podcast | Feb 27, 2023 |
Why Havenly bought Interior Define

Last year, the Sunday after Thanksgiving, Havenly founder and CEO Lee Mayer got a dramatic phone call. Interior Define, the direct-to-consumer furniture brand, was in trouble. Actually, it was worse than just trouble. Mayer was told that if she didn’t make an immediate move to acquire the brand, it would implode. “The company was not just out of cash, it was so out of cash it had pushed payables to some dramatic amount, and customer liabilities were very large,” Mayer tells host Dennis Scully on the latest episode of The Business of Home Podcast. “A week to do a deal and loan money to a company that is—if I didn’t step in—pretty much getting sucked into Chapter 7 bankruptcy, is a pretty tall task.”

That Interior Define desperately needed a bailout was not entirely a shock to Mayer. The brand’s troubles had started earlier in 2022, when, after a period of pandemic-powered expansion, sales fell off a cliff and investors got cold feet. Soon, Interior Define hit a cash crunch, and was unable to pay vendors to make and deliver its products, leaving thousands of customers in the lurch, waiting on unfulfilled orders. News of the brand’s predicament spilled out into the public, and behind the scenes, Mayer had already floated the idea of a purchase to Interior Define’s leadership, though at the time the company was holding out for a different deal—one that never materialized.

Ultimately, Interior Define and Havenly worked out a somewhat complex arrangement, in which Interior Define—the legal entity—was dissolved in a bankruptcylike process called an “Assignment for the Benefit of Creditors,” or “ABC.” Thus, Mayer and Havenly were able to buy Interior Define’s intellectual property without taking on its liabilities (which, according to documents filed with the ABC, were in the neighborhood of $96 million).

The transaction wasn’t ideal. Mayer has been paying shipping vendors out of pocket to get customers’ lost-in-limbo sofas finally delivered, but due to the complexity of the negotiations, not everyone is getting their order. Then there’s the bad will that’s built up after six months of delayed orders and negative press. Why go through the trouble of trying to put all the broken pieces back together?

For one, says Mayer, she was a fan of Interior Define—the two brands had started at roughly the same time, approaching the market in similar ways—and thought it deserved another shot. “We sort of grew up together. I know [Interior Define founder] Rob [Royer]—I’ve actually had six different Interior Define pieces over the years,” she says. “I liked it and thought there was something there, and felt like it deserved to exist.” (The prospect of a major venture-backed home industry brand going under, adds Mayer, certainly would not have been great for Havenly—also a venture-backed home industry e-comm brand—either.)

But there was a nuts-and-bolts business case behind the acquisition too. Despite the drama, people still continued to order from Interior Define in late 2022—many of them were repeat customers who just liked the product. The brand had generally earned strong reviews prior to 2022, and Mayer reasons that if she can get through the confusion of this period, there’s no reason Interior Define can’t get back to winning ways. Plugging the brand into Havenly, too, makes for good synergy—Havenly can offer design services to Interior Define customers and get a better margin when its own designers spec Interior Define product. Having a significant retail brand under its umbrella can also give Havenly a hedge against unforeseen twists and turns in the famously turbulent e-design world.

In Mayer’s telling, the acquisition could be a first step toward a version of Havenly that consolidates under one umbrella multiple brands that share the same approach—digitally native, aesthetically driven—and audience: millennials. “You have the millennial generation starting to become the majority of home furnishing spend,” she says. “When you see these generational shifts, you have a really unique opportunity to come forward with a brand and a set of services that specifically appeal to that rising consumer.”

Listen to the show below. If you like what you hear, subscribe on Apple Podcasts or Spotify. This episode was sponsored by Loloi Rugs and Daniel House Club.

Homepage image: Lee Mayer | Courtesy of Havenly

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