Andrew Warner: Three messages before we start. First, it’s almost too late to apply for the Founder Institute. If you’re launching a company go to FounderInstitute.com and apply. If you’re accepted you’ll get mentored by experienced CEOs, you’ll get introductions to investors, and you’ll get training to help you launch right. It’s almost too late to apply. Rush over to FounderInstitute.com.
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Finally, who is Scott Walker? He’s the lawyer you turn to when it’s time to sell your company or raise money. But if you’re just starting out, his firm can also do your paperwork properly to make sure that you don’t run into trouble later on. You probably already know Scott Walker from his posts on VentureB, or on VentureHacks. Or, maybe you saw him cited on VentureCapitalists, Mark Suster’s blog. I’ve known him for years, and if you’re an entrepreneur in the tech’s base I think you should too. He’s the guy to turn to. Go to Walkercorporatelaw.com.
Here’s the program.
Hey everyone. I’m Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. And what that means is that this is a place where entrepreneurs who are dying to build something that leaves a legacy, dying to build something that leaves their mark on the world. This is the place where they come to learn from people who are doing it. And as you know, if you sell anything on line you don’t have to have the product, or ship it yourself. You can use a drop shipper. Well today’s guest, Jeremy Hanks, founded a drop shipping company named Doba. Doba manages over 1.5 million products that his customers sell on EBay, Amazon and other websites. They sell them, Doba stocks and delivers them. Welcome to Mixergy.
Jeremy Hanks: Good to be here.
Andrew: How did I do with the company name?
Jeremy: That was good. Perfect.
Andrew: All right. Cool. All right. So, I invited Jeremy here to find out how he launched the business. First question is this: You told me you were comfortable saying this, so I’ll start off with this question. How much are you guys doing in sales?
Jeremy: We’re pushing 10 million in sales, in annual revenue. And by that, our model is a subscription based service, where our customers, whether they be suppliers or small to medium etailers, pay us monthly or annual fees to access our technology, platform and services. And that’s what that is, revenues from those fees.
Andrew: Oh, I see. OK. So, do you guys take on the inventory yourselves and deliver it or, do you just connect merchants with the drop shippers?
Jeremy: Yeah, we call ourselves a virtual distributor. A heavily technology enabled virtual distributor, but we just play the connecting role so that the relationships and the technology can flow through us in a one to many transaction instead of a one to one transaction. So that’s how we make it work.
Andrew: I see. So you don’t have any inventory either.
Jeremy: No, we don’t touch it.
Andrew: Now most people think of, when they hear drop shipping, they think of the guy who is selling on EBay or Amazon. But, you made an interesting point. You said that even Costco uses drop shipping, right?
Jeremy: Yeah, it’s definitely a part of an overall strategy for ecommerce. It’s used by the largest companies, Amazon, Costco. Costco is interesting. If you go to Costco.com . . .
Jeremy: . . . what you do if you’re Costco, is you understand that you no longer have a constraint. I mean a Costco warehouse is very big and large. But it still has four walls and a ceiling. And online there are not constraints and so it’s approximately 70 to 80% of the products at Costco.com are drop shipped from their vendors, direct ship fulfillment, whatever term you use. You’ll never find them in a Costco warehouse or in a Costco shipping facility anywhere on the planet. And Costco.com just tipped over a billion dollars in sales I believe, in 2009, or maybe it’s 2008 even. It’s a significant strategy that everybody uses.
Andrew: Wow. I didn’t know that. So the vast majority of products coming from Costco.com are coming in from drop shippers, directly from someone else.
Jeremy: Exactly, yep.
Andrew: How much investment did you get in the business?
Jeremy: We didn’t have any investors. We started, I had two co-founders. I started the company in 2000 and we did that for a couple years. It was a marginally OK outcome and then jumped right into this business and decided we wanted to give it a go without investors to keep ourselves laser focused and to be very, very undistractable, I guess, if that’s a word. And so we didn’t have any investors, we just grew the business ourselves.
Andrew: So no investors, 10 million in sales is what you guys are coming up on. Did you say, are you comfortable revealing your profits?
