Sramana Mitra: What about inventory financing? Did you finance it all out of revenue or did you do some sort of bank financing?
Sean Dawes: We did a combination of self-financing and bank financing.
Sramana Mitra: Could you give us a range of what level of bank financing you used to leverage the company?
Sean Dawes: In terms of inventory, I’d say about 50% is financed.
Sramana Mitra: Did you do any kind of equity financing or do you own the company fully?
Sean Dawes: I own the company 100%. We’ve been approached by private equity companies, but we’ve not engaged.
Sramana Mitra: The question that I’m really getting at in terms of inventory financing is how much were you able to get, in terms of financing, the amount of loan you managed to get through bank loans that allowed you not to take equity? I’m trying to understand the level of debt you brought in to be able to grow to this stage.
Sean Dawes: I can’t really disclose how much debt we have.
Sramana Mitra: How much debt have you used to build this company is my question.
Sean Dawes: That would be a couple of million dollars. One of the most important things, for sure, is that it’s extremely difficult to get financing until you’re turning profitable.
Sramana Mitra: That’s right. At what point in your history did you start bringing in inventory financing and what were the metrics with which you were able to get to that?
Sean Dawes: We started bringing inventory financing in 2015. The biggest thing that we had to do was focus on churn. You have to move products fast because you’re going to get very little inventory financing. When you start with any bank, you’re going to get $100,000.
Sramana Mitra: $100,000 is good. Sometimes people start with $15,000.
Sean Dawes: We started the business in 2013. We put $50,000 on an American Express card. We heavily used credit cards early on. We would run hundreds of thousands of dollars a month on credit card.
Sramana Mitra: There are a few companies that have emerged who do small-denomination inventory financing based on transactions for e-commerce companies.
Sean Dawes: You’re going to get $150,000 paid back over 12 months 10% to 15%, which is going to slaughter any business with low margins.
Sramana Mitra: The story gets much worse if you’re doing this business in some other country. In India, the interest rates are 20% to 25%.
Sean Dawes: What hurts me most is that if anyone wants to go to graduate school, $100,000 will come real fast. If I want to start a business, nobody is giving that money. The system is broken.