Building A Niche E-Commerce Powerhouse: Coastal Contacts CEO Roger Hardy (Part 6)

Sramana: What specifically did you do to encourage your customers to make referrals?

Roger Hardy: I would love to tell you that we split the atom, but it was just a 10% coupon that they could share with their friends.

Sramana: Essentially you gave them a small financial incentive.

Roger Hardy: Exactly, and at some points we did not even give them an incentive. At one point we just put a note in the box that said, “Thank you for your business, if you have enjoyed this experience please tell a friend about us.” That really spurred our business. When we measured our new customers, we found that 30% came from referrals. That was really a big accelerator. Contact lenses are an annuity stream. As long as we keep serving our customers at a great price, they will keep coming back to us. We did it cheaper and faster than competitors.

Sramana: What did your revenue level grow to in 2005 and 2006?

Roger Hardy: Somewhere in the $50 million to $60 million range.

Sramana: What was the next strategic maneuver that you made which allowed you to go from there to your current volume of $155 million?

Roger Hardy In 2004, we were pleased with our acquisition. In 2006, we bought two more companies, one in Holland and one in Japan. Those acquisitions gave us a leadership position in both of those markets.

Sramana: Did you make those acquisitions with internally generated money, or did you have to raise more money?

Roger Hardy: We did raise a bit more money. We raised a total of $42 million through that time, and of that $42 million we have $20 million which have not been spent.

Sramana: Did you raise all of your money on the Canadian Venture Exchange?

Roger Hardy: We did.

Sramana: I would like to understand more about the Venture Exchange. Why did you choose to raise money there instead of through venture capitalists?

Roger Hardy: We decided to use the Canadian Venture Exchange predominantly because it was the avenue that we felt offered the best valuation for the existing shareholders. There is a fairly developed Venture Exchange market in Canada for smaller funding. I think the venture exchange model is more common in Canada than the venture investing model that you have in Silicon Valley. There are more junior exchange listing companies in Canada, and it happens quite frequently.

Sramana: Who are the investors in the Venture Exchange?

Roger Hardy: There are a number of institutional investors as well as some U.S.  and European investors. The Canadian commodities and resource markets as well as the junior mining market are fairly developed. There is a good corporate governance climate that our junior investors feel good about. It is really good access to capital for us. I had flown to San Francisco, New York, and Boston and had met with a number of private investors. None was willing to give me the valuation that I could get by doing the IPO.

This segment is part 6 in the series : Building A Niche E-Commerce Powerhouse: Coastal Contacts CEO Roger Hardy
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