The coolest NYC companies: wine start-up Lot18

Any New Yorker who’s enjoyed outdoor market food or trolled Smorgasburg knows how many NYC companies there are in the culinary world. But Lot18 is trying to succeed where other cool companies have failed—selling hard-to-find wines and bottles from under-the-radar producers. In its quest to replicate some of the city’s best wineshops online—and on a national scale—the start-up has endured plenty of drama, but they’re learning fast and growing every step of the way. When flash-sale sites started taking off in 2009, most focused their inventory on clothing and accessories. Kevin Fortuna, previously the CEO of search-engine marketing firm Quigo, and Philip James, founder of online wine community Snooth, saw a niche opportunity—selling high-quality, under-the-radar bottles of vino. In 2010, they debuted Lot18 (lot18.com), which has since transitioned into a more traditional retail operation that also includes a curated wine-of-the-month club.

The idea: To set their company apart from other wine-focused e-tailers (many of which had failed), Fortuna and James concentrated on providing access to smaller, lesser-known vineyards. They recruited Janine Lettieri, a sommelier who earned her stripes at Le Bernardin and the Waverly Inn, to serve as their imported-wine director. “I work with wineries around the world to find brands that are new to America and offer great financial value,” she says. “We also partner with wineries to craft new brands exclusively for us.”

Securing funding: Friends, family and angel investors supplied the initial cash, but venture capital from FirstMark Capital, New Enterprise Associates (NEA) and Accel Partners underwrote most of the business’s operating costs for the first two years.

Staffing up: Determining the right number of people has been somewhat of a roller-coaster ride for the operation, which began with a team of five and grew to around a hundred people by 2011. Over the past two years, execs realized that the high overhead costs associated with the original flash-sale premise meant Lot18 wouldn’t be sustainable in the long run. Earlier this year, two rounds of layoffs trimmed the company’s forces to 40 full-timers, plus a handful of contractors.

Building the brand and customers: “For the first couple years, we appealed mostly to high-net-worth consumers, which is a small slice of the wine-drinking public,” says CEO Jay Sung. “We’ve expanded our product range to appeal to a broader spectrum of budgets and palates.” Along those lines, the brand relaunched Tasting Room, a subscription service in which clients sample and rate mini bottles, submitting tasting notes to Lot18 sommeliers, who then personalize a shipment.

Advice: “Know going in that there are pros and cons to working at a start-up, mainly having to do with culture. Things like structure, policy and hierarchy tend to be dismissed as antiquated or outdated.”—Andrew Lowitz, vice president of operations

“Test, test and test again. Assume nothing. Constantly communicate with customers to stay focused on what your customers are experiencing. Deliver more of what they want, whether it be an easier-to-use website, faster delivery, or better selection and pricing.”—Jay Sung, CEO