Josh McDonnell speaks with Grana founder and CEO Luke Grana about how he managed to generate $6M USD in funding after only starting out with $200,000 USD.
How did you generate that initial $6 million in seed money?
At that time I had $200,000 USD ($260,000 AUD) in savings and I brought a one-way ticket to Hong Kong, set up a small little warehouse in Kennedy Town, which had 500 square feet, then I ordered the first batch of 2,000 tshirts.
But before we launched I was reaching out to different investors saying “if I start his business will you invest money into it?” And a lot of them said they wanted to see a proof point. So I said to them that if I could go through a Beta launch and sell out of 2,000 t-shirts will you provide some funding?
At that point they said yes and that's when I managed to go through a Beta launch and sell out of 2,000 t-shirts within three weeks, which were shipped to eight countries all directly from Hong Kong.
Then back in April/May 2014 we did our first $1M USD (1.3M AUD) in convertible notes and the lead investor in that round was Blue Bell Group.
Then we did another round of funding of 1.5M USD (1.95M AUD) in 2015 and then a $3.5M USD (4.5M AUD) equity round to convert both the note one and note two into equity and that's what we call our $6M USD (7.8M AUD) seed funding round.
Then last year, mid-year, we did our A Capital round with Ali-Baba based in Hong Kong, who were the lead investor in this round.
Were there similar outcomes that needed to be completed in these later rounds of seed funding?
After we launched we had a really solid growth rate on sales. On average we have been growing sales by 15% every month at a minimum.
I think investors really liked the maths behind our business but I think also the scalability. Being in Hong Kong makes us very scalable into a lot of new countries as well as product categories. We have a very simple business model and I think investors really like the potential of the brand. So I think it came down to the results we were achieving and the team we have.
Why the decision to head out to Hong Kong? What have been the benefits?
I thought of the idea back in Sydney, I really want to make a scalable e-commerce business, so I looked at different locations to set up a global distribution centre and I was looking at the UK, US, Singapore and then landed on Hong Kong.
The reasons I thought Hong Kong was a great location was because it is a free tax port, so we can import our products and export them to our key markets without having to pay sales tax and that's a big advantage for us right now.
Hong Kong is also a world sourcing city, especially for fashion. So rather than doing business from Sydney we can have that one-on-one face time with our key suppliers. Which makes it really quick for replenishment and product development.
Then the most important is that Hong Kong is the worlds largest air cargo hub. So it has the most planes from any location in the world. For example, everyday DHL has six express planes going to Sydney, 12 going to the US and 16 to Europe. So with this volume of flights we've been able to negotiate really quick distribution times.