Lawrence Lenihan's Blog


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June 10, 2013
Filed under: Ready, FIRE!, Aim - Teaching@NYU — llenihan @ 11:43 pm \

During my 2012 Ready, FIRE! Aim entrepreneurship course at NYU, I told my class that, rather than donating my teaching salary back to NYU, I would use it to fund a business started in the class.  The final selection of the winner was a very difficult decision that came down to two businesses.  The terms of the investment were simple: don’t waste my money and don’t waste my time.  The students who won were outstanding and quickly got down to building their business.  They would not draw my money until they were confident that they had a business they wanted to pursue and where they felt that they could succeed.  After several months, they decided that they could not build what they envisioned and they disbanded before taking my money. It would have been incredibly easy for them to take the money, screw around and fail.  They viewed the commitment of taking an investor’s money so seriously that they refused when they felt that they could not live up to the obligation.  These students are incredibly talented and will be superstars in the industry one day.  I was once told that the definition of integrity is doing the right thing […]

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June 4, 2013
Filed under: Fashion and Retail — llenihan @ 4:37 pm \

We are ruining potentially wonderful companies out of sheer ignorance of the fashion industry and a lack of understanding of how technology will impact it. We are overcapitalising companies and forcing unnatural, unsupported expansion — and by we, I mean investors and the entrepreneurs who take too much of our money. We are not purposely killing these companies, of course. It’s just that we are not experienced enough with the subtleties of the fashion industry to understand how a relationship with a customer is earned and have misapplied lessons learned in building companies like Amazon and Google. As investors, we are very skilled at taking the early trajectory of a company’s growth and extrapolating a presumed future revenue path. We look at Google and Facebook and Twitter and we see that early rapid growth portends future rapid growth. But, we fail to understand that these companies are not technology companies. What if, after a period of rapid growth, a brand or retail concept approaches saturation of its market and growth slows to single digits each year? What if the actual market sizes for these companies are less than we thought? Technology has changed everything. What started with silly online fashion concepts like […]

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December 11, 2012
Filed under: Fashion and Retail — Tags: , , , , , , — llenihan @ 1:47 am \

[I wrote the following post about a month ago for the Business of Fashion as a guest op-ed piece] Fashion is an incredible industry. It’s sexy, it’s glamorous, it’s exciting. But it’s also incredibly complicated and the amount of change the Internet and other technology innovations will bring to this industry in the next decade will be mindboggling. Indeed, our offices have been swamped with business pitches from more than a thousand entrepreneurs who want to transform this industry. As for the ideas themselves, many look great on whiteboards or in business school competitions: virtual closets, flash sale businesses, new designer “discovery” sites, you-be-the-designer sites, social shopping, user-curated boutiques, subscription sites, custom clothing, and so on that seek to use technology in ‘clever’ ways. But, in the end, they often miss the mark by a wide margin. There are many flaws to these businesses. But the biggest flaw I see is that these “Internet entrepreneurs” fail to understand how the Internet will fundamentally transform the fashion industry, not just provide another access point to buy something. In my opinion, the biggest change will be a dramatic shift in the relationships amongst brands, retailers and customers. Going forward, every brand must […]

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June 26, 2012
Filed under: Fashion and Retail — Tags: , , — llenihan @ 12:41 pm \

The relationship between a brand and a retailer is complicated on many fronts and it is going to get a lot more complicated in the coming months and years.  Since time began in this industry, the direct relationship with the customer was owned by the retailer and brands have been reliant on the retailer to manage these customer relationships. Most major brands have established their own flagship stores, especially at the luxury end of the market, but a very large chunk of the revenue still passes through the retailers’ doors and web stores. I’ve had lots of conversations with fashion designers about retail.  I usually start the conversation out by asking them if it is worth paying a retailer $600 to sell a product that is sold to the consumer for $1000 (assuming a fairly standard wholesale/retail mark-up of 2.5x).  The response is almost always: “Oh you don’t understand.  We sell it to the retailer for wholesale and then they mark it up”.  I respond by telling them that if a customer is willing to establish an economic value for the product by paying $1000 of which they only get $400, those dollars are being paid to/taken by/stolen by someone, in this case, the retailer.  At […]

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June 4, 2012
Filed under: Fashion and Retail — llenihan @ 3:19 pm \

We just closed an investment in Tommy John, a manufacturer of the best men’s underwear on the planet.  Since we are technology investors, it might be fair to ask why we are investing in a company that makes product.  The reason is simple: we will use technology to transform how a product brand is built in today’s retail industry. Ecommerce retailers and bricks and mortar retailers who sell on the web are not new by any means.  Nor are brands that sell directly to consumers via the internet.  But what is different is that these strategies are simply extensions of a retail business model that has been in place for ages: aggregate customers geographically by building stores where they are and sell to them.  The future is aggregating customers by who they are, what they like and what they want to be.  This is not a geographic phenomenon; it can only be done on the web (I have an entire blog post on this topic here).  This may sound pretty much the same as the old way, but it is actually completely different.  For a brand, it means that they need to connect directly to the customer and not rely […]

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