June 3, 2016 by Speakers' Spotlight
Michele Romanow’s Entrepreneurial Secret? Launch Now, Fix Later
Tech titan Michele Romanow is an engineer and a serial entrepreneur who started three companies before her 28th birthday. The newest (and youngest ever) entrepreneur to join CBC’s hit show Dragons’ Den, Michele is the co-founder of e-commerce platforms Buytopia.ca and Snap By Groupon, which have saved millions of users hundreds of millions of dollars. Ranked in WXN’s “100 Most Powerful in Canada” and listed as the only Canadian on Forbes’ “Millennial on a Mission” list, Michele brings her youthful energy and incredible entrepreneurial savvy to every stage. Canadian Business magazine recently profiled Michele and zero’d in on her message for aspiring founders: don’t wait:
“Please, help yourself!” Michele Romanow cries, seeing me eye the coffee table overflowing with swag. It’s the first day of taping season 11 of Dragons’ Den, and food was a prominent theme: Samples of exotic trail mix and a box of Sweets on Demand peek out from under a pair of bright blue spandex pants (from a pitch for a “soccer lifestyle brand”). Now, 13 hours into a day that started at 6:30 a.m. with two hours of makeup and hair fluffing, she’s finally kicking back in her dressing room, on-air black leather pants swapped for jeans and a T-shirt. Tired? Ha. Even in downtime mode, the woman radiates energy, her thoughts flowing out in rapid, breathless streams that occasionally end in, “Does that make sense?”
At 30, Romanow is the youngest Dragon ever, and she’s made youthful vitality something of a trademark. Bubbly, thought her business partner Anatoliy Melnichuk when he first met her at Queen’s University—and he didn’t know the half of it yet. She’s launched four businesses, three of them with the same two partners, but that doesn’t really sum up her entrepreneurial knowledge. On her fourth day of shooting last season, the show’s producers approached her warily to ask if she was getting notes from the presenting entrepreneurs, because she knew a surprising amount about each industry. “No,” she told them. “I’ve tried to start half of these businesses.” Biodegradable packaging, bespoke suits made overseas, subscription beauty boxes and hundreds of other ideas—Romanow and her partners brainstormed, researched and started or rejected them all. “For every business we tried that people might know, there were five that didn’t work,” she says.
In 2014, she left the best known of those businesses, Toronto-based daily deals website Buytopia, to join Groupon after it bought her Buytopia spinoff. Now Romanow is getting ready to start her fifth business, in fintech. She knows little about financial services, but then she also knew nothing about running a café, making caviar, managing websites or peddling rebates when she pressed on with previous startups.
That’s one thing to know about Romanow: She has unshakable confidence—no, certainty—that she can figure out anything. She admits to having something to prove. “I don’t know where I get that from,” she muses, fiddling with a blingy earring left over from her Den outfit. “Maybe thinking I’d never be as successful as my dad.” (That would be Marvin Romanow, the former CEO of oilpatch giant Nexen.)
Her worries seem unfounded. Over the past decade, she’s learned that success demands refusing rejection and not waiting for permission. “Michele is a person who skips the line,” says Nicole Verkindt, founder of online aerospace marketplace OMX and one of Romanow’s best friends. “‘No’—she doesn’t even hear the word.”
Start something. Anything
This persistence was evident at an early age. In Grade 5, Romanow felt her bedtime was too early, so her parents encouraged her to survey her classmates for comparison. “The results showed that her bedtime was dead last, but despite the evidence, she still argued she should go to bed later,” her dad recalls. The first of four kids, Romanow was born in Calgary, and then moved to Regina, but spent a lot of time on her extended family’s farms. The experience taught her that no task was beneath her. Her motto: “Successful people do what unsuccessful people are not willing to do.”
An academic high achiever, she studied civil engineering at Queen’s but within a year knew it wouldn’t be her career. At 19, she decided to open a zero-waste café on campus and entered business plan competitions to raise funds. She didn’t win, but Melnichuk, a fellow engineering student, saw her pitch and pulled her aside. “Next year, we can beat these guys,” he said. Her first thought: What do you mean we?
She opened the Tea Room in her fourth year and, 10 years later, it’s still run by the student government at Queen’s. Meanwhile, Melnichuk introduced Romanow to Ryan Marien, “the smartest guy in engineering and chemistry,” who also had a knack for analyzing business models. But Melnichuk, who did door-to-door sales as a kid, is the one who taught the partners to be deaf to “no.” “If you’re afraid of someone saying no, you won’t try,” Marien says. Melnichuk had another quality Romanow needed: He was an ultra-high risk taker while she struggled to find that gutsiness early on.
The trio spent most nights brainstorming business ideas and then cold-calling companies, saying they were students doing a research project. “Part of the benefit of starting so young was that we believed we could learn anything,” says Romanow. Some ideas (subscription cosmetics) were a poor fit with the Canadian market, and others (financing home upgrades) demanded more capital than three 20-year-olds could rustle up.
