Andrew: Hey there Freedom Fighters. You know me, I’m Andrew Warner, the Founder of Mixergy.com. It is home of the ambitious upstart. Hey, before I do the official intro for today’s guest, Gavin, I’ve just got to ask you about this article that I read five minutes before this interview started.
Tell me if you remember this, it’s from June 27th, 1999. It says “It cost Gavin Mandelbaum about $6,000 in 1995 to start his own web-based business, an infant product store called Internet Baby . Three years later the San Diego entrepreneur sold his online business to New York-based iVillage in a stock and cash deal. The terms were not disclosed, but Gavin’s dad says it’s safe to report that his son is now a millionaire.” You remember that article?
Gavin: I do. Was that…
Andrew: Why were you cringing as I just read it?
Gavin: I’m sorry.
Andrew: Why did you cringe at the end of that read?
Gavin: I prefer being modest, so not to self-promote myself.
Andrew: It was a period there where a lot of people did not want to be modest, 1999. You sold just before the bubble burst. Did you get to keep all that, or did it go down with the iVillage mess?
Gavin: Well, it wasn’t just me. And so it was a family business that I was fortunate to be involved with, and give credit to my parents who worked there, 20 years in this business. I really came along to help put that business online. I had wiser people than me helping. I was just 24 years old, 25 years old and didn’t really understand. I wasn’t mature enough, I think, at the time to manage.
Andrew: Are you saying that you blew it all on coke and hookers?
Gavin: Not quite. No, I was very modest. I was still living at my parents’ house when this happened. Bought a small home and set up half of that as an office for my new business.
Andrew: I see. I’m looking here at your LinkedIn profile. You just kept going right back into it. 1998 BabyCenter.com, 1999 iMaternity.com, 2001 iHome, 2013, what we see behind you which is Acenda. I didn’t even get into 2004 which is Torrey Commerce. Let me do a quick intro for you.
Gavin, as I’ve said, is Gavin Mandelbaum. He is currently running Acenda. It’s a content management tool that is really good at eCommerce. That means it allows you to sell on your site and manages it for you, and in a clever way that you’ll hear later on in the interview, it also allows you to sell on Amazon and on eBay and get this, Walmart, lets you sell your stuff on Walmart. I actually hadn’t heard of anyone else who could do it. I don’t know if anyone else does. We’ll find out about that business, and I want to find out about how he built iBaby.
And this whole thing is sponsored by DesignCrowd. If you need a designer, don’t look for your friend’s friend or some designer who’s going to be too good to take your feedback. Go to DesignCrowd.com/Mixergy. Later on I’ll tell you why. And if you need a developer, a really good developer, I’m talking about the best of the best to work for you part-time, full-time, even just a few hours to help out. Go to Toptal.com/Mixergy.
Gavin, this whole thing started after you grew up in a family business, right? Your family essentially was catering to kids. What was the family business growing up?
Gavin: It was a chain of kids and baby furniture, strollers, etcetera, stores based in San Diego. I can give you a little background to the business.
Andrew: Sure.
Gavin: I graduated Berkeley, UC Berkeley. Went to live in Boston after graduating and was asked by my father and mother to return to San Diego to help with the business. It was a difficult time in retail. This was ’95, ’96. I just offered to build a website. This was a very early time in eCommerce, mostly articles concerning eCommerce, thought that it was impossible to encrypt a credit card online. Still may be impossible to encrypt a credit card online, but at the time it was the big issue du jour. And I built a website while I was living in Boston to merchandise the products from their stores, and it immediately took off. It was just tapping a super bid market.
Andrew: I don’t get why. We’re talking 1996. The average person was not even on AOL, let alone on the internet, right? The whole thing seemed too foreign. People who were online were using things like news groups, and they were using things like Gofer, which is now gone, right? They were TelMedic and stuff like that. Why are these, I think, they were a bunch of guys baby shopping?
Gavin: They were all academics. Every shopper we had was someone in academia or a scientist. It was still a very tight community, and there was no such thing as marketing. I mean, there was Yahoo, but you had to ask Yahoo to add yourself to the directory. It was a very manual process. It was just word of mouth. It’s a category particularly with pregnant mothers. That’s very well suited to be online. Pregnant mothers, you know, have several months to plan before their pregnancy. They shop around. They talk, and I’d say that probably was the way we were growing too.
Andrew: I see. And academics either are pregnant or going to be pregnant, or they might have wives that are getting pregnant or girlfriends.
Gavin: Primarily a female consumer and very patient. I mean, CheckOut didn’t even have us to sell. It was so primitive. You were just posting your credit card by email.
Andrew: Were you also taking orders via fax or mail?
Gavin: The answer is yes, but still everyone was very pro-web at the time. So they wanted it to work. These are academics who really weren’t afraid of credit card fraud. Bottom line is the consumer doesn’t really carry the risk of the fraud, it’s the retailer or the bank. So fraud didn’t even cross our minds. It was literally two orders one day. It became 4 orders, 10 orders, 1,000 orders,2,000 orders, 5,000 orders. It was just crazy.
Andrew: And you just went into your family store, took some photos, put it online.
Gavin: I would travel back from Boston once a month with a 35 millimeter camera, take photos, go back to Boston, and scan them at Kinko’s. It was a very, very slow, tedious process.
Andrew: And did you…
Gavin: But then a volunteer fireman who was retired offered to help for free. So I’m grateful to him.
Andrew: By doing what, scanning the photos for you?
Gavin: No, he would take photographs in San Diego, and he would ship the goods. He was just an amazing man.
