Bootstrapping to $55 Million from Rural Minnesota: Tom Fallenstein, CEO of Fun.com (Part 2)

Sramana Mitra: You joined the costume business in 2004?

Tom Fallenstein: Yes, I was the only one doing it full-time. It was only a seasonal business up until 2002 and then I built a website to see if I could make it a full-time job. I was doing extra orders basically through college out of my dorm room, which was just extra cash for going out. When I graduated, I wanted to do it full-time. In October, everything exploded.

Sramana Mitra: What happened that October?

Tom Fallenstein: I graduated in December of 2004. I built three new websites: wizardofozcostumes.com, expandedflappercostumes.com, and startwarscostumes.com. I bought inventory and was keeping it at my mom’s garage. I hired my first employee to help build the websites with me. I was just working out of my mom’s kitchen at that time. In October, we saw how many people searched online for costumes at that point.

Sramana Mitra: This was 2005 October?

Tom Fallenstein: Yes.

Sramana Mitra: The investment that you made to buy this inventory was based on the profits you were making from the business or did you put in extra money?

Tom Fallenstein: I borrowed $5,000 from my parents to buy the first inventory. I knew the risk was pretty small because I knew what we were renting the costumes for and what I could buy them for at wholesale. I knew the worst case scenario was I could sell these costumes on eBay and break even. That’s how I justified it. The costume industry is actually unique in that a lot of the vendors allow you to buy inventory and let you pay them by November 10th. They know that you don’t bring in any money until October. It’s a very unique industry.

Sramana Mitra: At that point, customer acquisition was all organic search? You said people were searching for Halloween costumes online and that’s the demand that you tapped into.

Tom Fallenstein: At that point, it was all free. Google was actually residing within Yahoo’s directory. Everything was free and there were very few results when someone searched for Star Wars costumes.

Sramana Mitra: You didn’t have a lot of competition and organic search results were yielding very high ranking for you.

Tom Fallenstein: Right. I had a keyword-exact domain name. You could build a couple of links built to that domain and it was ranked in almost a month or two.

Sramana Mitra: How much did you do in 2005?

Tom Fallenstein: We did $250,000. We had to unplug the phones. We couldn’t help any more people. They were calling to place orders. I was getting emails to place orders. I was overselling products. My sister, mom, and dad were helping ship products. My friends were over late nights. We couldn’t even keep up with the orders. I had to cancel a few orders. We did $250,000. That was the max capacity.

This segment is part 2 in the series : Bootstrapping to $55 Million from Rural Minnesota: Tom Fallenstein, CEO of Fun.com
1 2 3 4 5 6 7