…The math needs to add up. It’s really easy to grow a business where you’re selling 70 pence for 90 pence but if it’s growing because you’re offering a really big discount or you’re offering a service which is great but is costing you more than you’re making, it won’t be sustainable. You don’t need to figure out for sure what the economics are going to be on day one but you should have a very simple spreadsheet, which outlines the per unit costs to offer to a customer.
Startups have such a glamorous reputation. Companies like Facebook, Instagram, Youtube, Uber, and Airbnb once started as scrappy startups with huge dreams and huge obstacles.
Yet we of course know that most startups don’t end up as success stories. What does a founder or a founding team need to know to create a highly successful startup?
In this series, called “Five Things You Need To Create A Highly Successful Startup” we are talking to experienced and successful founders and business leaders who can share stories from their experience about what it takes to create a highly successful startup.
I had the pleasure of interviewing Kieran O’Neill.
As a serial entrepreneur, Kieran O’Neill founded two startups that scaled to millions of users before being acquired, and ultimately starting Thread in 2012. Thread is improving the wardrobes of over 1.5 million people — combining human stylists with powerful machine algorithms to create a service better than a human could offer by themselves. For 9 years, Kieran has held the reins of the company, watching it grow to one of the UK’s largest online fashion marketplaces.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Thread is my third startup. The first one is one of the first video sharing sites, like YouTube, but about two years earlier. In 2003, I was at school and it took off growing to about 500,000 users so I was trying to figure out how to build a server infrastructure to handle the video streaming while balancing schoolwork so it was quite intense. I got it profitable, it kept growing, I kept running around school and
college. I was then almost sued by Disney during university for copyright infringement and so went through a really long legal experience with them but managed to settle out of court. Around the time I was thinking of closing it down, Carl Paige, who is Larry Page’s older brother, the Google founder, got in touch. Carl is a billionaire and he was interested in buying the site. I was interested in selling it. He offered $1 million US to buy it which I thought was better than being sued again so we began negotiating the sale.
I sold it for $1 million — I was 19 at the time — and that’s how I got into building tech companies. I then founded a video games social networking service at uni that tracks what you played on your X-Box, PlayStation and PC — it would learn your preferences and create special leaderboards for you and your friends. I dropped out of university to work on it full-time. I convinced a really talented engineer called Ben Phillips to quit Google and we went on to raise funding from entrepreneurs, investors, founders and groups. About one and a half million gamers were using it and then we sold it in 2012.
The plan then was to take a break and go traveling but I went out for a beer with Ben and decided we wanted to work together again so we started Thread in 2012.
What was the “Aha Moment” that led to the idea for your current company? Can you share that story with us?
Ben asked what I wanted to work on and I had loads of ideas but only one of them was solving a problem I had myself, which was wanting to dress well but I found shopping to be really frustrating. Offline was busy and crowded and just time consuming while online, there was just an overwhelming number of options. Which things were going to suit me and fit me and go with what I already owned? What I wanted was a service that understood me and my preferences but also someone there who had amazing taste and knew all the brands and could basically email me new outfit ideas, personalized to me.
I wanted it to be an app where I could browse and discover as much as I wanted — that had every brand in the world in one place and continued to learn based on my preferences. It didn’t exist so we built it by moving out to Silicon Valley — we were there for about six months, came back to London and started building Thread.
Was there somebody in your life who inspired or helped you to start your journey with your business? Can you share a story with us?
Former Google engineer Ben Phillips, who I mentioned previously, was crucial to the success of Thread. We knew we worked well together which I think is key for any business partnership.
What do you think makes your company stand out? Can you share a story?
Customers tell us they joined Thread to get new ideas for what they should wear and then in particular, because they can scroll Instagram and see tons of outfits on other people — what a celebrity looks good in may not be what they look good in. We’re giving outfit inspiration ideas based on each person’s appearance, body shape, style, brands they like and don’t like, colours they like and don’t like, their hair color and so on, so it’s extremely personalized. As well as the outfits, people get a personalized store that takes into account all their preferences as well. It’s unique in the fact that we have so many brands in the marketplace, a thousand brands, at different price points. But I think the most unique thing is the personalized outfits, outfit inspiration and store.
How have you used your success to bring goodness to the world?
It’s great to know our service is helping people to feel their best by looking their best. I know the struggles of not knowing what to wear and it can knock your confidence.
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?
Drive and tenacity has to be one for any entrepreneur. For Thread, it’s taken a lot of work to build a system that is part AI and part human stylist that is as good as a person styling someone by hand. That really is where the bar is set and it’s taken us years to focus on the problem and build to get it right. Now it’s working really well and it’s very scalable, but that took time to build.