Andrew: Oh wow. And so your parents brought you back, asking you to help out with the family business. What was going on in the business that they needed your help?
Gavin: You know, retail was slow. We had three locations. One location was a gold mine. Another location was average, and another one wasn’t very strong. So we just needed more hands on deck, just affordable hands on deck.
Andrew: I see. Just kind of show up, answer questions when customers come in the store, hit the cash register when you’re needed. That kind of thing?
Gavin: I don’t know if it’s as mechanical as that, but maybe… I was still very young so I was learning, but I’d work in the business most summers so I had a decent handle on the operations, etcetera. I also had some web experience. So in college I built Gavin’s Virtual Garage Sale which sold my furniture from our apartment on the web. And the only way I could do that, there really was no advertising. So I spammed the under graduate email address at Berkeley which landed me in the Dean’s office, but I ended up making it out without any probation.
Andrew: I see. Actually, you know what, for the time, I’m looking at screenshots of your site from back in 2007. Excuse me, 1997, and 1996 back when it was called Internet Baby Inc. It’s pretty good. You actually tell people where to click because hyperlink may not be enough. There’s an arrow with some text that says “click here” but it’s really well designed. I can see you’ve got all these different baby gates here. Fifteen bucks for one and 31.95 for another.
Here’s the thing that stands out. First of all, they’re gifts with clip art of a baby moving. And then the second thing is the phone number really big at the top, right? That’s got to be because at the time people just weren’t feeling fully comfortable buying online.
Gavin: Possibly. Now, the majority of our orders still came through the web too.
Andrew: Wow.
Gavin: Remember, this was very academic. I imagine they did call, and we were there to answer it. But it was the very early days. We had a huge volume, remarkable if you look at how much volume we did relative to todays, you know, no brand baby stores.
Andrew: Do you remember the revenues?
Gavin: We did almost… Well, the first year we did zero, and it grew to almost $20 million in total revenue by the end of the enterprise.
Andrew: Which is roughly in 1999.
Gavin: I stopped operating in about ’99, 2000.
Andrew: Because by then you had sold.
Gavin: What’s that?
Andrew: Because by then you’d sold.
Gavin: Yeah, I [inaudible 00:10:13].
Andrew: One of the exciting periods for you was then you got a call from somebody asking you to buy you out. Do you remember who it was?
Gavin: It was a company called Price Club. I don’t know if you remember them, they are Costco today. And it was a miracle because I was in Boston and they were based in San Diego. Turns out that we were headquartered in San Diego. So it made for a very exciting conversation. We wrote a business plan, spent a lot of time thinking about the business, and then at the last minute they decided to can their entire online business, including possibly acquiring us. But it did validate the model for my family because it wasn’t a standalone business yet. We were still small at the time we got that call, but it helped validate that there was potential.
Andrew: You mean, they walked away. Didn’t you feel a little devastated? I guess you can’t feel a little devastated. Did you feel devastated?
Gavin: No, I was just so passionate about this. Every enterprise I’ve ever had since then and including that has just been a roller coaster, but it’s my passion. I’m not doing it for the money, I’m doing it to work with wonderful people, wonderful technology in a wonderful space.
Andrew: I know you love it, and I’ll tell you how I know you love it. The fact that everybody else in your office is now watching Apple’s Keynote and hearing that and frankly everyone else in Texas, and you’re still here talking about your new company after you’ve had all these other successful companies. It shows your drive. I tell you, I’ve had other entrepreneurs schedule interviews, find out that Apple’s event is going on, on a Tuesday.
It happens this year it’s on a Wednesday, and they keep thinking, “You know what, my work is important. My work is important. I’ll just show up for the interview and like minutes before the interview they’ll text me and say, “Andrew, I can’t do it. The event is going on.” And they just can’t give it up, and that’s impressive that you would.
Gavin: Well, thank you for having the teleprompter with what’s happening in the news on your screen.
Andrew: You’re fooling me. That would be too distracting. So you said a lot of ups and downs because we’ve seen some of the… well, actually wait. Before we go on, was it devastating when Price Club calls you, says, “Hey, we want to buy you out.” You get your hopes up and suddenly they drop you.
Gavin: It was not devastating because they threw us a bone. The bone was they validated the model which said that there was potential here. They opened our eyes to the volume because even though they canned their business it was huge, and we got to see operations run by professional operations for eCommerce which they were running, the head of big business. It was all built on Rainman, AOL shopping.
At the time there really wasn’t a web business for them, but it taught us a lot. And so I think we realized that we could do more business with our current traffic. They got us on track, you know what I mean? That business plan made clear what we had to do.
Andrew: Did you write the business plan just because they were interested in the business?
Gavin: Yes.
Andrew: Oh I see. So because they validated you, you felt better about your business. Because they forced you to think about your future, you started to see the possibilities. And when they walked away you said, “You know, it’s not so bad. We see the possibilities here. Let’s go for them. We could do this.”
Gavin: Our business was growing every day. It wasn’t like we just lost the deal, and we had no alternative. We didn’t need an alternative. We were growing like crazy.
Andrew: What did you do to get so many customers back then?
Gavin: You know, I would say the skill was my parents. They just really had good merchandising. They had great products and great prices, in stock. I mean, they had a big warehouse. I had a decent web experience. I wasn’t a coder per se, but I taught myself to code. We just had the right formula for the product and the community of pregnant, mostly moms as opposed to pregnant dads was just such a powerful community.
Andrew: Do you remember what you did to tap into the community back then?
