You can't find too many entrepreneurs who can say their company
started with the idea to write a novel.
Of course, Varsha Rao didn't think her literary inclinations would
lead to anything other than maybe a book on being a woman in business.
She wanted to pen the Great [Indian] American novel three years ago. So dedicated was Rao to the idea that she took a month's leave from her
demanding, high-profile consulting job at McKinsey & Co in New York to
But like a quick plot twist, before she could write a single
sentence, an old friend came calling with a pitch to launch a startup
Rao is not sure. But what
she will admit, though, is that she was looking for a change from
her career at McKinsey. So after some research and soul searching, she found herself in
Francisco, in a new, demanding, high-profile job, this time, running
Eve.com, an online retailer of high-end beauty products.
It was the beginning of her ride on the Internet economy rollercoaster,
and it took her to some great heights. Rao and her fledgling online
company were written about in publications like People and The
Standard, and attracted considerable web traffic. She met President Bill
Clinton, and attended glamorous events in New York, rubbing shoulders
with its top fashionistas.
But when the Internet economy started bleeding last year, so did Eve. It was eventually sold and then promptly closed, joining the ubiquitous ranks of fallen dotcoms.
Soon after, Rao took a trip to South America, to reflect on what she had done wrong and on what she had done right. And to see once again what there was outside the high-paced life of the dotcom bubble.
She walked away with a reported $ 17.5 million, and is now
thinking about heading yet another company; this time it could be in
fashion. She is also considering becoming a VC, certainly an interesting
reversal of roles. For Rao, 30, there is life after Eve, and she's ready
to bite into the apple again.
And yes, she's thinking about a novel, though it may not have anything
to do with her company. But if she were to write about how Eve started, Rao
would have to first mention the phone call that began it all. The phone call that began Eve.
And how was Eve born?
She got a phone call from a friend,
Mariam Naficy, who had gone off to study at Stanford when Rao, a Harvard MBA,
went to McKinsey.
Interested in ecommerce, Naficy was running ideas by Rao all the time.
The possibility of trying ecommerce didn't interest Rao as much as joining a
venture with Naficy. Rao says she wanted to do something on her own,
she didn't know what.
That's when the thought of selling cosmetics flashed across her mind. Being small and
to ship, they seemed the perfect product to hawk on the Internet.
There were predictions that the online cosmetic industry could reach $ 1.2
billion by 2003. Women were becoming a force on the Internet. Rao saw an
opportunity to market high-end cosmetics, to busy professionals, who knew
what they wanted.
She researched and mulled over the proposition. On a vacation in New York state with some friends, Rao spoke about her plan. It was the
time she had ever brought it up with anyone. Predictably skeptical at first, they
warmed to the idea.
It gave her the confidence to make a decision. A few days after she
returned, she took a call at 2 am from Naficy. It was then that they
decided to test the idea of online beauty.
Her husband, Cameron Poetzscher, an investment banker she met at
was supportive. But when Rao told her father, a chemistry professor and a stockbroker, and her mother, a systems analyst, about her plans, they
thought she was crazy.
"They said, 'Why? You're at McKinsey. You have a good job. You're on
to becoming a partner,' " she recalls.
Their concern was not because Rao was leaving the navy-blue-and-pinstripe world of McKinsey for the hot reds and pinks of the
cosmetics industry. Instead, they worried that she was leaving a secure
career. Their fears, however, were allayed by her determination to be a
success in the Internet market that generated hundreds of wonder
Rao and Naficy knew they were on to something after their first meeting
with a venture capitalist in San Francisco's Chinatown. Like all first
attempts, they got the interview because a friend knew someone at the
Rao says they had a very sketchy PowerPoint presentation. But the rep showed it to his boss and the VC boss called
them. "It was just the two of us and an idea," she
says. "We were laughing afterwards."
They later secured their seed money from Bill Gross, the southern
California venture capitalist and brainchild of Idealab! Rao and Naficy
had 90 minutes to make their pitch. A day later, Gross contacted them
an offer. The money raised in the first round, nearly $ 4 million, went
designing the website and signing up ten suppliers.
Even a virtual company needs space to work... Eve's first offices were
and sparse. The white table, that they would use as a background for the
products they photographed, was also used for lunch breaks.
What was amazing for Rao was her staff's passion. "They worked at Eve as if it
their company," she recalls.
Rao remembers how employees cheered, like they were at a football game,
Eve's first television commercial was screened. An article by The
Standard on how the company prepared for the Christmas season had
The media also published tongue-and-cheek reports about the company website. They
to bargain for Eve's web address with six-year-old Eve Rogers, of
Williamsburg, Va, whose mother had bought the address for her. A trip
Disneyland, $ 500 worth of toys, a new PC, Eve stock, and money for college,
sealed the deal.
