Vinomofo was able make good use of its cash flow when it launched.
It would take money from customers, who would pay with a credit card.
Vineyards would then ship the wine, but did not need the start-up to pay them for 30 days.
This meant it was able to use the money to expand, quickly grabbing new users. Its revenue has grown 1,732% between 2011 and 2013.
It is this business model, as well as really caring about how users and suppliers view the brand, that is the secret to its success said chief executive Andre Eikmeier.
“Our customers are not wine snobs, but they are open to expanding their knowledge.
“We say ‘there is a wine’. Yes, or no? Thanks.”
This helped in the beginning, though a backer was required to take it to the next level.
“We needed to get to the next step, where we had genuine competitive power,” he said.
For a cash injection, as well as for some help with the business the founders sold 70% to the James Packer-backed deal site CatchOfTheDay.
It meant suppliers began to take notice.
“They felt like we were getting serious,” Eikmeier said. The small start-up could approach big suppliers such as Treasury Wine Estates.
But it also meant the competition. Supermarket chains with bottle shops — Woolworths and Coles –started playing hard ball.
Eikmeier said that this is when its relationship with suppliers, and its brand image paid off.
“We saw that you can’t take likely the emotional investment of your customers. And big suppliers say ‘this is worth doing, even if Woolworth’s gets their knickers in a knot.”
This year, the founders bought-out CatchOfTheDay.
While the suppliers never saw the deal site as a corporate like Woolworths or Wesfarmers, once they went independent it increased Vinomofo’s credibility.
“[Suppliers] said it was better to give money to the underdog,” Eikmeier said. “A lot of start-ups can achieve that if they open up.”
Vinomofo turned over about $2.5 million per year when it was owned by CatchOfTheDay.
Now it has quadrupled its revenue to $10 million in 2012-13, and grown 30% month-on-month since buying out the company on 30 June.
“Now we are on our own, we can pretty much do whatever we like.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.