5 months expenses and investment for BOAS (boas.co) to generate €5-10K monthly sales. We expect €5-10K monthly sales makes it likely (80%+ odds) BOAS can raise a first fundraising round (€596K) from non-EA investors and execute its full plan.
Without the investment we expect around 40% odds or raising our fundraising round, and we expect less money and worse terms (worse terms mean less profits going to effective charities and more going to investors and less money results in higher odds of a competitor with deeper pockets and faster money outcompeting us).
BOAS is a reverse auction vintage fashion platform that donates all (non-reinvested) profits to effective charities. This business model is called Profit for Good (PFG). The assumptions is that, with philanthropic investment, PFGs grow faster and more profitable because people prefer working for and buying from them. There is some research that indicates PFGs live longer and have higher profitability.
Our full plan, if we raise the full investment round (€596K) can be found here.
A detailed financial forecast connected to that plan can be found here.
Actual results to date here.
Our finances are 100% transparent, here.
Generate €5-10K monthly sales with BOAS (boas.co), so we can raise €596K of investment from (mostly) non-EA impact investors. We currently have the team and plan in place but we struggled to find early funding to buy stock and increase sales numbers each month. Most investors, especially in this investment bear market, don't invest in only teams and ideas without strong traction. This project enables that traction so we get full investment.
It's currently very hard to reach €5-10K in monthly sales because we cannot invest in used fashion stock (no stock=no sales). We will buy €15K worth of stock (retail value of €60K) and show we can sell the stock in the next 5 months. BOAS currently burns €4K per month on intern salaries (founders are unpaid), software costs, cost of shipping, cost of returns and buying stock. Our founders are unpaid.
Another (optional) goal would be for two of our founders to draw salaries that enable us to work on it fulltime (CEO Vin can work fulltime for 2 more months before he has to go part-time to fund himself, Or potentially has to take another job if we don't get funding, severely hurting our traction).
Used fashion stock: 15K (60K retail value)
Founder salaries: 0K (if you decide to fund only our stock and expenses) or 20K (if you decide to fund 2 of our founders too)
9FTE intern salaries: 7K
Operating expenses: 12.5K
Contingency: 4K
Total: 38.5K (without funding for founders to go full-time) or 58.5K (with funding for two founders to go full-time)
The expected value of our company to effective charities is currently ~€1 million (our estimated company valuation which is similar to the expected profits, some would argue it's much closer to zero, some would argue it's 2-3 million). This is with high odds of being close to zero (60%), medium odds (30%) of zero to one million and low odds of a million or more (10%). Our current forecast for money to effective charities in the next 6 years, including odds can be found here.
In our full plan we aim to run at a loss to capture as much growth as possible in the used fashion market (growing 25% per year) for the first three years. Most growth focused startups take 5+ years before they generate profits and are then able to generate large profits. The profit potential in our market is €600 million to €1.2 billion per year (10% of the European online used fashion market, 20% profit margin at scale).
3 founders (CTO, CEO, CMO), with 6 former startups, 3 exits and 30 years experience in our field (e-com, platforms, marketplaces). Former employers include IBM, Samsung, Adidas, SumUP (unicorn), ServiceNow (unicorn). The team has Harvard and Oxford grands and an MBA grad. We also have 12 interns to help us scale.
CEO: Vincent van der Holst https://www.linkedin.com/in/vincentvanderholst/
CMO: Or Perlman https://www.linkedin.com/in/or-perlman14/
CTO: only disclosed to those seriously considering investment (he still works full-time so we can bootstrap), his background is in the full plan though
Full team (excl. CTO) here: https://boas.co/pages/team
Profit for Good companies have more trouble raising investment. There's a lack of infrastructure, understanding and money compared to raising investment with the same company, but for profit. For BOAS specifically we expect the biggest cause for going under in the next two years would be lack of investment. Outcome would be little to no money donated to effective charities.
Wrong business model: PFGs for unforeseen reasons cannot succeed or grow fast, and the assumption that they grow faster and more profitable with investment proves to be wrong. We did a red team session on this at EAGxRotterdam, but unfortunately the recording was lost. The most plausible objections for succeeding were: lack of funding, not finding great founders if they can't get super rich, competitors with deeper pockets, people don't care about PFGs, people actively dislike PFGs for some reason (if they donate to causes they don't like for example) and customers demanding the profit goes to popular instead of effective charities.
Wrong business idea: our assumptions might be wrong and we end up getting no traction
Wrong team: our team might not be the right group of people and we end up getting no traction
Wrong market: we're in a fast growing market that is unlikely to slow down (more likely to speed up due to increased legislation around reusing clothing) but something weird might happen (we don't need clothes because we all start living in the metaverse or weird stuff like that)
Competitors with deeper pockets. It will be relatively easy for competitors to replicate our strategy, possibly with more investment from venture capital and they can out-compete us by undercutting prices until we die
Not able to compensate the team: there's a limit to what the founders can do without being paid. They will have to leave the company if we don't raise money so they can provide for themselves and their families. CEO Vin runs out of money by the end of the year and other founders would need to find jobs on the side or leave the company.
Elizier is right and we all die because of AI before BOAS generates large profits for effective charities, or other existential risks messing up our plans
You can read the thread with Jason for more causes and outcomes: https://forum.effectivealtruism.org/posts/ufmRBzscMnBkyYxSc/vincent-van-der-holst-s-quick-takes
This goes for every company, but there are small odds we get PR trouble if we're not able to become profitable and donate to effective charities or do something stupid we haven't yet thought about. We have 100% open finances to mitigate and actively inform our customers how it works. We have no priors of PFGs getting negative press on this. Negative press might have a harmful effect on the effective organisations we donate to too (e.g. AMF)
If PFGs turn out to be less effective money multipliers than investing for-profit and donating returns to effective charities. 5%-8% of worldwide profits currently end up at charities through philanthropy, so it would have to be 90% less effective
PFGs pay lower tax rates, if taxes end up being more effective than donating to effective charities, this might be harmful
The money we raise might otherwise go to more effective projects and would end up lost if we don't reach profitability
We received 10K in zero interest unsecured loans from 2 EA's and a 2K zero interest unsecured loan from one of BOAS advisors. This gives us 3 months runway (until end of October 2023). We are trying to raise €596K in total funding, which is much less likely without investment to show traction (€5-10K monthly revenue) to investors. We expect most of the €596K to come from non-EA investors. Founder Vin funds the company from savings too, but is reaching his funding limit quickly.
Austin Chen
over 2 years ago
Hi Vincent! Thanks for submitting this; I'm excited about the concept of loans in the EA grantmaking space, and appreciate that your finances are published transparently.
I expect to have a list of follow-up questions soon; in the meantime, you might enjoy speaking with the folks at Give Industries, who employ a similar profit-for-good model!
Vincent van der Holst
over 2 years ago
Thanks Austin, I know Kat from Give Industries, another great example of a PFG! They are part of our Profit for Good initiative (group of PFGs promoting and advancing the model).
I look forward to the follow-up questions.