirds, according to Allbirds, makes “the world’s most comfortable shoes.” Thirdlove, according to Thirdlove, makes “the best-fitting bras.” Brooklinen says they “do sheets best.” Ritual vitamins contain “nutrients in their best forms,” and buying a Quip toothbrush will get you “the best experience at the best price.”
The direct-to-consumer landscape is expansive, but no matter the product category, a startup’s promise is almost always the same. These companies claim to sell you the very best thing while disrupting the status quo, whether it’s Warby Parker upsetting the $140 billion eyewear industry by selling glasses online without the retail markup or Casper’s mattress-in-a-box making industry giants stumble.
Most of these startups follow a similar playbook. Enter a sleepy or uncrowded market, develop a product with millennial-friendly branding, and then raise millions of dollars in funding from venture capital firms. The money that’s handed over is often spent in a dizzying whirlwind: on merchandise, marketing, talent, ads, events, collabs — all with the goal of seeing exponential sales growth in the shortest time possible.
Three years ago, Josh Udashkin decided that the luggage industry was yet another market ripe for disruption. Luggage accounted for $30 billion in annual global sales at the time, yet was pretty underwhelming as a product category. There were a few luxury brands in the space, like Rimowa and Tumi, but nothing more affordably priced that also had memorable design and branding that could appeal to millennials, a demo that loves to travel and is willing to shell out for their wanderlust. If Casper could build brand affinity in the unsexy mattress space, couldn’t Udashkin do it with luggage?
At the time, the now-35-year-old Udashkin was traveling frequently as a lawyer for the footwear company Aldo. Dismayed with his luggage options, he wanted to make the best suitcase, in terms of not just style and price but also tech. He named his company Raden and in 2016 introduced a sleek polycarbonate bag with four-wheel spinners and an ergonomic handle, which could act as a scale to determine the bag’s weight.
The real star of the show, though, was the bag’s built-in lithium battery. It could charge gadgets and had GPS radios and 3G connectivity built into it too, so when suitcase owners connected their bag to the Raden app, it could be tracked. The app would send push notifications to relay flight information and when the suitcase arrived on the luggage carousel. Udashkin priced his bags at $295 for a small carry-on and $395 for a large one; they came in several colors, including pink.
Within six months, Raden earned a spot on Oprah’s annual Favorite Things holiday shopping list. “They practically come with a college degree,” Oprah enthused. “Smartest luggage ever.” By Christmas, Raden’s inventory of 19,000 suitcases had completely sold out, and there was a 7,000-person waitlist. Retailers from all over the world were phoning Udashkin, eager to stock the bags. The founder calculated that at this rate, Raden would be on track to hit $10 million in sales by year two.
Udashkin calls the 2016 holiday season, with all its Oprah madness, “a life highlight”; he describes 2017 as “a terrible year.” Over the course of a few months, Raden went from a company that was thriving to one that was barely surviving. In May 2018, Raden completely shuttered, leaving customers bewildered: How did such a promising startup, one that wanted to make the best suitcase, boom and bust in no time at all?
Like many Silicon Valley startup founders, Udashkin was young, male, and white and had access to a network that was willing and able to back Raden. He secured an initial $500,000 between his own savings and investments from family and friends.
That money went toward hiring supply chain experts from Samsonite and Tumi to consult on how to manufacture luggage and a product designer from Beats by Dre to build the “smart” component of his suitcase. This tech offering was what Udashkin believed would set up Raden for instant success. He wanted his luggage to be more than just a bag; he wanted to it to be a covetable gadget that would make traveling easier.
After a prototype was built and the production logistics were figured out, Udashkin realized he needed a lot more money to get the company off the ground. The most natural option would be to raise a seed round of funding led by a venture capital firm, but he was hesitant.
VCs invest with the expectation that they’ll get rich off an IPO or an acquisition from a Walmart or a Unilever, and they’re willing to infuse small companies with huge amounts of cash to make that happen. Casper has raised $239.7 million and Warby Parker $290.5 million; both companies have been on IPO watch for a while now. Then there’s Rent the Runway with $416.2 million and Harry’s with $474.6 million. Jessica Alba’s Honest Company tops them all, with $503 million in funding.
