Bootstrap First, Raise Money Later: Art.com CEO Josh Chodniewicz (Part 3)

Sramana Mitra: What was the revenue trajectory with search engine and affiliate marketing as the drivers?

Josh Chodniewicz: The other consumer driver for us was our partnership with eBay in 1998 to list our products. We were talking to eBay about why their marketplace didn’t have the traction. The problem was their listing fee. They were charging a 10-cent listing fee.

I have three million products. I want to list them and it will fill all these gaps, but I can’t pay them 10 cents when they don’t have the buyers. I’ll gladly pay the percentage on success. They did that for us. The moment something sold, we auto-listed it again. It sold through the roof.

In 1998, we sold more products on eBay than any other company in the world. We also eventually saw over 10% of our revenue coming from the Amazon marketplace. This was later on. You asked about the revenue trajectory. It was slow to start. It felt like molasses in the early years. We took $16,000 out. We lived in the same apartment together.

Sramana Mitra: Was it just the two of you?

Josh Chodniewicz: We hired a couple of people in our fulfillment area.

Sramana Mitra: It was very lean.

Josh Chodniewicz: Super lean. Everything had to be out of our revenues. Think about that. We start with $35,000 and bought a $3,000 server. We were paying $600 a month for the internet connection.

Sramana Mitra: How long did it take you to hit a million in revenue?

Josh Chodniewicz: I believe it was 1999. It took five years. Our real traction started in 1997. A couple of years later, we got to $1 million in revenue.

Sramana Mitra: How about $10 million?

Josh Chodniewicz: Two years later. We went from $800,000 to $2.4 million. In the following year, $10.4 million.

Sramana Mitra: All those channels took off at that point.

Josh Chodniewicz: Going from $800,000 to $2.4 million, that was all us. At that time, we were allwall.com. Our leading competitor was art.com. Art.com went through a more traditional trajectory. It raised $15 million in venture capital. It ended up being sold to Getty. Getty paid $135 million for the business. Getty bought it in 1999. Then over the next two years, they pumped an additional $200 million.

Sramana Mitra: Was art.com making that kind of money or was it just speculative?

Josh Chodniewicz: They were the same size as us.

Sramana Mitra: I was in Silicon Valley at that time. I did three startups as founder CEO during that period.

Josh Chodniewicz: It was crazy times.

Sramana Mitra: How did the $2.4 million to $10 million happen?

Josh Chodniewicz: We bought art.com. We bought them pennies on the dollar. We had a situation where we ended up buying this business for way too little. The end price was $618,000. We borrowed it from Getty. They loaned us the money to buy the company from them. It was a wonderful experience.

We ended up buying them and paying off the loan in seven months. We had five years to do it. All their revenues continued to us. We just cut all their expenses except for the COGS. We probably had about 30 people. Now we own the art.com domain.

This segment is part 3 in the series : Bootstrap First, Raise Money Later: Art.com CEO Josh Chodniewicz
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