Sramana: How would you handle very small startup companies? Would you like to hear from them?
Maria Haggerty: Absolutely. If there is a small company with a great idea, then we would love to talk to them. We have a very small company that was founded by young woman with no VC backing. She is curating a fashion style on her site and is starting with low volume. We liked her business plan and the types of people she is surrounding herself with.
Sramana: You sound almost like a VC when you are looking at the companies to accept or not, and that is a difficult thing to do well.
Maria Haggerty: We do know, from our existing clients, what sells and what does not. We have a sense of what we think is a good “gut” feel. We may not be qualified to determine what money to invest, [but] we do invest our business practice. We have not selected nothing but winners; however, we have had a lot more winners than losers.
Sramana: That is intriguing because I see a lot of niche e-commerce. It is very hot right now. There are companies like Blinds.com that do $100 million a year selling window blinds. There are all sorts of $10 million to $15 million companies in this niche space.
Bill Follet: I think you are absolutely correct on niche e-commerce. When we started out, we defined our product as a maximum two cubic foot household product with a minimum 50% margin. We felt the average sale would be $60. We felt if you had those things, then you were probably going to do well as a niche e-commerce seller.
We like to work as a partner, as if we are an extension of the company. We are not just a third-party warehouse. We get involved with tremendous communication with our clients. They have the ability to see their business growing in real time.
Sramana: My main concerns at this point are with the sub-$1 million companies, many of which are bootstrapped companies.
Bill Follet: If the company is making a product that has good margins, has an interesting marketing plan, and has good management, then we are very interested in them. We would want to know, in our hearts, that we could grow them into a $4 million to 5 million dollar company within 24 months.
Sramana: That growth rate is not simple for a bootstrapped company.
Maria Haggerty: Clearly not. We are not trying to oversimplify. We do think that companies that can come to us and not worry about logistics are able to grow faster because they can focus on the other key areas of their business.