Interview with Giorgi Chugoshvili: Co-founder of Phubber

Mar 3, 2021

What is Phubber, who is it for, and what problem are you solving for them?

Phubber is a digital marketplace for fashion items. We launched our operations in mid-2019, and today, we are Georgia’s largest online fashion retailer, entering the Ukraine in Q2, 2021. Having started with bootstrapping of 15,000 USD of our own savings, today, the value of the items listed in Phubber is more than 10 million USD. And it is just a beginning. Phubber is not just a platform; it serves as an ecosystem for everybody who wants to sell apparel, shoes, and accessories, new or pre-loved. Our sellers are individuals, Georgian designers, Georgian brands, stores, vintage shops, etc. Creating a Phubber account means to have a perfectly running engine of technology, mobile and web, authentication, quality control, marketing, customer service, logistics, packaging, and payments. All a user needs to do is to upload items; the rest is on us. After an item is bought on the platform, we bring it to our facility, check the condition and the size, and then authenticate it, package it, and deliver to the buyer before paying the seller. That is why our users love us and 92% of our GMV is from our returning customers.

We believe that fashion resale is a new trend and that soon it will be larger than fast fashion and luxury. We also believe that individual designers and small stores do not have sufficient resources to create and professionally manage online stores and apps, to attract a large number of customers, and establish fast and efficient logistics. We serve them all. Any individual can clean out their closet and sell them on Phubber; any designer or small store can list their catalogue on the platform and try to sell it to our 100,000+ users without any headache. Soon they will be able to do it internationally.

How and why did you come to found Phubber?

Phubber has two founding partners, me, Giorgi Chugoshvili, tech, finance and operations and my partner Anano Dolaberidze, fashion, marketing, and PR. We both have been C-level executives in our industries for more than 10 years and always wanted to start our own business. Online is on the rise, and fashion is a huge industry, but standard e-commerce requires a lot of investment in the inventory. Therefore, we searched for a business model that would allow us to create the largest online apparel store in the country without owning stock. Research brought us to online resale, which is growing significantly faster than general ecommerce. We started Phubber with our savings and then a GITA (Georgian Innovation and Technology Agency) grant gave us a second boost. After that, we took part in a Silicon Valley Acceleration thanks to USAID and USMAC, and then the 500 Startups acceleration in Tbilisi and here we are. We are now closing our investment round to invest in development and expansion. Lack of financial resources pushed us not to go down the standard ecommerce path and which led us to our highly successful approach – sometimes scarcity is a blessing.

What do you see to be the main advantages and disadvantages of founding and growing a ‘frontier’ business?

Definitely there are both pros and cons. These markets have their natural risks not present in developed markets, such as lower purchasing power per capita and political instabilities. But any start-up that manages to create a product or service that serves several countries in these markets, will make huge step towards becoming one of the first unicorns from the region. There is still very limited competition, and it is becoming more and more common for start-upers to look for tried and tested business models in developed countries and launch them locally. Another advantage is that leading companies from east and west are concentrated on their home markets and do not want to spend resources to enter these markets themselves, but they are very interested to acquire a company that will collect all those markets as one market. Multiple opportunities are in all directions starting form ecommerce ending with fintech. Fortunately, more and more investors are considering investing in these regions, with expectations of higher returns than in developed markets.

What is the key to successfully managing a team across several geographies?

We are just setting up a team in Kyiv, Ukraine. That will be our first expansion. I spent several months in Kyiv and already realize that it will not be an easy journey. Our goal is to be in at least five countries by 2022. Different time zones, different cultures, different legislation, and taxation. But it is worth it. Current technologies and collaboration tools make life easier. Being in Kyiv and watching how the team is performing in Tbilisi on a minute-by-minute basis gives me, as a founder, more confidence that I will manage to set up efficient processes in multiple countries. Of course, it is better to be with your team on the field, but it is not always possible. Everyday zoom calls are becoming even more challenging when we have active discussions with our investors in the US; time differences makes it even harder. But this is inevitable, thus we have to find a way.

If you could give young entrepreneurs in frontier markets one piece of business advice, what would it be?

My main advice would be to control costs and scale only after nailing the business model. The worse scenario of the development I see for Phubber is that we, as management, fail to scale. It means that the market liked our product, we have customers, investors trust us, gave us resources, but we failed, as managers, as founders, as professionals. Last year I concentrated on increasing my theoretical knowledge in start-up building. The more I read, the more I understand that it is a very logical process, and one can easily predict whether a start-up will be successful or not. Many teams have gone through the same problems and have shared their experience and lessons learned. All founders need to dedicate their time to learn from others’ mistakes and be very careful while scaling, as scaling needs significantly better management and the costs of mismanagement can be very high. Sometimes we think of those days when I could give Phubber a runway of several months with my savings, today all my savings will not be enough to give a runway for several weeks; tomorrow, with scale, it won’t matter at all.

What is the most important source of value-add (aside from capital) you seek from an equity investor?

Advice. Most start-ups die not because they do not have money but because they do spend it very wisely. Founders often think they know everything, but in reality, they do not even know their customers at all. Of course, investors can bring many things to the table; contacts, contracts, and other investors. But for us, it is to give us the right direction. We believe that if we understand our goal, if we don’t lose our focus, and don’t deviate from the right path, then success will come, and money will come. My co-founder and I have rejected cash multiple times, despite the valuation offered being higher than we expected, and the main reason was that we could not see a specific investor as our advisor in the long-term development. For us, it is especially important at this point, when we are making our first steps, when our business is still fragile and painful mistakes are waiting for us ahead. Having strong support from your investors is the foundation for a productive relationship, not only with capital but, more importantly, with trust and belief in you as founders.