Gavin: We didn’t have to do anything, just had to fulfill orders on time.
Andrew: That’s it.
Gavin: Be courteous. I mean, this was my passion. I was answering emails myself. I’d put on as many different hats as I could wear to make this business successful. I was living at home, so I didn’t… Fortunately, my mom and dad prepared food and helped with the laundry. I was just working like crazy. I remember…
Andrew: Let’s talk about that. You told our producer, April, that, “Look,” you said, “It’s not a sob story, but I was 23, 24 living at home, and my friends were all independent in New York City. And I’m just at home.” Talk about that.
Gavin: Well, it’s a very nice home. It was a nice home. I can’t complain.
Andrew: Could you bring… Go on. I’m sorry.
Gavin: Could I bring…
Andrew: Could you bring girls home to your parents’ house?
Gavin: My parents were very progressive. I wouldn’t say my game was great, so I wasn’t like I was productive. But I was very focused on the business. I was driven by… I wasn’t just doing a business for eCommerce for myself. It was helping to save my parents’ business. They were working their asses off day and night. You know, I don’t say I missed a lot. And then things worked out very well for me and my family. So I’m very grateful.
Andrew: Actually there was one low point that you told April about. You did a promotion with a health insurance company.
Gavin: Oh yeah.
Andrew: What happened there?
Gavin: The game of Telethon. I don’t want to mention this company. It’s one of the largest health providers in the country. They ran a catalog for their store employees. Printed over 100,000 of these catalogs, and there was a typo that said, “This product reduces the risk of SIDS,” which is Sudden Infant Death Syndrome.” You never want that to happen, and it went out to 100,000 of these people, and we were accused of this false promotion.
And it turns out that it could have risked our entire IPO and enterprise, the purchase of our company. We were still in the pre-purchase phase, still doing the dance with iVillage who acquired us. And the risk was that if a child, God forbid, died from that product, our liability would be enormous. But it turns out that the final copy that we signed off on and we sent to the health provider had the word “may” in it, so “may reduce” and we were off the hook. But it was like three days of sleepless nights, sweats.
Andrew: And it was all because you found the word “may” in the copy you signed off on. They somehow removed the word “may” so it was not on you.
Gavin: No, thank God. All these little tiny things. It amazing how a massive deal was saved by the word “may.”
Andrew: Why did you decide to sell? You were looking for a sell, right? Why?
Gavin: I don’t know. I think it was just exciting to do deals. It was just fun. Another thing I would say was back then at the time there really wasn’t a road map. There wasn’t any technology that provided an eCommerce solution like there kind of is today. I could go into terrible stories of the software we tried and the failures we had.
Andrew: Give me one of them.
Gavin: Well, our friends at Microsoft, bless their soul, provided us with beta software, demo software, that they said wasn’t demo software. We were to be a poster child of Microsoft, and everything goes by. We’re 90 days into the operation, and everything is great. And all of a sudden your trial has expired on the software. So everything goes down, and it was impossible to get that code that removed the trial software that would extend the trial period. They don’t have that. So the skeleton key doesn’t exist. So it was three days of reinstalling software, just the licenses. It was a nightmare, maybe even longer.
And then I’d also say that the software at the time that we were promised didn’t live up to our expectations. At the time we were doing real volume. To do 2-3,000 orders a day doesn’t just happen very easily. So there were just bugs as there are in any software. So we ended up reverting back to some software that I’d written with the help of some scientists at UCSD in San Diego. It’s amazing that software is actually the foundation for our company today, and we’ll discuss later.
Andrew: How did you get those developers to work with you back then? How did you find them? How did you convince them to work with you.
Gavin: I have to give credit to one of my closest friends, Graham Gabriel, who introduced me to them. There wasn’t a Craigslist, it was through referrals and connections. I tried everything. I tried friends who were working at MIT. I worked with a ton of people to eventually find something that would work for us.
Andrew: What did you learn about finding the right developer when you’re not a developer? I know that they’re a lot of people in the audience, frankly me included, who are non-developers hiring developers.
Gavin: I don’t know if it was me finding them or they finding me. I just think people, if there’s a relationship and you feel it, it works, there’s a lot of trust involved. The work that we did together, it wasn’t just them or me. We worked together, and his name was Chuck Norris, like the actor.
Andrew: Really. Was there anything you did to learn how to communicate to them what you needed, how to work with them?
Gavin: I would say I’m grateful that I lived in a household that was retail, and I grew up in retail from a very small age. So I was able to meet with them. They were working still as scientists, so after work I would meet them at my home or at their home, and we would brainstorm. And I would communicate what I knew about retail because building an eCommerce platform generally cannot be done just by engineers alone. There has to be a level of experience in retail to do it well. So very hands on.
Andrew: All right. I’ll do a quick sponsorship message for Toptal. If you’re not a developer, or frankly if you are a developer and you need to hire someone to do full-time work for you, part-time work for you, and even a few hours to help round out your team or to build a project, and you don’t know where to find the right person, you can start asking your friends, the way that many of us have and hope that your friend has the right connection. And even if they do, you might end up with all kinds of problems, like how do you communicate what you’re looking for? How do you keep from creating an argument because you didn’t communicate the right thing that you wanted? What if they end up disappearing on you?
So if that’s not the right way, maybe you go to Headhunter and pay huge fees and hope you get the right person and don’t have to let them go. Or maybe you go online and look for freelancing websites where you find someone in God knows what part of the world who has no connection to you and you hope they don’t skip out on you. Those are the options that used to exist.
