How I grew and sold a wine business to Catch of the Day
Thursday, April 26, 2012/
Vinimofo, the daily deals site for wine founded by Andre Eikmeier and Justin Dry, was acquired by Catch of the Day last week, as part of the online retail giant’s movement into new categories.
The site was only established last year, after the pair operated a wine community site for years, gaining a reputation in the industry as the most social-media savvy operation.
Eikmeier says being acquired was never at the top of the company’s priorities – and yet it soon found itself having to choose between two potential backers.
So how did Vinimofo begin?
Back in 2006, it was when Facebook was just starting to get traction. It had some penetration in the United States and Britain, but not so much in Australia. Certainly customer reviews weren’t around much, even though Amazon was doing them, and so they weren’t as prominent.
I came up with an idea to create a wine website that was like a customer review website. The community would run it all and it would be a very community-oriented website.
But Justin, my brother-in-law, came back from a six month trip overseas and got exposed to Facebook over there. He wanted to start a similar sort of site.
So we started the business, this wine community site based around reviews. Now it seems old hat, but back then, it was very new.
That was Qwoff, right?
Yes. It sort of became this genuine community, and it was really good. We started getting invited along to things, and we sort of became the “social media wine guys”. That was the space we were in, but we didn’t make any money doing that.
So where did the daily deals part come into it?
We eventually got to a point where we got people talking about wine, but we really needed to start selling it. So we dabbled in a few things, but nothing really grabbed our attention. So we started paying attention to Groupon over in the States, thought it had legs, and then got the idea.
Justin came back over a Christmas break, and we just thought we should be able to do it.
We had actually just launched a new campaign, it was very cool, and I thought basically we didn’t have time. But after looking into it I felt we could do it, and we took all of our resources and moved into it.
Did you look at selling straight away? What was the timeline here?
Within about three months we started looking at getting some capital in there. We started pitching around to venture capitalists and individuals with wealth, and then from August we started looking at the process of getting someone to assist us growing faster.
But in a couple of months of negotiations and chatting with people who were interested, we grew quite exponentially. We really needed someone straight away.
Were you approached by anyone other than Catch of the Day?
We actually started talking to one of the major media companies. We were actually just about to close on a deal with them, and that would have been a good partnership. But the Catch of the Day guys approached us out of the blue, literally a week before signing the deal. And it was probably a bit late, so we just said, thanks for your interest.
So how did they respond?
They just said let’s not waste any time, and let’s talk about things. So we chucked a few things out there, got on a Skype call, and we quickly flew over.
And it became apparent pretty quickly this was going to be a better fit. We liked the key operators, we liked the way they do business and the culture, and we liked the fact they had succeeded in doing this sort of thing a few times.
It was the best option for us, and we had to do the deal within about four to six weeks.
That’s a very short amount of time for a sale.
Lawyers are expensive. So it was good.
But you were still a very young company. Was it jarring to go from starting up to all of these discussions about sales?
We had been operating for about eight months. And then suddenly we’re in negotiations with a serious, big company. We were really excited, and saw it as a great opportunity. We had talked with a few other companies but we realised it wasn’t the case that we needed cash. We needed a database of engaged customers who were going to be into the product.
Was there anything else about the media company deal you didn’t like?
The other deal wasn’t a majority deal, it was a much more aggressive deal on their behalf. And rightly so, but it was more important to us that I get the feeling we’re all going to be making decisions on the same agenda.
We all appreciated the value and brand of culture in a business, and it’s important we all feel like we’re on the same page.
Were you ever concerned about losing control in the business?
We were never concerned about that, provided we had faith in the company. Without trying to sound too idealistic about the whole thing, I think that solves a lot of problems right there.
Can you reveal any details at all about the sale price?
No, I can’t unfortunately. It’s not like we’re going out to buy yachts or anything, but we think it was good value. To be honest, we weren’t looking for a reward. We were just very interested in making sure they have the confidence we were worth actually investing in. It’s about us having the faith and right partners to grow into the number one wine retailer in the country.
You’re part of the Catch of the Day umbrella now. What is it that you think they saw in your company?
I think it’s a big thing for Catch of the Day to say this is an area they don’t have expertise, and then look at another business that does it well.
But I also think they saw a lot of themselves in us. They started in their garage hauling stock, and we did the same. So there are a lot of similarities there.