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Here’s the interview.
Hey, everyone. It’s Andrew Warner, founder of Mixergy.com, home of the
ambitious upstart. And before I even introduce today’s guest, today’s
interviewee, I’ve got to explain the beard and the way that I look. I
haven’t been feeling well. It’s Monday. I had a rough weekend, and just was
in bed all morning today.
But I knew that I was going to get to interview Boris Wertz, and I had an
obligation and a commitment to do it, and I wasn’t going to stay away. So
hopefully I’ll survive for this interview, and get to go home and rest, and
maybe shave tomorrow morning.
So Boris Wertz, who I kind of introduced there. He is the founder and CEO
of W Media Ventures, which offers seed investments and consumer-based
Internet companies. Previously — and this is one of the big reasons why I
wanted to have you on here, Boris — previously, Boris co-founded Just
Books in September of ’99, sold it to Abe Books in October of 2001, and
then Abe Books itself, which he helped run — which you helped run — was
sold to Amazon. And now you’re helping entrepreneurs by not just giving
them investment, but by also teaching them what you’ve learned as you built
your business.
How did I do with that intro?
Boris: That’s perfect. A very good summary of what I’ve done in the past
and what I want to do in the future.
Andrew: All right. And you’ve invested in 15 companies. So it’s not just
what you want to do in the future, but you’re already doing this now,
right?
Boris: Yes. Exactly. I started out two years ago to invest in consumer
Internet startups. Have done 15 investments so far, all consumer Internet,
and within the consumer Internet broad range of ecommerce, social networks,
content, gaming. So, yeah, we’re pretty happy so far with what I’ve
invested in.
Andrew: Okay. All right. My focus here is probably going to be about your
entrepreneurial story, but I also want to save some time towards the end to
talk about the investments that you’ve made through W Media Ventures, talk
about why you invested in them, what you learned as you invested in them,
and get some advice from you on angel funding and the whole funding
process.
So let’s go back to Just Books. I said that you launched September of 1999.
What was the opportunity that you saw when you launched it?
Boris: Yeah. I mean, it’s… think about it. That was a little more than
ten years ago, and it was really at that cusp of the Internet hype. And at
one point, a little bit crazy period, everybody wanted to become an
Internet entrepreneur. And there were a few people in my PhD program that
all gathered together and said, you know, “It’s such an exciting time to do
something. We need to start an Internet startup.”
So we looked at a few verticals that we found interesting, and founded on
books. Not the new books, but more kind of the niche marketplace of used,
rare, out of print books. Very inefficient market that had been run locally
by antiquarian bookstores, but there wasn’t national, international access
to all of that inventory that was in the local stores.
Andrew: What about Amazon at the time? What were your feelings about the
giant in the book space?
Boris: You know, I mean, it was always… at that moment… Amazon got
founded, I think, in ’95, so [??] years ago, it was already kind of the
big, you know, player in that space. But we felt that they hadn’t really
nailed kind of the used, rare, out of print experience, and they really
focused more on new goods, etc. So that’s really where we saw the
opportunity.
And in the end Amazon was always kind of a natural buyer for Abe Books.
And, you know, eight years later, turned out that this was exactly the
sweet ending for everybody.
Andrew: I see. So you were hoping or expecting that Amazon would be the
buyer from the beginning.
Boris: No. I mean, they were always a strong candidate. I think, in ’99
when we started it, there were a few other players. Especially, you know,
there was BUL, there was Barnes & Noble. I think the book market was a
little bit more open. But it was pretty clear overall for us that at some
stage we would end up with a bigger book player.
And, you know, a few years later, it became clear that Amazon would be
definitely the strongest player in that area.
Andrew: I like to see how companies evolve as they grow, but to do that, I
want to get to know first that original idea, to see why you evolved from
it, and how you changed.
So beyond just letting… beyond freeing up the independent sellers to sell
their used books, what else did you see? How were you thinking that they
would find each other? How did you think that they were going to buy each
other? Take me through some of the details that you imagined, and then the
next set of questions will be about how did that change. How did that
understanding change?
Boris: Yeah. So I think that it was always the core market collectors that
were collecting antiquarian books. And they were going to all of these
local bookstores. And there’s about a 200,000 bookstore in this world that
have local inventory. And they were meeting at fairs and gatherings to kind
of find the book they were looking for. But what was much more on tap was
the potential of here’s somebody that was just looking for an out of print
book. They couldn’t find it anywhere.
They were running from bookstore to bookstore. They didn’t really have the
time to look at that. There was a whole market of used textbooks. Students
that basically had local markets and trying to buy the used textbooks
somewhere from another student. But basically all inefficient local markets
that we felt, like if we can aggregate all of that inventory from
booksellers, from what we call private sellers, and put it on a, in a large
database on the Internet, people can, at a fingertip, find the book they’re
looking for and get that book shipped.
And there’s always great stories of students saving money. People, a person
from Australia that suddenly found the book that he was looking for ten
years suddenly in a book shop in Canada. Things like that. So it really
turned that industry upside down in terms of suddenly you have access to
local inventories from around the world.
Andrew: I remember actually back then, in fact even earlier than your
launch, looking for Andrew Carnegie’s autobiography because I heard great
things about it, because I was moved . . .
Speaker: Yeah.
Andrew: . . . by Napoleon Hill. I went to the bookstore. They didn’t have
it. I said online, that’s why they’re going to have it. They didn’t have it
there. I went to the special used book store; they didn’t have it. I ended
up . . .
Speaker: Yeah.
Andrew: . . . I don’t remember what website I found it on but I remember it
had to be a hunt and it wasn’t easy back then.
Speaker: Yeah.
Andrew: It’s not what it is today where you can go to Amazon and find this
big collection.
Speaker: Yeah. Exactly.
Andrew: Okay, so, that was the original idea. How did it evolve in the
first few months?
Boris: You know I think we first focused on kind of the core collectibles
market, antiquarian market. And over time we really understood what the
niche markets where around then. One of things that we really didn’t
understand at the beginning how big the college, the used textbook market
was, in especially North America.