“The position of investors funding these consumer brands is that they don’t mind spending money to develop a product faster, steal talent, hire more people, and kill off competition,” says Alex Wilhelm, the editor in chief of Crunchbase, which tracks investment rounds.
This is the exact opposite approach Udashkin wanted.
“I have friends who are VCs, and I know that the money isn’t free — it has an outsize return,” he says. “You have to give them a return of 10 times, and I didn’t want to run on an endless treadmill. The way I saw it, Tumi spent 40 years getting to $100 million in sales. I wanted to be a $100 million business, sure, but I didn’t think I had to do it in two years.”
Still, he needed capital to bring his product to market.
“I don’t think I understood the type of money that was going into this world,” he says. In August 2015, he raised $3 million from Lerer Hippeau Ventures (which has invested in Allbirds, Casper, and Everlane) as well as First Round Capital (Uber, Rover, Warby Parker). Investors were taken by Udashkin’s enthusiasm and charisma. Ben Lerer, a managing partner at Lerer Hippeau, wrote on his company blog that the founder was “the right kind of lunatic” with a “brand-building mentality.” He declared that Raden would “change the way people travel.”
When Raden launched its website and simultaneously began selling on Amazon the following March, the company was lavished with press attention. A Soho pop-up that opened a month later earned the startup a profile in the New York Times, which Udashkin says helped him secure wholesale partnerships with Farfetch, Selfridges, and Nordstrom. Raden suitcases were put on tons of best luggage roundups. Things were going so well that after the company was notified it had been selected for Oprah’s Favorite Things, Udashkin raised another $2 million from investors, to keep up with the company’s growth.
But trouble came for Raden shortly after the Oprah bump. Raden was cash-rich and inventory-poor, so much of the new VC money was spent fulfilling orders on the waitlist. The rest went to overhead: salaries for 15 employees, office space, retail rent, website maintenance. By the early months of 2017, the business was operating on a shoestring budget; Udashkin admitted “there was sometimes $0 in the bank.” Investors counseled him to raise more money, but he believed he could keep the company running from the revenue Raden was earning from sales.
But Raden wasn’t the only game in town. It launched around the same time as another smart luggage brand, Away. Direct-to-consumer brands often launch in clusters; take the slew of mattress companies — Leesa, Tuft & Needle, Purple, Allswell — that entered the market around the same time as Casper.
In addition to Away, there was Bluesmart, which began selling smart luggage after crowdfunding its product in 2014 on Indiegogo. But Bluesmart, with bags twice the price as Raden’s, was seen as making luxury luggage “for a business executive with an expense account,” according to The Verge, and was never quite considered a direct Raden competitor. Away was a different story. The companies’ bags were priced similarly and the designs were close too, with their hard-shell covers, four-spinner wheels, and plethora of color options. (Away also had a millennial pink bag, of course).
Still, Udashkin didn’t felt threatened by competition; there are plenty of people who need suitcases, after all. Then in May 2017, Away raised $20 million in funding. The round included the venture capital firms Global Founders Capital, Comcast Ventures, Accel Partners, and Forerunner Ventures, which count companies like Facebook, Slack, LinkedIn, Eventbrite, and Jet.com in their portfolios.
With this kind of cash, Away planned to get bigger fast by expanding beyond a single carry-on bag into other product offerings and by opening permanent brick-and-mortar retail stores. It also set its sights on becoming a lifestyle brand by way of a magazine and podcast. Eurie Kim, a partner at Forerunner Ventures, says she was attracted to Away because of its founders’ multifaceted aspirations for their luggage company.
“The Away brand has always been about a broader vision for modern travel,” says Kim, “so even in product development, they didn’t focus exclusively on the tech aspects of the product, but rather the spirit of the wanderlust-driven community.”
Suddenly, Away was everywhere, online and off. In New York, there were Away billboards; in Chicago, ads at the airport. You couldn’t scroll through Instagram or Facebook without seeing promoted posts about the brand.
“Raden had never been on a billboard or bus ad, and had gotten to where we were by being quite frugal,” Udashkin says. “It felt like we were getting killed.”
At that point, he realized Raden needed to start advertising — and would need to raise money to do so. When he started his search for new investors, he found the tide had turned.
