A Serial Entrepreneur’s Playbook: ChannelAdvisor CEO Scot Wingo (Part 3)

SM: How did you fund the AuctionRover.com? Did you bootstrap that as well?

SW: We funded ourselves for a long time and eventually raised venture capital to try to sustain marketing as well as to scale faster.

SM: How much money did you put in on your own, and how far did that get you before you went out to raise money?

SW: We put in $2 million to $4 million. This was in the heyday of the dot-coms. We raised money because people were offering us term sheets. The more we said no, the more people wanted to invest. Once we launched, everyone was very excited about what we were doing. We received term sheets without even trying. The terms were to the point where we could raise $3 million with little dilution.

SM: Were you still based in North Carolina?

SW: Yes, it was 1999 and we were based in North Carolina.

SM: You raised money in late 1999 and the market crashed in 2000. What did you do?

SW: We had always been fascinated by GoTo.com. They understood paid search, which was novel back then. The majority of search engines were sponsored by banner ads and this company made money on the clicks. From an economic standpoint, relevancy helps. People are willing to pay more for relevant offers in e-commerce. We applied that same model to AuctionRover. In early 2000 we started receiving acquisition offers that did not make sense for us. Then GoTo called and made an offer; we felt it was the best home for what we had built. We sold the company to them in early 2000 before the correction hit.

SM: Was GoTo still a private company?

SW: They were a public company by then. But they went public in late 1998. They had quite a bit of revenue compared to a lot of other Internet companies. They had a business model and were able to monetize.

SM: How much you sell the option company for?

SW: That was about $120 million.

SM: Did you have revenue?

SW: We didn’t have any revenue.

SM: So you got the end of the bubble?

SW: We did.

SM: What was your next move?

SW: We rode out the storm with GoTo.com, which was nice because we had a lot more resources. They took over the search engine part of what we did and integrated a lot of the technologies into their search experience. That left us with a large headcount and little work. We started to experiment a little bit. Initially AuctionRover had two business models, buying and selling. We had only been able to execute on the buying part, so we started experimenting on the selling side of things.

We started focusing on helping eBay sellers. We came out with a small business selling application, and we had a lot of success there. Initially we offered it free and then we started to charge for it. It was not working out well because very small businesses did not sell a lot so they did not want to pay a lot. Customer service was very expensive and difficult to manage.

The epiphany that ultimately became ChannelAdvisor happened one day when we were looking at reports about what our customers were doing. Our very first seller had been a little seller in Iowa named Granny Goose. She sold $1,000 worth of handmade stuff. I was shocked to see that Sun Microsystems was our number one seller and that they had sold over $1 million of servers on eBay. They never called our customer service and we never heard from them. They just signed up for software and used it. That was interesting on many levels. First, they were crushing Granny Goose. Second, it opened our eyes to enterprises selling on eBay.

This segment is part 3 in the series : A Serial Entrepreneur’s Playbook: ChannelAdvisor CEO Scot Wingo
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