Sramana Mitra: When did you leave Sage?
Mitch Russo: 1998.
Sramana Mitra: Then you came back to Boston. What happens next?
Mitch Russo: I’m returning to Boston and I’m like a local hero now. I’d done a lot of innovative things at that time but what was particularly interesting about what happened next was that I applied to venture capital firms to see if I could help them run some of their invested startups.
I thought I would get a job as a resident entrepreneur or as a CEO of one of their companies. Absolutely, nothing happened. Nobody was interested. I called back and asked, “I don’t understand. I just completed the one thing that you want every one of your companies to do.” One guy confided, “You’re too old. We’re looking for 20-something CEOs at this point.”
If they won’t help me, I’ll compete with them. I started my own venture capital firm. I set aside just half a million dollars to start investing in startups – $25,000 to $50,000 in every startup. That started to grow until one of the venture firms that I had approached came back and said, “Can we hire you as a consultant to help us figure out a business model?”
I started to work on the business model and they were very clear on what they wanted. They wanted to take these two founders of a brick-and-mortar furniture business. They wanted to turn it into furniture.com. Two weeks later, I came back and I said, “I’m going to be returning your money. I won’t work on this with you. There’s no possibility of succeeding. You won’t be able to sell furniture over the internet – not at this time. If you look at the numbers of furniture.com, they’re dealing with 40% plus return rate. On top of that, the systems that they’re using are so slow. When the furniture pieces arrive, they’re the wrong size and color.”
They said, “What would you do?” I said, “I would forget about selling furniture at all. I would become a marketing company for furniture stores and load furniture manufacturer’s catalogs onto the site and then sell a website service to all the furniture stores to get them on the Internet.”
They loved the idea and said, “We want you to be the CEO. What will it take?” I came up with an absolutely crazy number. They said yes. I then went to work as the CEO of this furniture company. We scaled that company relatively fast. We were starting to sign furniture stores. It was quite exciting at that time. We had scaled that company relatively fast.