Now, there’s something called Toptal. It’s a company that’s incredible. I’ve used them here at Mixergy. In fact, if I look now at my Skype, I see the contact information of the person at Toptal who I talked to as soon as I signed up. I signed up, I put in my credit card information so that they have some way to bill me when and if we decide to work together.
I spoke with a guy named Mark, and frankly I can introduce you to Mark Bosma directly. Just email me, Andrew@Mixergy.com and I’ll make a personal introduction to him. And he asked me, “What’s the project? How do you guys work? What are you looking for? Describe what you’re looking for as an end result? What languages do you want your developer to work in?” I told him the whole thing.
And he and his team went out, looked for developers from Toptal’s network. They have developers who are the top 3% among their peers, and they introduced me to someone. And our developer here at Mixergy said, “You know, he’s good but he’s not the perfect fit.” We went right back to Mark and his team. They found someone else who was the perfect fit for us and that guy was ready to start, I think it was, the following Monday. You can started often with them within 24, maybe 48 hours. Toptal is incredible.
We hired the guy. He did the work faster than we expected. We thought it would be four weeks, it ended up being one week. And if we need him, he’s still there. That’s the kind of relationship you want when you’re building a real business. If you’re looking for that kind of relationship, if you’re looking for that kind of developer. go to Toptal.com/Mixergy, T-O-P-T-A-L.com/Mixergy.
For a limited time, when you go to that URL you will see that Mixergy listeners will get 80 free Toptal developer hours when they pay for 80. In addition to that, there is a no risk trial period of up to two weeks. Who does that? Two weeks of working with the developer. And if you’re not happy, they will make it right. You will not be billed.
All right. And again, if you don’t want to sign up… I don’t know who is going to be afraid to link in. Maybe you want a personal introduction. Email me, Andrew@Mixergy.com, and I will make a personal introduction. That’s how strongly I feel about Toptal. Top, as in top of the heap, Tal, as in talent, Toptal.com.
You’re a retailer. You speak to a lot of customers. You just saw me do this promotion. Give me feedback. How did I do on that sponsorship message?
Gavin: I like it. I think for us finding talent has become a real challenge in the United States. Expectations are difficult. Fortunately, we live in San Diego so we’re able to attract talent, and we’re able to give them a nice work environment. But I was interested in it, I am interested in the Toptal service, particularly for helping us develop some apps and extensions for our products.
Andrew: You’re saying standalone products as opposed to having them do something that’s a big part of the project right now.
Gavin: Exactly. It’s sort of like where we need part-time, we just need to scale fast. We have a big project due, that sort of stuff.
Andrew: They’ve got great backing. I think Andreessen Horowitz is an investor. Horowitz, I’m just trying to remember. You know what? I’ve said that in the past, and I’m 90% sure. Let me confirm it right now. Let’s see. Yes, even CrunchBase confirms it. Cool. All right. So you said you decided to sell because the deal was fun. How did you come across iVillage?
Gavin: It was a small market back in 1998-1999, and they had a lot of press in the newspapers. It was a company that owned Parent Soup which was a large community for women. Back then content was king. Commerce really wasn’t featured as much, and I saw potential particularly with their new mother network of Parent Soup and they had lots of parent channels. I saw the potential of taking that community and providing them with product. And they had a store, which I thought was not properly focused on the market. It wasn’t servicing the needs of the consumer. It was a little bit too gift oriented, and we were much more practical product oriented, and I knew our volume was far larger than theirs.
So I called them up out of the blue, and I just said, “I think we could do well for each other. I know you’re going IPO. I think we can provide you with additional revenue. And we structured a deal that would reward us based on revenue. That actually kind of backfired because we started doing so much revenue that our valuation based upon the multiple that we negotiated would have put us as a majority owner in the new enterprise of iVillage, which was huge.
And at the time no one really valued eCommerce. So we had to actually downgrade our valuation relative to the original contract.
Andrew: You renegotiated in their favor?
Gavin: Yes, at the time we may have jeopardized the entire IPO because people remember. The mindset wasn’t that commerce was king, which maybe it is more today. Content was king back then. So we had to make the deal work.
Andrew: I see. I see. And so you knew that if you ended up… well, actually who cares if you ended up owning more than 50% of the company and an IPO. Isn’t that fantastic for you and sucks for the other inside investors and great for the market because they have you there.
Gavin: The answer is no.
Andrew: You wanted liquid shares. You wanted to be able to…
Gavin: But the answer is we were going to jeopardize the entire party. So we had massive venture capital partners, massive banks. Everybody wanted their share.
Andrew: I see. You guys were bootstrapped. It’s iVillage that had the massive investors.
Gavin: Exactly. As we are today.
Andrew: So were you able to sell your shares before the company lost its value?
Gavin: Yes, thank God.
Andrew: You did. How did you know? Why aren’t you… By the way, you’re being too humble. Why aren’t you saying, “Hey, you know what, this was 1999. I saw valuations were out of control. I decided I wanted to sell before stuff happened.” Why aren’t you saying it that way?
Gavin: You’re absolutely wrong. I wanted to stick with it. I believe that the model would keep growing, but fortunately I had some advisors who were really, really shrewd businessmen who recommended that I sell it first chance.
Andrew: Why?
Gavin: I prefer not to say. There was no insider news. It was just a cultural thing that…
Andrew: You mean, like you and your parents?
Gavin: Not my parents. My dad was one of the advisors, but there were other advisors. I don’t want to meant who they are. But it was just a general sense that the culture of iVillage wasn’t one that was compatible with our culture.
