In 2000, 28-Year-Old Mariam Naficy Sold Her Startup For $110 Million — Will History Repeat Itself?

Mariam Naficy

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Mariam Naficy managed to come out of the dotcom bubble unscathed.When she was 28, she and her cofounder Varsha Rao sold their online makeup company Eve for $110 million to Idealab.

The deal ended up being a huge mistake for Bill Gross, who outbid LVMH for an 80% stake in Eve only for the company to later fail.  But Rao and Naficy both walked away with tens of millions of dollars.

Twelve years later, Naficy is back in the startup game. She founded Minted, an e-commerce site that sells work from emerging designers, in 2008. Yesterday she announced a $5.5 million Series B round of financing.

We asked her what it was like to make so much money at such a young age, and what it’s like to be an entrepreneur during both tech bubbles.

“To be totally honest, Eve was a walk in the park compared to running Minted,” she tells us.

BI: You were an entrepreneur during the first dotcom boom. How did your career begin?

Mariam Naficy: I worked for an entrepreneur right before I applied to business school.  He was my mentor and he wrote my recommendation. After business school in 1998, I lived with Varsha Rao in New York.

We were both in investment banking; I was at Goldman Sachs. We totally bonded over the Sunday New York Times and bagel bites. We got along, shared the same work ethic and had the same goals.  It made for a very good partnership. 

At age 28, I had no retail experience, no consumer marketing experience and no real Internet experience. But I decided I wanted to work for myself. I felt starting a company would enable me to get the responsibility I deserved and that I couldn’t do that within the confines of a bigger company.

Varsha and I started [an e-commerce makeup company] and raised about $26 million in venture capital. We sold it for about $100 million two years later. 

The sale was not something we planned, but we started to feel a little bit uneasy about the market.  LVMH approached us because we had become far bigger than Sephora online — about double its size. It had just opened one store in New York and LVMH was really concerned about Eve. It thought we were going to move into retail and open up a store. LVMH decided to try and buy us, then turn us into something else. Idealabs outbid them and bought us instead.

You sold Eve for ~$100 million before you were 30, but didn’t people doubt e-commerce and your company at first?

MN: Everywhere I went people would explain, in nice ways, why makeup wouldn’t sell online. There were two big problems in the industry. First, the Lauders controlled half the market so you had to follow the law of distribution from the Lauder brands. Another issue, people felt was, how can you buy something online that you haven’t tried?

With Eve, we thought we would start a replenishing business. People would buy brands and products they were already familiar with.  What ended up selling, strangely, was all the colour cosmetics — the things you would think people would want to try before they’d buy them. 

Also, the market started changing while we were running Eve.  All these boutique brands, like Urban Decay and Nars, started emerging and they were looking for distribution outside of the department stores.  It was quite good timing because you could make a business out of distributing these smaller brands and Eve was helping little brands become known.  And that’s what women started wanting.

There’s a new kind of e-commerce emerging. Subscription e-commerce companies, like ShoeDazzle and Birchbox, send users monthly samples to encourage online shopping.  What do you think of that business model?

MN: I think it could work but there needs to be a pretty high degree of personalisation and choice when a user is receiving samples.  I think just getting a surprise box might not work.  I think models like ShoeDazzle, where you talk about what you like and then have that kind of product delivered, might work. I’m not that familiar with what Birchbox is offering but I’d imagine there’s a good chance it could succeed if there’s personalisation involved.  Everyone has different skin types and complexions, so the box has to be relevant.

You’ve been an entrepreneur during both tech bubbles. What are the similarities between now and then?

MN: There are a lot of businesses rising now that may struggle to get the revenue their valuations imply.  There’s quite a bit of that going on. 

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It’s pretty astonishing how much you have to raise your game now to compete in today’s entrepreneurial world compared to twelve years ago.  There’s so much more information available now and such a higher level of savviness in the entrepreneurial community than there was back then.

To be totally honest, Eve was a walk in the park compared to running Minted.  Businesses are innovating faster now; they have far greater access to information thanks to the internet.  Twelve years ago it was a benefit to have an MBA and have gone through a venture capital class because the information wasn’t available online.  You’d have to hear about negotiating tactics in class or find someone who knew the information and could tell you.

Now it’s all available on VentureHacks and elsewhere in a very well-written and informative way.  Excellent content is available online to everyone.  I like it because it’s a flattening of the playing field.  I would say yes, there are some really frosty valuations happening but on the other hand there may not be as many incredibly silly mistakes when it comes to use of the capital — which happened a lot in the early 2000s. People now are a little bit more wary.