Jeremy: Yeah, maybe not specific numbers. But we’ve been profitable since the beginning because you have to be if you don’t . . . The whole idea of a burn rate doesn’t apply if there’s nothing to burn. You can burn what you create and that’s it. So we’ve always been profitable from the beginning and cash flow positive from basically, day one. The first year, year and a half was very tricky because we had to build our product; we had to build the beginnings of our technology platform. We would do things that weren’t directly related to our core business if they were able to bring in revenue. So we did those things. We did things like SEO. I mean we did anything we could. Lead generation, email marketing, we did different things like that to try to keep the lights on while we built that first version and found suppliers to work with and started our marketing engine. That’s kind of, I think, the only way you can do it as a bootstrap company.
Andrew: Oh cool. So you did SEO consulting for other companies and other kind of consulting work until you had enough money and the business was strong enough that it could survive on its own.
Jeremy: Yeah, even I did some of the work. I would build targeted keyword optimized content pages for companies and things. Anything we could tap into, again, to kind of get us to that first step.
Andrew: Anthony Saro in the audience is asking, “What’s his background?” What did you do before this?
Jeremy: Yeah, so my background is I went to school at BYU and I started out in computer science. I did that for a year or year and a half. The only way I can really explain is I got lazy and decided to give up on the technical road. The math and science and physics was not as interesting as it was. Shifted into accounting and then dropped out of school to start my first company which was called Geartrade.com. It was an online marketplace for closeout equipment in the outdoor recreation vertical. And then right on the heels of that, in 2002 is when we got Doba started. So that’s kind of my background. I’ve always considered myself an entrepreneur. Growing up as a kid . . . I grew up on a farm in Idaho . . . I told everyone I was going to be an inventor. And I think entrepreneur is pretty close to that. So that’s kind of my story as far as my background. I never had a lot of jobs.
Jeremy: I haven’t had a lot of real jobs as far as working for other people. I did have a couple in college, but other than that I’ve always just done my own thing.
Andrew: Brigham Young, that’s the school that you went to?
Jeremy: Yeah, Brigham Young, yeah, BYU here in Provo, Utah.
Andrew: Oh, cool. So where did the idea come from?
Jeremy: It really came out of that first business, Geartrade. The idea for Geartrade came from a ski swap. If you’re in any kind of mountain town, in the Fall, coming up soon, you’ll have these ski swaps you can go to. There’s hundreds and even thousands of people who come and there’s all this closeout merchandise. And a friend of mine from Idaho’s family does that. They buy skis from manufacturers and take them to ski swaps. And I said you know the internet could help these kinds of people, especially the specialty retailers in the outdoor recreation market, can help get their closeouts to a broader audience. And we said let’s wrap a community around it. Let’s do some used products as well. That was Geartrade. Through Geartrade over a couple of years, the more that I started looking at what these small little one store shops, ski shops, backpacking shops did, the more we realized his inventory was a huge, just a massive constraint on their ability to match supply to demand; to take products from the companies that make them and match them up to the companies that buy them.
And that was kind of the genesis for the idea for Dobo, which is the web virtualizes the retail to consumer relationship. If we can help virtualize through technology and management of relationships, if we can help virtualize the business to business side, the manufacturer/distributor to retailer relationship, then we can help companies match supply/demand more effectively. And that’s where the idea for Dobo came from.
Andrew: Why not become a drop shipper yourself?
Jeremy: The biggest reason not to become a drop shipper is that I didn’t want to touch the products. I didn’t want to deal with the physical inventory. The cost to do that would have been . . . we currently work with approximately 1.3 to 1.5 million different wholesale products across basically every product category that there is. To build a scale to that level as a drop shipper as a real distributor with real warehouses, you know, you’re talking about investments in the 10’s and 10’s of millions of dollars, just to get things running. So we’re able to provide some significant value to our customers in a nice economy scale and find a nice spot in the value chain by being a virtual company; and by building technology and software process versus actually putting things in boxes. And other companies, they already do that. The distributors of the world do that. A lot of brands, manufacturers have started doing their own fulfillments and things. There are lots of companies that will do the box piece of it and we just wanted to carve out the online piece, the software piece.
Andrew: Was anyone doing it at the time?
