Transparent Collective Talks: Live with theCut
Transparent Collective is a nonprofit organization focused on breaking down the barriers that acutely affect the success of underrepresented founders at the early stages of their startups. We focus on tackling three areas where underrepresented founders encounter the most challenges in building successful technology company companies, and raising venture funding.
- Preparing founders to fundraise.
- Connecting investors to high caliber entrepreneurs.
- Contributing to the development of an ecosystem where all entrepreneurs can flourish.
We’ve been operating for several years and over that time, we’ve worked with over 50 startups who have collectively secured north of $40 million in seed funding. In 2019, we had the privilege of hosting Obi Omile and theCut in one of our batches. In this event, we talk to Obi about his founder’s journey so far, recent wins, and lessons learned.
Obi is Co-founder and CEO of theCut, the largest technology platform modernizing the barbershop experience for barbers and the people who need them. theCut boasts more than 70,000, barbers, 2 million users, and over 18 million appointments booked nationwide disrupting the $20 billion barbershop market. theCut was a Techstars 2018 alum, and Obi was recently on the Forbes 30 under 30 list.
Below is a full transcription of the conversation. Want to watch the video? View it here.
Can you start off by giving everyone a bit of your background on yourself, and how theCut came to be? What’s your founding story?
I graduated from college in 2014. I got my degree in economics. I interned for a startup the following summer as a data analyst. After the internship ended, I tried to find a job working for someone like the World Bank or in International Economics. That’s what I loved. However, initially, I wasn’t able to find the job I wanted. So that summer, I ended up learning how to code with the help of my to-be co-founder, and I landed a job in North Carolina as a software engineer at Wells Fargo. That was the way I was able to get into banking but do software as well.
Down the road is where the idea really rose to prominence. I had gone almost a month and a half without getting a haircut, which for me was entirely too long. It wasn’t there weren’t any great barbers [where I was]. It was just hard for me to find one that I was willing to trust. That was the first time the idea was really festering in my mind. “This is a struggle, and it should not be, because you see apps for everything. There should be an app for this.”
About a year later, I moved back home to the DC area. My co-founder had moved back around the same time from working at Yahoo in New York. And he had similarly had terrible haircutting experiences. One so bad where he ended up cutting his head bald, and then, out of protest, he grew his hair out to shoulder length. So he felt the problem pretty passionately, as did I. One day, we’re bonding over playing basketball and talking about how this is an issue, and I was able to convince him and a couple of other people there that this is a real problem. That was in 2016, and we’ve been off to the races.
You’ve gotten some really well-deserved wins. Recently, you successfully raised a seed round, hit six figures in a revenue milestone, onboarded two million users onto the platform… but I’m sure, behind the scenes, there’s been a lot of challenges and hurdles you’ve had to overcome for each of these milestones and achievements, especially during COVID too. Looking back, what are the two or three biggest challenges and lessons learned you’ve experienced when building theCut?
For all the wins, there were a lot of losses to go along with it. Probably the biggest thing was, we weren’t able to raise funds early on in the business. We raised our seed at the end of 2019, which was three and a half years after we started a business. And we grew to just about a million users. We had to have a lot of proof of the business before we were able to convince investors to write us a check.
The learnings that came with that were we had to be scrappy, resourceful. We had to really be deliberate in the decisions we made as a business. We had to be super cost-conscious when we spent the money we had. For example, when we ran ads, we had to be sure to check the ROI on the ad copy and closely monitor conversions, views, impressions. We would make sure that every dollar spent would actually impact the business. When it comes to funds, we tapped into all different types of resources. We were able to raise money from a local Angel group in Virginia from our alma mater. We ended up having to run a crowdfunding campaign through The Republic where we were able to raise money from a bunch of our users and other people we were able to convince. That helped us get through the times when we didn’t have as much cash. It was also a proof point that helped us get into Techstars, because if our users were willing to invest in our business, then we have something here that people want or believe in.
We had to really think about how to grow the business on a budget. And that forced us to be more disciplined. And ultimately, lead to building a better business.
Since you did successfully raise in 2010, can you share some of the dos and don’ts with founders? What have you found are the best ways to get introductions? How do you capture the attention of investors?
The first advice is don’t give up. I definitely have heard hundreds of “no’s,” and each “no” [cuts] a little deeper.
I started to take it personally at some point. But when I speak to our mentors, they would continue to tell us to not take it personally. It’s just part of the game. You have to look at the bigger picture things. [That investor probably wasn’t] right for you, because if you have to convince them what you’re working on is a viable business, then they might not be the right partner. It was finding who believed in what we’re working on from the outset, who got excited. Those people will be a useful resource to you as you continue to grow the business.
In terms of intros, the cold intro was my bag.
What would you say when reaching out to investors?
I think I’m pretty good at drafting emails, My email game is pretty strong. And also my business had great traction. The biggest [question from] investors was [if we could] monetize our user base. For example, would barbers pay a subscription fee or a processing transaction? We had to convince [investors that they would]. But because we had great traction numbers, if I crafted a good enough email, they would be enticed by the numbers. But I will say, not having warm intros did kind of hurt us.