Marium Naficy Varsha Rao
Varsha Rao and Mariam Naficy cofounded Eve in 1999.

BI: What did you do in between Eve and Minted?MN: I took some time off to travel all over the place with my husband but I was always worrying about what I was missing back home.  I had a hard time focusing on my vacation. 

When I returned, I helped 5 Studios launch MovieLink, a downloadable movie service. Then I went to the Body Shop where I ran its e-commerce division for four years.  I really felt like I didn’t understand how to manage P&L or how to manage a large group of people; I wanted to learn a lot more within a larger company.  The chairman, Adrian Bellamy, hired me and now he’s an investor in Minted.  He’s on the board of Gap and Williams Sonoma and he has very steep retail knowledge. 

BI: How did you start Minted and what is it?

MN: I started Minted in 2008.   We raised $3.3 million and closed the deal two weeks before Lehman Brothers collapsed so we built Minted around a pretty scrappy culture. 

The Minted mission is to be a community that supports designers from all over the world and provides them with an opportunity to be discovered and build their careers.  Any designer on the planet can enter our challenges. The users vote on their designs and tell Minted what to sell. 

That voting mechanism is pretty competitive and brings the best designs to the top.  It really is a very meritocratic process.

BI: That process — voting on designs and having the community decide what Minted sells — sounds like Threadless’ model.

MN: It’s very similar to Threadless’s process.  The thing that makes Minted a little different is that the actual art isn’t quite as edgy and humorous.  It appeals more to the mass consumer, especially women. Most of the designers on Minted — 95% — are women, and many of them are mums. 

All of the women designers give Minted a very different aesthetic than Threadless; we sell much different types of goods.  I admire Threadless very much. I’ve bought a lot of their t-shirts, but I think our audience is very, very different.

BI: Would it be accurate to say Minted is an Etsy meets Threadless?

MN: Unlike Etsy, which is all handmade, we print and ship the products, not the designers. We relieve the designer from having to make and ship everything, package it, and provide customer service.  All the designer has to do is submit art and keep doing what they love doing. We’ll take care of the rest.

BI: What’s the revenue share?

MN: That’s also a different model from Etsy’s.

We pay cash up front for each design in addition to a sales-based revenue share with artists.  The cash up front doesn’t count against the royalty. 

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We’re trying to create a retail distribution for the designer and get them in business and help them build their presence on Minted. We even help some of them launch entire lines on Minted if they win one of our competitions.

We’re trying to help them get retail distribution they wouldn’t get otherwise.  We find that most of the designers doing really well on Minted are not from New York and L.A., where you might imagine the best designers are in the U.S. Instead, the top sellers are from small towns and secondary cities in the U.S.  One of our best designers lives on a farm in Iowa.  We think that’s because designers in New York and L.A. have lots of opportunities; they don’t need to enter our challenges. Talented people everywhere else do.    It’s amazing to me how much scattered talent there is that doesn’t have opportunity simply because of where they live.

BI: How will Minted expand?

MN: A lot of our designs are very sophisticated pattern work, so we see Minted’s community creating great art that can be leveraged across many types of consumer products, not just stationery. 

We don’t really see ourselves as a stationery retailer, but as a design on paper goods retailer.  That’s really the reason we took the financing, to be able to expand.

The most important way is through other verticals.  We’ll be moving far more into the core art space, with our first launch being prints.  Those prints are both personalizable and non-personalizable.  We think the market for personalizable art to be made chic and beautiful is quite large.  Right now, it’s a bit of a cheesy space. 

For example, one of the entries we received in a current challenge/competition is a beautiful modern rendition of a family tree.  It’s very artistic and it’s a personalizable piece of art.  Family trees, growth charts and more can be done in a very chic, not cliche, way. We’re also moving into limited edition prints and wall art.

BI: How big is Minted?

MN: We’re approximately 42 people including our customer service group and we’re based in San Francisco. The number of designers we have is in the thousands.  It’s constantly changing because it depends on how interesting a challenge is for different artists.  The number of customers at this point is in the tens of thousands, across the country and the world actually.  It’s really a global audience.  We just started international shipping this summer.  In terms of the country, we have users in every state.

BI: Where do you see Minted in five years?

For Minted, my goal is to build it into a favourite design and lifestyle brand for consumers and to provide designers with opportunities that didn’t exist before. I see us becoming an iconic design brand in several years.  That’s what my goal is for Minted.

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