Time to scale

‘No offence guys, you've done a great job to get the business this far, but now we need some rock stars to take it up a notch!’ said Lee Fixel, the man from Tiger Global.

What he really meant was:

Let's bring in some more experienced people who've run a business many times this size to help you run this show.

Tiger Global had just invested $80 million for a 40 per cent share of our business, and Lee was here on their behalf to make sure we delivered on it. It's not uncommon for venture capitalists to surround the founders with people of their choice, and this situation was no different. They believed that a CEO and a stronger management team (with corporate and public company experience) would always be a safer bet than two founders with no real track record of running a corporate business.

Prior to their investment in May 2011, the Catch and Scoopon businesses were run by a management team of Gabby, Hezi and Anees, backed up by Vijay, Catch's first employee, who took care of logistics and operations. None of us carried any titles, and if there were major strategic decisions to be made about hiring, firing, marketing or negotiations, we all had a say. None of us had executive assistants or highly paid advisers. We still checked all our own emails, booked our own meetings and thrived on the adrenaline of making it all work. We were a real team. We ran what we considered to be a small business. It was a fast‐growing small business, and a very profitable one at that, but we treated it as a small business.

With the arrival of Tiger Global, all that changed.

This influx of venture capital came with added pressure. We were being watched and they expected us to deliver. The message? Scale. Grow. Now!

Within months, we'd gone from not knowing what a CFO is, to forking out $2 million in annual salaries on hiring a raft of C‐level guys: CEO, CFO, CIO, CMO (and a whole bunch of other Cs). We also formed a board and started having monthly board meetings—or ‘bored’ meetings, as we called them!

So much was happening so quickly that we needed to keep everyone informed, including our suppliers. They've always been part of our three‐way wedding (Catch‐supplier‐customer) so we needed to bring them along on the journey. Remember, without suppliers there is no business! Here's how we announced our $80 million investment to them.

Within 18 months of Tiger Global's investment, we'd mushroomed from 100 employees to 300. What the f$#@! Let us repeat that: within 18 months, we'd grown from 100 to 300 staff members. How did we grow so quickly? More on that later, but being featured on the front cover of BRW didn't hurt. That was a super proud day for us. Here we were, two guys who started with a stall at the markets, now on the cover of Australia's premier business magazine! The magazine is gone now, but we're still here.

This media coverage didn't just create great memories for us, it created great momentum for the business, which enabled us to grow quickly. More media meant more customers, which meant more deals, which meant more sales, which led to greater exposure. The cycle of success was in full swing. Business was already booming and then it just exploded. The warehouse was packed, the offers were pouring in, and people were working to capacity. And while growth is great, it created problems.

Photo depict the BRW cover story that documented how and why Tiger Global and some of Australia's wealthiest families invested in Catchoftheday.

The BRW cover story documented how and why Tiger Global and some of Australia's wealthiest families invested in Catchoftheday.

Source: © Fairfax Media

Growing pains

People often ask us what the biggest challenge in building this business has been, and to be honest, we can pin it down to a single factor: ‘growing pains’. Here are our yearly sales results.

Bar chart depicts the yearly sales results.

We have pretty much doubled our business every single year since launching, which generally meant doubling our team size, doubling the number of parcels dispatched, needing to find and invent new processes to accommodate the growth, and moving four offices and four warehouses at the same time.

Growing pains are never easy, but it's a fact of life for disruptors. The upside to this pain was we had good people, solid infrastructure and streamlined processes to support what we were experiencing, and we were having a lot of fun! Do you know what was the hardest part? Moving. Who likes moving house? No‐one. Times it by a million and you get the size of the headache. It's not just the time‐consuming tasks of dealing with real estate agents, inspecting new properties, restructuring finances and revising all the corporate collateral to reflect the new location. It's also the physical act of moving and the logistics of relocating hundreds of staff, tonnes of warehouse machinery, thousands of boxes of stock and the requisite clean‐up of the premises that made the moving process so exhausting.

So, in mid 2012 we reluctantly decided to geographically separate the business into two parts. Why? Both businesses grew so fast that we simply ran out of office space and, in particular, we needed more storage and warehousing capacity. Gabby and the teams of Catchoftheday and Grocery Run moved to another, bigger office/warehouse in Braeside (How big? 16 000 m2 big—the size of the Melbourne Cricket Ground!) and Hezi and the Scoopon team, still growing fast, stayed put at the Moorabbin office/warehouse.

Every start‐up wants to scale up as quickly as possible, and we were no different. With the pressure from Tiger Global, we knew that we had to do something innovative to achieve it, and we knew it would come at a cost because at critical junctures like this, it becomes physically impossible to achieve growth without making major structural change.

This is how we did it.

Until mid 2012, Catchoftheday was all about a catch of a day: selling a single deal in high volumes, creating a lot of buzz and doing it all again the next day. It was a winning formula that propelled us to the top of the online retail leader board, all in six years. Selling one deal a day in large volumes had allowed us to streamline our packing process. It's pretty simple to pack 3000 of a single item into 3000 postage bags, and then load them onto the Australia Post truck. These logistics were a piece of cake compared to what we were about to implement. Looking back, oh how we miss those days of the single deal!

But with few suppliers who could meet our need to supply one product in the quantities we needed (which was thousands) for each deal, we sadly had to say goodbye to our single‐deal‐a‐day format. It was not a decision we made lightly. To scale, we moved to an ‘events’ format, which brought with it the potential for growth, but all manner of headaches too.

In short, ‘events’ were Catchoftheday deals on steroids.

Each event had anything from one to 1000 products available for sale each day, and each event was dedicated to a single brand or theme. The deals were still time limited, and the event started and ended at given times throughout the day.

While the event format enabled us to offer a lot more deals on any given day, and increase our revenue, it also created a series of operational and financial challenges we had never faced before.

For a start, our previous fulfilment process of packing one product into one bag had now become a highly complex task involving thousands of different products in millions of combinations going to hundreds of thousands of people. It was complicated. That wasn't the only challenge. We now needed:

  • more storage rooms to handle the increase in received goods
  • more packing staff in our warehouses to manage the goods
  • more photographers and copywriters to promote the events
  • more IT people to handle the growing demands and loads of a heavier website
  • even more finance teams to handle the increase in accounts

… and much more money to purchase a greater range of goods.

And if this wasn't enough to manage, we added four new sites in 2012:

  • Grocery Run
  • Mumgo
  • Vinomofo
  • EatNow

… to our existing sites of Catchoftheday and Scoopon.

Photo depicts the airline arrival style board.

We hung up this airline arrival‐style board in our foyer to showcase when our new brands and websites started (landed).

In addition to moving to the massive new warehouse in Braeside, we opened a larger logistics centre (23 000 m2, even bigger than the other one) in the suburb of Truganina, 28 kilometres west of Melbourne. Add to that the opening of new offices for Scoopon in every major capital city around the country and voilà!

That was the short version of how the hell we managed to mushroom from 100 workers to 300 workers in a year and a bit (and then 400 one year after that) and how we suddenly found ourselves running a not‐so‐small business anymore.

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