The Importance of Reaching a Real Product-Market Fit

By: Danielle Hasson, Amit Raveh and Mayan Aran





Fast facts:

Tomer and Peleg have known each other since childhood.
Tomer and Peleg are now working on a new venture together called AudioLabs.
A representative from Zalando who collaborated previously with Tomer, Peleg, and Nitzan later joined Bllush as a product consultant.
Table of content

How Bllush Began

Peleg Aran (CTO) and Tomer Dean (CEO) have known each other since childhood. They both  joined the Zell Program in 2014  where they met Nitzan Gal (CMO) and formed a Zell team together.

Bllush came about from a workshop they participated in during  the Zell Program, where each team met with several employees from Sears Israel. The workshop included  a competition for the best idea in the eCommerce field. It was here when Bllush's initial idea was formed and with it won the competition.

 Their idea linked social media platforms, like ״Instagram״ and ״Pinterest״ as inspirational tools for people who shop online. Up until then the shopping experience was still relatively distant from from the content and fashion styles shown on ״Instagram.״ They saw an opportunity - if they can bridge the  content from Instagram to eCommerce, online shoppers will buy much more.“It was long before Instagram introduced direct shopping, which is the ideal way to shop while watching content and not the other way around,” Tomer said.

Before hitting the ground running with their idea, the Bllush team needed to validate some assumptions. The first being that influencers are easily accessible and would provide access to their photos.

They pulled the  influencers' email addresses from ״Instagram״ and sent out cold emails along the lines of,  "We love your photos, would you like to collaborate?" It worked great, as  about 30% of their outreach responded. The second assumption was that Influencer photos help purchase conversions much more than standard content immagery on an e-commerce site.  The Bllush team created  landing pages of ״Nike״ and ״Zara״ products, and with A/B testing using ״Facebook״ campaigns showed that the conversion rate was higher on the pages where the products are next to a widget displaying pictures of influencers wearing these products.
For Tomer this was  was a strong case for  UGC (User-generated content) and thus a good base of initial validation to open their startup.

While seeing clicks on ״Facebook״ ads was exciting, the desire to see real sales improvement was needed. They got ״Rockglam״, ״Styleriver״, and ״Modly״ as design partners through friends and family connections. Very quickly they developed a plugin which displays images of influencers with the products on the company shopping websites They have proven that there is an improvement in sales through the measurement of the data. 

As difficult as it is to prove to companies that an addition to their site can lead to an increase in sales, after measuring the data they saw a jump in customer sales 

 The three companies continued with Bllush, as they were content with the initial results and were interested in seeing how it would continue to perform. 

In 2017, Bllush raised 200K$ pre-seed, from initial investors including the Zep fund. With  three clients under their belt, they started looking for clients outside of their homebase, Israel.״ Zalando״, a huge German eCommerce company, was one of their first customers. They met them at an eCommerce fashion conference in London during their Zell year and it took about a year until this relationship matured into a pilot.

By 2017, Bllush had 10 customers paying large amounts, encouraging them to seek out a Seed round. In 2018, Bllush raised $1.7 million, led by ״Leta Capital״ and a number of Israeli angel investors. Tomer credits the round to their business deck and rising projections.. It was no easy feat as they were first time founders and not necessarily in a bustling market, but ultimately managed to raise based on their

Time To Scale?

"We reached 2018, we had customers, there was revenue, there was recruitment. We were in heaven, and from there it started to get worse,” Tomer said. In terms of best practice, 10 B2B customers who pay several thousands of dollars a month reflect product market fit, because that means the company can get from 10 to 20, and later to 100.

Bllush brought on small and large customers alike, such as ״Zalando״, ״Trendyol״, and ״OttoGroup״. They seemed to be heading in the right direction and felt they had reached product market fit.

They switched their focus to scaling and acquiring a large number of customers at this time. Their scaling included:

  1. The majority of employees were busy onboarding new clients instead of making improvements to the product.
  2. There were about two months that only focused on decreasing the onboarding time of a client.
  3. Automate the product completely. Up until now, a team reviewed the pictures to ensure they were uploaded correctly. Now, they are automating to support a large mass of customers. 
  4. Software developers, VP Marketing, and SDRs were recruited.

By the time the company reached its peak, there were 15 employees, and the founders became heavily involved with employee management.

Towards 2019 the Bllush team started to see customers dropping off after eight months and they didn’t understand why. Tomer explained that most of the clients were active for over a year but they noticed that a lot of them relied on personal connection with the Bllush team. Initially, Tomer thought this was a good thing, but in the end, proved otherwise. “You want a product that sells itself," Tomer said. In addition, no one besides Tomer managed to make sales which caused doubt about the product's vitality.

One of the most significant events confirming their doubt was when Bllush's servers crashed. At that time they had 10 active customers, but a whole day passed, and not one of them complained. Their lack of engagement and interest in the product was self-evident. When customers do not complain when a product stops working, they probably do not care much about that product.

Time To Pivot

In 2019, Ofer Vilensky, their advisor, informed them that their income was going down and they would soon run out of money. Tomer and Peleg understood there is a big problem. Although Bllush provided reports and data, they realized that their customers didn't fully comprehend the company's value proposition.

A change was needed. They began to brainstorm how to pivot their product so it can bring more value to their customers, while also making it appealing enough that it could be sold within six months - the runway Bllush had left. To start, they fired their employees, stopped onboarding new customers, and focused their attention on talking to existing customers and seeing what could be improved. 

They tried to introduce a new pricing methodology and conduct interviews with clients, but it proved futile given that examining their results was taking too much time. 

Closing The Company

By 2020 their pivot had not reached product-market fit and they were not in a solid position to raise more money from new investors. COVID-19 also brought with it many supply chain challenges that directly affected the eCommerce industry and Bllush’s customers were not really responsive to their attempts to improve the product. improvements. Ultimately, they decided to close Bllush.

The Learnings They Gained

According to Peleg, their most significant mistake was shifting their focus from the product and their customers to building their team and managing employees. Tomer and Peleg became less involved with the product and whether or not they gave a strong enough value proposition to their customers. 

On top of that, they felt the eCommerce market was far too saturated. "If everyone agrees that you have something good, it may be too late in the market. If you want to enter the market in good time, you need some to tell you the idea is retarded and some to say it's genius," Tomer said.

Since then, Peleg and Tomer have licked their wounds and taken their learnings with them into their next venture, AudioLabs,   "Until there is a very significant product-market fit, we should probably avoid management,” Tomer said.

Discussion Questions

  1. How did the founders of Blush see the opportunity in the market?
  2. Why were Peleg and Tomer sure they had a product-market fit? How did they find out they didn't?
  3. What were the challenges of Bllush to realize at the beginning that they don’t have a product-market fit?
  4. What were the reasons for scaling so soon after the investment?