Getting to Velocity: TeePublic Founder Adam Schwartz (Part 4)

Sramana Mitra: What was the structure of how you would do this buyout? What proposal was on the table and how did you do the financial engineering of this buyout?

Adam Schwartz: It was somewhat complicated actually. In all honesty, my partner Josh orchestrated it because he was already at IAC. Effectively, IAC owed Josh money from his previous deal. The way that we worked it out, in part, was that in exchange for the money that was owed, we would get the business out.

Sramana Mitra: Did Josh own most of the company? What was your deal?

Adam Schwartz: At that time, Josh owned most of the company and I had a a minority equity stake.

Sramana Mitra: You went to work for BustedTees basically.

Adam Schwartz: I started as the GM. When we got it out, he was like, “I haven’t really touched this business since we started it. Let’s figure this thing out.” Our assumption in buying it was that IAC is a really big company and the back-end is probably in really good order. The real game is going to be how to grow it. It had unrealized potential. It was a small company in the IAC ecosystem.

The reality was the supply chain was not in good shape. There were huge issues. When we bought the business, 150,000 shirts were miscut by the supplier. They were overpaying on the cost of the product. We spent a year auditing everything in the business from the supply chain to the marketing. There had never been an A/B test run nor was any retention work done. It was under optimized. We spent a year rebuilding the foundation of the business. Then the next year, we started to see the fruits of that labor.

Our supply chain quickened. Our cost went down. We started growing between 2011 to 2014. We grew the business every year by 40%. We did it profitably. Most of that was done by building out a really comprehensive and holistic marketing strategy that took into consideration a customer from a point-of-click, all the way through to their subsequent visits of the site. We built a data system that internally could tell us not only who our customer is and what their lifetime value is, but what their behavioural patterns as a buyer are and what marketing channels drove them.

That allowed us to figure out what we could afford to spend to acquire customers from different marketing channels, what a good customer looked like, and how we would take that behaviour and create a model and try to pull on marketing levers to get our customers to behave and look like that. It was a lot of customer acquisition and a lot of landing page optimization. I’m proud of that because I think it’s real work and because we did it profitably. When you’re venture-backed and there’s a lot of pressure to grow, there’s a tendency to spend to acquire customers. It’s tough when you try to back it out and make it work. BustedTees was negatively growing from 2009 to 2011. We got it back on the right track and got it beyond where it was at its height back in 2008.

Sramana Mitra: As a point of that outcome, what was the revenue level?

Adam Schwartz: It’s up to $8 million.

Sramana Mitra: What year was that again?

Adam Schwartz: Now, it’s the end of 2013.

This segment is part 4 in the series : Getting to Velocity: TeePublic Founder Adam Schwartz
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