Another is not accepting the status quo. If you have a problem I don’t believe that the way it is being solved today is the way that it can be solved and should be solved. The way that we’ve approached, for example, Thread, is not by looking at the industry and seeing how it’s typically done but by bringing it back to first principles. I try to solve problems and come up with, quite often, innovative solutions. It isn’t a typical shop, it’s a feed of outfit ideas and inspiration that learns as a user engages with the platform. It’s quite different from what most people do in our space.
The third is the job of a founder is basically to be an endless sales person because you need to sell in just about every context, from getting people to come work for you, investments and everything. I feel like I didn’t intend to become a sales person but that’s part of what the job is and now I actually quite enjoy it.
Often leaders are asked to share the best advice they received. But let’s reverse the question. Can you share a story about advice you’ve received that you now wish you never followed?
The worst piece of advice is to hire fast and fire fast. That sounds great but when you hire someone and they’re the wrong fit, you need to start all over again. You’re back to square one — it takes months. The extra pain that you bring to the business by
investing heavily in onboarding somebody — and making their experience great — if that doesn’t work out, their manager has to go through the stress of firing them and then other people have to take on responsibility for the work previously delegated. We’ve got quite a different view on it, which is to hire slow and fire fast. You don’t get it right every time but it’s such an important thing to get right. It’s much better to spend time upfront even if it slows down the process.
Can you tell us a story about the hard times that you faced when you first started your journey?
Solving the technical challenges around how you merge AI and stylists was really hard. We’re in a good place now, but you know, it can always improve. When we started the business, it was my third business and my second with Ben. Going into Thread we were excited by the vision and what the product could be and how it could help customers, but also about building a company and a culture that shared our values and stood for excellence. Since day one, we’ve written down and shared what the culture was that we wanted to create as a company. So trying to attract those who shared those values and repel the people who didn’t.
Where did you get the drive to continue even though things were so hard? What strategies or techniques did you use to help overcome those challenges?
I deeply believe that what we’re doing will inevitably be the future of the industry. Whenever you’re on the edge of something, it’s never a straight line, because you’re creating and inventing. It’s really clear to me now that machine learning exists, we can give each person their own individual store and experience. Even the idea of a generic multi-brand reseller, I just don’t think will make sense in the future because why try and merchandise for everybody and give the same experience when you can give people an individual experience. We’re pioneering that and that belief has been what’s kept me going.
Let’s imagine that a young founder comes to you and asks your advice about whether venture capital or bootstrapping is best for them? What would you advise them? Can you kindly share a few things a founder should look at to determine if fundraising or bootstrapping is the right choice?
Not every business can raise VC. For venture capital to be right for you, you need to be in a business where there are credible existing players that are worth hundreds of millions or billions of pounds, because what VCs invest in is the next Facebook, the next Glossier and so if it’s not likely that that’s the path you’re on, then it just doesn’t makes sense to VCs and therefore it’s probably not going to be successful for you. Bootstrapping can make sense in any scenario, whether it’s a business that is trying to become a better bounds or not. Generally speaking, if you can easily bootstrap it, you almost always should and if you’re generating cash from day one and don’t need a lot of capital in order to build a product or rescale it then it’s just a lot simpler to own the company yourself and not have given away a chunk of it. What makes it hard is that if you have competitors who do raise money, they afford to lose money
when you can’t. That means that they could afford to have a bigger team and make the product better, or spend on marketing and growth faster and then you might lose out to them. The case in which VC and bootstrapping doesn’t make sense is when you’re in a network effects business where the bigger you are, the better the customer experience is.
The classic example is eBay, where it’s only as good as the number of products and sellers there are. In a business like that, you need to raise a lot of money, so you can spend it to acquire a lot of suppliers and supply on the marketplace or in the network because that makes it better for customers and that will make your business better than the one that hasn’t raised VC and done that, and then you’ll win. Network effects businesses are often winner takes most and are races, whereas if you’re a fashion brand or something, it’s not the same, no one wants to use 10 different auction sites, you just want to go and sell on the biggest one. But people do buy multiple fashion brands so it’s a different dynamic for those businesses.
Ok super. Here is the main question of our interview. Many startups are not successful, and some are very successful. From your experience or perspective, what are the main factors that distinguish successful startups from unsuccessful ones? What are your “Five Things You Need To Create A Highly Successful Startup”? If you can, please share a story or an example for each.
- They need to solve a problem that people really care about. People are busy and if you’re solving a problem that they genuinely have, but they don’t actually care that much about solving then it’s just too much faff to try it out. They’re not going to talk about it to other people and so on.