Jeremy: There wasn’t anyone really at the time doing it. At the time it was really very new. Pioneers . . . Amazon was somebody who really pioneered this idea of drop shipping. Drop shipping has really existed for 30 or 40 years. And the way it worked is you’d walk into your retail store and you’d say, “I want to buy a pair of Nike shoes.” And they’d say, “Well, which Nike shoe, is it on the wall?” And you’d say, “Well, no, it’s not on the wall.” And they’d say, “Well, here’s a Nike catalog is it in here?” You’d say yes, they’d say OK, and they’d call Nike and get the shoe shipped. And it’s kind of drop shipping, right? It’s the same idea. It really hit scale though, with the web because of the virtualization piece of B to C commerce. So Amazon started pushing the supply chain to do this. We happened to start our company at the right time. From 2003 to 2006 we were the fastest growing company in Utah and number 23 on the INC 500 list and things. We started it at the very right time which was the maturing. And it’s still maturing but it was the tipping point of this service to go to mainstream. But it didn’t tip enough where you still had to deal with a lot of different data feeds, a lot of different relationships, and by putting that all into one place there was a nice value proposition.
Andrew: So what was the first thing that you did after you came up with the idea?
Jeremy: The first thing, right on the tail end of Geartrade we kind of had seen this idea. So we finished up the kind of exiting of ourselves from that business. We sold the assets to the company and basically paid off all of our credit cards and computer visas and things, and broke even from that side of things. We had investors in Geartrade. We had done a seed router funding and that didn’t work out for them. It’s just one of the things that happens.
So the first thing we did is try to figure out what would the product need to do. So we spent a little bit of time understanding, what would this product have to do to make it work? And we started with three suppliers that we found; mostly distributors that could do mostly data feeds and could do some different things like that. And we looked at their specifications. We looked at their processes. We looked at kind of what we wanted to do. And we basically mapped out what we would say would be our minimal viable product. And one of the founders, who is named Dave Gray, he was my roommate in college. He stuck with computer science, you know, he’s a computer scientist and software engineer. So he started building and then Brandon, the other founder and I, that’s when we basically said, “We’re open for business. We’ll do anything that pays a buck.”
Andrew: While he was developing the first version.
Jeremy: Yeah, that first version.
Andrew: How long did it take him to develop the first version?
Jeremy: It took us about six to nine months before it started coming together where we had a system where we were pulling in the virtual inventory from those companies. And we were able to kind of say we’ve got the beginnings of this system. And then the other pieces, all the behind the scenes, the data management, data exchanges, and then the front end, which is what our customers log into and see; we had the beginnings of that. So, the first part of mid 2003 we were about nine months into it. That was the first time we really started trying to market it. One of the things that happened to us that has nothing to do with drop shipping or ecommerce really directly, is the invention of Adwords, or, in essence, paid advertising online. Back then it was Goto.com and some other companies. I put together our first campaign. And this idea of drop shipping had started catching on in the EBay power seller community and others. So we were able to basically take this product that we had built, and because there had been also some other entrepreneurs and inventors out there that created a whole new way to market and advertise, insert our company directly into that demand flow. And that’s when we exploded for a lot of years.
Andrew: What was in that first product? What was the bare minimum that you needed to have in order to launch?
Jeremy: The bare minimum is we needed to get the product data from the supplier. You know whether it’s a manufacturer or distributor, we had to get pictures, descriptions, kind of basically that catalog data. It’s descriptive data about . . .
Andrew: And you were just pulling that data in from the suppliers, from the drop shippers who already had them?
Jeremy: Yeah, and sometimes you’re grabbing it from a flat file, a Microsoft Excel, it’s EDI, sometimes it’s XML, it just depends.
Andrew: Did they make it available to you, or did you have to go in and scrape their sites?
Jeremy: Both, at first. There were definitely companies that we did scraping of because they wouldn’t give it to us. So we went around the system, basically. We were too small to be, I mean, some of these large distributors, you’ve got to be approved to credit terms for them to even turn you on. And we were just a startup company. There was no way we could jump through the hoops they needed. So when we’ve got to get that product data into the system, and then we need a way to display that for our retail customers so they can see it, interface with it, search through the product. So we had some really basic rudimentary online cataloging interface technology. And then we needed to be able to pass orders back to the supplier and also grab updates; out of stocks, backorders, and inventory, quantify on hand changes and those things. So those were the very most rudimentary three steps; catalog data in, orders back, and updates to that catalog data and inventory levels back and forth. And we needed to show that in a way that on the supply side they can see it and kind of interface with it on the retail side. But supply side was very rudimentary. There wasn’t an interface. It was all stuff we were doing. You couldn’t come to Doba and log in. The login was focused on the retail side because that’s where our subscription revenue was coming from.
