- Chew On This
- Story: Why Obvi raised $2.2m in 2022
Story: Why Obvi raised $2.2m in 2022
Get the scoop (not of collagen) on why we raised money from the community last year.
Welcome back for some more bites to chew on.
We have something a little different on the menu today.
Earlier this week, we tweeted that post-iOS 14, we were struggling with our CAC, and we raised $2.2m from the eCommerce community on LinkedIn and Twitter to help address our acquisition costs:
This oversimplified the business circumstances and our goals a bit, so we wanted to give greater context to the tweet:
What led to the funding round
What we’ve done/are doing with the money
First Course: Our Mistake + The Consequences
Mistake: Betting too much of the business on unstable variables
Much of Obvi’s earlier success was built on highly successful partnerships with well-known influencers on Facebook.
It led to extremely rapid growth, as we immediately had a receptive audience: when they talked about us, we got crazy sales (they quadrupled).
To be clear, we didn’t set out to build an influencer-based business. We were investing in what worked, and the influencers effectively became our brand ambassadors.
They appeared in 80% of our ads and were plastered everywhere—the faces of our company.
One influencer was particularly successful, and they had nearly 2m followers. So, anything that they put out on Facebook would get six figures in view count. Anything they posted, the community loved, and when they talked about Obvi, everyone in the community loved Obvi.
Especially at our stage then, those were incredible engagement numbers.
And we leaned into it, dumping a lot of money into paid media.
For a year and a half, we were running whitelisted ads through their account, but we didn’t realize what the consequences would be.
❌Consequence 1: The minute they left the ecosystem, so did their customers.
❌Consequence 2: We hadn’t built a company that truly could sell on its own.
❌Consequence 3: Our cost of acquisition increased because we had to sell as the brand instead of via influencers + whitelisting.
❌Consequence 4: The demographic that the influencer brought in was not who we wanted to target to grow the brand.
❌Consequence 5: We had accidentally f***ed up our Facebook Pixel.
❌Consequence 6: Post-influencer, our CAC was incredibly high, and we were losing money on every sale.
About the F***ed Up Facebook Pixel
After the influencer left, our ad account thought our target buyer was the audience they brought us. The influencer brought in hundreds of thousands of customers of this demographic, and Facebook had optimized traffic to it.
No matter how hard we tried, we couldn’t get our ad account working as we wanted.
We tested thousands of ads—nothing really worked. We were able to improve our CAC somewhat, but it wasn’t enough. These were also the times immediately after iOS 14: everything was particularly chaotic and stressful.
We talked with other media buyers as well as engineers at Meta to understand the issues with our ad account. How could we test thousands of ads and not find a single winner to turn things around?
They advised us to reset the account. So:
❌Consequence 7: We had to start everything from scratch. New Facebook page, new Instagram page, new pixel, new ad account.
Second Course: Our Deeper Mistake
To us, the influencer, influencer fallout, and the struggle with the post-iOS 14 world were symptoms of where we were as an organization, rather than the underlying issue.
The issue: We got comfortable.
As entrepreneurs, we had to truly, deeply accept an uncomfortable truth about business, and especially the DTC world…
Your fortunes can change in a snap, and if you’re not prepared, you won’t survive.
It’s infinitely better to be uncomfortable and innovating than comfortable and vulnerable.
Third Course: Raising $ and Ascending
Resetting our ads account and starting from scratch was a nightmare, but it was the correct course of action. Our CAC dropped overnight (though the CAC still wasn’t where we wanted it to be).
It also marked a necessary inflection point in our story in which we sought to improve our entire brand.
So we raised money to do it.
Some of the specifics:
Influencer improvement: Leveraging a powerful influencer was not fundamentally a mistake in our business. The manner in which we distributed our risk, however, was. That’s why we started influencer seeding, testing, and building connections instead of betting it all on red, so to speak. If we could find multiple influencers like our initial successful one, it would not only be incredible for sales but substantially reduce our risk. If one influencer left, we wouldn’t be screwed.
Website improvement: To continue our CRO efforts, we needed to work on our website. Web developers aren’t cheap (for a serious site project, you’re never going to be looking at a cost below 6 figures), but having a well-oiled website pays dividends.
Product improvement: We came out with two new hero SKUs: A new version of our collagen, our More Than Collagen formula, which is all-natural, has better flavors, and more premium ingredients. Plus, a V2 of our top-selling collagen-infused fat burner.
The product improvement required R&D.
UGC and testing: We invested in working with a lot of UGC creators, creative strategists, and agencies who helped us create high-quality assets and content. With the fundraise, we were allowed to hyper-test everything because we had more of a cash cushion. We were able to find more winners more quickly and greatly increase top-of-funnel awareness for the brand.
🌟Retail: Crucial to this entire discussion. A lot of retailers were interested in the product (Walmart, Rite Aid, Sam’s Club), and we certainly had greater retail ambitions. Without additional money in the bank, we weren’t even going to be able to afford the initial (7-figure) purchase order.
All of this is to say…
In our tweet, we’d talked about fundraising to lower CAC.
With the infusion, the improvements we made to our brand and marketing allowed us to lower it and get to a healthy place from a cash flow perspective.
The other major part was to be able to expand into retail and scale in ways that we weren’t previously able.
Tool of the Week
Back in the summer, Proxima came to us and said that they’d built an AI-driven lookalike audience with data from tens of millions of shoppers and $10B in spending.
Frankly, we didn’t know if it was another AI overpromise.
We ran a free trial and tested it against our broad campaigns on Meta and we found:
Our NC-CPA dropped by 6.2%
Our NC-ROAS increased by 7.5%
We’ve been able to scale it efficiently, and it now takes around 30% of our Meta ad spend. That’s a good chunk of money.
Anything that lowers CPA and increases ROAS is a major win in our book.
For more about Proxima, click here.
We sincerely appreciate every moment you spend with us and reading our work. We’ll see you soon.
All the best,
Ron & Ash