This morning we announced an investment in Spreadshirt, certainly the most fun business in my portfolio. It’s all the more fun thanks to the whirlwind presence of the company’s talented and energetic CEO Jana Eggers, who blogs about the challenges of managing growth here.
Many of you will know Spreadshirt or some of its competitors already. If you haven’t tried it, you’ll be amazed how easy it is to find a cool t-shirt and personalise it. I've abused my position already by arranging for 20% off for my readers for the next 10 days: simply visit Spreadshirt US or Spreadshirt EU and enter EXPRESSYOURSELF in the coupon code field at checkout.
Back to the business:
Spreadshirt is different from the traditional enterprise software and Web services companies I’ve invested in over the years. But that’s not because the company sells t-shirts rather than bytes. Or even because they are organic cotton, high quality t-shirts, often delivered within 48 hours. Its because Spreadshirt has a purpose.
The first chapter in the book Mavericks at Work shows why companies built around a cause, an original idea, are more successful than those built around a simple business objective. Instead of “beat the competition” or “maximise cash flow”, these companies aim to “help people save” (INGDirect USA), or “democratise the skies” (Southwest).
Jana Eggers was a computational chemist at Los Alamos National Laboratory, helped build supercomputers for Lycos, and developed a SaaS business before anyone had heard of SaaS. So why is she so excited about making t-shirts with slogans?
What you quickly realise in talking to Jana and learning more about the quirky, hypergrowth world of mass customised apparel, is that it’s not about the clothes at all. It’s about self-expression. And everyone has something to say. The clothes are a medium, a billboard, a door opener, a conversation starter. The first time I met Jana, her t-shirt read:
Giving an outlet to personal creativity is Spreadshirt’s cause, and the whole company has embraced it. Every employee collects his favourite quotes or coolest drawings. They share them in meetings, blog about them, twitter on them. Production staff in Leipzig reward the most creative customers with a personal note of encouragement.
The cause unites a company that straddles Germany, France the US and other countries. And it opens up a market that is not constrained by traditional definitions. This is not the t-shirt market, it’s the self-expression market.
Last week Jana’s shirt said:
But the cause isn’t just good for company morale. It drives a lot of business value. When customers design a Spreadshirt they take on some of its production costs and create something valuable for themselves. This means Spreadshirt benefits from twice the gross margin of a branded eCommerce site, and the consumer gets a product to wear “everytime it’s clean” (so say 75%). Customer satisfaction runs high, with a Net Promoter Score above 50%.
Some time during our due diligence:
Focusing on the cause also allows Spreadshirt to distribute self-expression without being constrained by traditional channels for 'fashion'. On Spreadshirt’s web sites, the message can be a one-off gift, a design shared with the community via Spreadshirt’s Marketplace, or a full range of apparel sold through one of 500,000 shops that people have set up –- be they bloggers, tattoo artists, graphic designers, cult martial arts heroes, cartoonists or pop-rock bands.
Enterprises have also cottoned on the potential. CNN has thousands of walking billboards thanks to its wildly successful “headline on a t-shirt” offering. Innovative ad agencies have helped brands like Holiday Inn use Spreadshirts to launch new offerings. Warner Brothers used it to promote the last Harry Potter film, while Electronic Arts operates its Spore t-shirt shop on Spreadshirt.
Think of all the content that could be part of a personalised shirt or jacket: music lyrics, blog excerpts, film quotations, inside jokes. In spite of what you hear these days, content does have value, but much more so if it has an emotional connection with the consumer. Personalised apparel creates that connection, more effectively than an iPhone or a Web browser. It’s an early market.
I like entrepreneurs who think like this:
This blog is often about the growing quality of entrepeneurial leadership in Europe. Jana Eggers is a good example of a manager –- who happens to be American –- running a trans-Atlantic business by harnessing its regional strengths. She takes best practices from the US (marketing anyone?) and from Germany (quality control and production efficiency) and merges them into a coherent company culture. The result is an organisation of impressive dynamism and resilience. And a lot of air miles for Jana.
Spreadshirt fits our investment model to a T (no pun intended) because it was founded by a couple of real bootstrappers, Lukasz Gadowski and Matthias Spiess. They created the early momentum, built the business in Germany, and then took it global with funding from Accel Partners’ Harry Nelis. And all this on a relatively small amount of capital. Today, with over 300 people, Spreadshirt is market leader in Europe and a top contender in the US.
What I’m wearing today: