First movers don’t always have the advantage. Sometimes the smart thing is to wait for the pioneers to take the initial risks, and to do the hard work in shaping a market.
This award is for the company that moved quickly to dominate an emerging market category, typically with a different and better business model than the first mover.
Driven by improvements in efficiency and test accuracy, the landscape of healthcare blood-testing has undergone significant change in the past few years. For a while the US company Theranos, which set out to build a completely new testing system, seemed set to revolutionise the industry, with a business plan built on creating a domestic kit that could replicate the full range of laboratory tests from a few drops of blood. The industry loved the idea: Theranos secured funding of $700 million and partnered with institutions such as US retail giant Walgreens. The problem was, in terms of the technology, it tried to sprint before it could even crawl and collapsed in 2015, sparking claims of fraud from furious investors.
London-based Thriva, needless to say, has quietly gone about its business in a rather different fashion. Instead of trying to reinvent the wheel by creating new testing technology, it focused on the customer relationship and how to create a service that provides actionable insights based on cutting-edge research. The model is not only proving attractive to customers, with sales of 100,000 mail-order tests since 2016, but is continuing (thanks to its comparatively low CapEx and R&D costs) to attract serious backing from investors, with a £6 million Series A round in August 2019 taking total funds raised to £7.5 million.
Sometimes, to compete with the first mover in the market, it isn’t necessary to have a more sophisticated product that promises all manner of improvements. Sometimes, less is more. Knowing that has enabled Thriva to mount an almost bloodless coup.
Follow on Twitter: @thrivahealth
The idea of a fashionable and socially conscientious shoe is by no means new. Osklen has been using sustainable materials for clothes, accessories and shoes since 1999. Toms, founded in 2006, manufactures all products from sustainable or vegan material. Indosole has been manufacturing luxury shoes from discarded car tires since 2009, predating Rothy’s shoes (made from recycled plastic bottles) by six years.
And since its launch in 2015, many companies have adopted a similar business model to Rothy’s – but none have enjoyed remotely the same success. In 2018 it sold $140 million worth of shoes, a figure likely to double this year, attracting a $35 million investment from Goldman Sachs.
What makes it different? Rothy’s listens – and learns. Where fashion brands traditionally work a year in advance, Rothy’s focuses on the coming two seasons only. It learns which lines to make more of and which to drop from online purchases, and runs customer competitions to identify what styles to sell next. As co-founder Roth Martin says, “If we ever make a mistake, we might have two weeks’ stock rather than four days.” It means there is little manufacturing excess – and no need for discounting.
With its success founded largely on low-cost social media marketing and word of mouth, the brand is attracting a hugely loyal customer base, including a private Facebook group with nearly 14,000 members, and a valuation of $700 million after its most recent funding round. It may not have been the first mover in the market, but Rothy’s is undoubtedly the leading mover and shaker today.
Follow on Twitter: @rothys
Accounting software is hardly new. In fact, desktop accounting software has been around practically as long as personal computers, dominated by industry giants like Sage, Oracle and SAP. And the first ‘proto-cloud’ applications go back at least as far as the 1990s, when telecoms companies began offering virtual private network services. Given the obvious product-market fit, it is perhaps surprising that the large-enterprise software providers weren’t the first to develop accounting software in the cloud. Instead, it was left to New Zealand firm Xero. The company saw a massive opportunity in supporting the needs of SMEs with cloud-based accounting software. Xero stole a march on the giants with the first cloud-based accounting solution in 2006. Born in the cloud, Xero is a beautiful, easy-to-use platform targeted specifically at small businesses and their advisors.
Sage, Oracle, SAP and their ilk still dominate the large-enterprise market. But, to date, Xero has racked up more than 1.8 million subscribers in over 180 countries, with 463,000 of those in the UK. The company has also built a thriving ecosystem of 700+ third-party apps and 200+ connections to banks and financial service providers, while garnering awards by the bucketful along the way. Of course, it is still David to the many Goliaths of the software-as-a-service (SaaS) industry. Then again, look how it ended for Goliath…
Follow on Twitter: @Xero
Indisputably the best-known brand in the UK online estate agency sector, Purplebricks is also the dominant player by sales volume, selling over £10 billion worth of property since its inception by leveraging state-of-the-art technology and a dedicated team of local property experts.
But it was far from the first estate agency to disrupt the commission-based, bricks-and-mortar incumbents through an online-only, fixed-fee model – pioneers such as eMoov, Tepilo, Hatched and HouseSimple were much quicker to market. In fact, Purplebricks was only launched in 2014, more than two years after its rivals. Astonishingly, one of the main factors that enabled it to beat the first-movers is that the delayed entry was intentional: the founders spent those two years-plus conducting in-depth market research into consumer preferences, using the data collected to develop a superior hybrid model prior to launch.
The other main factor behind its success was its ultra-ambitious – not to say brave – scaling strategy, raising an £8 million war chest a few months after launch, then £25 million via an IPO on the AIM after only 19 months of operations. The success that followed was due in large part to efficient allocation of this capital, with around £5 million of the initial funding spent on a TV ad campaign for a then-unknown company that catapulted the firm to market prominence.
It was not the first mover by a long way, but – with a market share of almost 70% of online sales – Purplebricks is certainly the biggest non-bricks-and-mortar mover of bricks-and-mortar in the UK market today.
Follow on Twitter: @PurplebricksUK
If, in Japan in 2013, you had to launch a start-up in the online consumer-to-consumer (C2C) space, you probably would not have chosen internet auctions. For a start there was ebay, the US behemoth founded in 1995 that dominated global online auctions. And in Japan, Yahoo! Auction dominated online C2C auctions.
How could a late-comer compete with such established rivals? Surely there was little room for innovation, and any new features could be swiftly emulated by the incumbents? Shintaro Yamada thought otherwise. For one thing, typical Yahoo! Auction users were men in their 30s and 40s, looking for higher-cost collectibles. What about the underserved demographic of women in their 20s, interested in more daily-use items? And Yahoo! focused on desktop computer users. What about smartphone users, looking for rapid item upload and quick sale? As for interactivity in the age of social media – could e-commerce be a social platform, too?
Launched by Shintaro Yamada in July 2013 on the basis of these insights, ‘flea market’ app Mercari is now Japan’s largest community-powered marketplace. With more than 100 million downloads since launch, it is currently processing more than JPY 40 billion in transactions each month.
It was not the first in the space, by a long way. And it has some way to go to establish global viability. But, through its attractive ‘snap-and-post’ interface and ability to scale through powerful C2C network effects, it has already achieved massive success in a very crowded marketplace. Look behind you, ebay…
Follow on Twitter: @mercari_app