Andrew: Oh I see. Sell your shares, but still why sell your company to iVillage? You’re saying it was fun to do a deal. It doesn’t sound like…
Gavin: It didn’t start that way, it didn’t start that way.
Andrew: How did it start?
Gavin: So there’s a whole lock up period of six months. And so the transaction really went down at the minute of the IPO. So it was like half cash, half stock.
Andrew: But still why cash out if you were growing? Why cash out unless you believed that the internet bubble was going to burst?
Gavin: We didn’t know that. It was entirely a decision just on where the direction of the company was going. iBaby was managed by iVillage. It was a conflict. We had a different vision of where iBaby should go.
Andrew: Forgive me. I mean, why sell your parents’ company to this internet startup unless you were worried about something?
Gavin: No, remember we were on honeymoon for the first year. It was the honeymoon, and everyone was happy. It was after the IPO when they started to take over management the direction changed. So it was after the honeymoon that we decided that we wanted to be divorced. Our divorce had nothing to do with the market.
Andrew: But the idea to sell to iVillage in the first place sounds to me like it was an opportunity to take some money off the table here.
Gavin: Maybe. I wouldn’t say no, but I would say that there was a general opinion that content was king. They had the traffic, the eyeballs. By giving them more product we would generate an enormous opportunity.
Andrew: I see. You know what, I had a real chip on my shoulder with my first company because so many venture backed companies were getting a lot of attention, and they were acting like they knew everything about business, including what the future was going to hold. And I was making more money than they were, and no one was giving me any respect, and that really bugged me. I’m surprised that you weren’t bugged by that, that you didn’t say, “You guys have nothing. I should be buying them instead of them buying me.”
Gavin: You know, that was my opinion, but I was 24 years old.
Andrew: I see. And you still were just a shareholder. It was your parents’ company too.
Gavin: Yeah, yeah.
Andrew: I see. What’s the best thing that you did after you sold your company, personally fun? I don’t mean like start another company.
Gavin: My brother and I went on a trip together.
Andrew: Who did?
Gavin: We went to Egypt, Jordan, and to Israel.
Andrew: Who did?
Gavin: My brother and I.
Andrew: You and your brother. What made that such a great thing to do?
Gavin: The lessons I learned actually, the lessons I learned. I learned a great lesson in Egypt that sticks with me today. I’ll tell you a very quick story. So in Egypt we would jump in a cab, and we would say, “Please take us to, you know, the pyramids.” And we’d get in a cab, and they’d drop us off. Guess what? Not where the pyramids were.
So anyway this happened twice, and the lesson I learned was from my brother, Justin, who said, “Before you tell them where you want to go, you should get to know these people and introduce yourself. And ask them, my name is Gavin. I’m from San Diego. What is your name?” And the minute that we develop that rapport with the people and that connection, it changed the whole experience. And so that still stays with me today.
Andrew: Interesting. And so by getting in the cab and saying, “My name is Gavin. I’m here on a trip. What’s your name?” And getting to know them and then say I’m going to see the pyramids. You are more likely to get to the pyramids.
Gavin: We wouldn’t always get to the pyramids.
Andrew: How do you use that today?
Gavin: Just being polite and nice to everyone and slowing down a bit, listening better and communicating. Look people in the eye which I should be to the camera, but it’s only one eye.
Andrew: You were one of the first guests who where before an interview starts, I ask the guest, “How do I make this useful for you. What’s your goal with the interview and so on?” You’re one of the few guests who then turned around and said, “All right. Now, how do I make this useful for you, Andrew?” And we got into that. I saw that.
All right. So you sold the company. You got to travel. You got to buy a house, and then you went on and you started another company. I don’t know what it is, by the way, about. I get eCommerce. I think that you were one of the few people who understood that there was money in eCommerce and excitement in it. And it wasn’t just that content was king, there was a lot of other opportunities online. I’m wondering why maternity, why iHome? You’re a guy, as far as I know, at this point in the story you weren’t married, right?
Gavin: No.
Andrew: Why move on to maternity? Why not go on to other things?
Gavin: Well, [inaudible 00:36:14] So maternity was started while we were still operating iBaby.
Andrew: I see. Both 1999.
Gavin: So iMaternity leads to iBaby, leads to iHome. [inaudible 00:35:23], either way, can mix itself up. And the reason I did iHome was really to focus on the textile business, the bedding business. And iBaby, a substantial part of our business was in baby bedding. I had a non-compete for a year. So I wasn’t able to sell baby bedding, and they’re really wasn’t anyone selling adult bedding online well. So iHome was really targeting the home textile market for adults which is a large part of our business today.
Andrew: Of iHome?
Gavin: Selling bedding, textiles online.
Andrew: Gotcha. So iHome, I was going through the internet archive, year after year, looking at how the website changed. And then suddenly there was a note that said, “Sorry iHome is gone. If you have any trouble with your orders, contact us.” What happened?
Gavin: We were acquired by the former Linens & Things.
Andrew: I see. All right. And that was another bootstrap company?
Gavin: No, that was venture backed. It had tons of dough.
Andrew: I see. How did you do there compared to the previous business or worse?
Gavin: It wasn’t a win.
Andrew: I see. All right. And now you are at Acenda, and I’m just realizing that, first of all, you have this great background on you. And second, somehow the letters are reversed, like it’s a mirror reflection. Don’t adjust it. Keep it like this. Joe, the editor, will adjust it.
Gavin: No, I can fix it because it’s very easy to fix. Would you like me to?
