Paragon Lake Out to Dazzle Jewelry Buyers with Virtual Customization
You could say that her love of jewelry brought Deborah Besemer out of early retirement. But while that might have a certain, shall we say, ring of truth to it, it’s really only one facet of the story. There were other, more important factors, such as the opportunity to challenge herself in a new arena and to revolutionize how people buy and sell jewelry, a $60 billion market in the U.S. alone.
Oh, and then there was the chance to mentor a 23-year-old entrepreneur whom she paints as the next great entrepreneur in New England. As she boldly puts it, “I’m going to be a part of helping make Matt the most successful entrepreneur ever to hit the software industry.”
Matt is Matt Lauzon, the co-founder of Paragon Lake, a startup housed in incubator space at Highland Capital Partners’ headquarters off Route 2 in Lexington, MA. I guess you could call him a diamond in the rough, only he seems pretty polished. Lauzon recently gave me a quick tour of his already impressive operation. And when I heard that Besemer—who sold the last startup she ran, BrassRing, for $115 million and previously headed worldwide field operations for Lotus—was coming on board as the new CEO, I dove in to learn more about Paragon Lake.
The company was founded in August 2006 by Lauzon (who moved from CEO to COO with Besemer’s arrival) and Jason Reuben (who’s no longer with the company), when they were undergraduate students at Babson College. They chose “Paragon” for the company name because it “means the perfect embodiment of a concept,” says Lauzon. “Admittedly, there was not a lot of science behind ‘Lake.’” In 2007, the startup became part of the Summer@Highland incubator program—and hasn’t strayed from the Highland fold since. Last July, the company received $5.8 million in Series A funding, led by Highland and Canaan Partners in Westport, CT.
Lauzon’s gem of an idea is to bring a new era of customization and personalization to jewelry shopping. And the first step toward doing this is the Virtual Display Case, which launched with the company’s first retail partner this March.
The case is essentially a computer interface that allows customers to browse thousands of pieces of jewelry from up-and-coming designers. Think of it as a virtual inventory—and this is important, because as Besemer points out, the jewelry market “is still predominantly small, locally owned businesses.” These businesses are largely clueless about using the Internet to boost sales, she says, and “their inventory carrying costs are huge.”
The case, though, goes way beyond allowing store owners to display more items for sale. Paragon Lake’s proprietary platform involves digitally rendering each design so realistically it is difficult to tell them from a photo. This digitization allows customers to easily play with designs and switch key parameters around. As Lauzon explains, a customer might see a platinum ring embedded with diamonds that he liked but couldn’t afford. But imagine if the shopper could replace the diamonds with his daughter’s birthstone and change the platinum to sterling, personally designing “that ring for that special someone.”
Both Besemer and Lauzon call this a “wow” experience. “The consumer sees what they have just designed materialized right in front of their eyes,” says Besemer. She says (from first-hand knowledge) that the jewelry buying experience today is tedious. “We believe there’s huge opportunity to revolutionize the way people buy and sell jewelry, and in particular revolutionize the jewelry shopping experience itself.”
The company currently offers rings, earrings, and pendants—and some 1.7 million variations can be made from Paragon Lake’s inventory, Lauzon says. Orders are fulfilled by manufacturing partners, allowing Paragon Lake to oversee production of each item. Designers love the system, Lauzon says, because they can reach a much bigger customer base than would normally be possible. (The virtual display features designer photos and short bios alongside their designs, and customers can easily search for items by designer.) And of course, jewelry store owners like it because it gives them more things to sell in a way that makes their customers happier, hopefully boosting sales.
Paragon Lake’s plan is to install its virtual case in 50 stores going into the holiday season—the fourth quarter being the busiest time of year for jewelry sales. “We’re ahead of schedule in terms of that,” says Lauzon. “We have stores signed up and onboard in, I believe, 14 different states. We’re starting to see orders come in, which is very exciting for everybody.” (Bellman’s Jewelers in Manchester, NH, is the store closest to Boston with Paragon Lake’s virtual display.)
Which brings us back to Besemer, who officially started work yesterday. Lauzon told investors when he first raised capital that he wanted to step down as CEO early on and bring in someone who knew how to scale a company quickly. “I think my perspective is a bit different from a typical founder,” he says. He calls the CEO hunt “very selective.” But when they found Besemer, he says, “we sort of all looked at each other…and felt like we had finally found the perfect person.”
Her love of jewelry aside (Besemer says her husband asked, “please don’t spend your entire salary on jewelry”), it’s hard to argue with that. In addition to becoming EVP of worldwide field operations at Lotus—in charge of sales, consulting, support, and marketing execution—and running BrassRing, a recruitment services company that was acquired by Kenexa in November 2006, Besemer has held executive roles at three other companies.
Besemer has been retired “since the day BrassRing was sold,” although she sits on the boards of Brightcove, Double-Take Software, My Perfect Gig, and Bullhorn (and now Paragon Lake). One of her fellow directors at Bullhorn, Highland managing general partner Bob Davis, recruited her to Paragon Lake.
Besides loving the vision and the team, a big part of Paragon Lake’s appeal to Besemer was the the idea she could make a difference by drawing on her experience, while also doing something new. “The consumer side is what’s new for me. I think I’ve done every other kind of software, so this is really exciting for me,” Besemer says. “You always want to have an element of learning.”
Besemer calls the virtual display Phase One of the company’s plan. Paragon Lake is still signing up stores. The trick is to make sure the company grows fast, only not too fast. “There’s a backlog now of getting the stores trained,” she explains. “Right now, it’s much more about quality and learning than it is about quantity. Next year will be about quantity.”
Which brings us to Phase Two—bringing the same consumer experience directly into the home via the Internet, something she wants to do by next Mother’s Day (besides the holidays, Valentine’s Day and Mother’s Day are the biggest jewelry shopping days).
Besemer acknowledges that many jewelry companies sell online already. But, she says, “That I would call your sort of Web 1.0 experience, if you will. And your Web 2.0 is your ability to personalize something.” The customization aspect is universally missing from online sales, she says.
As she sails out onto Paragon Lake, Besemer pointed to two big lessons she’s learned. “Focus is more important than anything–staying focused,” she says. This doesn’t mean remaining focused on one thing, but knowing when it is appropriate to put your focus on something new. “It’s a common CEO mistake to try to build an application or enter a new market before you’ve got the first one nailed,” she says.
CEOs should also think about the balance sheet, and not just profit and loss, from the start, Besemer says. She learned a lesson in frugality from Ikea back in her Lotus days. There was a big conference in Amsterdam, she says, and the entire Ikea contingent took the train 20 minutes away to stay in a cheap hotel. At Paragon Lake, she says, “we will be sharing hotel rooms. We will be staying in these offices. I will use the laptop that I bought for myself a couple years ago.”
Both Besemer and Lauzon say they are in Paragon Lake for the long haul, not a quick sale. “We really believe there’s an opportunity to build a premium consumer Internet brand here in Boston,” says Lauzon, “the kind of company that folks here in Boston, and folks thinking about coming to Boston, get very excited about.”