Suddenly that was really the second growth phase for [??] books. That was a
huge market that we had always underestimated. So it really, I mean, it
really adapted over time. And the last step was to add new books as well,
as we realized that we are never going to be just a new book site. We could
be as big as Amazon yet people were looking at the whole range of books
they want to buy: new, used, or out of print.
So over time it started with a kind of the niche collectible area. It, we
added niche markets on top of that which is kind of a textbook market, and
last but not least, we kind looked at, kind of the complete book market and
added new books.
Andrew: Okay, but your original idea was to go after the everyday buyer to
go after somebody who loves books, but isn’t especially a book collector.
Isn’t a college student. Was it tough to narrow yourself down do that niche
at first? Did you have any concerns? Or what were the concerns that you
might be limiting the perception of what you’re doing?
Boris: Yeah, I mean, I think it’s exactly the right strategy how to build
a company. Like what do you need to identify. Where is your passionate
community of buyers that want to really use a service? I mean, you know,
look at how Facebook got built. It was first really built in a small, in
one college. Then it expanded across other college, then they opened up.
And I think this is really how you build a successful company. Look at a
really small niche of passionate buyers, passionate users. Build your
community, your site around that and then expand from there.
Andrew: I’m sorry but . . .
Boris: [??] Yes.
Andrew: I want to go back to the mindset at the time. This was September,
1999, and when people weren’t satisfied with the niche, when there was this
feeling that you have to conquer the world. If you’re going to go into used
books, let’s go in and dominate and own this space.
Boris: Yeah.
Andrew: Why? Were you thinking any of that? How did that end for you?
Boris: Yeah, no. Funny enough, at that moment was, was the time of the
really big ideas. And a lot of people smiled about us and just laughed
about us. So why do you guys, you know, look at used books? All right. And
there were bigger ideas out there, you know. As you know pet food and cars
and whatever it is. Fashion. [??] .com, so whatever it is. It looked like a
very tiny idea.
And it was sometimes tough to stick to that in that phase while out there,
because you look at, kind of, startups that, yeah. Then online at the same
time and already expand internationally.
Andrew: So why did?
Boris: [??]
Andrew: Why did you, despite the questions you are asked by others, despite
the environment at the time, why did you focus on it? What… maybe, was
there money concerns? Was it that you had a passion here?
Boris: No, I think it was always in terms of how the team was set up. I
think we were always on the conservative side. And, I think we had our
moments when we got kind of a little bit over-motivated, and over-excited
about some of that (?), but I think overall, we always kept it pretty
realistic. We knew that we had to build a real business, that you know, you
couldn’t just bank on venture financing all of your life of a startup, and
we needed to build a real business.
And we felt that we provided a real value at that moment to (?) book
sellers as well as collectors, and despite that being a smaller niche, in
the end, we felt it was a very valuable service that we were offering, and
that’s what would count in the end. We stayed pretty conservative in terms
of developing that company.
Andrew: Okay. What was the funding at the time?
Boris: You know, in total, we raised about 10 million deutschmarks, so
that’s around $5 million, in three rounds. So, you know, it’s still pretty
big, compared to what startups raise today, but very small compared to what
other companies raised at that moment.
Andrew: What was the experience like of raising that money? Was it easy?
Was it a process that you learned?
Boris: I think we went through two different phases. It was at first
extremely easy. I mean, September ’99, we did an angel financing, and we
approached basically three angels in (?). We only had a business plan. We
didn’t even have a site. And then our first venture round, we went to four
VCs. We got four offers. It was just about picking the VC that we really
liked. It got much tougher later on, right? Once (?).com, March 2000 kind
of went bankrupt, that’s where it all broke down. What people call the
nuclear winter for funding.
The lucky thing is that we had a very good partner in (?) mentors that
supported us, and they saw the traction that we got. They believed in the
team and they continued funding it, but there was no chance to get any
external funding (?) The market was shut down.
Andrew: I want to come back to that and ask what you did when there was no
VC. Let me ask one of the questions from the audience. It’s a short one.
It’s from Oz. He’s asking who wrote the business plan. I see that you had
one, two, three, four, five co-founders.
Boris: Yes. You know, we did it all together, in different phases. There
was a, you know, different people wrote in it, but you know, in the end, I
think it also go, you know, it was such a fast development over time. I
don’t even remember that we spent too much time on the business plan. At
that moment, we were all about doing, getting together our presentation,
getting in front of angels, getting the money and then, just run.
We built the website within a month. It was crazy from the moment we got
the funding to when we went live. It was a month, and we had a full
marketplace online. So, it was all about speed at that moment. Not really
all about thought and business plans.
Andrew: Okay, let’s get to that. How did you get so many people on your
site? You’ve got a chicken-egg problem, right? No consumer like me is going
to go check out your website unless you have books. How do you get people
to list books on a site with no consumers like me?
Boris: You know, it was, in the beginning we were just on the phones,
right, talking to antiquarian booksellers, to tell them to send us their
inventory on CD. It was crazy. At that moment, people said, oh, yeah, you
know, I have it but I can only fax it to you. And we’re like, yeah, you
know, fax doesn’t really help. But it was really, 10 years ago. A lot of
people didn’t have digital inventory. They had catalogs. Printed catalogs.
So we thought about all these solutions. We even bought books ourselves and
then inputted them into the system to have some inventory on there. So when
we went live, we had about 30,000 books online, and we went live with the
Frankfurt Book Fair, and it was amazing to see there were some people
coming up, and they actually found books they were looking for. We were
amazed ourselves, right? And then on the first day, we had about 20 orders.
You just look at that and you can’t believe it. It felt really unreal.
I mean, to give you an idea today, Abe Books has a little bit more than 110
million books online, so the 28,000 we started with was a pretty small
amount, and today, there’s probably not a single book that you couldn’t
find on AbeBooks. But it’s always the question of the chicken and egg
problem with the marketplace. The inventory, supply and demand. And I think
the only thing you can do is work really hard in convincing people that
there’s something there, get as much supply on there, try to show as much
traction as possible. And then, yeah, it’s a matter of time and continuous
pushing.