“People had questions about why we weren’t seeing crazy month-to-month growth, and they felt that even though we were selling bags, we weren’t ‘acquiring customers,’” he says. “I actually thought we were making an enormous amount of money.” While Udashkin declined to share sales figures, he says the company was not yet profitable.
This skeptical investor response isn’t surprising to Wilhelm. “If you’re in a space with VC competitors and you don’t have enough VC money, you have to be 10 times better or you will die,” he says. “It’s a meritocracy, where capital is the advantage rather than the product.”
Udashkin eventually landed a verbal commitment from a private equity firm, which promised a check if results during the holiday 2017 season were satisfactory. But Raden had disappointing holiday sales. Maybe it was because smart luggage was no longer a novelty, or potential customers were flocking to Away instead.
Then came the smart luggage ban on airplanes. Lithium batteries, like the ones that powered Raden luggage, were starting fires on planes, and in December 2017, the Federal Aviation Administration announced passengers couldn’t fly with smart luggage whose batteries weren’t removable. (A couple of years earlier, major airlines also banned hoverboards out of concern their batteries were a fire hazard.)
“Once I saw the airline announcement, I knew fundraising was over,” Udashkin says. “There was no one who would invest in this business with this risk.”
It wasn’t that the FAA rule made Raden luggage unusable. The company’s batteries were indeed removable, but they were located inside a zip pouch on the inside of each bag, so customers would have to unpack their suitcase to remove the battery before boarding a flight. The company have a prototype with a more easily accessible removable battery in the works. But without funding to lean on, development couldn’t be accelerated, and issuing refunds or replacing old models with new ones was out of the question.
“We branded ourselves as a smart bag,” Udashkin says, “and once you can’t have a battery, the entire value proposition and product development investment is killed.”
In the end, a perfect storm of fierce competition, too little funding, and government regulations killed Raden. Udashkin thought about selling the company but decided to shut it down entirely this past May, just two weeks after Bluesmart announced that it too was going out of business.
Raden’s website now features nothing but a somber goodbye note; its Instagram is frozen in time. Bloomingdale’s and Need Supply are running through their remaining inventory by offering steep discounts; used Raden suitcases are available for sale on Amazon and eBay.
Away, on the other hand, has thrived. After the FAA announcement, the company emailed customers with instructions on how to remove its batteries from the luggage with a screwdriver, and posted related videos to its website. It redesigned its bags to feature batteries that easily pop out on the exterior, and allowed customers to swap out their old models for free. In June, one month after Raden folded, Away announced it had raised another $50 million in funding.
Hindsight for Udashkin is, of course, 20/20. Looking back, he knows he should have raised more money and put forth a wider brand vision for Raden.
“I guess I was really caught up in the business, and I was honestly happy with where I was,” he says. “When you’re in it, you feel like you need to push through and ignore feedback you don’t feel to be true.”
Raden’s investors likely aren’t too devastated; this kind of crash and burn happens all the time.
“There’s going to be a high rate of failure, and while no one likes to lose money, the whole point is to be in it for the risk,” says Edward Lando, an angel investor who made a small investment in Raden after meeting Udashkin at a conference. “When I write a check, I kiss the money goodbye. The downside is that you lose the original investment, but the upside is that you can earn 100 times more.” Lerer Hippeau and First Round both declined to comment.
Raden may be a blip in the greater history of startup failure, but the experience was traumatic for Udashkin, and one that he’s still working through in therapy. Having to tell investors, family, friends, and staff the company had failed was brutal. “I didn’t get out of bed for two months,” he says. “I thought no one would ever want to speak to me again.”
A few months after Raden shuttered for good, Udashkin started consulting for LVMH. He doesn’t plan to start a new company anytime soon. Every now and then, though, he’ll get a call from a VC eager to hear if he’s got anything cooking. They couldn’t get rich from him the first time, but there’s always round two.
The absurd quest to make the “best” razor
The rise of the recommendation site
11 senior citizens on the best products of the past century
The best doesn’t exist. A psychologist explains why we can’t stop searching.
The “best” lipstick probably won’t change your life — but the search for it can
Online reviews will never help you find the “best” product. That doesn’t mean they aren’t useful.