One day, someone suggested growing trees for expensive furniture. “If we’re going to farm anything, it’s gotta be the most expensive product in the world,” Melnichuk retorted. That was enough to send them off researching the caviar market; they discovered the world supply had plunged by 80% due to sturgeon overfishing. They read every study on fish farming and travelled to meet with sturgeon researchers. Romanow informed her parents that she couldn’t come home for Thanksgiving because she was flying to San Francisco to visit a sturgeon farm. After six months, they had a comprehensive 18-tab Excel spreadsheet and entered numerous business plan competitions in North America. By year’s end, they had collected $120,000.
The three of them packed into Marien’s Toyota Camry and drove to tiny Evandale, N.B., which had one of the few remaining natural supplies of Atlantic sturgeon. They knew that five local fishermen, all retired, had licences to catch sturgeon and found one who agreed to rent it to them. Now they had to find a working fisherman. “You should get Ted,” they were told. “Just go up the street, left at the lights, and he’s in the white house.” Romanow sat by the door for 10 hours waiting for the guy to get home. “I thought, I did an engineering degree. I did an MBA. And I’m literally stalking a fisherman right now.”
To get Evandale Caviar, a sustainable sturgeon aquaculture facility, off the ground, they lived in a hotel, and learned how to process fish and make caviar themselves. In the evenings, they called high-end restaurants and hotels to sell their wares. After the summer fishing season, they sold most of their inventory before October—October 2008, that is. The world of luxury retail collapsed. New export legislation hammered the final nail in Evandale’s coffin. Nevertheless, Romanow sees Evandale as a huge personal success. “I don’t think I could ever do that again, but the fact that I did it was so powerful.”
Ignore the naysayers
With the recession in full swing, the partners took a hiatus, and Romanow snagged a job as director of strategy at Sears Canada. The plodding corporate environment was a big contrast to the lightning speed of a startup. Still, Romanow was part of an internal consulting group and inhaled every piece of research that came across her desk. During a get-together with Melnichuk and Marien, she told them about the explosion in group buying, with companies like Chicago-based Groupon giving merchants a low-cost way to connect with consumers, who received deep discounts. None of them had technology skills, but they saw an opportunity—if they moved fast. With no time for meticulous planning, they threw together a strategy. “We would have a famous person tweet for us, we’d outsource the website overseas, and we’d launch at a trade show,” Romanow says. “That was it. Pathetic!”
Buytopia’s launch, at the National Women’s Show in late 2010, was a shambles: The firm they had hired to build the website missed the deadline, so they just put up a JPEG of the site’s layout and pasted a “Buy” button overtop a PayPal interface. Nevertheless, their first three deals brought in $10,000. Getting that early customer response was crucial, which is something Romanow believes many entrepreneurs still underestimate. “To have real people swipe their credit cards is so much more valuable than combining 18 VCs’ notes,” she says. “If you can do low-cost trials of an idea, let the market tell you if it’s good.”
The market was challenging: Groupon’s rise had fed a massive wave of me-too businesses, and Buytopia was a late arrival. “If I had come on Dragons’ Den, I wouldn’t have given myself money,” says Romanow. Indeed, no investor did. They used leftover funds from the caviar firm and pooled their own money to bootstrap Buytopia, which managed to sign a deal with Sears. That put it on the map and led to contracts with Cirque du Soleil and Staples. “We got all these national brands that probably should have worked with Groupon because we were persistent and we got there first,” says Romanow.
By the second year, Buytopia went on a shopping spree and bought six competitors. The partners tried to build relationships with their rivals, while closely tracking the competition’s traffic and sales data. “As people started to exit, we were the first phone call they made,” says Romanow. By the end of 2013, consolidation had shrunk Canada’s daily deal arena to a few dozen sites and, with 2.5 million subscribers and $10 million in sales, Buytopia was one of the largest.
But it was a complex business, involving operations in sales, technology, content creation, email marketing, customer service, financing and e-commerce. For the first two years, the partners didn’t pay themselves. Romanow worried about turning off her cellphone at night. Recalling the stress of those days, her tone goes quiet, as if she’s remembering a trauma. “Every day I was scared. You’re a day away from bankruptcy, markets are shifting very quickly and at any moment this could all fall apart, and I will have been the hardest-working person of all my friends and missed every birthday party, neglected my body and destroyed my personal relationships, and I will be left here with nothing.”
In those turbulent years, Romanow tried to surround herself with entrepreneurs. She started jogging with Verkindt, and those runs became therapy sessions in which they shared their deepest fears. “When you want to believe that things with low probability will happen, you have to be around people who have succeeded in that,” Romanow says. “Otherwise, you’ll have rational people every day tell you all the reasons it will fail, and you’ll start to believe them.”
