Sramana: I agree that if small businesses have to handle their own logistics, it is another hindrance to their growth. My recommendation to smaller e-commerce companies is for them to outsource their logistics. I’m not sure if you are the right place for those types of companies to go to, however, because your standards are pretty high.
Bill Follet: If they do not have the working capital to grow, then there is an issue. If they have 50% margins on their products, then they would have the working capital required to grow from their revenues. I believe it is that simple.
Sramana: I don’t think it is that simple. Going from zero to $1 million is already a complicated without financing. Once you have enough validation to go out and raise money, then things are fine. If you study the market carefully, you will see that is the stage of the business which does not have many financial tools available to it. The reason I am doing 1M/1M is because the zero to $1 million phase of business building is the most challenging due to the lack of resources. Less than 1% of the companies that go out to raise money are able to succeed and raise money.
Maria Haggerty: That is true.
Bill Follet: The first dollar is much harder than the millionth dollar.
Sramana: The 1M/1M incubator is about facilitating growth in this system. Once you get a company to a million dollars, then a lot of doors are opened.
Maria Haggerty: We get that phase of business. Could we do a small company with less than $1 million in revenue? Of course, however, we are going to choose our customers carefully. If we buy into their business, then we can choose to do it. We won’t do it for anything, but if we find it interesting then we are going to take them. Birchbox was a very similar scenario and we bought into that.
We can still add value for somebody that is starting off at zero to $1 million dollars now. Even if we can’t help them directly, we can provide advice, point them to somebody who could help them, and perhaps generate some goodwill that could help our company out at some point in the future.
Sramana: Can you talk a bit about the industry and the ecosystem? Who are the providers who cater to the really small ecosystem?
Maria Haggerty: I have a very good friend who started a company from scratch. He uses Shipwire. I know they deal with a lot of new startup companies.
Sramana: I think you have a very interesting company. You do something that a lot of people don’t like to do, and you do it well. Logistics is very complex. I had a company in our portfolio that just outsourced manufacturing and logistics. We recommend outsourcing logistics for our companies, and if I do see a match I will certainly send them your way.
Bill Follet: In 2012 Dotcom has doubled its capacity of space. We have added another 400,000 feet. In that new addition we already have five clients, and three of them are startups. They are doing very well and growing very fast.
Sramana: Thank you for sharing your story. I appreciated learning more about your company and really respect what you have built.