Then a few years into it we built a bunch of technology on the supply side. We call it Supply Utopia, where there’s actually an interface for suppliers as well.
Andrew: Let me stay with that original idea.
Andrew: So you went out to the suppliers, or the guys who have the inventory. The retailers are the ones who want the inventory drop shipped to the end user, right?
Jeremy: Yep, yeah.
Andrew: So you found a way to grab the data from the suppliers. Some of it was passed on to you and others you scraped. You made it available on your website in an organized way so that retailers could see what was available, right?
Andrew: And then when they place an order, how did you place that order back to the suppliers in the early days?
Jeremy: Again, it depends on the supplier. In the early days, as the suppliers were coming up to speed with technology, we would send them an email. We even, if I remember right, had a few suppliers where we integrated to a fax gateway. And we would take it from our web system and turn it into a fax and send them. But wherever possible, we wanted to automate. We had some suppliers for a lot of years, even for four or five years of our history, where we had a person on our team that would manually go and punch the order in their site. We try to walk the line between . . . I think one of the dangers of technology is this kind of panacea of, “everything can be technologically enabled, and thereby we shouldn’t have any people or any processes or any manual work happening.” And you run a real risk of coming up with enough technology to build that you’ll never get to it all. And so we kind of took the approach of more like a 75% approach, or the 80/20. 80% of the problem we’re going to automate, the 20% of the problem we’re going to pay people an hourly rate to manually place orders until we eventually get to that.
Andrew: In the first version, how much of it was manual and how much of it was automated?
Jeremy: The very, very first version, when we first launched, it was definitely . . . The catalog piece was the first we automated. We did the ordering stuff second. So the catalog was mostly automated.
Andrew: And then when somebody placed an order, they went to your site?
Jeremy: Then it was mostly manual, yeah.
Andrew: That was maybe you seeing it by email that the order came in, and then going over to the supplier, punching it in on the computer and sending the order out.
Jeremy: Exactly, yeah. Because our thought was that it’s a step process. It’s chicken and an egg. If can’t get the virtual catalog data, we won’t get any orders. So that’s step one. But once you get step one out the door then we’ll worry about the problems of the orders. It would be a good problem to have if, at the time we probably had our first employee or two, if all we did all day long was place orders manually that’s a good problem to have. So that’s how we approached it. It’s a more limited approach to how fast and how quickly we built technology to solve those problems. Even today in our business there are thinkings we could probably engineer away, but it might take, the investment might be ten times what it would cost just to pay someone to do it for a lot of years. And so we said why build the technology? I mean, sometimes people can go do a job. That’s how we approach it. If we don’t see an ROI in it, we’re not going to automate this, try to scale things just to do it. I kind of use that when I talk to other entrepreneurs. You know, go get a forest fire started before you start worrying about how you’re going to control this fire. That’s a good problem to have. A lot of entrepreneurs wait for the forest to erupt in flames and they’re all ready for it and it just never starts on fire. And they’re out of business.
Andrew: [laughs] Well put. OK. And you started that as a subscription based service right from the start?
Andrew: And the retailers who were subscribing, they would punch in their credit cards to you, and you would take those credit cards and you’d send them over to the suppliers. Is that right?
Jeremy: No. On the subscription piece, we do the billing. So, you know, that’s a system that we’ve developed to do the actual subscription billing. As far as the orders . . .
Andrew: That’s what I mean.
Jeremy: We act as a broker and they pay us and then we pay the supplier. And what we try to do, one of the values we can provide, is to try to eliminate the transactional cost of moving money up and down the supply chain. Because as we started getting some momentum we were always able to get credit terms with our suppliers; so there wasn’t a Visa, MasterCard, PayPal fee associated with that. And that allowed our customers to pay us in those vehicles without us having to pay, in essence, those fees twice. That was something that we kind of identified early on is to help make that work. One of the only real jobs I had just before I started Geartrade, is I worked at Authorize.net, which is a payment processing gateway. I actually learned from that experience the processing money piece of everything. But I also learned the subscription model. They had a company that sold right when I started working for them. They had sold it for 100 million dollars to Goto.net. They charged people 10 bucks a month for a gateway fee. So I saw how powerful a small, reoccurring revenue per customer could be if you could scale to a large number of customers.