I used all the best stuff for a week and it nearly broke
When the “best” busts: the spectacular rise and fall of smart luggage startup Raden
How a company goes from totally sold-out to totally shuttered in just two years.
By Chavie Lieber
Vox, Dec 12, 2018
The Goods
Part of The best of everything
Allbirds, according to Allbirds, makes “the world’s most comfortable shoes.” Thirdlove, according to Thirdlove, makes “the best-fitting bras.” Brooklinen says they “do sheets best.” Ritual vitamins contain “nutrients in their best forms,” and buying a Quip toothbrush will get you “the best experience at the best price.”
The direct-to-consumer landscape is expansive, but no matter the product category, a startup’s promise is almost always the same. These companies claim to sell you the very best thing while disrupting the status quo, whether it’s Warby Parker upsetting the $140 billion eyewear industry by selling glasses online without the retail markup or Casper’s mattress-in-a-box making industry giants stumble.
Most of these startups follow a similar playbook. Enter a sleepy or uncrowded market, develop a product with millennial-friendly branding, and then raise millions of dollars in funding from venture capital firms. The money that’s handed over is often spent in a dizzying whirlwind: on merchandise, marketing, talent, ads, events, collabs — all with the goal of seeing exponential sales growth in the shortest time possible.
Three years ago, Josh Udashkin decided that the luggage industry was yet another market ripe for disruption. Luggage accounted for $30 billion in annual global sales at the time, yet was pretty underwhelming as a product category. There were a few luxury brands in the space, like Rimowa and Tumi, but nothing more affordably priced that also had memorable design and branding that could appeal to millennials, a demo that loves to travel and is willing to shell out for their wanderlust. If Casper could build brand affinity in the unsexy mattress space, couldn’t Udashkin do it with luggage?
At the time, the now-35-year-old Udashkin was traveling frequently as a lawyer for the footwear company Aldo. Dismayed with his luggage options, he wanted to make the best suitcase, in terms of not just style and price but also tech. He named his company Raden and in 2016 introduced a sleek polycarbonate bag with four-wheel spinners and an ergonomic handle, which could act as a scale to determine the bag’s weight.
The real star of the show, though, was the bag’s built-in lithium battery. It could charge gadgets and had GPS radios and 3G connectivity built into it too, so when suitcase owners connected their bag to the Raden app, it could be tracked. The app would send push notifications to relay flight information and when the suitcase arrived on the luggage carousel. Udashkin priced his bags at $295 for a small carry-on and $395 for a large one; they came in several colors, including pink.
Within six months, Raden earned a spot on Oprah’s annual Favorite Things holiday shopping list. “They practically come with a college degree,” Oprah enthused. “Smartest luggage ever.” By Christmas, Raden’s inventory of 19,000 suitcases had completely sold out, and there was a 7,000-person waitlist. Retailers from all over the world were phoning Udashkin, eager to stock the bags. The founder calculated that at this rate, Raden would be on track to hit $10 million in sales by year two.
Udashkin calls the 2016 holiday season, with all its Oprah madness, “a life highlight”; he describes 2017 as “a terrible year.” Over the course of a few months, Raden went from a company that was thriving to one that was barely surviving. In May 2018, Raden completely shuttered, leaving customers bewildered: How did such a promising startup, one that wanted to make the best suitcase, boom and bust in no time at all?
Like many Silicon Valley startup founders, Udashkin was young, male, and white and had access to a network that was willing and able to back Raden. He secured an initial $500,000 between his own savings and investments from family and friends.
That money went toward hiring supply chain experts from Samsonite and Tumi to consult on how to manufacture luggage and a product designer from Beats by Dre to build the “smart” component of his suitcase. This tech offering was what Udashkin believed would set up Raden for instant success. He wanted his luggage to be more than just a bag; he wanted to it to be a covetable gadget that would make traveling easier.
After a prototype was built and the production logistics were figured out, Udashkin realized he needed a lot more money to get the company off the ground. The most natural option would be to raise a seed round of funding led by a venture capital firm, but he was hesitant.
