STARTUP

How We Started Small & Raised Money

Start-up NatureBox just raised $2 million in seed financing. Here's their story.
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Being an overweight teen who lost 70 pounds by learning to eat right, Gautam Gupta was primed to understand why we buy and consume what we do. And that led him and partner Ken Chen to launch NatureBox, which received a $2 million dollar round of funding today.

Gupta and Chen met at Babson College, but went separate ways after graduation. Chen had a successful real estate firm and then grew and sold an online marketing firm. Gupta started working with venture capital firm General Catalyst Partners during college, and went on to help open their Palo Alto office and source $80 million worth of investments.

Both Chen and Gupta were looking for new challenges, and Gupta had noticed the convergence of trends: people are buying more food online, and more interest in what is in food. "Is it natural, local, organic, independent?" asked Gupta. "We thought we could provide value by creating an online experience to personalize a basket of natural food items people can receive monthly."

Gupta and Chen focused on snack foods, since "Snacking is one of the leading causes of obesity in America, and it is ubiquitious. If we start a business focused on a behavior almost everyone has, we can expand from there," said Gupta. The duo claim that they have seen between 50% and 100% growth per month for the past year. They have built their assortment of healthy snacks to over 60 different items, managed by 12 employees. With an active Facebook page and over 110,000 fans, Gupta said that many of their sales comes from friend pass-along and word-of-mouth. Since Chen is an online customer acquisition expert, this is not a surprise.

While many "in-a-box" companies have started by shipping samples of other manufacturers goods to consumers, NatureBox decided to manage the supply chain end-to-end, selling everything since their January launch under their own label. "We want to control the customer experience, so customers will trust our brand and value the relationship. Over time, our business can become more than a subscription box. We can work on retail and beyond," said Gupta.

Expanding the NatureBox brand is certainly in the plans now that Gupta and Chan have obtained seed funding of $2 million led by Gupta's former employer General Catalyst Partners, and Redpoint Ventures as well as other individual investors. For other entrepreneurs trying to raise money, Gupta had some suggestions.

Work Your Network and Prove Your Concept

As a former VC, Gupta stressed the need to leverage your network to learn how to operate a business. "I never did anything other than investing before and I realize now how different it is from operating. Operations is more about building a team and creating alignment around a set of goals," he said. He talked to everyone from friends to workers at the local Whole Foods to figure out how to create their initial relationships with contract manufacturers for their goods. "Try to do as much as you can with your own money and on your own time before you ask for investment. As soon as you raise capital, the stakes go up, your clock is ticking. By taking months to understand the business, we had the answers to the questions investors were asking, and we knew what we need to get done in the future," he added.

Live Your Passion and Pick a Good Partner

Gupta reminded us that entrepreneurs talk about their products with people all day, every day. "Make sure you pick something you enjoy, because you're communicating with everyone about it. Gupta and Chen also worked a cause into their product. Through their partnership with Feeding America, NatureBox donates one meal for every box they deliver to end children's hunger.

"Find someone you enjoy working with, and with whom you can discuss business issues," said Gupta. "It takes a load off to have someone else as committed as you are to the business. "Early stage companies are a roller coaster ride. You have to try to keep your emotional state constant. Any good or bad news shouldn't sling you in one direction or another. No matter how good news is, it's never as good as you think, and the bad news isn't as bad. A startup is a journey."

 

IMAGE: Flickr/incurable_hippie
Last updated: Dec 11, 2012




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