Kirsty Nathoo with Shan-Lyn Ma, Founder of Zola

Okay, hi everybody. I'm Kirsty Nathu. I'm one of the partners at Y Combinator, and it is my great honor to introduce Shanna Lynn, MA, who's the CEO of Zola. Zola has reinvented the wedding gift registry, and they've now worked with hundreds of thousands of different couples. The latest reported valuations for the company are over 600 million dollars. So welcome!

So I gave a brief description there of what you do, but I'm sure you do it a hundred times better than me. So why don't you say a little bit more about what it is and what brought you to that point?

Sure! Maybe I can start by getting a show of hands of who here has used Zola, either as someone getting married or someone going to a wedding. Great!

Well, thank you to you all. And for those of you who aren't as familiar, Zola is the fastest growing wedding registry and also one of the fastest growing wedding companies and e-commerce sites in the country. We use design and technology to really reimagine what it's like for couples getting married today to plan their entire wedding. We look to serve couples from the day they get engaged through that first year of marriage. People getting married today, the millennial generation, are unlike any other generation; they want different things.

We are really the only place where couples can register for things they truly want, no matter who they are, where they live, or whatever device they live on.

So what drew you to weddings?

Well, like many successful startups, we started Zola really out of personal need. In 2013, which was the year that I started out with my co-founder, that was also the year that all my best friends were getting married at exactly the same time. Yeah, so I'm like many of us have had that year where you’re going to a lot of weddings and you’re buying a lot of gifts from really painful wedding registries often. So I was doing that in 2013, and I was so frustrated because my friends were registered at the traditional department store registries. I had worked in e-commerce for a long time, and I thought that buying from their registries was the most painful e-commerce shopping experience I had ever seen.

I started talking to my co-founder, Nobu, who was the head of the user experience design team at Gilt. We had worked together at Gilt for a very long time, and he's married. He started complaining about how bad it was from the couple side, where he really wanted to register for not just products, but experiences and cash. He couldn't do that. He wanted to enable group gifting; he couldn't do that. He wanted to personalize his registry; he couldn't do that.

The more we talked about it, the more we realized this was an opportunity, and we were the best possible people to solve it.

What was it about it that made you jump into being a founder from a relatively stable job and everything else? What made you take that leap into the unknown?

Well, my background and my co-founder's background is really in product management. We went through a very traditional product development process before we decided we really wanted to commit to doing this 24/7. The process was we would start to talk to any engaged person that we could find, any friend or friend of a friend. We would meet them, understand their experience, their pain points, and then go away and try to design and innovate on how we could improve their wedding registry experience.

In 2013, we thought there were really three things that kept coming up again and again. First, couples really do want to register for products and experiences and cash, all in one registry—they couldn’t do that anywhere else. Secondly, couples really do want to fully personalize their registry—they couldn’t do that anywhere else. In a world where, on average in the country, people spend thirty-five thousand dollars on one wedding day, which is the average yearly income, they really care what it looks like, and they want the registry to reflect that.

Third, we heard again and again that the worst part about registry from couples was they wanted to control when their gifts were sent to them. They didn't want to receive anything before they were ready, and for most couples, this actually means they don't want anything until after their wedding date.

So we started designing this concept for Zola based on these three differentiators. We would put prototypes in front of users, and we would ask them to walk us through the designs. Over the course of a few months, we would wait and try not to sell them or lead them; we would wait for the brides-to-be to ask us the magic question, which, in the product world, is "When can I use this product?"

It's really hard because you want to pitch them on how great your product is, but we tried not to, and we didn't hear that for a few months. It was only after we started to hear brides who were getting married the following year say to us, "Will this be ready in time for my own wedding? Can I use this anytime soon? Can you email me when I can sign up?" That’s when we knew we had a winning product, and that's when we committed to doing it 100%.

Wow, that's exciting! That's like the full-on process before taking the jump; it's a good way to do it. So, we see a lot of wedding startups applying to us; there are lots out there. We're in an age where retailers generally are struggling, so what do you think it is about Zola that's made it so successful?