Andrew: If you do, then when Joe fixes it, it’ll go back. But I can ask Joe…
Gavin: In the beginning they were in the right way.
Andrew: Then go back and adjust it now. Then Joe doesn’t have to do anything.
Gavin: Sorry, Joe.
Andrew: What software are you using to do this?
Gavin: I’m using Logitech’s Web Cam Controller.
Andrew: Are you on a PC?
Gavin: I have both, yes.
Andrew: There we go.
Gavin: No problem.
Andrew: There, perfect.
Gavin: Is that at my left?
Andrew: So here’s the thing. We’re talking about, at the beginning of this interview, about how you created a new eCommerce platform, a new content management tool that’s really good for eCommerce. Hasn’t this already been solved? I mean, Gavin, we’ve got Shopify. We’ve got Magento.
Gavin: Great product.
Andrew: Why does the world need another one?
Gavin: Well, Andrew, I will tell you from my experience, why the world needs another one. So I’m going to start with giving you a picture of today’s eCommerce. On one side of the spectrum we have Amazon almost eclipsing 100 billion in revenue online. And if you look at the internet retailers top 500, at the bottom number 500 only does 10 million online. You know, it’s a respectable number.
But when you think about the 10 million that they’re doing online, and I know this because we run lots of these sites. The majority of that $10 million is actually coming from Amazon and eBay. So that their actual dot-com web store sales is likely to be half that number, if not less. Let’s call it $2 million online. So it’s about 25% of the total opportunity. And so we developed Acenda understanding that eCommerce is made up of islands of shoppers.
So there’s an island of shoppers on Amazon. There’s an island of shoppers on eBay. There’s an island on Walmart. There’s an island on your dotcom website. There’s an island in Facebook. Some islands are bigger than other islands. And it’s important that you have a presence in all of these different places. So how to do that? There are great eCommerce platforms out there for managing your web store. Remember, that’s only 25% of the total opportunity.
Andrew: Because you’re saying, look, all these places that I’ve mentioned, like Shopify, are meant to sell on your personal site. But the bigger independent guys are not just selling on their site, they’re also selling on Amazon and eBay and so on.
Gavin: You need to, and then so what’s come along is middleware. So there’s ChannelAdvisor. There’s Mercent. There’s a dozen of these providers. There’s even Ship Station, Ship Works, that allow you to have a presence outside of your own web store. But now what you’re creating is middleware, another piece of software to manage.
Andrew: see. So you’re saying if I’m on Shopify and I just did a Google search for Shopify, eBay, and Amazon, and I came up with the page that says “Integrating your website with eBay and Amazon.” You’re saying that that is not built into Shopify as experience, I’d need middleware to do that.
Gavin: You need a plug-in, and now you have the management plug-in, blah, blah, blah, and you have to pay for the plug-in. And, again, you start to build a very Frankenstein solution which, A, relies on other third party developers connecting to another software. It’s just not native.
Andrew: I see.
Gavin: This isn’t just like a feature. This is a core function of your business. So it’s not just having an eBay store and an Amazon store. Literally, that’s not even hard to do. It’s efficiently managing an eBay and Amazon store. And what I mean by that is I’ll give you an example.
So a pair of scissors, Scotch scissors. If I go on and I haven’t done this example, but let’s just run with it for a second. If I were to list this pair of scissors on Amazon, I’m probably going to be competing with 30, 50 other retailers also selling this exact pair of scissors. How do I win? Well, I have to lower my price. It doesn’t guarantee me the buy box. In effect, I’m not going to do any volume by selling this scissor on Amazon. There’s no volume in the near term.
Andrew: In fact, I do see some pairs of scissors here, and they’re sold. They look like the ones that you’re holding up, and it’s $10.63 and if I click the cart I get it at that price. But that is just the best price. If I click on the new offers, I can see someone else is offering it at $9.92. Someone else is offering it at $7.30 plus $7.49 shipping. So they’re trying to get away with something. So all these guys are competing to make a sale, and only one of them is going to get the sale because that’s the one that Amazon is showing. And that’s the problem.
Gavin: Some of those other guys can get lucky, Every now and then someone will throw them a buck. So I’m not proposing anyone does this, but there are ways to list this item again without competing with those others.
Andrew: Let’s talk about that because that’s the part that I thought was especially interesting before we started talking.
Gavin: Sure. So what you could is you could go online at a dollar or a couple cents, depending on what service you want to use. You can have a new UPC created or hard code created and put the site up. Now, you’re going to list it on Amazon. They’re going to hate you for doing this, but you’re listing this pair of scissors on Amazon not competing with anyone else.
Andrew: Because it’s got its own unique UPC symbol, and I’ve just invented it. So I’m the only one who’s selling this thing.
Gavin: Correct, and maybe you don’t take a photo of it this way, you take a photo of it this way. And have a description.
Andrew: So it doesn’t look the same way. I see.
Gavin: You know, they’re going to try to bust you, but it’s very likely that you’ll have, you know…
Andrew: I had no idea this was going on.
Gavin: It’s happened to me once.
Andrew: Now, it explains why. Actually, you know what, now it explains why when I do the exact same search on Amazon I can see… I was going to say three, but as I keep scrolling I see multiple people selling the exact same pair of scissors at different prices, slightly different description. I see. So that’s what going on in the Amazon store. I had no idea.
Gavin: So how do you do that? Well, there are multiple ways of doing that. How do you list this item on Amazon one way, and how do you sell it on your web store with the correct UPC? You don’t want to have multiple UPCs in your system to mess up your inventory counts. So I’m not picking on any one provider, but traditionally eCommerce solutions have just one space for each skew. So you’re going to have the pair of scissors, the bar code, the price, the description. And if you want to create another one, you have to create another skew. So you have two skews for the same pair of scissors.