Andrew: OK. So what a customer is paying you for is access to all those drop shippers and all the products that all those drop shippers have. Instead of going out–and they could do this–they could go out and reach all those drop shippers individually and work out relationships with each one individually. Instead of doing that, they come to you, you give them access to everything and you make it all look the same and give them a consistent experience.
Jeremy: Exactly, yep. That’s exactly how it works. And some of the suppliers we work with, a lot of our customers would not be able to work with.
Andrew: Because they’re too small?
Jeremy: The bar is too high. They would never pass the bar to become an authorized dealer. It’s just out of their reach.
Andrew: Is there a risk there that you won’t get paid but you’ll still have to pay for the product?
Jeremy: We collect everything up front. We require payment. We do have a prepaid program as well to help people save a little money. But we always get our payments up front before we send anything to the supplier.
Andrew: What about fraud?
Jeremy: Fraud is interesting. It’s definitely a reality. What we started realizing early on is that we’re in this interesting position for fraud. The end consumer can try to defraud our retail customer. Our retail customer could try to defraud us. We’re pretty sure we’re not going to defraud our suppliers, so we take that one off the table. But there are still two different dimensions of fraud, so we had to build some triggers and technology to watch out against fraud directly to us from our customers to people who sign up for the account. But then also how to, if possible, protect our customer from being defrauded by somebody telling them to send something to Nigeria or something. So we have identified, and we do have a fraud protection system. We do catch a decent amount of that end consumer to our customer fraud. Based on the information we get on where the product is going to be shipped to and how new the person is to Doba and things. We kind of have an algorithm which will flag certain transactions, and say this seems suspicious to us. And then our fraud team, well we have one person, but our fraud guy, he will contact those companies and basically see and kind of dig into it. And in a lot of cases we shut those orders down.
Andrew: Give an example of a situation that forced you to put this into place.
Jeremy: Early on there was a situation where one of our customers had ordered, if I remember right, 10 or 15 thousand dollars worth of laptop computers from one of our suppliers.
Jeremy: The orders come through and it was early enough where we were kind of seeing everything and so we were like, “Wow, that’s kind of interesting. That’s a lot of laptops. What’s going on there?” I think it was like 20 different laptops. So we called the customer and basically they were like, “Yeah, so and so said they saw that I put a laptop on EBay and they offered to pay me more money than I had listed it for. But I have to ship it overseas.” So, it was, “You guys, this is a fraudulent kind of thing.” And from that scenario, over the next long period of time we built those tools where we can help watch for that kind of end consumer fraud. It’s somewhat tricky. We don’t see a lot of that transaction. We don’t see the IP address. We don’t see certain things from that end consumer to our customer. They might have a webstore with Shopify or with EBay prostores or Amazon stores. We don’t see that transaction, but we see enough of it based on what product is being ordered and where it’s going to ship to, to kind of at least have conversations with people if we see fishy stuff.
Andrew: OK. So going back to when you launched. We have a sense of how you got the data. We have a sense of what you made available to your end users. How did you get those users? How did you get those paying customers?
Jeremy: The thing we did not have to do was generate interest into this idea of drop shipping. We didn’t have to go create our own market. A lot of companies do. It’s something that’s completely new, and they have to do that. We didn’t have to do that. That was being done by the Amazon’s and everybody else that was doing it.
Andrew: They were already training the world that drop shipping was necessary. But how would somebody know that you’re in the business?
Jeremy: That’s where the paid search came in. We basically started bidding on anything related to drop shipping or wholesale supplier or different things. We just inserted our offering into the existing demand and awareness that was out there. From that standpoint that’s one of those ones where I look and say how really lucky for us. We were in the right place at the right time. We didn’t create that demand and we didn’t create the awareness. But we were able to tap into it. And again, a lot of entrepreneurs with their businesses, they have a bigger challenge because they have to create the awareness and demand. It’s something that kind of really new and they can’t tap into something that’s already happened. So I guess that’s why I say that’s why we’re really lucky.
Andrew: How much of your business came from Google ads?
Jeremy: At first it wasn’t Google, it was the other guys. But at first 100% of our business, 100% was paid . . .
Andrew: 100% from overture, right?
Jeremy: Yeah, it was paid search advertising . . .
Jeremy: . . . back in 2003. Today about a third of our business is from paid search.
Andrew: What other sources did you hook up?