The closeness among the partners made a big difference. Rather than split up the leadership functions, they tackled priorities together and traded off if one wasn’t making progress. They often disagreed, but the rule was that if two voted one way, that was it, and they moved on. “If you were listening to our conversation, you’d think it was a brutal fight, but it was just us debating,” says Melnichuk. Most important, they helped one another through crises. The experience gave them a benchmark for measuring adversity. When things seemed bleak later, they looked back on Buytopia’s early days and thought: We’ve been through far worse.
Know when to exit
Even as they laboured to grow Buytopia, the partners continued to develop new ideas. “We never called them ‘new businesses.’ We called them ‘projects,’” says Romanow. “By the time you say you’re starting a business, it feels too big to fail.” One such project was online scheduling software called Cleverfox, which stemmed from Buytopia’s experience with merchants who struggled to track customer appointments. They built it and released it, but it didn’t take.
Another venture was a mobile couponing app that allowed consumers to earn grocery rebates by photographing and emailing their receipts on selected products. It essentially bypassed retailers and connected Buytopia’s subscribers with packaged goods companies. The app launched in August 2013, and shoppers took to it immediately. But consumer products giants have long sales cycles and weren’t keen on working with a startup. The partners realized that to get SnapSaves going, they needed to gain traction in the bigger U.S. market. Cracking it would be expensive, and they’d need capital. So they travelled to Silicon Valley and Boston for meetings with investors and potential partners. They scored term sheets from three VC firms when Groupon asked to meet.
The trio expected a courtship but instead got a hazing. There were 10 people around the table, all asking questions, when Eric Lefkofsky, Groupon’s co-founder and then CEO, interrupted: “Listen, when the market changes and the retailers are pissed off that you disrupted the space, what are you gonna do?” The memory makes Melnichuk chuckle. “[Eric] made me run the gauntlet, trying to see how much shit I could take and if I could break,” he says. “After that meeting, we thought, This is done. Eric hates it.” But as the team flew home, Lefkofksy gave his lieutenants an order: “Buy the company.”
Groupon, with 50 million active customers, would give SnapSaves immediate scale and credibility in an arena already full of rivals. “If we raised money, we’d be starting from scratch,” says Melnichuk. The deal closed in June 2014, and Groupon relaunched the app in the U.S. as Snap by Groupon a few months later. Melnichuk and Romanow moved to Chicago to work as Snap heads of sales and marketing respectively, and severed active ties with Buytopia to avoid competitive conflicts of interest. (Marien stayed in Toronto and remains Buytopia’s CEO.)
Suddenly, Romanow found herself back in a corporate environment. “There was definitely a bigger-company mentality: Things took longer, [and] there was more risk aversion,” she says. But while Snap was one of Groupon’s most successful launches, it soon became apparent it was the wrong fit with the American coupon culture: People were looking for deals from retailers, not the manufacturer coupons for which the app was designed. Six months in, Groupon pivoted the app to focus on retailers. Romanow insists that was fine by her. “There was no part of me that was upset—you want your product to succeed and evolve.”
Melnichuk and Romanow were required to remain at Groupon for a year; they stayed for a year and a half. Romanow says she never envisioned a long-term commitment to the company. “Groupon isn’t mine [to build].” Besides, she was already involved in something that was calling her back home.
Take another risk
When Romanow joined Dragons’ Den last season, she was the youthful sparkplug, the most approachable of the quintet. Her ever-present Moleskine notebook in her lap, she looked like a student taking notes in class and was sometimes shouted over and patronized by the older men on the panel. Then came the gourmet poutinerie episode. Romanow was explaining why the entrepreneur’s ownership structure was untenable when Jim Treliving, the restaurant franchise master, tapped her arm. “Hold it, sweetie,” he said. “Don’t call me sweetie,” she snapped. After a frosty, tense pause, she resumed her lecture.
It made for good TV. Twitter loved it. Romanow’s sister Jackie even offered to put the retort on T-shirts. But the incident highlighted the downside of Romanow’s business-prodigy image: Her youth, combined with a diminutive, girlish demeanour, can also be a hurdle. “There’s definitely an old school–new school dynamic with me and Jim,” Romanow says. But on the show, she tries to keep her ego in check and insists on giving the entrepreneurs a genuine shot. “I’m not going to be the asshole. I was most recently on the other side, walking into VC meetings scared out of my mind. When we start interrupting people in the first two minutes and throw them off their game, that doesn’t bring out the best in them,” she says. “I remember what it was like to take those risks.”
She’s about to take those risks again. Romanow won’t reveal much about her new venture, other than to say, “I’m passionate about the future of work and fintech.” She figures she’s seasoned enough to raise her odds of success. “My ratio before was one in five. Now, it’s maybe one in four,” she laughs. But no matter how high the odds, she passionately urges entrepreneurs to try—and try young, before a mortgage and kids tie them down. You don’t need an MBA, Romanow insists. You need a GSD—the “get shit done” degree. “The worst piece of advice young people get is, ‘Do this one day, but for now you need two years in this job or it will look bad on your resumé,’” she says. “You’re not building your life for resumé readers. Just get going. You’ll figure it out.”