As a leather goods merchandiser for Louis Vuitton, James Chang saw something missing in the world of fashion. “Clients would come in with clippings from magazines or pictures on their phone and want to buy the item, but didn’t know where to get it,” explains Chang. So Chang and business partner Chirag Shah, who met in business school, came up with the idea for Frenzy, a website that compiles content from popular fashion magazines, blogs and websites. More than that, however, Frenzy is a “Shazam for fashion” where users can search for products using words or images, find them and buy them instantly.
Chang and Shah had commitments from blogs and magazines including Fashionista.com and The Sartorialist, but needed financing to cover overhead startup costs. In September 2014, Chang visited the Bixel Exchange, a part of the Los Angeles Small Business Development Center Network.
Bixel Exchange Business Advisor Craig Wilson helped Chang develop a compelling pitch deck, create a realistic four-year financial projection for sales and operations, figure out how much money he needed to get in his first round of financing and plan for future rounds.
Have a Plan
“I’m a first-time tech startup founder,” Chang explains. “I’ve run little businesses in the past, but nothing with this sort of potential. We’re bootstrapping it and seeking a minimum amount [of funding], but it’s still quite challenging getting financing as first-time founders in the pre-launch, pre-seed, pre-angel stage when you don’t have a product yet.”
It didn’t help that Chang’s financials were rusty. “I had taken some finance and budget evaluation classes in college, but I don’t spend my days working on Excel,” he admits.
That’s where Wilson came in. “Craig has a very good idea of what angels expect to see in your business plan, your projections and how it ties in to your overall story,” Chang says. “He also helped us show that we have researched our market and articulate our understanding of the competition in our business plan. Now our plan shows investors why we are positioned to merge content with commerce better than anyone else.”
Know What You Need
Even though Frenzy is still completing its initial round of financing, Wilson is already helping the partners prepare for the next phase. “Within the first year, if we get the kind of traction expected with the blogs and magazines we have on board, I expect to make a splash and possibly need to keep pursuing angel rounds of funding or jump into a seed round [of venture capital],” Chang says.
Wilson has helped the partners determine what they can expect to give away in equity, as well as how much money they need to hire necessary team members and scale Frenzy’s infrastructure. “He’s given us a long-term view, both for ourselves and for the investors we’ll approach at a later date,” says Chang.
You’ve Got to Sell It
The partners had raised some financing from friends and family, but approaching angel investors was a whole different ballgame. “Friends and family were more interested in the concept and product. [Angels] are more sophisticated and focus on the future [returns],” Chang explains.
To convince angels to invest, Frenzy’s PowerPoint pitch deck was crucial. “Craig was instrumental in helping us take something that was ‘cruddy’ in the beginning and communicate it very well,” Chang says. Wilson helped the partners organize the slides within the pitch deck and use graphs to convey market research and technical details.
Beyond the presentation, Wilson helped the partners zero in on their value proposition and how to present it to both customers and investors. “I had been promoting Frenzy as a dynamic fashion site that compiles articles from your favorite fashion magazines,” Chang explains. “That got us by in the beginning and helped us get commitments from publishers. But Craig spent the time with us to understand the nuts and bolts of our business and our product, then helped us craft the message toward investors and what they want to hear.”
Just six weeks into working with Bixel Exchange, Frenzy had raised $60,000 in financing. Now Chang and Wilson are exploring additional introductions within Wilson’s network of financing sources.
Chang will also continue working with Bixel Exchange to make new connections with brands, publishers, investors, advisors and mentors. “L.A. is a small community when it comes to digital media,” he says. “We’re looking forward to seeing how extensive the Bixel Exchange network is.”
Shah, who handles server-side technology, is hard at work developing the website with help from a team of independent contractors. The partners’ goal is to have the site up and running before Fashion Week in February 2015.
Bixel Exchange will be instrumental in helping Frenzy reach that deadline. “Craig is constantly checking on our progress and sending us emails,” Chang says. “Craig is a veteran of Microsoft and has a great background in product development; he reviews our site designs and helps with the user experience. It’s been really awesome bouncing ideas back and forth.”