Jeremy: Yeah, so the other macro level channels are; we have affiliates and partners; we work with a lot of companies that are in this ecosystem of small business online.
Jeremy: Hosting companies, shopping cart companies. They’re our partners; they send us leads and customers. That’s about a third, with the affiliates. Organic search is a big chunk, you know. And that took us a long time to build up, all the different articles and things that we were able to put up. So roughly our business breaks down into kind of a third partners affiliates, a third paid search and then a third organic search and other channels that are able to add up to those numbers.
Andrew: I saw the [xx]
Jeremy: Yeah, it was all paid search.
Andrew: You are also an author. You wrote a few books on this?
Jeremy: Yeah. It’s loosely worded, I think. The guys at Wiley, we did one. It’s more of a . . . it’s not a full, full book. It’s one of their smaller books, but it’s called Drop Shipping for Dummies. Because what we found early on is there was a huge amount of misconceptions about what drop shipping was. And most people were convinced that it was nothing but positive and there’s actually some significant disadvantages depending on how you deploy the strategy into your business. And so we did a book about that and then another one about . . .
Andrew: A book about the disadvantages?
Jeremy: Well, it was both.
Jeremy: We talked about the advantages and disadvantages.
Jeremy: In the Drop Shipping for Dummies. And then the other book was about finding inventory to sell on EBay. And a gentleman who had written several other books about EBay approached me and Doba, basically saying, “You guys are very much kind of topic experts. I would like your help in providing content in the book and things.” Those were two really fun experiences.
Andrew: How did they impact business?
Jeremy: It was really big. The biggest was Drop Shipping for Dummies. And from that, the For Dummies series . . .
Jeremy: . . . is an extremely well known and powerful brand, and our company, drop shipping is at the core of what we do; that we help enable and facilitate. So to be able to say that we, and basically, Doba, was behind this small little pamphlet book Drop Shipping for Dummies, it gave us a lot of credibility. We were able to leverage their brand against our brand in product and service and it helped us a lot. It definitely gave us a big shot in the arm.
Andrew: So people were reading the book and then coming over to Doba.com and finding out about it and converting into customers? That was a good source of customers?
Jeremy: Yeah. It was a little bit of that. But the bigger win for us is that we were able to put a picture of Drop Shipping for Dummies on a landing page that someone came from paid search. It gave us credibility. It gave us instant credibility. When you asked, we’d say, “We wrote the book on drop shipping.” And so it gave us a lot of credibility related to all of our other marketing channels. So those books ended up being more of an indirect kind of benefit more than a direct benefit. It gave us that credibility as a thought leader’s kind of topic expert.
Andrew: Any big setbacks that we can talk about here in the interview?
Jeremy: Yeah. Definitely. 2007 was a tough year for the company. We were growing so fast that our four year growth rate for the INC 500 was like 3206%. We just exploded, and it was chaos and the product wasn’t built the way you needed it and we didn’t have the right dash board and the metrics and, you know, it was just really hard to stay on top of everything as fast as it was moving.
Andrew: Because the business was growing so quickly.
Jeremy: Exactly, and inside of that growth there’s a lot of questions. And at least in my experience with this we didn’t have a lot of the answers. For a period of time, that was OK, because it just was going. And then, it starts to mature and change, and then we had a period where we ended up doing two layoffs that year. We lost a large partner. So, you’re making these projections based on revenues and leads and customers and everything. And when a partner came and went within about six months, and that was a shock to the system, we didn’t react fast enough because we were in this growth cycle. So we had to make some hard, tough decisions and say we have to think about the long term. We don’t have investors behind us. We don’t have the ability to let this thing go negative for a period of time. We’ve got to do some things and so it definitely was a period of time where it was . . . OK that was the first four and a half years of the company . . . that’s OK, that’s been great. It’s been barely managed chaos, so now, what about the next many, many years of the business? And so from that point on we started changing. It was definitely a growing up period for Doba and the rest of the management team in understanding how do we need to have the right things in place so that we can be more accurate in our projections, with our growth and with different projects that we tackle? But it was a painful period in the business for sure.
Andrew: So how did you get that explosive growth all of a sudden?
Jeremy: That’s the one that I say it’s hard to take a ton of credit for because I think it was that we were at the right place at the right time. The market around us is what drove that growth; more so than us architecting the growth.
