Caraa co-founder Aaron Luo: ‘Retail brands should not raise VC funding’

With Caraa, Aaron Luo is looking to prove aesthetic isn’t everything.

“Everything starts with product. With luxury brands, the aesthetic is becoming stale. It’s beautiful to look at, but not functional. We felt that this customer wanted more — something beautiful, but very functional,” he said.

Luo joined the Glossy Podcast to discuss why his brand didn’t raise any VC funding, how he chooses brand partnerships and why he decided to test selling products on Amazon.

On investing in product, not story
Luo and his co-founder, Carmen Chen Wu, are in a unique position, in that they own their supply chain and didn’t raise any venture capital funding. The bulk of the brand’s investments has gone into product design and development, rather than branding and marketing.

“That works for brands that have deep pockets and a lot of venture capital,” Luo said, of brands going the alternate route. “Time will tell if they’ll be around for a long time. We lead with product and design first, and we didn’t raise VC funding. I have a theory that retail brands should not raise VC funding in the early stages. We wanted to be in control of our own destiny.”

On partnerships
Organic customer growth was also crucial in the first year after launch — but in place of spending on customer acquisition, Caraa invested in brand partnerships.

“We’ve partnered with Equinox. We came out with a collaboration, and that helped us in the early stages with credibility,” said Luo, adding that the brand’s collaborations have to make sense. “Most recently, we formed a partnership with Athleta to help them think through the sports and fitness accessories category: We designed a collection that was exclusive to them. When we’re not raising any money on acquisition, this type of thing gets awareness out there.”

On Amazon
Caraa is currently selling on Amazon, in what Luo calls a testing phase, despite the fact that other luxury brands have been highly resistant to go there. The results to date have not convinced him to roll out all products on the platform.

“You can lose exclusivity and make your e-commerce less special, when it comes to that; Amazon is not brand-friendly,” he said. “If you are in the commodities business, you should be scared, and you should not be on Amazon. It has massive access to big data and can identify trends for the main basis; they can copy. But for niche brands like us, we’re led by a fashion designer who creates trends. Our job is to tell the consumer something. Amazon will never be able to copy us, so we don’t see them as a threat. [On Amazon,] we tested high- and low-priced items, what people were buying. But price wasn’t a huge point of test. We knew it couldn’t be cheaper than our own website.”