Andrew: Okay. What about, then, the consumers? How did you get them on the
site?
Boris: Yeah. I think for consumers, it was always a relatively easy
proposition, because there was a lot of word of mouth. When you think about
it, if you have been looking for a book ten years, 20 years, and you
suddenly find it, you tell a lot of people. So. . .
Andrew: But how do I suddenly find it on the site, when I know to go to
Amazon, I know to go to the bookstore and the library, but I kind of accept
that this is impossible, to be able to get out of print books?
Boris: I agree, but, you know, it was really about, in the beginning, about
that passionate, you know, group of collectors that the word of mouth
spread, right? And we attended fairs of where these collectors met to
really spread the word.
The problem was, at that moment, there wasn’t a lot of efficient online
marketing. I mean, the only thing you could basically buy is a Yahoo
homepage banner, which was extremely expensive. Because, I mean, you know,
tons of people want one to buy that. So it was very hard at that point.
So we tried a lot of things. We tried from offline, trying… you know, got
a little bit of word of mouth promotions. Online banners, etc. But, you
know, in the end, it was really… I think the biggest factor was word of
mouth, in the beginning. And once you have some traction, right? The more
inventory you had, the more traction you got.
Andrew: Okay, so fairs were, I’m hearing, a big way for you to get traffic.
Boris: Yeah.
Andrew: But that doesn’t scale. How did you decide to do fairs? Why did you
accept to a system that doesn’t scale as your marketing system?
Boris: Yeah. You know, because it was the only choice at that moment. We
didn’t have Google AdSense. There weren’t any affiliate networks.
Everything what we have today… there wasn’t any SEO in that respect. I
mean, Google really didn’t exist at that moment, right? You had… nobody
thought about doing SEO for products.
I mean, that was all before the time when we had an efficient marketing
system. And we think about today in terms of email marketing, SEO, pay-per-
click, affiliate networks, whatever it is. It just didn’t exist at that
moment.
So the only chance that we had was really, you know, go offline, knowing
that it wouldn’t scale. But it was the only way to reach consumers, in the
beginning.
Andrew: Okay. I asked you the opportunity that you saw when you started the
business. I’d like to go and ask… I’d like to ask you about you. Why did
you decide to get in this business?
And I’ll tell you that, for me, I started my first business out of college
because I was poor, and I saw that the people who had freedom were the
people who made money, and the people who had companies that were their
companies had the most creativity in the moneymaking game. So that’s why I
got into it. Why? What was it internally for you?
Boris: I always wanted to become an entrepreneur and run my own company.
And that was always part of the life plan, because I enjoy creating
something, building up something, creating a mission for a company.
And that… and then it came [???], and it was really kind of that Internet
hype that, you know, suddenly everybody wanted to become an entrepreneur.
And that was kind of just, “Hey, let’s just do it.” It’s the right time.
You just need to grab that opportunity.
You know, the original plan was to, you know, get a few years of experience
work in a company, and then start something. But, you know, suddenly there
was the opportunity. I thought, “Let’s just do it.” And that was one of the
best decisions in my life. And it’s something that you take very quickly.
Andrew: Let’s go back even way before 1999. You always were an
entrepreneur. What kind of companies did you have even as a kid, long
before the Internet was popular, long before you were old enough to start a
real business?
Boris: Yeah, no, I… [laughs] I did a few entrepreneurial ventures. When I
was a teenager, I started growing snails. I don’t know. In Europe, you
know, snails are something that people like to eat. So I saw an opportunity
of growing snails. So I did that work for a year. Wasn’t really super
successful.
Then, during college, I started a consulting company with somebody, and we
had a pretty good run at it. I mean, at some stage, it wasn’t really, you
know, scalable, and… it was a really good company. And then also during
college, I started a car importing company, importing North American cars
to Europe.
So I had a few ventures. I mean, none of them really successful, but it
gave me the taste of being an entrepreneur, and thinking about
opportunities. So a very wide range of things.
Andrew: Why’d you need the other four guys, then? Why not one developer, or
one guy who can help you out, but…
Boris: Yes. You know, today, yes. But at that moment, it felt like… I
mean, A) it was really the moment of a lot of big teams that you have
looked at have other founders. And, you know, yes I had started some
ventures but I had never really raised some money etcetera. So, I think it
was always the idea of putting something together with a few people. So
yeah.
Andrew: You said that you started the business in Europe and we talked
about the funding in Deutschmarks.
Boris: Yep.
Andrew: What about the business itself? Was it going to bring in revenue in
dollars? Was it going to start off by pursuing a US audience?
Boris: What we did, we really focused on Europe. So nine months after we
started Germany, we started the UK and an English website. So I went to
London and started kind of that side of the business. And then a few months
later we launched the French market. So we were in three markets. The three
biggest markets in Europe before we sold to. . .
Andrew: Abe.
Boris: Abe Books. The U.S. was always kind of out of reach because it was
always too mature. Abe books was already a big player. So it felt like this
was out of reach but we always thought we should do a really go job in
Europe and the different countries.
Andrew: Did you start off thinking that you wanted to create the European
version of Abe Books?
Boris: Yes. I mean we always looked at Abe Books in a certain way. We saw
an opportunity around textbooks that Abe Books never really pursued at that
moment. They were really focused on the hard coop electro market. We saw
way more opportunities around private sellers than they did. But we always
looked at them as one of the bigger competitors and role models.
Andrew: Okay. We started off talking about how you had a vision for the
business. We talked about how you executed that vision. It sounds too
clean. I want to get into the dirty part of it. The tough parts where you
thought you were going to go right and you ended up having to take a sharp
turn and go left. Or, actually yeah, what were some of the big changes in
the business?
Boris: I think there were three things that I would do differently today
where, you know, we learned a lot and we have made a lot of mistakes. The
first one was we had way too many resources?? in the beginning. And that
led us to believe not to work too much on the core product but adding bells
and whistles where we didn’t need them.
And quality was also linked to a second problem which was too many
founders. If you have five founders you have too many in the beginning to
have business support. So I think the big problem was focus on too many
additional features that weren’t really related to the core product and
improving the core product. Having too many founders in the room. And last,
but not least, expanding too quickly into the different markets when we
didn’t have an idea how to do that right.
