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The Drop: Getting to a £1m run-rate profitably

By

Investor

@ChrisCorbishley

The Drop started as a tailoring business named Jon Kruger, which the founders had set up to trial bespoke menswear, tailored in two weeks and delivered directly to the customer. With the insights gained through their initial trial, they wanted to build an ecommerce business that could be everyone’s personal fashion concierge. Fast forward 18 months and the team have built a successful menswear brand, underpinned by a fully functional ecommerce site. Growing 30% month on month, the business has achieved an impressive £1 million run-rate in Summer 2018.

How we met

The Drop co-founders Jonathan Kruger & Stephen Stroud realised that to grow their idea at pace  they would need institutional investment

I was keen to not only get funding but also hands-on help. Most investors said they would need to see a £1m run rate in order to invest, but this wasn’t an issue for Forward Partners. They were willing to help me get there instead - Jonathan, co-founder and CEO.

Jonathan and Stephen decided to attend one of Forward Partners monthly FP Live events and introduced themselves to the team there. Following that first meeting, they came along to an Office Hours session and pitched their big vision for The Drop.

Before taking investment from Forward Partners,CEO Jonathan had spent nearly three  years working in supply chain logistics for major high street retailers, so he had a first hand insight into the industry that he wanted to disrupt.

Championing the “full-stack” fashion model observed by companies such as Spoke and Thread, Jonathan spotted an opportunity to turn the arcane high-street model on it’s head. Mass production meant a limited range of suits was being made, in a limited range of sizes, resulting in high customer dissatisfaction and high amounts of discounted/ unsold product ultimately going to landfill.

The origins of The Drop lie in an tailoring business named Jon Kruger which the founders had set up to trial affordable, custom-made menswear, manufactured in two weeks and delivered to the customer’s door. With the insights gained in this initial trial and the traction they had driven, Jonathan and Stephen wanted to build a personal, on-demand fashion concierge which is when they pitched to our team at Forward Partners.

Building the product

Working alongside the Forward Partners team through the initial lean canvas process, Jonathan and Stephen were able to identify a very specific initial target market in a specific geography.

Having spent months getting bogged down in the finer details around the technology and operational aspects of the business, the lean canvas workshop presented a great opportunity for Steve and I to take a step back and look at the business again almost with fresh eyes.

Jonathan Kruger, CEO, The Drop

The team came to the conclusion that the most effective core audience to target initially would be men attending their friends’ weddings in London in the next 3 weeks, a cohort which we felt would give the optimal chance of growth at the required pace.

Our Product team established the required site functionality and design in order to appeal to this audience and began building The Drop’s MVP over a two week period together with Stephen. This process enabled Jonathan and Stephen to get to market and find their first customers quickly whilst also ensuring that the foundations of the business were solid and the technology that it was rooted in was optimal for their ambitions.

“I felt way more comfortable using the Forward Partners team, a team of experts who were in the room with us and who had a vested interest in our success. The silver lining was that they were also much better value than an agency.”

Stephen Stroud, CTO, The Drop

After launching successfully, the real challenge faced by The Drop was to grow the business beyond the initial niche audience, whilst also driving growth in unit economics. Our team worked closely with Jonathan and Stephen to establish the base metrics needed to achieve the required growth trajectory in the required time frame.

“As a founder, the Forward Partners team has given me a lot more focus and more understanding of how to build a business and how to do things properly.”

Jonathan Kruger, CEO, The Drop

Bringing down the marketing costs

Naturally, it wasn’t all plain sailing. After some initial marketing tests, the team had realised that attempting to scale on their original ecommerce site was proving to be extremely expensive. Customer acquisition costs were sky high and the team had been overly focussed on one segment of the market; selling wedding suits.

Concerned with whether they could build a profitable business, they worked with the product and growth teams to put together a set of KPIs that could be matched against objective key results (OKRs) within the team. These specifically related to product improvements that could boost conversion rate and marketing initiatives to bring down CPAs.

Through weekly product iterations and channel optimisation, the founders worked with FP to launch a new and improved version of the site, break into the UK workwear market and establish a series of strategic partnerships with Laundrapp and others. Meanwhile our Head of PR & Comms helped them to raise their profile with a feature in the Times Newspaper, whose highly relevant readership helped to drive significantly more organic traffic onto the site.

“I felt way more comfortable with the Forward Partners team, a team of experts who were in the room with us and had a vested interest in our success. The silver lining was they were there when we needed them most.” (Stephen Stroud, Co-Founder of The Drop)

Although in the same period, their largest UK competitor had fallen into administration, The Drop had worked with our Head of Growth and product team to reduce CPAs significantly, and the business had become profitable on a first-order basis.

Onwards and upwards

As one of UK’s fastest growing menswear brands, the Drop have now raised a follow on round at 3x their previous valuation, led by The Garage, Soho. Additional funding has also helped them scale up their team, working with FP’s Head of Talent to hire a full-stack engineer, a product manager and a Head of Growth who previously worked at online jewellery brand, Monica Vinader.

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