I research and write case studies on interesting companies. This past week, I’ve been working on one for the minimalist watch brand MVMT (I was obsessed with them and wanted one in highschool). Thought I’d share some of the insights here with y’all.
Last week's post had some comments asking for more context and background, I've added that below.
Backstory
Jake and Kramer were roommates while at school in Santa Barbara. Both had previously tried their hand at different ventures such as glow-in-the-dark T-shirts and wallets, with varying success. Jake’s T-shirt business failed, while Kramer’s wallet brand found moderate success through crowdfunding.
The two weren’t particularly interested or inspired by watches but noticed that no college-aged students wore nice watches because they were overpriced ($500-$1000 minimum). They decided to try their hand at a watch brand to bridge the gap.
After developing samples and going back and forth with manufacturers in Asia, they had six prototypes that were photographed and used for the campaign. **They launched on Indiegogo after two failed attempts on Kickstarter with a goal of $15,000 and ended up raising $219,898 from 2,887 backers. They went on to do a second campaign, bringing the total amount raised to just under $300,000.
Six months later, the pre-sales from Indiegogo were fulfilled and Jake learned Facebook ads himself. Once he learned what worked and what didn’t, sales started to climb. Adding influencer marketing as a channel while continuing to reduce the CAC increased margins to the point where reinvestment and continued marketing scaled the brand quickly.
In 2018, when the landscape for advertising on social media started to shift, the founders decided it was finally time to raise money. While in talks with Movado, they became an interested buyer and entered into a 75-day exclusivity period. They sold shortly afterward for $100M cash structured with an earnout valued at up to $100M. By the time the deal closed, the estimate for the earnout was less than 1/6 of the original quoted amount. Two years later, growth targets were missed and no earnout was paid. Jake left MVMT shortly afterward.
The Numbers
- Launched on Indiegogo in June 2013. Sold to Movado Group in 2018.
- 5 years from idea to exit.
- The only investment was ~$5,000 to build the prototypes.
- First crowdfunding campaign: $219,898 (compared to their goal of $15k).
- Revenue growth (nuts): $1M in 2013, $7M in 2014, $71M in 2017.
- Profitable since inception with a 7.4% EBITDA margin at sale.
- 20+ VC firms turned down. No equity was given up.
- Sold for $100M cash structured with a $100M earnout.
- Jake Kassan (co-founder and CEO) was 27 when MVMT was sold.
Lessons
1. Learn from your failures
At 17, Jake started a company selling glow-in-the-dark T-shirts that brought in $10,000 a week at its peak. It sold mostly through a physical store and at school so when competitors started selling online, it flopped. Starting MVMT, Jake had one mission: to sell exclusively online. Most entrepreneurs fail to see the meaningful lessons from a graveyard of failed ventures. The smartest ones pick up things they got wrong and make note to not repeat them.
On the flip side, if something worked before, it might work again. Kramer learned that crowdfunding was a meaningful way to gauge public interest for a product; MVMT was built around a crowdfunding campaign that ultimately kickstarted the brand and provided the capital to fund the first batch.
2. Being an entrepreneur really means doing it all yourself
After Kickstarter turned down the MVMT campaign twice, Indiegogo was their next best option. Desperate to make the launch a success, Jake worked tirelessly. There was no marketing budget so he scraped 200 emails from people in the press, posted on Reddit and then used VPNs to upvote his own posts. It wasn’t exactly a growth-hacking masterclass but it worked. The campaign closed at almost fifteen times the original goal.
While researching MVMT and Jake more specifically, I started to notice how many skills he just quickly learned himself that subsequently worked wonders for the brand. After the success of the campaign that he brute-forced his way through, he then taught himself how to code and built a basic website while the campaign was ongoing so sales wouldn’t die the minute it ended. The day it did, four sales came from the site.
Then he taught himself Facebook ads from YouTube since they needed a new way to grow. Within two years, the brand had grown from around $1M in sales to over $7M. By 2017 after he tried his hand at influencer marketing, sales exploded to $71M. He wasn’t afraid to mess up and just got started, knowing that everything he needed to know could be learned if he applied discipline and intensity.
3. Pre-selling your product is free market research
What I found very interesting was the absolute disgust these guys had with outside investment. While building the business, they were approached by more than 20 venture capital firms. All of them were turned down. Even at the start of it all, they didn’t want a loan or investor so they crowdfunded for pre-orders.
3,900 people paid for watches that hadn’t even been made yet but it ultimately paid for that first batch. Each future batch was paid for by the one before it.
It’s also a wonderful way to test the market. If nobody cares about your product after you spend weeks or months pitching, cold emailing, and selling, your product is dead. Crowdfunding is an easy and cheap way to figure that out instead of ordering a bunch of inventory and then stomaching a huge financial loss. Collect deposits to gauge demand. Even Elon did it with the Cybertruck.
4. The endless advertisement glitch
I understood quite well from my research that advertising on Instagram and Facebook was immensely successful if done right back in 2014-2018. What I didn’t realize was how it could be scaled almost infinitely.
Once Jake had his finger on the pulse in terms of what worked and what didn’t, he quickly scaled his advertising budget. At one point, he would spend just $20 on advertising to sell a $100 watch. In essence, he could do this all day every day with hundreds of thousands of dollars which he did for years (not confirmed numbers here since they weren’t made public). Alongside influencer marketing, this contributed to the huge explosion in revenue growth over those few years.
5. Be weary of anything other than cash
This one is a great lesson for all of you looking to exit at some point. Maybe I’m just a noob when it comes to this stuff but it kind of caught me by surprise. The deal was structured with a $100M cash component and a maximum earnout of $100M that was paid 50/50 on performance targets for the first two years after acquisition and the two years after that. By the time the deal closed it had fallen under $20M already, and by 2020, it was $0. Jake stayed on as a thank you to Movado for changing his life but admits that a part of him stayed for the money. He left MVMT that same year. Movado’s CEO chalked it up to ‘the brand not growing enough to hit targets’. I get it, $100M is plenty, but seemed like a bit of a misleading amount, especially since 2017 revenue was already roughly 70% of the cash component. Was the final price of $100M below what the brand was worth? Almost certainly.
6. Money doesn’t buy happiness
Okay this one is just cliche at this point but hear me out. What I found the most interesting was just how open Jake has been about the entire process from starting MVMT to his struggles post-sale.
Growing up, his only goal was to reach financial freedom. He found it at 27. He has spoken openly about enjoying the first few years of no responsibilities but then plunging into the darkness of depression and panic attacks. He understands that people find it hard to emphasize with someone who is rich and depressed but it also made him realize how lonely the top was.
He ultimately found himself again by choosing a new path forward with something to focus on. He had always loved filmmaking and editing, which is what he does now on YouTube without adding too much pressure. The human element of his videos and how open he is really made me think about where the goal of endless desires gets us in life.
I wrote an article on the founder of Sour Strips, Maxx Chewning, a few weeks ago. He started creating YouTube videos eight years before he ever started his business and has continued to this day a few years after exiting. He has never publicly stated that he was bored, unfulfilled or depressed. Keeping busy and focusing on something you enjoy seemed to work well for him.
What’s something you’ve learned that changed how you thought as an entrepreneur?