So in the beginning what we did, we really just copied the website and
translated it. So it didn’t really work on the infrastructure. But it was
all about speed. So I think part of that was inexperience. Part of that was
just the time that, you know, required a lot of speed. So yeah.
Andrew: Okay. Let’s break those down. You said too many features. What
extra features did you add and how did you decide to take some of them
away?
Boris: Yeah. So, for example, we added then a manual search service. So if
you didn’t find that book on the site then you could kind of place a manual
search on the site. [??]
Andrew: I’m sorry. What kind of search?
Boris: A manual search. So some people, basically in the background, search
for that book in other databases, in other catalogs, etcetera. It just
didn’t scale. It didn’t really make sense. It was a nice service but it
didn’t make sense. We had a reprint service so you could reprint some
books. Again, nice idea but didn’t really improve the core experience.
Andrew: How did you make the decision to kill those features? Let’s take.
Boris: No.
Andrew: The great one that was manual.
Boris: We basically killed it after we merged with Abe Books. When Abe
Books bought us, that was the moment we needed to merge the product. And
that was the time to review what had worked, what had scaled, what hadn’t
scaled. And that’s when we basically killed it.
Andrew: I see. So even though you knew that it wasn’t going to the scale,
even though you knew that it was taking resources, you just didn’t have the
ability to kill it. Why?
Boris: No. I would say at that moment we didn’t really realize it. We were
. . .
Andrew: Okay.
Boris: I think in hindsight I look at it and say listen these were big
mistakes that we made. But at that moment we didn’t really realize it.
Andrew: So it was Abe Books looking at your business and helping you think
it through that made you realize that this wasn’t the future.
Boris: Yeah. A) that. And secondly if you just think about the new product,
and then it forces you to think about, hey, what really worked in the past
or not. Sometimes you just don’t value that hard enough. You just keep on
using the product.
I mean, killing features is a very tough time, because nobody likes to do
that. You invested the time and the money into it, and energy, etc. You
don’t really like to kill it.
Andrew: Yeah. And the people who respond first to something you kill are
the people… the few people who actually like it and used it.
Boris: Yeah. Yeah.
Andrew: Okay. You said too many founders. What do you do about that?
Boris: Yeah, I mean, one of the founders didn’t work out, so he left the
business within a year. And then, again, when we merged with Eight Books,
it was clear that, you know, just because we had… you know, even more
people on the management team. Another two founders left the team.
So it really, you know, the two of us, [??], who is still running Eight
Books today, and myself, we stayed with the business. Just today, if I
started a company again, I would have perhaps one co-founder, perhaps two,
but definitely not four.
Andrew: Okay. And that seems to be the way that tech companies are founded
today.
Boris: Yeah.
Andrew: Okay. Finally, on that list that I wrote down, you said too…
expanded too fast. Where did you go, and why was it too fast?
Boris: Well, I mean, in the end, because it was all about speed. We didn’t
really think about the right structure. So we basically replicated just
books that we have built in Germany in the UK. And that was not the way you
would, today, you know, roll out international.
What you would do, you would, you know, use the same code base, but have
language files and make it really scalable. You probably wouldn’t even open
an office right away there, but run it out of the original company, and
just hiring these speakers out of that.
It’s just at that moment, we didn’t know any better. I mean, it was…
everybody opened offices. Everybody just, you know, opened a website. So
from that point of view, it was the way people did it. Today, you know, we
would do it much, much more different.
Andrew: Okay. So you guys just rewrote the site? Or did you rewrite the
site for… in English, for the English audience?
Boris: Yeah. Basically, we just copied the code, and then… and translated
it. And then you have basically two sorts of… you know, two types of
code, right, out there. So completely stupid. I mean, if you… suddenly if
you started, added a new feature in Germany, you had to add the same
feature in the UK again. I mean, you had twice the coding work.
Andrew: Okay. All right. We talked about… actually, let’s talk about one
other bad part, and then we’ll go back to the good part. No… the trouble
with venture capital. What was that like?
Boris: Well, I mean, I think external funding just completely died down in
March 2000. There was just no way that anybody would invest in anything
anymore. As I said before, I think we were really lucky to have a really
good partner that looked at the team, looked at the progress, and believed
that we could build a really good business in the long run if we just, you
know, hammered away at it and continued to grow it.
And I think some other entrepreneurs weren’t that lucky, and got dropped by
their VCs. So I think, yeah, the lesson that I learned from that is, you
know, probably look at people… at investors that you feel, you know,
trust you and support you also in the bad times.
And sometimes, you know, people optimize too much in the short term, in
terms of the better evaluation they get to go to the VC, etc. But I think
it’s important to work with people that have a long-term vision that you
share with them.
Andrew: Someone in the audience is saying that he didn’t see that there was
an interview on the calendar today and he’s glad he checked the website.
Yeah, I’ve got to thank you for that, Boris, that I had a last-minute
cancellation and I needed to find a replacement, and I’m really grateful to
you for coming in and helping out and talking about your story, without the
prep that a lot of people like. They like to check it out for a while. They
like to make sure we’re okay.
All right. Let’s talk about, now, the good part. How big did the revenue
get?
Boris: You know, in the end, I mean, Eight Books was a very small business,
and I don’t even know how big we were at that moment. Roughly a million
deutschemarks, in terms of revenues. Eight Books itself, I mean, it sold to
Amazon, was about $35 million in revenues. And so that’s commission and
subscription fees.
So overall, the platform revenue was over $200 million. So basically, the
sales that went through the platform. So… yeah.
Andrew: So did the investors consider this a positive sale for them?
Boris: Yes. I mean, I think everybody made good money on the whole
transaction.
Andrew: What did you guys sell for?
Boris: Unfortunately, I cannot disclosed [??] want to keep that for
themselves. Let [??] for the good sale.
Andrew: The sale of Eight Books I saw some hints online that it sold to
Amazon for 90 to 120 million dollars. That’s a big band. It tells me that
there isn’t enough information to really know where it landed. But what
about the sale of Just Books to Eight Books?
