Bootstrap First, Raise Money Later: Art.com CEO Josh Chodniewicz (Part 4)

Sramana Mitra: We are now in 2004?

Josh Chodniewicz: 2001 was when we acquired Art.com. Then 2004 was when we raised $30 million and combined it with our leading competitor at that time called AllPosters. I called up the other CEO and said, “We can shoot bullets at each other or we can join and shoot them at the rest of the world.” We put the businesses together in 2005.

Sramana Mitra: You ran the company?

Josh Chodniewicz: I did not. The other gentleman did. I was on the Board.

Sramana Mitra: All these three entities combined was a print business. It was not original art.

Josh Chodniewicz: It was not original art. In 2004, I had launched an original art business inside art.com. We built a platform for artists to connect and tell the world everything they’d like to and showcase their artwork. We spent about under a million to build it. Six months into it, I had 75,000 artists signed up and over 400,000 original works. It was a wonderful product. That was what I said I wanted to do originally.

Sramana Mitra: What happened to art.com eventually?

Josh Chodniewicz: About three years ago, Walmart acquired Art.com.

Sramana Mitra: Between 2005 when you went on the Board to 2018, it was just organic growth?

Josh Chodniewicz: Yes.

It’s interesting to see what happens to the company when the founders leave. It is dramatic.

Josh Chodniewicz

You put operators in there. We didn’t have the experience that we would have liked to see. I was the remaining founder on the Board. To watch hired guns run the business, it did well in certain areas. In other areas, it didn’t do as well. A lot of innovation goes away.

Sramana Mitra: Passion is what goes away often. It’s a different way of building businesses.

Josh Chodniewicz: There are a lot of businesses that can still do very well with the right people.

Sramana Mitra: You had the customer acquisition figured out. You had the product-market fit. Executing on those gives a certain amount of growth.

Josh Chodniewicz: Exactly. Then you have the rising tide of the internet. We never saw the massive $10 billion valuations.

Sramana Mitra: What was the peak revenue?

Josh Chodniewicz: A couple of hundred million.

Sramana Mitra: When Walmart acquired the company, what kind of price did they pay?

Josh Chodniewicz: It was on the downtrend. The Walmart acquisition was not a good one. It was not something I voted for frankly. It wasn’t beneficial to shareholders. It’s interesting as I think about the life of an organization like that. You saw Art.com in the hands of Getty. It didn’t work. Spending $300 million on a business that now has $2 million in revenue and losing $2 million a week.

Sramana Mitra: The problem is this is what’s happening again. That bubble cycle of getting to unicorn status in six months and ridiculous liquidation preferences has come back. The market is going through another bubble cycle.

Josh Chodniewicz: I remember having a term sheet in 1998. We talked to a few venture firms. I remember having this term sheet for $5 million. I forgot how much exactly. The gentleman also told us that we would be spending it on marketing. They started telling us that we were going to use this on this kind of ads. None of them works. I may have done it wrong. On the other side of it, I could have been spending that on building a brand without the substance.

Sramana Mitra: You could have gotten a good exit as the other guys did.

Josh Chodniewicz: Exactly.

Sramana Mitra: I hate businesses like that.

Josh Chodniewicz: I have a hard time building business like that. I watched my father build a business. He built a house for a certain amount of money and sold it for more. That’s a profitable mindset. If you build a product for $400 and sell them for $80, maybe you’ll sell a lot, but it won’t work.

Sramana Mitra: The internet has unfortunately given rise to this kind of scammy behavior.

This segment is part 4 in the series : Bootstrap First, Raise Money Later: Art.com CEO Josh Chodniewicz
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