Erik Allebest: In 1998, my Chess Club President friend said, “Let’s build a website together.” He built a platform for me to sell Chess equipment online. It became known as Wholesale Chess. It became the largest chess retailer online. This was before Amazon. I sold the business of teaching and moved to e-commerce. I did that for many years. I became tired of doing that.
My wife was urging me to do something else. She applied to business school for me and got me to Stanford. I sold the equipment business and ended up in Stanford where I was very underqualified to be there from an education standpoint.
Sramana Mitra: Your chess teaching business was bootstrapped. Was the chess e-commerce also bootstrapped?
Erik Allebest: Yes, but when I sold the teaching business, it gave me a small amount of capital.
Sramana Mitra: What were the years of the equipment business?
Erik Allebest: That was 1999 through 2005.
Sramana Mitra: How did you acquire customers at that point?
Erik Allebest: At first, we were trying to do SEO, but everybody was doing SEO. We were pretty good at it. I learned a lot about SEO. This was early days for Google AdWords. We were bidding on AdWords. There were four or five of us bidding on the same term, selling the same product. We were fighting each other for lowest price and fighting each other on the other side of the highest bid on keywords. It was a race to the bottom on price and a race up on customer acquisition cost.
Finally I said, “I’m sick of doing this. The way to do this is by getting a chess community online. Have them not focus on equipment. When they come to talk about play, there’d be some links where they can buy equipment.” Nobody wants to go to a chess community called Wholesale Chess. It just happened that the owners of Chess.com were in the Bay Area. We did a deal together.
Then they said, “By the way, we owe $5 million that we raised. We have these debt and encumbrances. We’re going to have to go bankrupt.” They want to a bankruptcy auction. After dealing with them for a time, I realized I didn’t want to be in business with them. It wasn’t a good fit. In the bankruptcy option, I was the highest bidder. I bought the domain name.
Sramana Mitra: How much did you pay?
Erik Allebest: $55,000.
Sramana Mitra: It’s a very valuable domain. That was in 2006?
Erik Allebest: By the time I bought the domain name, I had already sold Wholesale Chess and was on my way to business school. I was at Stanford business school when this all happened.
Sramana Mitra: Who bought the equipment business?
Erik Allebest: Just another entrepreneur. He was an executive at AOL actually and was looking to run more of a lifestyle business. He successfully ran it for several years and then turned around and sold it again.
Sramana Mitra: How much were you doing when you sold that business?
Erik Allebest: Almost a million and a half in revenue.
Sramana Mitra: You sold this for how much?
Erik Allebest: $2.5 million.