Boris: That was a complete sales transaction, so, basically we got a piece
of the company which was roughly 20% of the books at that moment. It was a
great exit of us because at that moment, they were a much bigger partner
and they were already profitable. We provided them with kind of a growth
perspective in Europe so it was a huge upside. But again, in October 2001
it was a few days after 911 that we closed the sale.
So it was a pretty tricky period where not a lot people had confidence in
the business world anymore. So we were lucky to get that through and again,
it worked out for everybody involved.
Andrew: Did you have to sell at that point because of what was going on in
the overall tech market and because of what happened later on with
terrorism?
Boris: Yes. No, I mean we had to get some new funding partners in there. It
was clear that Burt, as loyal and supportive as they were they couldn’t
really plan on what was going on in another 3 or 4 years. It’s just the
market wasn’t there at that moment. We had been looking for strategic
partners and that kind of lead to the exit-decision talks by Eight Books.
So it was a little bit of a lucky moment for everybody.
Andrew: How did you and Eight Books hook up? I’m imagining that,
Boris: We saw each other a little bit at [karos] already, and then one day
we started talking to the CEO, Eight Books [Burt] James. He wanted to look
at our business and within three months, basically, we closed the deal. He
came over to Germany. Within two or three months of that call, we
negotiated terms when he was over and then we closed this whole thing
within 3 months, which was pretty fast. Just like the terrible events of
911 in between, that kind of got a lot of people scared but we marched on
and closed the transaction, and never looked back.
Andrew: The feeling from Eight Books, is that something that you can talk
about now? How they were negotiating considering they had the upper hand at
the time. Is that something we can talk about publically? Or Boris, is that
something we would need to have a drink or a private meal and talk about
it?
Boris: Ha, ha, ha, no I think it was a very friendly organization. We
really believed in the business, so despite having problems raising more
money; we felt we were building a great product. I was not built on hype.
It was not built on some fluke. We felt that that it was a fundamentally
good business, despite financing problems that everybody had at times.
So from being in that position of relatively good self-confidence, I think
we negotiated pretty hard. They knew what the opportunity was to very
quickly grow in Europe. Overall, you look back and say, it was a good deal
for everybody involved. That’s the best thing, you look back and that’s now
eight years, nine years ago. You look back and I think everybody that
participated in that deal said it was a great deal for everybody.
Andrew: Why did you stay on board at Eight Books and take such an active
part? You started your own business, you knew what it was like to run a
business, to launch it, to raise the funds for it. You knew the whole
thing. Why stay on with Eight Books?
Boris: In the beginning the plan was to stay on in Europe and run the
European section. Within a few months, we realized that, that wasn’t that
exciting. I mean, you loss, [kind of] product development to North America.
You lost [??], finance, etc. In the end, it was really about market
development and adapting an existing product to local languages and
currencies, etc. So, actually, we all had in our [explanation] and said
listen, you guys run with it. It’s just not exciting anymore, for us.
That was the moment when, Burt James, the CEO of Eight Books offered
[Hammond] and myself to come over and co-run the company. He had intended
to leave and do something else. It was a great opportunity of us, to semi-
run the mother-ship, move over to Canada. So we took the opportunity. It
was probably one of my best choices in life. Not to leave at that moment
and leave the baby but run the bigger entity.
Anyhow I look back at these eight years with just [??] books and an
incredible wealth of experience from starting, co-founding, and starting a
company, setting up a desk and painting walls until the end co-running a
business that had 140 employees and $35 million in revenue. So in terms of
when you think about different experiences that you need, to understand how
to scale a company it was perfect, everything from starting out to running
a mid-sized Internet company.
Andrew: I interviewed Ron Drury, the founder of Zero.com and he said that
every time he sold one of his previous businesses he learned something
different because he was exposed to a new size company and new environment.
And it raised his outlook and made him find a whole other higher tolerance
on the horizon, if that’s possible.
I wonder for you, what did you learn from being in a bigger business? What
did you learn about scale specifically? What did you learn about having so
many employees. What did you learn in general?
Boris: Yeah, at first we were just a small team but then co-founders and up
to five, about 20 people in total. So in the end you were very much still a
big part of doing things, actually. Once we moved over to the much bigger
organization, so it’s really much more about a management role and managing
employees and setting a vision and setting the framework, define the
framework, define the strategy, etc. than actually doing any of it.
I think it was a hard situation for an entrepreneur, right? That is hands-
on and likes to do things, and suddenly you’re more kind of in an
overseeing role, in a managing role, etc. than actually a doing role. So I
think that was kind of the challenge for me in the beginning to transition
over to more kind of a managing role than actually a doing role.
Andrew: Okay. Did you find that you weren’t that person that you’re not the
manager at that stage? Or did you find that that’s a part of you that’s
just been there that you didn’t know existed before?
Boris: No, I mean, I think in the end I always like to dig into details
again but them pull it up again and say, “Listen, I also like to think
about the strategy, think about if we’re able to do it. I think it’s a
phase in life. I probably will never be the entrepreneur that Todd Lewis
[SP] who wants to define the last feature on the website. I love managing
people. I love setting a vision. I love setting a strategy and then letting
people executing it. It’s just that in the beginning it was just a little
bit of a traditional period until you get to that point.
Andrew: Why did you sell?
Boris: To Amazon?
Andrew: Mm-hmm.
Boris: Yeah. No, I think that I left the business a little bit before that.
Andrew: I see.
Boris: I was communicating between Vancouver and Victoria, and it was time
for me to settle down in one place which is Vancouver. We had invested in
there, so at some stage it was clear that they should be next to get the
money back to the investors. And it was the right moment. I think we had
internationalized the business to five countries. so five regions. You had
North America. Then you had the European business, the U.K., Germany, [??],
Spain, and then later even Italy.
We had internationalized the base into the biggest markets. The whole book
market was getting mature. We had a good job on monetizing the business and
streamlining the business. And then there was an opportunity to hand it off
to a bigger firm that could take it to the next level.