VCs invest with the expectation that they’ll get rich off an IPO or an acquisition from a Walmart or a Unilever, and they’re willing to infuse small companies with huge amounts of cash to make that happen. Casper has raised $239.7 million and Warby Parker $290.5 million; both companies have been on IPO watch for a while now. Then there’s Rent the Runway with $416.2 million and Harry’s with $474.6 million. Jessica Alba’s Honest Company tops them all, with $503 million in funding.
“The position of investors funding these consumer brands is that they don’t mind spending money to develop a product faster, steal talent, hire more people, and kill off competition,” says Alex Wilhelm, the editor in chief of Crunchbase, which tracks investment rounds.
This is the exact opposite approach Udashkin wanted.
“I have friends who are VCs, and I know that the money isn’t free — it has an outsize return,” he says. “You have to give them a return of 10 times, and I didn’t want to run on an endless treadmill. The way I saw it, Tumi spent 40 years getting to $100 million in sales. I wanted to be a $100 million business, sure, but I didn’t think I had to do it in two years.”
Still, he needed capital to bring his product to market.
“I don’t think I understood the type of money that was going into this world,” he says. In August 2015, he raised $3 million from Lerer Hippeau Ventures (which has invested in Allbirds, Casper, and Everlane) as well as First Round Capital (Uber, Rover, Warby Parker). Investors were taken by Udashkin’s enthusiasm and charisma. Ben Lerer, a managing partner at Lerer Hippeau, wrote on his company blog that the founder was “the right kind of lunatic” with a “brand-building mentality.” He declared that Raden would “change the way people travel.”
When Raden launched its website and simultaneously began selling on Amazon the following March, the company was lavished with press attention. A Soho pop-up that opened a month later earned the startup a profile in the New York Times, which Udashkin says helped him secure wholesale partnerships with Farfetch, Selfridges, and Nordstrom. Raden suitcases were put on tons of best luggage roundups. Things were going so well that after the company was notified it had been selected for Oprah’s Favorite Things, Udashkin raised another $2 million from investors, to keep up with the company’s growth.
But trouble came for Raden shortly after the Oprah bump. Raden was cash-rich and inventory-poor, so much of the new VC money was spent fulfilling orders on the waitlist. The rest went to overhead: salaries for 15 employees, office space, retail rent, website maintenance. By the early months of 2017, the business was operating on a shoestring budget; Udashkin admitted “there was sometimes $0 in the bank.” Investors counseled him to raise more money, but he believed he could keep the company running from the revenue Raden was earning from sales.
But Raden wasn’t the only game in town. It launched around the same time as another smart luggage brand, Away. Direct-to-consumer brands often launch in clusters; take the slew of mattress companies — Leesa, Tuft & Needle, Purple, Allswell — that entered the market around the same time as Casper.
In addition to Away, there was Bluesmart, which began selling smart luggage after crowdfunding its product in 2014 on Indiegogo. But Bluesmart, with bags twice the price as Raden’s, was seen as making luxury luggage “for a business executive with an expense account,” according to The Verge, and was never quite considered a direct Raden competitor. Away was a different story. The companies’ bags were priced similarly and the designs were close too, with their hard-shell covers, four-spinner wheels, and plethora of color options. (Away also had a millennial pink bag, of course).
Still, Udashkin didn’t felt threatened by competition; there are plenty of people who need suitcases, after all. Then in May 2017, Away raised $20 million in funding. The round included the venture capital firms Global Founders Capital, Comcast Ventures, Accel Partners, and Forerunner Ventures, which count companies like Facebook, Slack, LinkedIn, Eventbrite, and Jet.com in their portfolios.
With this kind of cash, Away planned to get bigger fast by expanding beyond a single carry-on bag into other product offerings and by opening permanent brick-and-mortar retail stores. It also set its sights on becoming a lifestyle brand by way of a magazine and podcast. Eurie Kim, a partner at Forerunner Ventures, says she was attracted to Away because of its founders’ multifaceted aspirations for their luggage company.
“The Away brand has always been about a broader vision for modern travel,” says Kim, “so even in product development, they didn’t focus exclusively on the tech aspects of the product, but rather the spirit of the wanderlust-driven community.”
Suddenly, Away was everywhere, online and off. In New York, there were Away billboards; in Chicago, ads at the airport. You couldn’t scroll through Instagram or Facebook without seeing promoted posts about the brand.
