Bootstrapping a $25 Million E-Commerce Company: Saatva Co-Founder Ricky Joshi (Part 4)

Sramana Mitra: Are these people in your payroll the people who are doing the delivery?

Ricky Joshi: It depends.

Sramana Mitra: It sounds like a very expensive infrastructure. That’s what I’m struggling with. For a bootstrapped company, to roll out that kind of infrastructure is rather difficult. Help me reconcile.

Ricky Joshi: We’re doing $25 million in revenue.

Sramana Mitra: Still, that full logistics infrastructure around the country is expensive.

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Bootstrapping a $25 Million E-Commerce Company: Saatva Co-Founder Ricky Joshi (Part 3)

Sramana Mitra: Absolutely. Tell me more about the business itself. First and foremost, who were the people involved when you got this off the ground? You mentioned your co-founder. Where did he come from? How did you meet him? Where do you know him from?

Ricky Joshi: There are basically three co-founders of the company—myself, Kris, and Ron. I actually hired Kris at Craigslist. We also had a startup that we were incubating. I just knew that Kris and I would be working together. Kris is one of the smartest and most disciplined persons I’ve ever been around. It’s interesting because oftentimes, you have these people who are famous and have these brand names. Kris definitely has that spark.

Sramana Mitra: What is his background?

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Bootstrapping a $25 Million E-Commerce Company: Saatva Co-Founder Ricky Joshi (Part 2)

Sramana Mitra: Talk to me about the dysfunctions of the industry? Why does that industry warrant starting a new company?

Ricky Joshi: You basically had four manufacturers who controlled 81% of the market. Majority of them were public companies. The average margins of manufacturers is around 40%. On top of that, you have distribution companies that take a percentage of the profit. Then you have retailers, which are also public companies. At the end of the day, a mattress that costs $500 would go to retail for $3,500 or more because of so many parties involved. We cut all that out. We’re not branded manufacturers. Because of the structure of the industry, you end up in a situation where there’s benefit to collusion. Different retailers will request proprietary products. What ends up happening is they’ll just change the stitch and call it a proprietary product.

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Bootstrapping a $25 Million E-Commerce Company: Saatva Co-Founder Ricky Joshi (Part 1)

I have spoken with many VCs who are looking or e-commerce companies that can scale at venture pace, which is hard to achieve. On the other side of the spectrum, however, the bootstrapped e-commerce companies are going gangbusters! Saatva is one such and a terrific company.

Sramana Mitra: Let’s start with your personal back story. Where are you from? Where were you born and raised?

Ricky Joshi: I was born in Columbus, Ohio. I went to Dartmouth College in New Hampshire. I was very involved in the entrepreneurial scene there. I actually helped start the Dartmouth Entrepreneurial Network, which is now the flagship entrepreneurial program at Dartmouth. I started my first company at school. >>>

Building a Secondary Ticketing Business From Spain: Ander Michelena, CEO of Ticketbis (Part 5)

Ander Michelena: In 2012, Ticketbis was growing strongly and very fast with very good margin. The other business was growing but it was something that was stopping us from concentrating on one thing. We decided to close it. The learning we got out of that is if something is working very well, don’t try to do other things. Don’t deviate and start doing other projects. Just concentrate on what is working and grow it very fast. That’s the learning we got out of that. If I could go back, I would never have launched that. >>>

Building a Secondary Ticketing Business From Spain: Ander Michelena, CEO of Ticketbis (Part 4)

Sramana Mitra: So people were just finding you through organic Google search basically.

Ander Michelena: Yes, we were using SEM, SEO, and affiliates to get traffic. That was what it was. Before we launched in other countries, we were only based in Spain. With that million euros, we created the website and made it compatible with local companies. We follow the same strategy in those countries. In the second year, we did €5 million in revenue.

Sramana Mitra: What are some other interesting strategic moves that you made in building this company? Obviously, you’ve built a very capital efficient company and you’ve scaled it to a very significant level with a very disciplined approach. I love that. That’s our philosophy in our program. Share more of your insights and learnings on what you did right and what strategic moves you made that helped you achieve that.
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Building a Secondary Ticketing Business From Spain: Ander Michelena, CEO of Ticketbis (Part 3)

Sramana Mitra: The numbers you are quoting are amazing. Even in India, you cannot get a great engineer for $25,000.

Ander Michelena: You can get very good talent at a cheaper rate. That is one of our main competitive advantages. We are almost more than 300 people in the company at this point. Most of the team is based in Spain where the salary cost is under control. We fight against some American players but their cost base is much higher. That gives us an advantage.

Sramana Mitra: What were the milestones that you accomplished with your Series A financing?

Ander Michelena: We launched the website with our money in January 2010. The money was raised in July 2009. With that first round, we obtained revenues of one million euros. The model was working quite fast and quite well actually.
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Building a Secondary Ticketing Business From Spain: Ander Michelena, CEO of Ticketbis (Part 2)

Sramana Mitra: Let’s step back. What I’m trying to trace here is more of a case study of the entrepreneur’s journey. What was the first thing that you did when you launched the company? It sounds like you were able to convince investors. What kind of investors were these?

Ander Michelena: The good thing about my previous job in investment banking and my partner’s job in private wealth was that we knew quite a good number of people who had created their own companies and had considerable wealth. Once we quit, we started contacting these people that my partner had connections with. We were quite surprised because everybody was quite interested. The first round was quite easy. We didn’t raise too much. It was $400,000. That’s the first thing we started looking at.

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