With Acenda you are able to create an Amazon skew field, an Amazon price, an Amazon description, an Amazon image that’s going to keep everything neat and tidy in your system.
Andrew: I see. And Acenda still knows it’s all one product in your inventory, and if it sells on Amazon with one UPC and on your system with another and you only have two, it knows you’ve run out and you’re not overselling it. And it tells you how well the scissors have done. All right. And then, of course, this is not meant just for scissors it’s meant for other products too. I get it.
All right. Let me ask you one other question. Two others, but before I do, I should say something about my sponsor because it’s very important for people to hear this. These guys are not sponsoring for more than, let’s see, four episodes. So write this down because you’re going to thank me.
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Write that down. You’ll need it in the future or one of your friends will or one of your clients will, and they’ll be grateful to you for having introduced them to DesignCrowd.com/Mixergy. I’m grateful to them for sponsoring.
So Gavin, the next thing I want to know about was Walmart. Individuals can actually sell on Walmart?
Gavin: Well, Walmart and Amazon and eBay are channels you only want to sell on when you’ve got your ducks in a row from a fulfillment and product and price standpoint. So we will be inviting the premier merchants on Acenda into our Walmart integration.
Andrew: So you have an integration, and when someone uses your platform, they have an opportunity to list themselves on Walmart. Actually, I don’t know how Walmart works. I never thought about it. Can someone just go to Walmart and start listing their products there, the way we list our products on Amazon?
Gavin: No.
Andrew: No? What’s the process for getting listed on Walmart?
Gavin: It’s very difficult to be listed on Walmart.
Andrew: What is that process like? You have to start applying?
Gavin: You have to start what?
Andrew: Let’s see. I just Googled “Sell on Walmart marketplace?” On boy, okay. What is the process?
Gavin: It’s a very difficult process, and there are only 169 merchants selling on Walmart.com.
Andrew: I see. All right. And if we… actually, why would we even want to sell on Walmart? What about Instagram or Facebook? That’s where everyone is. Shouldn’t we be trying to sell on Facebook and Instagram?
Gavin: You should sell everywhere, Andrew.
Andrew: All right.
Gavin: But if you look at the numbers, Amazon does 88 billion online. Walmart does 12 to 15 billion online. The next closest competitor, like number 50, does 350. Number 100 is 150, 250. It drops astronomically. So yes, you can “waste your time” with Instagram and Facebook, or you could do real volume with Walmart, Amazon.
Andrew: You’re saying they’re not as sexy. We’re not hearing as much about them, but they are aware of the customer right now.
Gavin: I’m not going to go as far as that because I hear success stories with Instagram and Facebook, and there are success stories out there. I just haven’t been able to make it work. But I have been able to make serious money using the bigger channels and C Series, by the way. This is like serious volume.
Andrew: What do you mean? Give me an example.
Gavin: Well, one of the things is our customers choose at this time not to list on Internet Retailer Top 500. It tends to attract patent troll, lawsuits, and other problems.
Andrew: I see. You’re saying that there are people who are using your platform. They’re on Acenda, so you get to see their revenues. You get to see how well they’re doing, but they’re not listing themselves on these lists of Top 500 Sites because they don’t need the attention. They don’t want the patent trolls. So you’re seeing that there’s a lot more revenue out there in eCommerce than most of us know about.
Gavin: Correct. I think a lot of the, particularly, the smaller companies are self-promoting to try and raise venture money, etcetera. I don’t know their motivation, but I don’t see a lot of motivation going out to the world saying, “Hey, we’re successful. Come compete with us.”
The other thing is it’s very misleading because, like I mentioned before, the majority of the smaller retailers’ revenue is still coming from Amazon and eBay. So while they show they’re doing 10 or $20 million, the fact is that they’re usually that 25% of that actual number is what they’re doing on their website. Not to discount what they’re doing on their website as a waste of time, it still can be very efficient and profitable. But it’s only part of the entire equation.
Andrew: By the way, I just want to be clear. When you say that Amazon is doing $100 million a year…
Gavin: A hundred billion.
Andrew: It’s roughly like $88 billion last year, and that includes, doesn’t it, the Amazon Web Services and everything else that they do. It’s not just retail.
Gavin: These are numbers that are Internet Retailer Top 500. I don’t know how to verify it.
Andrew: I think from just looking at their annual report, I think it’s top line. They did 88.99 billion last year, roughly $89 billion. And I think that includes everything that they do.
Gavin: It may, but it’s astronomically larger than the closest competitor, which is astronomically larger than the next. I mean, it falls off the cliff.
Andrew: How did you get your first customer to Acenda?
Gavin: Oh my God. I feel sorry for them. You know what though, I’ll tell you the truth. It was a customer that we worked very closely with. There was a lot of trust that we helped make more successful, and the minute we switched them from their former system to our current system, every metric went through the roof, conversions.
Andrew: What’s the problem though when you… How you get them before we get into issues. How did you get a client when you’re building a brand new eCommerce platform that people hadn’t used before? How do you get one person to trust their business to it?
Gavin: They owed us a lot of money.
Andrew: For doing what?
Gavin: We were running their website prior on a different platform, and this was like… They just owed us a lot of money.
Andrew: I see.
Gavin: So we struck a compromise where we said, “Look, you’re going to be the guinea pig.” We already had test sites up. We weren’t throwing them to the sharks.