So when we were thinking about Zola as an idea, we thought that we could produce a product that was different and that users really loved. But just as important to that was that it was important to me that we have a business model that works. I think that has been our biggest competitive advantage and the reason why we've been able to survive and thrive where most other wedding startups have closed in the years that we've been around.

This was really based on my experience at Gilt. I worked at Gilt during the first four years of the business in product and saw a lot about what worked really well to drive that huge growth from zero dollars in revenue to over six hundred million dollars in revenue in four years. I also saw what ultimately did not work, which led to the decline and meant that it could never really be a profitable, sustainable company.

We looked at what those problems were at Gilt, which are typical e-commerce problems, and how can we solve them at Zola. For example, one of the things we learned was that in e-commerce, returns are the silent killer. You hear laughs from anyone who's worked in an e-commerce business. You don't quite realize that when you're first starting until you're halfway into the business, and you're like, "Oh, these returns are brutal to the business model."

The way we were able to address that at Zola is through this feature where we don't actually send anything until people tell us they want to receive it. Through the registry, people can do virtual returns; they exchange things through our app or through our site before they ever get shipped out to them. That has meant we have virtually no returns.

One of the other killers in e-commerce is inventory, and we were able to address that by building our back-end technology that enables us to dropship products from our partner warehouses directly to our couples. By not taking in product into our warehouse and then shipping it out again, we were able to be much more capital efficient and, ultimately, a more sustainable business than the normal e-commerce business.

The last thing I’ll say around e-commerce businesses is that they’re very hard to forecast and project, and to drive people down that checkout conversion funnel. At Gilt, one of the things that worked really well to drive demand and drive people to check out was that when you're selling designer brands that people love at 80% off for 24 hours only in limited inventory, that really drives demand.

The flip side of that is it's very hard to predict and forecast. So at Zola, we were thinking about how do we still drive demand intent but have a more forecastable business? When it's more forecastable, it's more manageable. The reason we are excited about the wedding registry business and the model we were adopting is that, for the most part, when people get married, they have to pick a wedding registry. When you go to a wedding, you kind of have to buy off the registry; that is part of a ready demand that is going to happen by a certain deadline, which is your wedding date.

That demand intent was built into the idea of a wedding registry, and that was one of the reasons we wanted to do this. The other thing that was important to us was that because people sign up for a wedding registry seven months before their wedding date and start adding things to their registry, we can very clearly predict and forecast what we're going to sell seven months to one year in advance. Then we can manage our business to make sure we have those items in stock available for couples when they want to ship them.

In doing so, we have a better user experience, but also a better business model. I think that solving the user experience and the business model together is what has allowed us to be successful in the wedding space.

Amazing! So I'm going to take you back in time, back to the very early days of the company, and I love asking this question because practically every founder I speak to has some kind of crazy story around this. So, let me ask you about your first seed round and how that came about—what are your crazy stories on there?

Oh, I have some crazy stories! I speak to a lot of founders and have really learned that every seed round is unique, and ours is no different. Our seed round was a bit different because I had worked at Gilt Groupe for four years before Zola and had worked very closely with the founder of Gilt. His name is Kevin Ryan, and he is a serial entrepreneur in New York. He founded Gilt, Business Insider, and co-founded Munger. He was excited to work with myself and my co-founder Nobu again.

So when we talked about starting this wedding company, he said, "I would love to work with you. I will give you the seed funding, and we can just get started." While many people are like, "That sounds like a really good seed round situation!" I will have to agree and say it was great, but it wasn't as easy as it sounds.

Because it wasn't like it was just handed on a silver platter. The reason I had that opportunity to have that offer was that I had worked with Kevin for four long years, for very intense startup years, and I had essentially slugged my guts out for him. For four long years, and that was the reason I got that seed offer! So while many people are like, "Oh, you didn't even raise a seed round," I'm like, "I was raising it for four years!"

