While You Were Blowing Cash on Meta Ads w/ Modern Citizen

"For the first three years of the business from 2015 to 2018, we didn't do any paid marketing spend, no paid social spend. 100% of it was driven really just by word of mouth," Jess Lee states matter-of-factly. While her DTC peers were pouring venture capital into Facebook ads, Modern Citizen was building something different: a sustainable, profitable business.

This focus on fundamentals sits at the heart of Jess's journey as co-founder of Modern Citizen, which has grown into an eight-figure powerhouse for modern women, largely through bootstrap financing and disciplined growth.

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And now, the episode!

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The Contrarian's Path

"We had a very, very small cash budget," Jess recalls, painting a picture of Modern Citizen's early days. "We funded the business with $200,000 of friends and family money at the very beginning and didn't have enough money to do paid ads." This constraint became their advantage.

While it felt "glacially slow" watching peers achieve rapid growth through meta-advertising, Modern Citizen focused on building real connections. They operated a showroom in their office where customers had to book appointments, run events, and build their brand through genuine word of mouth.

Learning from Legacy

Jess's perspective was shaped by her time at Gap Inc., where she worked in corporate strategy and M&A. "To be a business like a Gap where you started in 1969 and to still be massive and relevant today across a portfolio of businesses is not simple to do," she reflects. "We've seen in that D2C cohort many have risen and fallen and have disappeared within a very short span, less than 10 years."

This appreciation for sustainable growth influenced Modern Citizen's approach to financing. They raised just $1 million in friends and family funding in 2018, after their initial $200,000 seed. More notably, they've never taken on debt – not even a line of credit.

The COVID Crucible

When COVID hit, Modern Citizen's disciplined approach proved crucial. "Because we'd built that discipline in the early years of the business, making a dollar out of 15 cents," Jess explains, "we felt comfortable walking away from stores because it really was like kind of a minority share of our revenue."

While other brands struggled to quickly adjust their cost structures, Modern Citizen's lean operating model allowed them to adapt swiftly. Jess and her co-founder even became warehouse employees, shipping orders themselves during the peak of the pandemic.

Channel Evolution

Now, that patience is paying off. Modern Citizen has just signed leases for two new retail locations, including a coveted spot in San Francisco's Pacific Heights. "We ended up being the beneficiary of someone else going out of business," Jess notes, highlighting how their disciplined approach positioned them to seize opportunities others couldn't grasp.

Their approach to retail remains characteristically careful. Rather than signing traditional 5-10 year leases, they've historically sought out subleases and shorter terms. "We would literally walk into stores we liked and ask about taking over subleases to minimize risk," Jess shares.

The Future of Consumer

Looking ahead, Jess emphasizes the importance of constant reinvention. "You'll have to constantly reinvent yourself because that's how quickly this moves," she advises. It's a philosophy that's served Modern Citizen well, allowing them to evolve from an appointment-only showroom to a multi-channel brand with a growing retail presence.

Jacob's Expert Segments

In this episode, Jacob deep-dives into two critical areas that complement Jess's insights:

• First-order profitability: Looking into how first-order profitability, rather than lifetime value calculations, provided crucial stability during uncertain times.
• Raising funds and valuations: Exploring the implications of capital-light approach and how it differs from traditional DTC venture funding models.

Subscriber-Only Exclusive Content

This episode pairs perfectly with our latest founder-focused PDF: "DTC Margins Report Card" within which you'll find:

• Complete margin breakdowns of Chewy, Wayfair & more
• What makes their margins tick (or sink)
• The metrics that matter for sustainable growth
• Real lessons for DTC founders

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