innerTee: Hybrid Web 3.0

innerTee is a design community and customized apparel service. It offers users the ability to create highly customized screen printed apparel using artwork that has been submitted by members of the innerTee community. It compensates artists for submitted artwork that is approved for use, and promotes their work on the innerTee site, as well as by providing them with tools to promote their artwork & apparel mixes on personal websites, blogs and MySpace.

It’s a great example of a hybrid business that leverages Web 3.0 functionality to market a “physical” service: screen printing T-shirts. It’s not rocket science, and we have seen other variations on the theme : business cards, photo books, etc.

In fact, Cafepress is one of the biggest successes in the category, funded by Sequoia, and is profitable. Zazzle, funded by KP is the other big competitor.

CafePress is an online marketplace that offers sellers complete e-commerce services to independently create and sell a wide variety of products, and offers buyers unique merchandise across virtually every topic. Launched in 1999, CafePress.com has empowered individuals, organizations and businesses to create, buy and sell customized merchandise online using the company’s unique print-on-demand and e-commerce services. Today, CafePress.com is a growing network of over 2.5 million members who have unleashed their creativity to transform their artwork and ideas into unique gifts and new revenue streams. Members have created over 35 million unique products on customizable merchandise ranging from apparel, home and office accessories to music and data CDs and books to prints, posters and cards.

Given that backdrop, what does a little company like innerTee do? Their average community member tends to be between 15-25 years old. About 20% of the users are female and over 30% are from outside the USA.

The company was founded as a side project from the day jobs of the founders, Miles Sims and Jamie Fisher. They experimented with various screen-printing methods and developed a production/fulfillment process that they have been utilizing to sell a line of apparel on Amazon.com. “We reached a point where we felt the production process had far more selling potential than our little brand and we worked through some concepts for a few months. Eventually, innerTee was born.”

The company is 100% Bootstrapped using revenue from their existing business and the founders’ own personal funds. They launched the site in December ’06 and focused on post-launch site / design tool improvements as well as continued community building. Sales are picking up with each passing day and they are about to embark on our next phase of site improvements including a digg-like voting system for apparel mixes by the end of March.

Traffic in March should be just under 40k unique visitors, up over 60% from the previous month for both vistors and pageviews (just over 200k). innerTee was on the cnet home page a few weeks ago and a finalist for the SXSW Web Awards but they haven’t done any formal marketing to date. They are selling a few hundred shirts a month and the shirts range from $13.00 to $30.00 depending on the level of customization. Profit margins are around 60-70% per shirt, again varying based on the customization.

When asked, “Are you looking to raise another round of funding? What are your plans for the company?” the answer is: “TBD. We will continue to self-fund in the immediate future however we fully realize that there may be a time in the not so distant future where an influx of capital will be desired to ramp up to another level. We have a number of plans for innerTee beyond what is apparent on the site that may require outside help, however until the site/community reach a point of maturation we will most likely stay the course.”

In my recent post, Is Bootstrapping Becoming Sexy Again? I introduced the concept, “Built to Enjoy”. In reviewing innerTee’s business, my instinct says, this is a business that can be a nice “Built to Enjoy”. Traffic can easily ramp up to 250k uniques without too much marketing, and unit sales can also ramp up to a few thousands a month, offering a nice cash flow.

On the other hand, as evidence suggests, both Cafepress and Zazzle are venture funded success stories, and the scalability does exist in the business model. How the company differentiates – remains to be seen, and will determine the company building strategy, and whether it would be venture fundable.

As far as the Hybrid Web 3.0 business model is concerned, I would really like to see more of these, in other categories such as Travel (e.g. Unique chain of Hotels that create a community around its core theme such as Forest Lodges, or Tea Estate Bungalows in the Himalayas), Music & Dance (e.g. Nightclub chain around the Argentine Tango), and also in Apparel / Fashion, which happens to be innerTee’s segment, and they could leverage their roots to build up on that theme. In each case, I would like to see a good 4C (Context, Community, Content, Commerce), VS (Vertical Search), and Personalization (P) strategy, so that the user experience is comprehensive, as opposed to fragmented.