I think what I’ve seen in the past two years what Amazon has done to the
business is amazing. They had just had other technical and marketing skills
that we ever had and at the size of our company. They can really take that
business and go.
Andrew: And you left because?
Boris: In the end it was time for me to move on. I had eight years with the
business, an amazing learning experience, like I said, for starting up a
business and getting it off the ground to grow to a company of 140 people.
For me it was time to do something else and settle down instead of the
commuting part.
Andrew: Vesting? What part did vesting play in this?
Boris: No, I mean, vesting?
Andrew: Yes.
Boris: No big part. I left something on the table. In the end I never
really looked at money driven decisions. I looked at where I can learn
more, where I really have fun on a daily basis. It just felt like I wanted
to do something new.
Andrew: What was the new thing going to be?
Boris: That was kind of the investing part. So, I want to work with
startups to help them, you know, grow their business, develop their
business. And I have been doing a little bit of investing in the years
before I left, had done two or three investments and …
Andrew: What size?
Boris: It was, you know, usually in the range of 50 to $100,000 dollars per
investment, and from there on, I wanted to take it to the next level and do
that kind of full time. So, that’s what I did and so that’s (?) two years
ago.
Andrew: Okay. And in the audience, Todd is saying he wants to hear more
about that, what you’re doing now, but let’s go back to a question that
Pedro asked earlier, that I wanted to ask, too. Which is, can you take us
to the moment where Abe Books sold to Amazon. You get to cash out. What was
that like?
Boris: Well, like in the first sale, when we sold Just Books to Abe Books,
there was a little event called the Lehman bankruptcy coming our way. We
had signed the deal just before in August 2008, and then after that, as you
know, the financial world fell apart. So, it was a pretty nervous time. Are
we going to follow through with the deal? We had been negotiating for
almost a year, and had worked on that deal for almost a year.
But then, you know, I think that the day was kind of a happy and sad day.
On the one hand side, you’re extremely happy for the financial outcome for
everybody, the employees, the investors, happy that there is a company with
Amazon, is an extremely visionary company, that has taken over Abe Books,
sees Abe Books as a standalone company that they can take to the next
level, but at the same time you also…
Andrew: What about where you got to actually look at the rewards on paper?
And I think it was, you sold for cash, so you got to look at a check at the
end of the day. What was that like?
Boris: Not a check, but basically, a line on your bank account that… you
look at it, and you still can’t believe it. I showed it to my wife, and
said, have a look at that. It won’t happen so often. It’s an incredible
reward, right? By then, it was almost nine years of really hard work, so
yeah, I mean, it’s a great feeling. It’s a feeling that every entrepreneur
you know, dreams of and fights for and works for.
Andrew: How did life change after that?
Boris: Not really much. As I said before, I was never a financially driven
guy. I think that exit helped me now to do the things I want to do in terms
of investing in startups. If I didn’t have that exit, I couldn’t do that.
So for me, it’s about giving back to the startups. Certainly, I’m also
making a return on that, and hopefully a good one. But in the end, it helps
me and allows me to lead a life that I would like to lead, being an angel
investor in (?) startups.
Andrew: In W Media Ventures, let’s spend a lot of time on that because
people are asking for more information…
Boris: Yeah.
Andrew: W Media Ventures is all funded by you, or do you have other money
in there?
Boris: No, it’s all funded by me, but I’ve worked with a range of angels on
a regular basis to um, you know, co-invest. Usually, I’m not ever
completely alone in the deals, but the money itself is all from me.
Andrew: How do you find the deals?
Boris: It’s really through the network of entrepreneurs. If you’ve been
around, and especially if you look kind of in defined geographies, Seattle
and Vancouver are probably the two biggest markets that I’m in. You get a
lot of referrals from other entrepreneurs, from people that you’ve invested
in previously. So, that’s really how I get, you know, from time to time,
there’s the odd deal that’s intriguing that ends up in your inbox, but
usually, it’s really by being in the market and talking to people and being
out there that you get the deal.
And most often, a lot of the deals that came together over a year. You meet
the entrepreneur. He’s working on an idea. You provide feedback. You stay
in touch. And you do four or five iterations. And at some point, he’s ready
and you’re ready to invest. And then you go for it.
Andrew: And so do you limit your investments to companies that, or do you
try to limit to companies that are in Seattle and Vancouver?
Boris: Usually, Pacific Northwest, so you know, these are the two biggest
markets. That would be Portland, Calgary, Edmondton. I’ve done a few deals
around it, but I would never lead a deal around outside the geography.
Just, you know, if you want to provide the added value that I aim to
provide to entrepreneurs. You need to be close, and I can’t really help
people that sit in New York or sit in an office, no matter where it is,
right? So I’ve done a few deals with other investors like [inaudible].
Andrew: Sorry, I can’t hear you. Deals with other investors and then we
broke off after you said that.
Boris: Sorry, Union Square investors and First Run Capital, but these are
cases where they need to be on. And if I can add some value, great, but
that’s not part of the deal.
Andrew: Let’s take somebody from the audience here. Let’s assume Melvin Ram
[SP] decides that he wants to start a new business, a new web app. He’s
willing to move to Vancouver because his girlfriend’s there. I don’t know
the situation. So let’s say a friend of his is there and wants to partner
up with him. He knows that you’re in the area. How does he start before he
even builds his app? How does he start getting to know you, working on that
relationship so that he can potentially pitch you and get funding from you?
Boris: I always love to meet with entrepreneurs that have an interesting
idea over coffee and just discuss it, right? Or meet at an event and see
how it went in Vancouver that I attend. I’m looking forward to discussing
with entrepreneurs. It’s a give and take. If there’s kind of a chemistry
developing with the entrepreneur and the investor, then you’ve just got to
continue to have discussions about the product and pushing each other and
discussing it.
And sometimes it’s not developing, right? Then that’s also a kind of good
outcome.
Andrew: But it would start even with a coffee with someone. You wouldn’t
take a cold for coffee, right? You don’t know if the guy is a mental
patient or not. Or would you?