Being in the spotlight, at the head of a cosmetics company, Rao says, brought new challenges. A self-described fashion lover, (her first item of make-up was the mascara she bought in sixth grade. "A pink
and green Maybelline one.") she was as a newcomer to the cosmetics
industry clique, and struggled to break in.
"The cosmetics industry is a very close, tight, circle," she
explains. "I spent a lot of time in New York City, doing face time with
Rao, a former cheerleader, soccer player, valedictorian and captain of
school's lacrosse team, was being invited to chintzy fashion events, and
forced to constantly buy new gowns and get her hair and make-up re-done.
"At McKinsey, I'd just wear my business suits. But in this industry it
definitely mattered what you wore, so I always tried to be relatively
Rao and Naficy's business idea was constantly being challenged. skeptics tried
to point out flaws in their business plan. Financiers said women
wouldn't take to the Internet. They were wrong. They said women
wouldn't buy cosmetics online. They were wrong.
The one thing that financiers worried about -- which proved to be the
biggest challenge for Eve -- was: What would happen if the company wanted to market big high-end
brands like Versace and Estee Lauder?
"All these prestige brands aren't available everywhere," she explains.
we had to go and pitch to all these very large companies, that they should
give their products to us, to distribute on our website.
"It wasn't an easy sell. Most of them didn't know who we were, didn't
that we were going to protect their brand that they had spent millions to
create. They were used to selling to Neiman-Marcus. Who were we? Eve.com?"
Yet they proved they could sign up clients, doggedly pursuing some of
biggest names, and getting brands like Versace, Calvin Klein, and
As its first anniversary approached, Eve was
attracting over 600,000 visitors a month, more than three times any other
web-only beauty site. By June, the company inked a deal to make itself a
featured shop on Yahoo, and had plans to sell handbags, jewelry, and
accessories. Cosmetic industry trade publications reported that the
company was on track to make more than $ 10 million by the year-end.
But Estee Lauder didn't bite Eve's pitch. With a 48 per cent stake in the prestige cosmetic market, Lauder
declined to sell its products to independent e-tailers. Industry
observers have pointed out that Estee Lauder's decision not to supply Eve, causing the company to be short
supply, was the reason for its downfall. Rao rejects this thesis.
"Our goal was to be a business in beauty, then expand out into other
areas that women shop in. So if we didn't get every brand, it was not going
to be the end of the world," she explains.
As the Internet economy began its downturn, the question of funding reared its
Investors wanted to see profits, yesterday. The company had raised
$ 26 million in funding, but was searching hard for more cash.
"We were over our heads for the business that we were in, but we really
saw there was potential in where it was going," Rao says. "We definitely felt we
were not the right people to take Eve to be a billion dollar company.
"If it was going to be a billion dollar business in three years, that was
to be different than becoming a billion dollar company in 15 years.
We started to think about an IPO around January of 2000, or look at being
Rao admits that "neither [she nor Naficy] had the experience of running a
company, even a small one... so we started looking for an experienced
but we ended up selling the company before we actually found someone."
Idealab! bought back Eve.com, soon after stopped funding it, and shut it down on October 20.
Rao had hoped Eve would live on. But today, the web address is nothing but a landing page,
complete with an apology.
She is looking to her future now, but she won't say what. She has hinted that she might become a VC herself, a mentor to other entrepreneurs, and look into running a new company. The experience in cosmetics hasn't soured her either -- she's considering exploring the fashion industry.
But right now, she'll admit, with a smile, that she's unemployed. No better time than now, to write that book.
She has a living room full of material to fall back on if she is thinking about an autobiography. Throughout her tenure at Eve, Rao's parents dutifully collected every article and advertisement published on their daughter
and her company. "They were tracking all of it, through good times and bad,"
"When we were sure about what was going to happen, and ultimately when we were
going to close, they supported me, and let me know that I had done something
really amazing. That I had earned great experience. That we had a great
financial return for our investors and that I had nothing..."
She hesitates for a second. "Yeah, I really shouldn't be disappointed."
Som Chivukula and Shaheen Pasha contributed to this feature
Design: Lynette Menezes
Varsha Rao will appear on the Rediff Chat on February 21, 2000 hours PST. Don't forget to log in!
Women who inspire us: Varsha Rao
Boutique of the month: eve.com
Beauty in distress
An ugly end for Eve.com
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