So that was our seed round, but the funny story is when I was negotiating the seed round with Kevin, I was actually in Ireland because I had to go and get my visa, since I’m from Australia. So I was in Ireland, on a hike. For those of you who had Game of Thrones fans, it was like I was essentially at Winterfell, hiking. It was pouring with rain; there was no cover anywhere, and I was on the phone, trying to negotiate terms with him. We got there, but it was interesting!

What was it like working with him as an investor and someone that you were working with?

It's fantastic! Because I've worked with him now for close to 10 years, he has been essentially like a coach and a mentor, and in many ways, a very active investor and co-founder in the business. It's great to have someone who has operated at this point in New York for decades and has seen many businesses. He can give me a reality check and do so from the operator entrepreneur perspective, which is very different from the VC investor perspective.

Okay, so now coming back up to present day, where you've gone from negotiating seed rounds in the rain to raising 140 million dollars. How has the pitch changed? How has it changed how you talk to investors? What mistakes have you made along the way? Any advice for these ladies?

Yes, I wish someone had told me in the early rounds what I'm about to share here. In some of the later rounds, when I would pitch in partner meetings, which were inevitably at that time all dudes and maybe one woman in the room—like 20 dudes, one woman—I would always ask, “Do you see differences between the way I pitch and the way male founders pitch?” Every time, I hear a very consistent response.

Guys come into the pitch, they bang their fists on the table, and they swear that this is gonna be a billion-dollar business. They have no doubt that it's gonna be a billion-dollar business, which is funny because every single guy has no doubt it's going to be a billion-dollar business. Women just don't really do that. And certainly, I didn’t!

So my pitch, you know, I have had investors tell me, "You're just more modest and more factual and not really as aggressive as a lot of the male founders pitching." I’ve been thinking about this a lot over the years, and what I’ve tried to do is really verbalize externally during the pitch the conviction that I feel internally.

But in the early rounds, I never had enough confidence or enough guts, I would say, to really be banging my fists on the table because the thought in my mind at that point was always, "There’s a small chance that it may not be a billion-dollar business." So I didn't know if I wanted to say this, "There’s no doubt this is gonna be a billion-dollar business." But it turns out that actually, I feel very strongly about it, so I should just say that.

The funny anecdote here is that more recently, I had a guy pitching to me that he was building a trillion-dollar business.

Alright, wait, are we there, though? I guess so, right? I have to upgrade my pitch.

So you've mentioned your co-founder a couple of times. How does your relationship work between the two of you? How has that changed over time? How do you complement each other?

Yeah, Nobu, who is my co-founder, is the best! We love working together because part of it is we have worked together for many years before starting Zola. The reason we wanted to start Zola together was that we knew from our past work we were able to create great award-winning products together, and there was something so rewarding and fulfilling about that that we wanted to do that again.

He is, I think, the best design thinker in the world; he is our Chief Design Officer and leads product and user experience design. In the early days, when it was just me and him, he would focus on product and design and creative, and I would focus on everything else. Over the years, he has continued to really manage our design vision and product rollout, and I've tried to replace myself more and more in each function that I was initially responsible for.

Having someone that you trust fully, who knows you really well, who knows your weaknesses and strengths, has made all the difference in the world.

Amazing! Okay, so we just have a couple more minutes, so to wrap up, what's the one biggest piece of advice that you wish you'd known when you started that you can share with the audience today?

My advice to founders is always a piece of advice that I got when I was first starting Zola, and I think it was the most valuable piece of advice: before you really decide to commit to an idea for your startup, think about how you're gonna spend at least the next 10 years of your life focused on this one thing.

That's if everything goes well, but you are going to be living, breathing, working pretty much 24/7 on this one thing, and your most valuable asset is your time. So is this the best way that you want to be investing your time for the next decade? Because if it's not the best investment of your time, maybe you should think about another idea, another team, something else. But to really have a commitment to yourself before you bring anyone else on your journey.

Once you're able to think about that and commit to yourself that this is the only thing you want to be doing, then you're ready to go.

Alright, Shannon, thank you very much! This has been excellent.