Wednesday, July 5, 2017
Interview with Shaan Sethi, Jaanuu
Story by Benjamin F. Kuo
It's fairly unusual to see an apparel company with venture backing, and particularly unusual to see one with the strong lineup of investors that LA-based Jaanuu (www.jaanuu.com) has behind the company. Jaanuu, which provides medical apparel, is backed by Sipadan Capital, Roundhouse Ventures, Innovation Global Capital and Deborah Benton (board member of The Bouqs, Carbon38 and Vow To Be Chic), along with BAM Ventures, John Suh (CEO of LegalZoom), Ron Burkle (founder of The Yucaipa Companies), Sean Collins (founder of BCG Digital Ventures), Rick Marini (founder of Tickle and BranchOut), Potenza Capital, M3 Ventures and others. We caught up with co-founder and CEO Shaan Sethi to hear more about the startup, as well as Shaan's journey from investment banking to running an apparel startup. Shaan co-founded Jaanuu with his sister, Neela, a pediatrician.
What is Jaanuu?
Shaan Sethi: By way of background, I came from the finance side of the world. In the early 2000's, I'd worked as a consumer, retail investment banker. I had the opportunity to work with such aspirational brands as Lululemon and Underarmor. I moved down here to work as a large, $10 billion private equity fund with Ron Burkle, at Yucaipa Companies. There were lots of things we did around investment and acquisitions. I was in the consumer, retail space. The real genesis of Jaanuu came when my sister, Neela, who is a well regarded pediatrician, told me that the scrubs available for her colleagues were behind the times. The distribution channel and retail channels where they were sold, were made up of 7,000 to 8,000 mom and pop stores. They were incredibly behind the times. The thesis with Jaanuu, was that we could create the most, contemporary medical apparel brand in the world. We would have the design aesthetic of contemporary brands, combine that with performance-based fabrics to the like of Lululemon, Underarmor, and Nike Drifit. We could be the industry's first, antimicrobial finish solution. We found data that showed that 90 percent of scrubs carried bacteria which could cross contaminate. It doesn't make sense for health care professionals to be exposed to really dangerous bacteria in their practices, and bring that same bacteria to the general public. The last piece, was we figured that we could disintermediate a broken, retail channel, by creating a customized, sophisticated, Web 2.0 solutions, providing healthcare professionals with a more enjoyable and fluid shopping experience.
It's quite unusual to see an apparel company with venture funding, how did that happen?
Shaan Sethi: I think it's important to note, that from day one, Jaanuu has been focused on really generating a venture-trajectory growth, with strong unit economics and incredible, high customer lifetime value. Prior to our most recently, $5M round, we had only raised $2.6M. It was a deliberate approach, in all honestly, about raising and using capital. We wanted to make sure our fundamentals and economics were strong, so that we could scale the business in a rapid and prudent manner. The focus has really been on that as it relates to raising outside capital. Our folks not only have expertise in e-commerce, but we also have those with apparel expertise, and pioneers and visionaries in the lifestyle and premium brand area. Those people include Brian Lee from The Honest Company; Yasunobu Kyogoku, the former COO of Uniqlo, who now runs his own fund, Innovation Global Capital; and people like Deborah Benton, the former President at Nasty Gal, who is now on the boards of such great companies as Carbon38, Vow To Be Chiq, and the Bouqs. We brought Deb into the investor syndicate, because she really understand what has worked, and what has not worked in scaling a rapidly, growing, venture-backed business. It's been a core focus for us to be sure that we have thought leaders from the multiple disciplines and verticals that Jaanuu participates in, to ensure that there's a strong bench around me to guide us through the trials and tribulations and opportunities around a new business.
As an investor, what made you decide to go from private equity to an operational role?
Shaan Sethi: The interesting this, is I was that guy where I had a fortune cookie in my wallet from the early days, from my childhood, which stated that one day, I'd have success in a business of my own. I always wanted to create something from scratch. I really wanted to go build a lifestyle, premium brand. My passion really lies in the world of fashion. I saw an opportunity to leave the comfort of private equity, and go after this opportunity to change the world. Looking at my sister, and medical professionals around us, I felt like this opportunity really was a diamond in the rough. For all that healthcare professionals do for the general public, they deserve to have an offering which not only make them look good, and do good, but also feel good.
How has the reception of investors to the apparel industry, which has typically been avoided by professional investors?
Shaan Sethi: I think the medical market is quite different from traditional apparel. Private equity investors have shied away from the apparel business, given the Q4 spike and inventory obsolescence issues, and all that seasonality. That really makes private equity investors shake in their boots. However, the medical apparel space is, for all intents and purposes, a multi-billion dollar replenishment market. The useful life of medical apparel is quite short. It requires medical professionals to go back to the well quite frequently to replenish their inventory. I think that that's what makes what we are doing in the apparel category quite unique, and differentiated from traditional apparel.
What's the biggest challenge for Jaanuu?
Shaan Sethi: That's a good question. For us, it's really prioritizing our opportunities. In the last three to six months, we've had the good fortune of bringing on talent from The Honest Company, and from some really strong, Web 2.0 companies around the LA area. We created a world class team, and are scaling the business in incredibly rapid fashion. The list of opportunities has no definite certainty. It is really of function of how to prioritize those opportunities. We're on an incredibly fast and high growth trajectory, and the question is which opportunities we want to take down, and how we can quickly scale the business.
Finally, what's the next step for you?
Shaan Sethi: With the pool of capital, and the team we have of 25 to 30 employees, we have a lot in the hopper. As soon as the next 3-4 weeks you'll see some big news from Jaanuu, and we will continue to go into the summer and towards the end of the year, with not only product extensions, but interesting distribution extensions.