Andrew: So what was it about the market that suddenly took off at that period?
Jeremy: What was happening was that there was a big shift from entrepreneurial energy from offline to online. EBay was one of the major pioneers in that mindset. All of a sudden people would . . . Time magazine did a cover stories about The Age of the EBay Entrepreneur, or, I don’t know what they called it, and things. And so a lot of people started shifting their thinking and saying, “I want to start a business, I want to do something, I want to have a side business,” you know. And in that world a lot of people default to being a reseller. It’s difficult to create a product or service. It’s not as difficult to sell somebody else’s. And then they’re like, “Well let’s go try it online.” And so that drove that demand for drop shipping, and where do I find a source of products and a lot of other businesses like ours that do things like that. Ali Baba is a great company that they help with products [xx] from China. And they’ve exploded over the last five to six, seven years. Vendio is a company they just bought who provides auction management technology and a website hosting service. You know all of us in this space, you know, kind of that a rising tide lifts all boats. That’s what we were benefitting from, is that the mind share was shifting and we were in the right place at the right time with a product that was in demand to take advantage of that.
Andrew: Give us an example of a success story; someone who has used you, who has built an incredible company. I’d like to learn from them.
Jeremy: Yeah, we ran into a conference called The Professional EBay Sellers Alliance, and The Ecommerce Merchant’s Association. They do these conferences, and we ran into a Doba customer earlier this year. His name is Said. And he talked about how he takes Doba products and sells his products on Amazon. He has an Amazon webstore and he also sells through the third party web system. He started with nothing. He had a normal job and found Doba products. He very intelligently applied some thinking and even kind of some technology to his product selection methodology of what he wanted to sell, and what would fit into the Amazon system. He takes advantage of some of the shipping and different things that Amazon does. He quit his job and he told us that he was making a couple times more money than he was making as an employee in the real world.
Andrew: Can you be more specific? What was he selling on Amazon? What kind of things?
Jeremy: He actually sold a little bit of everything. It just depends. He does what a lot of people don’t do, which is he spends a lot of time with product research and looking into the market and looking at the price points and understanding a lot of that.
Jeremy: And so he was selling everything from electronics to outdoor products. It just depends on where he would find opportunities.
Andrew: And all he had to do was go into Amazon and add the product item, describe it in a way that would be compelling and help increase sales, and that’s it, the rest of it was automated, the data was going back to you.
Jeremy: Yeah because Amazon does the ordering piece, the front end piece, the customer piece. He would take it, send it to us and we’d relay it to the supplier, they’d put it in a box and ship it. So, that’s a perfect example of why we started Doba. If we can virtualize the supplier to retailer connections through Doba, Said and Amazon through their partnership, they’re virtualizing the retailer to consumer and all of a sudden you’ve virtualized the entire chain. And really what you do when you really step back at a macro level is you have a better way to match demand, which is consumer demand for those consumer products, to supply which are branded manufacturers and distributors that have these things sitting in warehouses around the country and around the world.
Andrew: And the key to success with a guy like that is experimenting with a lot of different products?
Andrew: Picking the right subscription?
Jeremy: Yep, exactly. Because we don’t filter, we provide tools to filter and to help them figure things out. But we onboard a distributor with 25 thousand skis; we’re going to put everything up there. We don’t want to be in the business of picking what to sell or what will sell. We’re in the business of being an aggregation company for these virtual catalogs and distribution fulfillment. We don’t want to be in the selection business. So our most successful customers find ways to do that or they find ways that our product mix can complement the product mix that they already work with.
Andrew: What size revenue is he doing?
Jeremy: He wouldn’t tell us. We kept pushing him on that. He’s like, “I don’t want other people to know, ‘cuz then they’re going to want to come compete with me.” But you know, his background was in IT. So he was making IT money, so in the grand scheme of salary ranges, he told us he was making, if I remember right, about two times as much doing the online business than he was before he was just working the store.
Andrew: Do you have another success story?
Jeremy: Yeah, we have lots of success stories. Another one that is a well known company is Ecost.com. They do about 100 million a year. Now you’re talking about the other end of the spectrum for sites.
Andrew: Ecost uses you guys too.
