San Francisco’s Five Mill Ventures Proving Out Self-Funding Investment Model

SAN FRANCISCO--(BUSINESS WIRE)--Five Mill Ventures, an angel investment incubator based in San Francisco, has proven its self-funding, revenue-only investment model with several companies in its portfolio including Argoz, an Internet retail startup that sold more than 10,000 pairs of argyle socks in 2012, its first year of business.

“Argoz is a great example of the Five Mill investment strategy playing out successfully in the marketplace”

Dan Soha, 31-year-old founder of Five Mill and self-described San Francisco “startup junkie,” spent last year refining his investment approach into what he believes is the “purest form of entrepreneurism.” Unlike the classic venture capital model that often burns, and usually wastes, lots of cash upfront before the company actually sells anything, all Five Mill deals start by self-funding with their own revenue. Soha’s motto is, “technology is cool, but revenue is cooler,” and thus actually rejects external capital investment until the startup sustains itself and proves it has the potential to grow by orders of magnitude with the infusion of outside growth capital.

“Argoz is a great example of the Five Mill investment strategy playing out successfully in the marketplace,” said Soha.

With its low-entry investment strategy using as little seed capital as possible (most of which was used to pay for initial inventory), Argoz has sold enough socks to order more inventory and expand marketing efforts. The sustainable run rate achieved in 2012 has justified an external funding round to take the company to the next level using Five Mill’s investor network and a campaign on Angel List. Soha has more than $250,000 committed for Argoz and is already making plans for “non-sock” accessory product extensions including wallets, belts and neckwear that he expects to be well-received by a customer base already loyal to the Argoz brand.

“We start with a purely digital sales approach to each startup, then apply ‘Blue Ocean’ strategy that finds an uncontested market niche, and removes the highest costs of an existing, traditional business model to maximize profits,” said Soha. “High-fashion socks have been around a long time, but we created a new, dynamic Internet retail model that was able to build brand loyalty without the high manufacturing, distribution and marketing costs of a traditional brick and mortar retail environment.”

The Argoz in-house shipping and packing process has been automated to maximize cost reduction, and refunds and returns are less than one percent – almost unheard of in traditional retail. Using the Curebit referral platform, Argoz integrates “Refer a Friend” sharing incentive capabilities to the sales funnel, and can track a user all the way down from ad click, purchase, referrals, subsequent purchase, etc. In-house-built shopping cart functionality enables Argoz to get creative with any number of buy one/get one deals, discounts, games and contests.

Soha and his team execute each business plan with only the raw ingredients of entrepreneurial risk: an idea and creative implementation. Five Mill codes, distributes and publicizes each product – the only ones that survive are the ones that fuel their own revenues and growth from the start without any front-loaded investment other than the creation and execution of the idea itself.

“Self-funded, and risking only time and intellectual horsepower, is the essence of entrepreneurism,” said Soha. “We’re removing the highest costs of venture capital – the capital itself and the distorted expectations that come with it. With Argoz and the other companies in our portfolio, we start with a clear path to steady revenue, supported by state-of-the-art technology, powered by innovative marketing and ecommerce infrastructure that our competitors simply can’t match.”