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Growing An Alcohol Delivery Marketplace To 40 Cities With Lindsey Andrews Of Minibar Delivery

As a first time entrepreneur it’s easy to doubt yourself, or come up with excuses for why something will not work. Maybe you don’t know the industry well enough, or you can’t find a technical co-founder, or you’ve never done sales. When starting Minibar, Lindsey Andrews and Lara Crystal didn’t have experience in any of these areas, but they saw a massive opportunity and simply focused on execution instead of letting doubt consume them. Four years later they’re in 40 states, servicing 90% of the U.S. population.

Listeners of The Mentors can get $10 off of their first order on Minibar by using the code THEMENTORS at checkout. Download the app at: https://minibardelivery.com

In this episode we talk through how the cofounders decided to quit their jobs to focus on making their liquor delivery service a reality. Within six months of coming up with their idea they got initial funding from an investor and launched their app, generating revenue on day one. We discuss how they ended up closing a $1.8 million seed round for their business, and what they would do differently if they were fundraising today. We also cover their customer acquisition strategy in detail, and how they strategically focused on on-boarding liquor stores in different areas of each city, one city at a time.

The team has been featured on NY Times, CNBC, Forbes, Fast Company, and more.

Show Notes

Lindsey Andrews – Founder of Minibar
Lindsey is the CEO and founder of Minibar. Minibar Delivery is an alcohol delivery company that was founded in New York City in 2013. Since then, Lindsey and her co-founder and co-CEO Lara Crystal have been featured on New York Times, Fast Company, CNBC and a host of other podcasts.

[2:42] Customer service has been a top priority for Minibar since day one. Lara and Lindsey have both come from other sectors of ecommerce where customer service was important. Lara was part of the founding team and the first employee at Rent the Runway. On the other hand, Lindsey previously worked at FreshDirect and the Diapers.com portfolio. Lara and Lindsey thought they could make a difference and make people loyal customers by focusing on customer service. They saw it as marketing to really make sure customers felt special when they have so many choices in today’s world for ecommerce.

[3:56] Lara and Lindsey were interested in entrepreneurship from the very beginning. After business school, they both went to work for at established companies for over four years. This was great because they got to learn a lot from great leaders and great teams. However, they always brainstormed ideas at Lindsey’s apartment. While looking online, they saw that there was no go-to brand or destination for wines, spirits and beer. There was no way to press a button easily and get it delivered. In New York it was even worse because it’s illegal to own more than one liquor store and so it’s highly fragmented. So there was really no go-to destination and it’s not the best shopping experience. They therefore thought this could be fun and exciting, plus it was a great blend of their two skillsets. Lara had come from the fashion side at Rent the Runway while she had come from the consumable side selling dog food and diapers. They both saw alcohol as the luxury consumable.

[6:43] While brainstorming, Lara and Lindsey tossed around other ideas but they never made the leap. They considered the Minibar idea great because alcohol consumption was a $100 billion industry for at home consumption and less than 2% was being done online. So there was a huge potential to bring this industry online. The other ideas they had, they sometimes felt that there wasn’t enough of a market to make it worthwhile or it could be very tech focused which neither of them have backgrounds in. The Minibar idea was great because they love building brands and they wanted to create the go-to brand for alcohol online. They made sure to do some legal due diligence before just to make sure their business model was legal because alcohol is so highly regulated in the U.S.

[7:39] Lara and Lindsey did some online research, talked to some lawyers and tweaked their business model a little and eventually settled on the marketplace model, so very similar to a Seamless or Grubhub except they work with local liquor stores. On Minibar you can shop for their products and see prices. They do the delivery, they accept payment and they’re the merchant of records. Since it’s a regulated product, they don’t touch the product but they create the shopping experience, the brand and customer service.

[11:12] Lara and her co-founder initially put together surveys to ask consumers if they would shop online, how much they spent annually in liquor stores and how often they went to liquor stores. These surveys were aimed at helping them estimate how much people would use their service and helped them to build a financial model for their business. They sent the survey to almost 300 people mostly in New York. The surveys indicated that the business idea was great and this gave Lara and Lindsey the confidence that people would want their product. After that it was just persistence. They actually went into liquor stores and explained to the owners what they were trying to do.