- The second is with your solution, it needs to be something that creates customers who absolutely freaking love it. You can’t be 10% better, you have to be 10 times better and that’s for the same reason that people are busy and they have habits, so you’re asking them to change their habits so it needs to be a lot better than what is already on the market.
- The third is the math needs to add up. It’s really easy to grow a business where you’re selling 70 pence for 90 pence but if it’s growing because you’re offering a really big discount or you’re offering a service which is great but is costing you more than you’re making, it won’t be sustainable. You don’t need to figure out for sure what the economics are going to be on day one but you should have a very simple spreadsheet, which outlines the per unit costs to offer to a customer.
- The fourth is it needs to be defensible because we’ve all seen it happen — a business takes off and then there are a hundred copycats. It’s just how the world works. If people can copy what you’re doing, it’s really easy to replicate, then all of the margin work will get competed out of because you’ll have 20 people all targeting the same people in Facebook and Google, et cetera, with the same ads basically, and the same offering. Everyone’s costs to acquire it will be massive and you won’t make money out of it. The misconception is that competition means that everyone has to lower the prices but in practice people have their prices roughly the same, but it means everyone has to bid more than each other on the marketing side.
- The fifth is you need to care because it’s going to be really hard. You need to keep getting up after you get knocked down and as long as customers love what you’re doing and there is enough margin in there to be sustainable, eventually you’re going to stop getting knocked down and it will eventually begin to work. People often give up, they run out of money.
What are the most common mistakes you have seen CEOs & founders make when they start a business? What can be done to avoid those errors?
I’ve seen people start businesses that they think will be really successful and profitable — that’d be the main driver for the decision. But, their business is built on something they don’t really care about and they’re not that interested in, so I see them struggle and give up after the initial excitement of setting it up, before they’ve actually cracked it and it’s really working.
Startup founders often work extremely long hours and it’s easy to burn the candle at both ends. What would you recommend to founders about how to best take care of their physical and mental wellness when starting a company?
I actually don’t work crazy hours. I think it’s often an anxiety or ego that forces people to work long hours. Once you’ve got momentum, once you have traction with customers and you’ve got a team, you’ve got funding, I think it’s much more important to optimise for being really effective and making really good decisions than it is just getting a higher quantity of tasks complete. Ultimately, for my job, I’m not actually doing any one thing or function. Ultimately my role is to provide strategic context for people in the business and then make say, one decision a day.
I’m not trying to say there’s not much to do but I’m trying to say that making a decision well, because I’m well rested and not burnt out, is more important than just cramming more hours in the day. I think how you do that is different for each person. For me, what I find really helpful is, I go to bed quite early, around 10 pm and then I’m up early. I make sure that I take a full four plus weeks a year on holiday, and that I switch off fully. I exercise a few times a week, eat healthily, make sure I take a lunch break, especially remote with Zoom and not staring at a screen all day.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I think if we don’t fix the climate crisis, then we’re all going to die. Whilst there are many, much bigger problems today, I think ultimately everyone dying is bigger over a longer time scale. When looking at the things that drive that, I personally think part of the solution is us being less wasteful, but I think a much larger part of the solution is technology that allows people to still have the same standard of living but in a way that consumes much less for the world. Things I’m really bullish on, for example, and am excited by, are cultured meat. Lab grown meat because animal food production, eating meat basically, is one of the biggest drivers of emissions in the world.
I don’t believe you can get the world stop eating meat, I don’t believe we’re going to make everyone vegan but I think if we can offer people basically the same thing at a much cheaper price, that doesn’t actually require any of the extra emissions, I think that’s the type of thing that prevents the climate crisis and that prevents everyone dying. That’s where my head would go.
We are blessed that some very prominent names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch, and why? He or she might just see this if we tag them.
I have learned a lot from afar from a bunch of different people and for different things. There isn’t one person who is the all rounder because they’re also just not especially original either. For example, Reed Hastings the Netflix CEO, is somebody who has built an incredible culture at that company. It’s not for everyone, but for people who it resonates with it’s very rich and clear and opinionated which allows them to build a very strong and vibrant environment. I’m super impressed with Bezos’ focus on customers. I think he presents it a bit more simplistically than it is in reality for my friends who work there, but it is real and genuine and that’s hard to do when you’re at that scale.
Obviously Jobs’ obsession about the products is pretty established at this point but I’ve studied that a lot and find that very inspiring. I’ve also learned a lot from a strategist and author called Hamilton Helmer, who has written a book called Seven Powers, which talks about the different ways that businesses have motes. His writing and his thinking is very crisp and clear, and it has a big focus on strategy.
How can our readers further follow your work online?
This was very inspiring. Thank you so much for the time you spent with this. We wish you continued success and good health!