Bootstrapping to $30 Million from Florida: SproutLoud CEO Jared Shusterman (Part 3)

Sramana Mitra: What’s the next major milestone? Put this in chronological order for me. Where are we now?

Jared Shusterman: We are going into December 2005. I was fortunate enough to be introduced to a jewelry manufacturer. I talked about what I was doing in terms of building marketing programs. He said, “Interesting. I like what you’re doing. What ends up happening is they’ll buy products from me and if they can’t sell it, they end up returning it. I’m going to give you a list of your customers. Would you help my retailers advertise the products that I’m selling? On top of that, we’ll pay for up to 50% of anything you guys spend.”

That’s where the light bulb really went off. We were now calling on behalf of a manufacturer that they already did business with. I had credibility because I was calling on behalf of their program. On top of that, someone else was subsidizing the cost of the program. That’s where the business model, for me, started changing. Instead of going after all of these small businesses and going from a bottoms-up approach, the idea was to go out and partner with these other manufacturers to help their jewelry retailers sell more products by getting their advertising into the local communities.

Because of that top-down model, it was one of the key mechanisms for us to be able to go out and grow on a bootstrapped investment because we didn’t need a lot of money in marketing. Once we partnered with these entities, they were doing the marketing and word-of-mouth for us where people were coming to us to spend money on their advertising.

Sramana Mitra: I think your business is somewhat complicated. I’m not sure if I got everything. Your original idea was to do email marketing. It’s morphed dramatically to a completely different zone. In this stage that you’re describing right now, what were you doing? You were taking calls on behalf of these retailers and selling on the phone?

Jared Shusterman: No. The original idea was for small businesses to buy direct mail marketing from us. In that, we were vertically focused on the jewelry industry. We’d have to get all of these small businesses to sign up. We met with the jewelry manufacturer.

Let’s say Rolex watches. They aren’t a client. They’d say to us, “I love how you’re helping jewelry retailers advertise their business. Can you help me help them advertise my products that I sell to them?” Because of that, Rolex would give us a list of their retailers. We would call on them right before the holiday season. We say, “I’m calling from Rolex Christmas Marketing program. Do you have a few minutes?” I had instant credibility.

On top of that, Rolex was paying for 50% of the advertising that these guys signed up for. It’s what’s called co-opt marketing. The business model changed from that point. Instead of having to spend a lot of money advertising to all of these small businesses to get them signed up on these services, the idea was to approach manufacturer after manufacturer to get them to give us their customer list and us to build these marketing programs on their behalf. A lot of times these programs came with co-opt marketing dollars so that the brand would co-subsidize with the retailer.

Sramana Mitra: What is your business model in this food chain? I understand the brand is paying co-opt marketing dollars. The retailer is taking advantage of that and putting in the rest of marketing dollars to market to their respective communities. Who is paying you and how much are you getting paid? What is the monetization model?

Jared Shusterman: Back then, we were making money on the actual marketing service that we were selling. If it was a direct mail package for $500 a month, it just became a form of collection. 50% might have been paid by the retailer and the other 50% would be paid by the manufacturer. We would then use that money to go out and run these marketing services and make money on that.

This segment is part 3 in the series : Bootstrapping to $30 Million from Florida: SproutLoud CEO Jared Shusterman
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