[15:38] Lindsey admits that sales was not her natural inclination. Lara was more outgoing than her so she was better at it. They convinced liquor store owners by informing them that the world was moving online and they wouldn’t want to be left behind. The opportunity was to be a win-win for the store owner. It wouldn’t cost them anything if Minibar sent them sales. So the owner would only be required to pay a small fee per order. Lindsey really tried to explain to liquor store owners that there was no risk for them as there was no cost upfront. Older liquor store owners were a bit skeptical because they weren’t fully bought into the internet yet. If a liquor store had a younger owner, they caught on much faster and were much easier to sell to. Lara and Lindsey didn’t take no for an answer. They took it as a no today and they would see them tomorrow.

[20:44] Lindsey and Lara used survey data and old models to put together the first initial round of capital. For example, Lindsey knew what the consumable repeatable customer looked like and how much you would have to pay for that customer. Furthermore, they both had credibility from running marketing at recognizable brands for over four years. However, execution is the most critical part of the equation. Having a great idea is one thing but execution is another. Lindsey wanted to have a well thought out model that made sense. They looked at the market size, the pros and cons of the competitors and the future growth opportunities that were available.

[21:40] Lindsey and Laura started by raising a smaller round which was in the range of $500,000 to $750,000. It actually ended up being $1.8 million – kind of seed round or friends and family round. They then got lucky with some bigger institutional investors after they had launched. They started in August and they did a rolling close. A rolling close is when you raise capital, usually from several different investors, over a period of time as opposed to all at once. Lindsey admits that this is sometimes a necessary evil but she doesn’t recommend this method of raising capital. If you don’t pick a date then the investors will just not initiate closing because the more time they have to get more data, the less risk there is in that investment. They closed the rolling close in July of 2014.

[25:22] Lindsey shares that they were scrappy in their marketing tactics in the early days. They did everything from hanging door hangers. The whole team would go to a big building and hang door hangers on all the doors. They also noticed that their customers were urban professionals between the ages of 21 to 35. So they would contact the companies these young professionals work at and they would request to do a Happy Hour. They would then tell people about Minibar during the Happy Hour. They would sometimes have signup sheets where they would capture people’s email addresses, but generally they would educate people about who they are, giving people discounts on their first orders. The added benefit was that the company would use them as well because corporate customers spend a lot more than the individual. Occasionally, they would also be just out in the streets telling people about Minibar. Anywhere where they thought a customer would be, they would also try to be there as well. Lara and Lindsey also hired a PR firm in the early days to get them into the New York Times and other big publications. The PR firm charged them around $6000 a month.

[27:48] Lara and Lindsey tested every customer acquisition tactic in the early days. Google AdWords has been great for them. It’s very efficient but it’s hard to turn up a ton. They also did Facebook ads early on. This was an easier way to turn volume up and down. Direct mail was another strategy they used. It’s a little bit more expensive, but it’s a good way to really crank up marketing. In direct mail, sometimes you can do a ZIP saturation where you send it to every single person in a ZIP code. However, the postage is way cheaper because you’re along the postage routes. Alternatively, you can do model lists off your current data or you can buy lists that other companies are selling. The most expensive part of direct mail is the postage stamp. To reduce this cost you can do a shared mail. This is where you share one envelope with three other companies and the cost of the postage stamp would be split in three. Today, Minibar uses a company called Share Local Media which does these shared mailers.

[35:19] Minibar is in about 40 cities across the U.S. They also work with vineyards which allows them to ship to about 41 states from the vineyards. So they serve over 90% of the U.S. population. One interesting fact is almost 90% of Minibar’s revenue comes from three states, New York, Texas and California (following the 80/20 rule). This is because Minibar has now slowed down expanding as much to new cities and is focusing more on adding stores in current cities as the volume and demand grows in order to make sure service doesn’t suffer in any way, shape or form. Lindsey feels that it’s gotten more competitive recently. There are a lot of big players now doing a little bit more with alcohol. For example, with Amazon’s purchase of Whole Foods, they have liquor licenses.

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