Garden.com is one of the hottest Internet companies around, but what's so special about it is how basic it is. Here's what you can learn from the secrets of this flowering Internet phenomenon.
The secrets behind the flowering phenomenon of Garden.com
It wasn't the brainchild of a high-tech guru looking to build the Next Big Thing. It wasn't funded by Paul Allen, mentored by Steve Jobs, or midwifed by a big-name venture-capital firm fielding a management team with all the right stuff.
Yet in the world of E-commerce, where buzz can mean the difference between flight or failure, between busted initial-public-offering dreams or billion-dollar market capitalizations, Garden.com is the sexiest Web-based business on the virtual block. As this story went to press, Garden.com was readying an IPO estimated to raise about $57 million--on top of $51.5 million already raised privately. In fact, investors are pounding down the door, coughing up more money than the company knows what to do with. Last May alone, $22.5 million gushed in. "I kept arguing we didn't need more than $12 million," says Steven Dietz, a partner at Global Retail Partners, based in Los Angeles, and a member of Garden.com's board. "But there were a lot of good, quality people who wanted in on the deal."
Even after raising another $10.5 million, Dietz says, "there were a lot of people we had to say no to."
Four years ago few would have imagined how many investors would eventually say yes to Garden.com. That's when Lisa Sharples and her husband, Cliff, and their good friend Jamie O'Neill all upped and quit their jobs at Trilogy Software Inc., in Austin, where the three had worked for only 10 weeks. Cliff and Lisa, newly married, had just bought their first house. "The first thing we did was get really drunk," recalls Lisa.
On the morning after, the new partners gathered around a whiteboard in the Sharpleses' garage and began brainstorming a design for the perfect Internet business. For months they lived off O'Neill's Visa card and peanut-butter-and-jelly sandwiches. On Friday nights they would treat themselves to dinner at a local restaurant, the Iguana Grill, where margaritas salved the week's wounds. The founders' memories of that first summer are elemental. "It was hot, and we had no money," says Lisa.
But today what's hot is Garden.com--hotter than Austin in August--which is another way of saying that money's no longer a problem.
Why are people flinging so much capital at what appears to be yet one more cash-sucking E-commerce black hole? Maybe it's because the company stands out in a more-than-virtual way. It boasts more than 550,000 members, a figure that's growing by 300% a year. And Garden.com is the first Internet company to address America's most popular hobby: gardening, a $46.8-billion-a-year industry. That's more than twice the size of the book industry, which Internet sensation Amazon.com dominates.
What exactly have the creators of Garden.com wrought? Have they pulled off the stunt so many others are hungry to achieve: crafting the perfect Internet business? Is this the multibillion-dollar sure thing?
Behind the veil
On a sunny day in early spring, Garden.com's offices seem all but hidden from the world. The company is headquartered in a one-story brick building in downtown Austin, in a neighborhood of bungalows and gas stations. Inside the cramped and near-windowless space the light is pool-hall dim, optimal conditions for gazing at the computer screens to which Garden.com's employees seem tethered most every hour of the day. Jammed into one corner is Cliff, the company's CEO and president. In khakis rumpled just so, and with his golden retriever, Hamachi, camped beneath his desk, the open-faced Sharples is a walking Gap ad. He exudes the confidence required for anyone staking his fortunes to the maelstrom of the Net. Cyberspace, after all, is the great leveler. Just as it diminishes wisdom and elevates cant, the Internet turns most every product and service it touches into a commodity. It is the ultimate margin crusher.
Like most of its E-commerce brethren, Garden.com is nowhere near breakeven --and its founders coyly resist predicting when that day might arrive. "Breakeven will be when the market values break even," says Lisa Sharples.
Another business might not be able to get away with an answer like that--but it's a different world on the Internet. And building the perfect Internet business is what the founders of Garden.com have set out to do.
What united the three beyond an idolatrous worship of the new medium was a seminal course they had all taken at Northwestern University's Kellogg Graduate School of Management, in Evanston, Ill. Taught by professor Louis W. Stern, the course was called "The Policies in Marketing Channels." "There is no question that that was the most impactful course for me--by far," recalls Cliff (in true M.B.A.-speak).
What Stern taught his students was to distinguish the supply chain from the marketing channel. Supply chain refers to how a product moves from producer to end user, but marketing channel includes how the product is conceived by its maker and received by its user. As O'Neill puts it, the marketing channel amounts to "a distribution chain based around the customer's needs."
Stern preached that the most successful companies are those determined and talented enough that they dominate their marketing channels in a way that effectively blocks out all serious competition. Such companies become superbrands in and of themselves. When you shop at Wal-Mart, you don't just get great prices and good service, for instance; you also get the warm feeling that Sam is behind it.
Stern himself believes his course teaches a unique lesson. "It very much has a customer-focused, market-driven approach to establishing distribution channels," he says. "It's very rare when someone sits back and asks, 'How do consumers want to shop for the products and services they buy?" He adds that most companies are egotistical enough to think they know what the customer wants. They end up distracted by lesser concerns like logistics and benchmarking. "The notion of figuring out how to go to market through new channels that conflict or compete with existing ones sends people into cataclysmic states," says Stern. "There's an enormous push toward the status quo in business."