I feel like there’s more of that happening in general. Folks connecting over Twitter, over cold emails… There are so many amazing companies and founders. I’m actually glad that it’s not all social proof to get you in the door. That’s pretty fantastic.
I feel like, if I’m presenting you with this idea, you should take another step to see if this is credible. Look that the domain is live, check out my Instagram.
I shouldn’t have to rely on a warm intro. I came from Virginia. I don’t know anyone in Silicon Valley. I don’t have friends or family out there. I’d have to hustle to get any of those connections.
Yeah, totally agree. A quick plug for TC, that’s one of the key hypotheses that we were running on: there’s an awareness issue. The fact that you can trade equity for money is a new concept to a lot of folks that aren’t from Silicon Valley. And then, there’s also an access issue. So even if you are aware that this is possible, how do you get that network of mentors, investors, advisors? I love that it’s becoming a bit more merit-based. I’m not gonna say it’s all the way there…
We met our investor through TC, so another plug there.
Love it! What is the team most proud of over this last year? What are the accomplishments that you are super proud of?
Being able to reach two million people is insane to me. When I’m wearing clothes [with theCut logo on them], and people come up to me and say, “hey, I’ve heard of theCut.” That’s wild that you know what theCut is.
We reached a level of profitability once we introduced barber subscriptions. That was super exciting.
We talk to our barbers, and the anecdotes they give us of being able to open up their own shop, and how the app changed their life. They get to spend more time with their kids and their family, relax… Those types of stories really hit home and motivate us, because we’re literally changing their lives, and giving them tools to be an entrepreneur and live the life they’ve always envisioned. Those are the big wins for us.
It’s well deserved. The focus on the barbers and the marketplace is really interesting, I’d love to drill into that a bit more. As you kind of think about growing your two-sided marketplace, you have the barbers and their customers, you have to grow them together. What have been the strategies for acquisition on both sides of that marketplace? What’s worked, what hasn’t?
Social media has been our bread and butter. We built this audience and community via engaging with barbers over social media when we first launched. I built a list of maybe 10,000 barbers from scrubbing Instagram profiles. When we first launched the app, I reached out to them all, and then they converted [them] from there. That has always been our DNA to engage with barbers. They really feel like they’re part of theCut family. They give us feedback and suggestions that we turn into features. What has got us to where we are is always putting barbers first.
We’re a quasi-marketplace in the sense that most of the barbers already have an existing book of clients. When a barber [joins the platform], they come with X amount of customers. Then for us, it’s now our part to really build a brand on the customer side. We’re becoming known as the discovery platform for new bloggers. We’ll do a collaboration on Instagram with influencers to raise awareness. That’s really helped us build this brand and acquire new users. We’ve also found a lot of success with organic referrals. For example, if a barbershop is using theCut, and he’s getting two or three new clients every week [through the app], when he tells another barber about it, they’re going to download theCut too, because they want new business. And the same thing for the customer side, if my friend has a dope haircut, and he tells me where he got the cut from a barber on theCut, he’s gonna download the app too. Organic referral has really been something that we’ve staked our claim in, and something we really plan on doubling down on moving forward.
I love that hyper-focus on who you’re serving and why it matters. I think that’s the best way to be building products. Because if you’re not solving that need for either side, you’re not gonna get anywhere.
Is there anything that you’ve changed your mind on while building the company, especially during COVID? Have the physical shops changed what they needed, or how you serve them? What’s worked that you didn’t think was gonna work before, or what hasn’t worked that was working pre-COVID?
We’ve been mostly digital, so we haven’t had to change. During COVID, we did give barbers a discount to use the platform. We helped them apply for the PPP loan. We’ve also launched a gift card program to help them get some money in the midst of a pandemic. We continue to be a resource for them. We want to continue to be a resource and add value. And not just them running a business, but every aspect of their life. That’s something we’ll be focusing on.
During COVID we were incredibly fortunate. Of course, every business was impacted, but as things started to reopen, we saw a huge rebound for two reasons. One is being stuck in the house on Zoom all day. People were forced to see themselves in the camera, which made them want to get a haircut. Also, various municipalities and the CDC gave guidance to both stylists and barbers to use some type of scheduling software to mitigate walk-ins and reduce meetings in a shop. So for barbers to be open safely, they needed to use some type of software that helps solve this problem and also provides contact tracing. So we’ve seen more barbers become aware of the need for scheduling software because our biggest competition is pen and paper. The pandemic has, fortunately, been more of an education for barbers on why they need to use the software.
We’re two weeks away from 2021, what are you most excited about with the product roadmap or business growth in general? What should we be on the lookout for with theCut?
We’re super excited about a few things. One, we’re working on a web version that barbers have really been anticipating. We’re also building out a more admin-level version of our product to give shop owners more visibility and oversight over their business. Then, growing our team. Right now we’re a team of 10. But we’re gonna be hiring a lot in the first half of the year to really support our business.
I’m excited for you guys. This is gonna be a good year. Thank you for joining us today!