Boris: [inaudible]
Andrew: I’m sorry. We lost the connection here. Just take a moment and wait
for the connection to catch up with us. Okay, I think it did. Sorry, as I
was saying, would you do a cold call request?
Boris: No, the forearmed instruction is always good from somebody that I
know and you look at LinkedIn contacts or Facebook contacts or whatever it
is. There’s tons of connections out there. And that’s probably always the
best way to start.
Andrew: Okay. If I wanted to or Melvin or Todd or someone in the audience
wanted to get to know you, what we’d probably do is go to the portfolio
section of your website, it sounds like, and where it says, “Ad Marketplace
is a company that you’re investing in or Fit Brains or Flurry.” They might
want to contact the entrepreneur behind those businesses and say, “What’s
this Boris like? I heard him on Mixergy. What’s he really like? What’s he
looking for?” Does that sound right?
Boris: Yeah, the more information you can collect about an investor and
what he likes, what he’s interested in, the better, right? And I think
that’s really something that a lot of entrepreneurs don’t do that. They
pitch you an idea and it might be out of scope because it’s too late at
this stage or it’s not what you’re really looking at, etc. So the more work
you can do to understand what the investor is interested in, the better
your pitch will be.
Andrew: Okay. All right. And then that’s talking to other entrepreneurs,
reading a website. Are you a blogger, an active blogger?
Boris: You know, I blog. I just looked at my 2009 stats. I blog about 35
times a year, so it’s every two weeks. I would say I’m not a great blogger,
probably a better tweeter than a blogger, but I’m also not inactive. So I
always want to do more. It’s always a matter of time, but I have a blog.
You can read my blog. You can follow me on Twitter.
Andrew: Let’s give people a few points of contact so that they can find out
more about you and get to know your thinking and maybe interact.
Boris: Yeah, so there’s the website, MediaVentures.com. That’s the website,
/blog is the blog. /Portfolio is the portfolio company, and then on Twitter
it’s BWertz on Twitter or WMediaVentures is the company account. I think
that’s the best ones and also LinkedIn BWertz on LinkedIn.
Andrew: All right. Can we take one of these companies from /Portfolio and
talk about how you met them, how you invested, what it was about the guys,
and how you helped them beyond the funding? Is there one that’s especially
interesting and helpful?
Boris: Yeah, I think it’s interesting. Indochino is one of the interesting
companies out there that I’ve invested in. It’s a website for tailor-made
suits. So you basically measure yourself or get measured by a tailor. You
enter that measurement on the website, and then you order the suit that is
custom made for you with additional customization options, if you wish to.
And they being produced in China. There it costs between $300/$400
delivered to your doorstep within two weeks.
Andrew: Before you continue, I just want to make sure that people, and the
transcribers especially, get to hear the name. We’re talking about
Indochino. That’s I-N-D-O-C-H-I-N-O. Indochino. I’m sorry. So you’ve given
us an overview of the business and you were taking us through the story.
Boris: So I met them very early together [??], my co-founder over at
AbeBooks, and they only had a business plan. So I invested a little bit of
money to go with two other angels to help them get a website. So they
started getting a website, evolved that. Then we helped them get a first
find thing [sounds like] round . . .
Andrew: Actually, let me pause it, slow it down so that we can really
absorb the steps here. Did you say that a co-founder of yours works with
the business or was advising the business?
Boris: No, we just met them together.
Andrew: I see. How did they get to you? How did they get some time from
Boris?
Boris: In this respect, it was through my co-founder, Hannis Broom [sounds
like] at AbeBooks. He was a mentor at one of the universities and met these
guys through that mentoring program. Right. And then we helped them get the
next [??] round with [??] Mentors, which is the big company that had
invested in Just Books. And then from there on, Buck did a great addition
to the board. Jeff Mallett, who is the ex-president of Yahoo, is now
sitting on the board. And that’s in a company that has a great Silicon
Valley contacts from his past history.
Andrew: What was it about these guys before then? In that first meeting,
you and an old friend and an old business partner are meeting with this, is
it one person who you met with, or two people?
Boris: Two founders.
Andrew: You’re meeting with two founders. What was it about them that made
you say, I at least want to hear more, if not, really, I’m interested right
now.
Boris: You know, these guys always had, despite the greedy [??] in first
time entrepreneurs, always a very clear vision of what they wanted to
build, the value of the product that they were building, and then, kind of
where they want to take the business. I always found that very impressive.
It’s often entrepreneurs that you see that first say, you know, I need two
million to do it, and then the exit is going to be in three years for
twenty million, or whatever it is. Right.
So you have people that, sometime I have the feeling they’re there only for
the financial gain or the potential financial gain. If you meet
entrepreneurs that have a true vision of building the best product out
there, that creates real value for customers, and they’re very consistent
in communicating that vision, and very ambitious to get there, that’s when
your work gets impressive and interesting.
Andrew: Okay. So they won you over with this vision. What was it about the
vision then? They’re not coming in with a conventional business model.
They’re not saying we’re going to build a website, we’re going to grow it
and monetize it using social media and advertising. They’re saying, we’re
going to be selling atoms. Selling online is tough. Atoms in general are
tough. Why were you drawn to it? What did you see? What was your vision?
Boris: It was kind of the good news, bad news about that. I think the
biggest critical point was always how can you scale that business. But then
the good news is, you know, it will be hard for everybody else to scale
that business because you need to figure it out. And there was everything
from how you do really online measuring and how do you help that process to
how do you scale a student production. I think there’s a lot of hands-on
operational things that need to be figured out.
And I wouldn’t say we have figured them out completely, but there has been
such tremendous over the last two and a half years. And I think the
ultimate vision is, the biggest problem in fashion online apparel and
online fashion is returns. So companies like Zappos, they average turn
rates of about 40%. So the question is if you really nail the customization
aspect and the online measuring aspect, then reordering will be so easy.
[TD].
Andrew: Sorry, looks like we lost the audio again. But it’ll come back to
us in a moment. I’m hearing some . . .
Boris: [??]
Andrew: Oh, there we go. It came back.
