Yona Shtern is the co-founder and CEO of Beyond the Rack, a Canadian startup that was named the fastest growing E-tailer in the US in 2011 by Internet Retailer Magazine. He has been an entrepreneur for over 10 years and is a frequent speaker and panelist at international marketing and technology conferences. He has also received numerous awards for his advertising, product launch, and marketing strategies.
His company, Beyond the Rack, is a private shopping club for women and men who want designer brand apparel and accessories at prices up to 80% off retail. Consumers can obtain authentic designer merchandise and provide it exclusively to Beyond the Rack members through limited-time events. Each event starts at a specific time and typically lasts only 48 hours. After each event ends the merchandise is no longer available. Members are notified by email in advance of each upcoming event according to their preferences.
Yona admitted he failed at four startups before having success the fifth time: “I had the chance of accepting a well paying job,” he says. “I am very grateful to my wife who let me try a fifth time.”
That fifth attempt turned out to be very successful. Beyond the Rack is ranked number one in the Techvibes Montreal Startup Index. They work with over 5,000 vendors and consumer brands. And, launched in 2009, Beyond the Rack has already raised a total of $53 million from angel and venture-capital investors including Rho Canada and iNovia Capital.
Shtern says such big bucks and the brainpower behind it—so-called “smart money”—has been essential to creating one of Canada’s fastest-growing firms; Beyond the Rack’s sales hit $6 million in its first year, $50 million in its second and $100 million in its third. For 2012, sales are expected to double yet again.
Yona found the concept of flash sales in Europe around 2002. It later came to North America.
Yona provided this advice for entrepreneurs: Always raise more money than you need. Three short years ago, Yona Shtern had a lot to learn about raising capital—and that may be putting it kindly. “I didn’t know a VC from a banker from a private-equity firm,” he confesses.
Fortunately for Beyond the Rack’s founders, their earliest backers had bought into private shopping clubs in other markets, allowing the investors to provide “invaluable guidance on what to do and what not to do,” says Shtern.
In order to achieving success, Shtern affirms that it requires a lot of help. He recognized where he and COO Robert Gold were lacking expertise—technology and logistics, for example—and invested in top senior talent.
“Robert and I share a philosophy about great people,” says Shtern. “You need people with knowledge and expertise that far outstrip your own.” Hiring the rest of the team was hit or miss. Some people thrive in a startup environment; others don’t. “If they ask about the hours or vacation days in the interview process, they might be the wrong fit,” says Shtern, who follows the management mantra “hire slow, fire fast.”
Keeping Beyond the Rack’s focus is more difficult with the fast growing employee base. Working toward the same objectives has been a key challenge.
To deal with this issue, Shtern is using monthly staff meetings in which he shares the firm’s operating metrics and opens the floor to questions. “It’s important that people are engaged and understand why we do things,” he says. “Thus, you can turn your employees into real stakeholders.”
Entrepreneurs are often told they’ll never make it. But Yona learned the merits of ignoring the naysayers. He had this last advice for entrepreneurs: “More people will tell you more reasons why you’ll fail than people who will be supportive. You need to be resilient. Anyone who’s done sales knows it takes nine no’s to get one yes. In our business, it takes 49 no’s to get one yes. But we still don’t give up.”