You could almost hear the collective cheers from startup land when the news broke that Unilever was buying the five-year-old Dollar Shave Club for $1 billion. The Dollar Shave Club acquisition was an affirmation of a type of company-building that can be seen in everything from Airbnb to Warby Parker and Casper.
These are companies driven by technology, with products and services sold directly to consumers for the most part, although online mattress company Casper recently did a deal with West Elm. So let's break down what Dollar Shave Club has that Unilever couldn't build it itself--those things that every big incumbent is willing to pay for.
The obvious reason to buy any company is for growth. Dollar Shave Club did $152 million in sales in 2015 and was set to exceed $200 million this year according to Unilever. In other words, Unilever paid about 5X sales for the company. So beyond gross revenue, what is Dollar Shave Club doing that made it so valuable and that every company can learn from?
1. Be an anchor brand for a new generation
Brands anchor with generations. Think about Cadillac, Gillette ("the best a man can get"), or Quaker Oats, they are brands that appeal to a certain generation. Dollar Shave Club (Harry's too, in the shaving space) or Warby Parker in eyeglasses, have anchored with millennials who identify with the style, the vibe, the convenience, and the pricing.
Mega-brands know that they track with generations. So how do you become relevant to the next generation? You buy the brand that already is.
That's, in part, why Campbell's bought my company, Plum Organics. Why Heineken bought a 50 percent stake in craft-brewer Lagunitas, and why Unilever bought Dollar Shave Club. These big brands are trying to future-proof themselves.
2. Follow a different game plan and deploy scary-good capabilities
Razors are a commodity. You might even argue that Gillette has the best technology, but what Dollar Shave Club had was a whole new approach to building and running a shaving business.
They buy their razors in Korea rather than manufacturing them. The business infrastructure is essentially rented from Amazon Web Services.
Logistics are off-loaded to a third party. Sales are direct to consumer. No paying for space in stores. No massive R&D spend. No power-sucking data centers.
Dollar Shave Club is nimble, growing revenue fast, and can turn on profitability when it wants, according to a recent interview with Founder and CEO Michael Dubin.
3. Marry convenience with lifestyle
Anyone can have razors sent from Amazon to their home, but Dollar Shave Club tapped into a lifestyle that syncs up with how younger men move through the world. Everything is just an icon-on-the-phone away.
Dollar Shave Club offered that by delivering razors to a home or office. But it also created a carefully crafted man's world that is far more inviting than simply clicking on a website for razors, or walking into a drugstore chain.
It's convenience married to an aspirational lifestyle positioning.
4. Bring authenticity
Consumers look for authentic brands that have a unique point of view about the world and align with their own values. They also present them in a way that no-one (or no company) has done before.
Dollar Shave Club CEO Dubin tapped into that with his ?. He took down the competition and an entire way of doing business in one scrappy video that was shared tens of millions of times. hilarious and irreverent YouTube videos
His tone was unlike anything else out there, and he combined it with a mission that every young man could get behind: make shaving cheap and convenient.
5. Have style to spare
There is a playbook that Gillette and Schick use to market razors to men. All those athletes and male models leaning over sinks and gazing smooth-faced into mirrors. Dubin and Dollar Shave Club called bullshit on that approach.
They marketed their company without regard for the conventions of the category. They did it on the cheap, with bravado, and with an unmistakable style and voice that extended to everything about the experience of being part of their shaving club. Great brands have a style and an attitude - think of Method and Virgin America - that is unique and it's infused in everything they do.
(Note to those big brand acquirers: You destroy any of these five things, and you can kiss your investment goodbye. So how do you make sure you don't? I'll tackle that in another column.)