Boris: Yeah. So if you really nail that, then repeat purchases will be very
easy to do, return rates will be really low. So what really fascinates us
about that opportunity is to build kind of the online custom clothier of
the world in a huge market, online apparel.
Andrew: Okay. We’ve got a couple of questions from the audience. Moses is
asking, are you using an ecommerce platform? I know that Moses, for his
site, monoGiggle, uses Magento. Or did you guys or that site build
something proprietary?
Boris: They built something proprietary. Because that whole online
measuring system and the merchandise, that was a little bit too tricky.
It’s not a standard product. If it were…
Andrew: Oh, we lost the audio again. I’m sorry. I don’t know what it is
with Skype, but it’ll come back in a moment. And, still hasn’t come back.
Let’s give it a little bit of time. You can hear me though, right?
Boris: Yes, I can hear you.
Andrew: Okay. The audio came back, and I can hear you, too. All right. One
last question about this. That is, you help… Actually, two. You help
entrepreneurs.
How did you specifically help these entrepreneurs? What ideas, what insight
did you give them?
I know that it’s hard to take credit for an idea and an insight because
there are so many people talking and so many people influencing it. But, is
there one that you can describe to us even if you don’t get full credit for
it?
Boris: Yeah. For Indochino I think one of the things that currently I’m
pushing very hard on is analytics and really understanding the customer. I
think the most important role of an investor is being that experienced
partner along the way in whatever question comes up, if that is what to do
next financing round, how to really scale marketing, how to position a
brand, how to choose the right people for your startup.
I think everybody has different priorities and different challenges, et
cetera. But, being that experienced partner that has gone through that
process once with his own startup and being able to provide that feedback
along the way is really where it’s valuable.
There’s probably not one single point where you say hey, listen, I took
that decision or I helped them with that decision and that changed it all
around. I think it’s ongoing process. I meet with all startups on a weekly
basis. From that point of view it’s on a weekly basis that you help create
a little bit of value for your investment company.
Andrew: Okay. Adam in the audience is saying that he saw the website
Indochino and he says it’s a nice looking site.
Boris: That’s good.
Andrew: Here’s something that I didn’t plan to ask you, but my head keeps
going to this one. I talk to investors. Everything that you seem to be
looking for in a company that you invest in doesn’t exist as an angel or
venture capitalist. You look for the exit, but there’s no exit for your
business. You’re not constantly looking out and saying can I say this
business to Clearstone Partners or to somebody else.
Boris: Yeah.
Andrew: It’s also not a growth business, right? We’re not seeing that much
extra financial activity being done. If it doubles sometimes it’s
inappropriate, because there’s just so much money that the space can take
in. So, why?
Boris: Why am I doing what I’m doing? No, I think if you’re a smart
investor that picks his investment in a consistent way and really helps
them grow then you can make a lot of money as an angel. That’s certainly
the one thing… I mean it would be dishonest to say there’s no financial
interest in the whole thing.
But, in the end it’s what I love to do. I love to work with entrepreneurs
and help startups grow. That’s the reason why I do it.
In the end, as I said before, for me it’s about having fun at work, going
to work every day and enjoying it, and what I’m doing for the moment is
probably I think the best job in the world that I could have. That’s the
reason why I’m doing it.
If there’s no big growth [??] in terms of I don’t want to really raise a
venture fund on my own, I don’t want to really sell the business, I’m
hopefully going to make some good money on some good exits down the road.
But, you know, it’s also clear that you’re looking at seven to ten years
until you have an exit. It’s not a quick flip business. It’s grinding away
a lot of years with a lot of companies.
Andrew: Okay. As somebody who’s sold lots of books and is in sales… We’re
all in business. We’re all in sales. You could appreciate this.
I want to know why you decided to do an interview with me so that when I
approach someone else who’s an investor or who’s an entrepreneur who sold
his business I’ll know what it is that worked for you and maybe understand
their psychology and what will draw them in. So, why? What kind of
insight…
Boris: Why [??]. Sorry?
Andrew: What kind of insight can you give me?
Boris: In terms of…
Andrew: Why you came here to do Mixergy, to do an interview here that’s
live on a kludgy system that involves Skype that sometimes goes out.
Actually, I’m sorry, it looks like it went out again. So, let’s see. Okay,
it came back in.
Boris: Two things. The first one is. Again, I think…what you’re doing is
really great. [??] Pass some knowledge about the nerves. And we think about
when we started in 99′. There weren’t any [??] resources. Right? In the
end, Internet just started. And then you were on your own. So I think today
it’s amazing to see how much information there is. How much knowledge [??]
And that in the end will help us build better companies across…the world.
From that point of view I think being part of that system and passing on
knowledge, either one to one to my start-ups or one to many in
opportunities like this is not a big part for me. I mean the second thing
is I also like to tell a story of AbeBooks and W Media Ventures as part of
what I’m doing and where I’m building my career for the moment.
So from that point of view, there’s always the interest to get more
exposure. Perhaps there’s another deal out there in our area that I haven’t
seen and one entrepreneur that watches your show comes and contacts me and
that is going to be a good outcome for everybody.
Andrew: That’s what I’m hoping for. I’m hoping you’ll get hit with
invitations for coffee… just from the right group of people. Not from
people who just want to have coffee.
Boris: Yeah.
Andrew: I’m very grateful to you. The reason that I wanted to have you here
is that…you had an interesting business story, you’re an investor who has
experience, and…I just was so curious about the experience, and I’m
grateful to you for coming here and being as open as you were, and for
spending the time with me. Thanks a lot.
Boris : For sure. Thanks, Andrew.
Andrew: Okay. And for everyone who is watching, I’d love your feedback on
this interview or the whole process here at Mixergy. I keep getting better
and better because of the feedback that I get and I keep getting better and
better guests because of people like John Bish[SP] and Coreen Mine[SP] who
introduced me to Boris Wertz. I would especially like feedback on how I
did, considering I was sick.
I didn’t think that I would survive. I thought my head would go plop down
on the desk and I figured I’d just move the camera away so you could keep
talking, but I didn’t have to. We were able to keep going. Alright, well
thank you, thank you everyone and I’ll see you in the comments.