Andrew: You had your own test sites up.
Gavin: We had our own test sites up. We were transacting, but at the same time there are bugs that you won’t find, nuances, but independent of all those bugs which we’ve been in beta for, I think, about nine months. Today’s the actual launch day of Acenda, crazy. But we’ve been in beta testing actual millions of dollars of transactions. It’s been through the wringer.
Andrew: Let me just be clear. TorreyCommerce is one of your businesses, and that’s a consulting company where you help eCommerce businesses, right?
Gavin: Yeah.
Andrew: Just looking at your home page, I can see Parents, Better Homes and Gardens, NBC. Does that mean they are clients of yours, or places where you place your products?
Gavin: Both.
Andrew: So that’s where you had a client who didn’t pay you, and therefore became the first customer or the first user of Acenda. All right. Did you also start your own stores on Acenda? Ones that you owned?
Gavin: There’s always [inaudible 00:54:03] in staging and production testing going on, automation and our own.
Andrew: Were there actual customers coming in? Did you have a multimillion dollar business of your own out of Acenda?
Gavin: No, no.
Andrew: Oh I see, okay. Than you had the first client. You were starting to say there was some issues. Talk about the biggest one. What’s one that you feel like, “All right, he had to put up with it, but it’s a little painful to look back on?”
Gavin: I would say that it’s junk in, junk out. So bringing in their original product database. Items weren’t entered properly into Acenda, which is a very, very flexible powerful system. It’s not as rigid as the former system was. I think that products just weren’t merchandised well. And, again, it’s really about merchandising.
Andrew: What do you mean the products weren’t merchandised well?
Gavin: They weren’t listed in the category pages in a very user friendly manner.
Andrew: I see.
Gavin: There’s never any downtime. These were just growing pains. We also were improving where we saw some weaknesses. It’s an evolving system. It’s continuously updated. And I’m very grateful to every engineer that’s sweated his or hers days and nights with this project. It’s taken us four years to get here.
Andrew: So I’m going to wrap up with this. I could have sworn that I saw somewhere on… there it is. Here’s a description from your site. “We are a feature rich eCommerce platform designed for mid to large size retailers with annual online revenue of $5 to $20 million. And it’s simple enough for the next brilliant startup to use too.” Is this just meant for the $5 to $20 million based businesses, or is it also for a new entrepreneur who wants to launch an eCommerce site?
Gavin: It’s for the latter really. It’s for everyone in that $5 to $25 million range. We consider those to be Tier 3 retailers, and it’s very simple to use. It’s free right now for the first…
Andrew: Two years.
Gavin: …two years and possibly longer. It’s a very easy to use system. The reason why I would say we’re targeting the larger retailers… First of all, you can… Our tagline is Launch a $10 billion online business in less than 15 minutes. And we mean that. I mean, you can launch a site in core products, had images resized, had a domain pointing with SSL, be on Amazon, be on eBay, integrated with ship station, APIs to everything in less than 15 minutes. It’s like, you don’t have to do a thing.
Andrew: Even if I’m just starting out in eCommerce, I could do that.
Gavin: Yes, in 15…
Andrew: You want the guy that’s starting out also.
Gavin: Of course.
Andrew: All right. I always assumed that Acenda was… I mean, not always. I don’t know the company that long, but I just assumed Acenda was for the heavy hitters, the people who are like where iBaby was when you were building it.
Gavin: You know, I would say we want to attract people who are serious. I don’t want to pick on our competitors, but a lot of them are like gym memberships, you know what I mean? People are paying 80 bucks a month. Half of them don’t even use the site.
Andrew: Wasn’t that a great business? Sometimes I look back and I know exactly what you mean. These are people who paid for their store. I don’t know what the price is per month, but they have their store up. They put everything in there, and they stop selling stuff on it because things just aren’t going well. They couldn’t get any customers, but they don’t want to take the store down because they put so much effort into it. So meanwhile, they’re paying monthly fees to keep those sites up.
Gavin: And they do no volume. It’s very sad. So it’s not about their website. Their website is great. The tools are phenomenal, but they have problems either in merchandising capital, people, politics. So we really want the people that really understand…
Andrew: You don’t want that customer. You want the person who’s going to be a real entrepreneur, really building the business, continuing to grow. But those are the guys you want to spend your attention on.
Gavin: When they’re ready to take their training wheels off, that’s when they come to us.
Andrew: Well, it’s a phenomenal business. Congratulations on all of the success. I’m really excited that we were willing to come on here and talk about a business that you launched back in the ’90s. I think a lot of people think, “It’s so far ago. Who care anymore?” I’ll tell you who cares, me because what happened in the past repeats itself today. Right now there’s somebody who’s creating an eCommerce something or other for the Apple Watch that is really way ahead of its time, the way you were ahead of your time. But there’s a bunch of people that are going to experiment. They’re going to buy on it just because they’re thinking ahead of everyone else.
So I want to hear how you did it. I want to learn from you, and right now there’s somebody who’s selling on Walmart or going to be because of Acenda. I want to introduce them to it. Cool. Thank you so much for doing this interview. Thank you all for being a part of it. Acenda is the website, A-C-E-N-D-A. You see it right there on his backdrop.
My sponsors are Design Crowd and Toptal. I’m really grateful to them. If you’re looking for a designer, go to DesignCrowd.com/Mixergy. If you’re looking for a developer, go to Toptal.com/Mixergy.
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Gavin, thanks for doing this interview.
Gavin: Thank you.
Andrew: Bye everyone. Thanks for listening.