“Raden had never been on a billboard or bus ad, and had gotten to where we were by being quite frugal,” Udashkin says. “It felt like we were getting killed.”
At that point, he realized Raden needed to start advertising — and would need to raise money to do so. When he started his search for new investors, he found the tide had turned.
“People had questions about why we weren’t seeing crazy month-to-month growth, and they felt that even though we were selling bags, we weren’t ‘acquiring customers,’” he says. “I actually thought we were making an enormous amount of money.” While Udashkin declined to share sales figures, he says the company was not yet profitable.
This skeptical investor response isn’t surprising to Wilhelm. “If you’re in a space with VC competitors and you don’t have enough VC money, you have to be 10 times better or you will die,” he says. “It’s a meritocracy, where capital is the advantage rather than the product.”
Udashkin eventually landed a verbal commitment from a private equity firm, which promised a check if results during the holiday 2017 season were satisfactory. But Raden had disappointing holiday sales. Maybe it was because smart luggage was no longer a novelty, or potential customers were flocking to Away instead.
Then came the smart luggage ban on airplanes. Lithium batteries, like the ones that powered Raden luggage, were starting fires on planes, and in December 2017, the Federal Aviation Administration announced passengers couldn’t fly with smart luggage whose batteries weren’t removable. (A couple of years earlier, major airlines also banned hoverboards out of concern their batteries were a fire hazard.)
“Once I saw the airline announcement, I knew fundraising was over,” Udashkin says. “There was no one who would invest in this business with this risk.”
It wasn’t that the FAA rule made Raden luggage unusable. The company’s batteries were indeed removable, but they were located inside a zip pouch on the inside of each bag, so customers would have to unpack their suitcase to remove the battery before boarding a flight. The company have a prototype with a more easily accessible removable battery in the works. But without funding to lean on, development couldn’t be accelerated, and issuing refunds or replacing old models with new ones was out of the question.
“We branded ourselves as a smart bag,” Udashkin says, “and once you can’t have a battery, the entire value proposition and product development investment is killed.”
In the end, a perfect storm of fierce competition, too little funding, and government regulations killed Raden. Udashkin thought about selling the company but decided to shut it down entirely this past May, just two weeks after Bluesmart announced that it too was going out of business.
Raden’s website now features nothing but a somber goodbye note; its Instagram is frozen in time. Bloomingdale’s and Need Supply are running through their remaining inventory by offering steep discounts; used Raden suitcases are available for sale on Amazon and eBay.
Away, on the other hand, has thrived. After the FAA announcement, the company emailed customers with instructions on how to remove its batteries from the luggage with a screwdriver, and posted related videos to its website. It redesigned its bags to feature batteries that easily pop out on the exterior, and allowed customers to swap out their old models for free. In June, one month after Raden folded, Away announced it had raised another $50 million in funding.
Hindsight for Udashkin is, of course, 20/20. Looking back, he knows he should have raised more money and put forth a wider brand vision for Raden.
“I guess I was really caught up in the business, and I was honestly happy with where I was,” he says. “When you’re in it, you feel like you need to push through and ignore feedback you don’t feel to be true.”
Raden’s investors likely aren’t too devastated; this kind of crash and burn happens all the time.
“There’s going to be a high rate of failure, and while no one likes to lose money, the whole point is to be in it for the risk,” says Edward Lando, an angel investor who made a small investment in Raden after meeting Udashkin at a conference. “When I write a check, I kiss the money goodbye. The downside is that you lose the original investment, but the upside is that you can earn 100 times more.” Lerer Hippeau and First Round both declined to comment.
Raden may be a blip in the greater history of startup failure, but the experience was traumatic for Udashkin, and one that he’s still working through in therapy. Having to tell investors, family, friends, and staff the company had failed was brutal. “I didn’t get out of bed for two months,” he says. “I thought no one would ever want to speak to me again.”
A few months after Raden shuttered for good, Udashkin started consulting for LVMH. He doesn’t plan to start a new company anytime soon. Every now and then, though, he’ll get a call from a VC eager to hear if he’s got anything cooking. They couldn’t get rich from him the first time, but there’s always round two.
No comments:
Post a Comment