Bootstrapping a Niche E-Commerce Venture: Elite Fixtures CEO Steven Annese (Part 3)

Sramana Mitra: How much inventory did you take on and how did you source that inventory? This is one of the key questions for every bootstrapped e-commerce entrepreneur.

Steven Annese: When I first started, I didn’t take any inventory on. I basically had a drop shop agreement with a major distributor at that time that distributed probably around 20 main brands of lighting, and they were very familiar with the lighting showrooms in the US. I didn’t have to take on any inventory which was a much bigger advantage than stocking a garage full of inventory. You have to also understand that when I launched, I launched with about 20,000 SKUs. >>>

Bootstrapping a Niche E-Commerce Venture: Elite Fixtures CEO Steven Annese (Part 2)

Sramana Mitra: Did you know anything about the lighting business?

Steven Annese: I didn’t but my sister was working at a lighting distributor. She told me that there were some companies that were trying to do business with them in the online world. That’s actually where my lead came from so I have to thank my sister.

Sramana Mitra: For educating you in this business.

Steven Annese: For both. Before I spoke to my sister, I was looking at several products. I was looking into importing my own products from China or another country. I looked at India. I looked at possibly bringing my own product line. I got into a conversation with her and she said, “There are a couple of people looking to do lighting. Did you look at lighting?” That was the time that I looked at lighting and I saw that the competition wasn’t so fierce. I started looking into that and I started asking her questions. She started educating me on the topics. >>>

Bootstrapping a Niche E-Commerce Venture: Elite Fixtures CEO Steven Annese (Part 1)

I’ve always been bullish about niche e-commerce. Here’s yet another story of an entrepreneur who has successfully bootstrapped a company in high-end light fixtures.

Sramana Mitra: Let’s start at the very beginning of your journey. Where are you from? Where were you born, raised, and in what kind of background?

Steven Annese: I’m a child of an Italian immigrant. I was born in New Jersey. It was in the 70s when most of the Italians migrated.

Sramana Mitra: What about college?

Steven Annese: University was interesting. I wanted to migrate somewhere out west or south. Unfortunately, since my parents were immigrant, they didn’t want me to leave the house. So I had to go to school locally. I attended St. Peters University in Jersey City. >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 7)

Sramana Mitra: Talk about the new product, and how did you identify the new product definition? How did you achieve product market fit?

Ryan Stolte: Through this relationship we had and the amount of breadth of customers that we were exposed to, we did get in front of a lot of these customers. They would say, “That was great what you did there. I have tremendous visibility into that product. Here’s my real problem.” These roots as a problem solver and consultancy never left us—staying close to our customers and really listening to their problems and pain. We had the opportunity to uncover what the new pains were.

At this time in 2010, there was this giant amount of security data and people didn’t really know what to do with it. For each one of these breaches, the raw data is there. People were having a very difficult time turning that raw data into something that they should actually do in order to improve their security. Back in 2010, working with a very large financial organization, we got to this point where people were trying to answer top line business level questions. They’d say, “I have a huge amount of people handling sensitive data every single day. My security systems are generating lots of noise about what those people are doing. Here’s what I need from you. I need you to take all that noise away and I need 50 people a day. I don’t care where you get the data.” >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 6)

Sramana Mitra: How did you price this new product?

Feris Rifai: The original OEM agreement started out as a royalty fee. The Symantec folks were selling it directly to the client. That grew from there to cover more of the Symantec portfolio of products. It also grew to Symantec actually including it in their product portfolio.

Sramana Mitra: Your go-to-market strategy for this product was an OEM business model?

Feris Rifai: That’s exactly right. That helped us fund our own ambition on the R&D side. Back to your point about services companies transitioning into product companies, that actually continued to help us drive that growth because we were able to use a much larger organisation’s sales force to sell our product.

Sramana Mitra: How long did you continue in this OEM mode? >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 5)

Sramana Mitra: Let me see if I got this. You had a bunch of partners and you were doing value-added type of work for these people?

Ferris Rifai: It was not reselling. It was more services-focused. They would use us as an extension.

Sramana Mitra: In that process of doing integration and consulting, it sounds like you were getting a lot of customers from these partners. That’s how you managed to immerse yourself in these customers, but I’m still looking for the nugget of what product opportunity you identified.

Ryan Stolte: That’s a great question. Take the systems management security products. The products that were on the market were focused on detecting things. They did a poor job, generally speaking, of turning the things they detected into reports, dashboards, and visualisations that the customer could understand and make sense of. They would go detect individual events. The niche that we got in as a consultancy was to help systems get up and running. Where we really added value was, “How do I take that raw data and turn it into a picture that an executive can understand and actually make an informed decision?” That really was the niche – taking that data and turning it into actionable business intelligence. That was the opportunity. >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders, Feris Rifai and Ryan Stolte (Part 4)

Sramana Mitra: What year did you start this consulting company?

Ryan Stolte: 2001.

Feris Rifai: Precisely on October 16, 2001.

Sramana Mitra: You did analytics consulting. How long did you continue in this consulting mode?

Ferris Rifai: When we first started, we started with consulting in analytics and, in parallel, information security and IT. What we saw was a gap in the market that nobody was addressing. Through our expertise in analytics, we identified this gap. Then we introduced the product into the market in 2007. That was our first entry into becoming a vendor. >>>

Bootstrapping Using Services: Bay Dynamics Co-Founders Feris Rifai and Ryan Stolte (Part 3)

Sramana Mitra: You were Head of Technology there and Feris joined as the Head of Sales?

Feris Rifai: Yes, I joined as Head of Sales and Business Development at that time.

Sramana Mitra: What is the name of the company?

Ryan Stolte: The company is called Caspio.

Sramana Mitra: Caspio is still around?

Ryan Stolte: It is. I can fill in the gaps there.

Sramana Mitra: Go ahead. Give a little bit of what happened at Caspio. Under what circumstances did the two of you pair up to start Bay Dynamics? >>>