A Perfect Example Of Why You Can’t Just Find A Random Co-Founder
Every single day we hear about people complaining about how they can’t find a co-founder for their startup. A lot of people also wished that incubators like Ycombinator and Techstars would provide them with a co-founder that they could work with. There’s a reason why incubators do not provide co-founders. It is mainly because your co-founder will be someone that you might be seeing every single day, 13+ hours a day, for the next 5-7 years. Because of this, you must share the same vision as your co-founder and you must be able to trust each other.
Yusuke Tanaka, founder of Locondo, is a perfect example of someone who did not get along well with his co-founders. For him, it was a blessing to be able to drift away from the original co-founders.
Locondo is an ecommerce startup based in Japan. The main focus of the site is to sell shoes which has a big market size in Japan. Locondo was started by Yusuke, who was previously a management consultant in Silicon Valley. Yusuke heard a lot of stories about Tony Hsieh of Zappos and was motivated by his success to start his own shoe ecommerce site.
Yusuke took his idea and pitched it to the guys from Rocket Internet, an incubator and early seed funding group. Rocket Internet loved the idea and saw the market. Shortly after, Rocket Internet funded Locondo $10 million in an early stage funding. That wasn’t the only thing that Yusuke received though. He also received 3 other co founders in which he thought he could work well with.
Yusuke and his co-founders engaged in numerous arguments and disagreements. Everyone in the startup had different beliefs and goals. Everyone in the team was filled with frustration and it seemed like nothing was going right.
One of the team’s biggest failure was the fact that they spend most of their money on advertising. Funds were being misused by the co-founders because nobody had the ability to make a solid firm decision. It was a bunch of mess for the team. The startup focused so much on mass media marketing, that they did not have enough money for more inventory. Yusuke recalls that the site had a lot of traffic and a lot of people were going onto the site, but there just was not enough inventory for the customers to choose from.
After a huge argument, the other three co-founders resigned leaving Yusuke on his own to battle this war. It’s not uncommon for early stage ecommerce company to be in debt due to the amount of capital they put into marketing, but when you are alone and your extremely low on money, that can mean trouble. The worst thing that can come at that point is if you cannot secure anymore funding.
Luckily Yusuke didn’t give up, he didn’t want to give up. He believed in his passion and believed in his company. He kept digging through his connections and fortunately was able to secure another round of funding from Lead Capital Management and Itochu Tech Ventures for an additional 15 million dollars.
After dropping his co-founders and finding new venture funding, Yusuke focused harder on trying to improve the business. In 2012, Locondo reached 30 million in revenue and shortly after the startup reached 50 million in revenue. Locondo has been adding more and more products to their product line. Originally the site only sold shoes. Now it has a collection of handbags, footwear accessories, and fashion clothing in general.
Yusuke implemented an extremely unique business model. Basically, Locondo will send you three pairs of shoe when you order one. Let’s say I ordered a pair of Nike size 8. Locondo will send me one size 8, another size 9, and another size 7. That way you can try on your shoes to see which one fits. You then have up to 30 days to call the delivery man and have him pick up your shoes for a return. It might sound like a high cost business model, but Yusuke claims that his margins cover it.
We have seen online ecommerce in China offering free returns within 14 days, but this is kind of a guaranteed return.