Jeremy: Well, yeah they use us. The thought there is they were very, very, as a company had come down the road at selling electronics at really good prices. And they wanted to find access to products that were in other product categories but they didn’t want to have to go build all the different product supplier relationships and learn about new product categories and things. They also wanted to try to find products that they could use in marketing almost as a marketing attraction strategy. We have a program called Dobadeals where suppliers can use us to help market and promote their opportunistic products, which are closeouts, or they need to move products faster. So Ecost taps into a) the ability to spread out different product categories and then b) the deals process. And they’re one of our customers too. And it’s exciting for me because we can provide services that have value for a 100 million dollar company, but we can also provide the opportunity for Said to go and chase his dream as far as being an entrepreneur and just sell things online. And so those are kind of two ends of the spectrum as far as success stories go.
Andrew: We talked about 10 million dollars in revenue. It’s not there yet, but about 10 million is where you guys are. I saw the INC 500 list that you guys were on. I think you were on INC’s list three times for the fastest growing independent companies. Right? That’s what that list is?
Andrew: Big numbers. Can you take me down to a smaller number? Maybe that first million that came in? What was that like?
Jeremy: Yeah, that was really exciting. I think our first year, the more exciting part is the first year we had like three months of 2002. So the first year was 2003 and the reality is that most of that money was us selling SEO services and lead generation and stuff. It wasn’t our core business. By the next year though, if I remember right, that 2004 is when we hit our first million dollars in sales. And so we moved so fast to that number and one of my favorite quotes of all time is, “Luck is when preparation meets opportunity.” And I think that sums up exactly what happened with us. We had the right product in the right place at the right time. But we didn’t control the place and the time. We just happened to be there. And so that was really exciting, to say, “Wow, this might be . . .” Every entrepreneur starts off to go make their way in the world and to be successful. But success is hard to define. What is success? This one has far surpassed what I think most of what we thought about success. I mean we have an awesome company. We have about 65 employees. We’ve won best company to work for by Utah Business a couple years, and we just really, really have a lot of fun. We look back and it will be eight years in about two months, of the company. It’s surprising, it’s been so fast. It’s been eight years. But you say, “What’s Doba going to be like eight more years from now?” And there’s still so many opportunities. The internet, software, technology, ecommerce and there’s just opportunity everywhere you look. And so it’s just so exciting to see how can we continue to rise to the occasion to find these opportunities and keep the company exciting, successful and keep growing and provide a great place to work and provide value to the customers. It’s definitely fun stuff.
Andrew: Where did the name Doba come from?
Jeremy: For a lot of years we were called Wholesale Marketer. It was really long. And the biggest issue we ran into is that it didn’t exactly describe what we did. It’s definitely related, the word wholesale and the word marketer. But the biggest issue is that we just got sick of people messing the name up. They’d call us Wholesalers Marketing and Marketers, and I mean there’s about sixteen different ways you can come up with combinations of words.
Jeremy: And I think the straw that broke the camel’s back is when somebody called us Wholesale and they spelled it Hole like sail, you know that they got both parts of the word wrong. And so we wanted to find something short. It was the end of 2004 back when you could still go buy a four character domain name. We bought that for $1200. My partner Brandon, one of the other co-founders, he came up with Doba. We did some research into trademarks and we found that we could buy the domain and we did it. We wanted something generic like EBay and some of the other companies that we could define kind of our own terms.
Andrew: And so easy to spell.
Jeremy: It’s not an acronym as much as it just was something we came up with.
Andrew: Doba of course. Thank you for doing the interview. I know that we’ve got a hard break here at the top of the hour. So I’m just going to thank you for doing the interview and thank everyone out there for watching. If anyone wants to connect with you is there a way to do it besides going to Doba.com?
Jeremy: Yeah. The best way is, I do a blog. I don’t do a lot of stuff but I try to speed my opinions to the world. Just Jeremyhanks.com It’s easy to connect to me through the blog.
Andrew: It’s a great blog. Check out I think it’s your latest blog post about why you don’t read the news. I agree with you 100%. I need more blogs from the news. It’s all meaningless. It’s useless.
Jeremy: Yeah. That was one of my favorite posts because I feel passionately about it. It’s changed my life as far as just realizing there’s so much in this world that I don’t need to care about.
Andrew: I’ll let them check it out at Jeremyhanks.com and of course the company is Doba. Doba.com. Thanks for doing the interview.
Jeremy: OK. Thanks Andrew. Good to see you.
Andrew: You bet, bye.
See you everyone.