Building Two Open-Source Startups in a Row: Sysdig CEO Loris Degioanni (Part 3)

Loris Degioanni: What we did was, we created a new project based on the same code base. It was called Wireshark. This was 2006. Wireshark was an immediate success. We put a bunch of resources behind it. We told Gerald, “Just keep working on this and make the community happy.”

After 13 years, Wireshark is still one of the most successful open source projects in the history of open source. It has a huge community. It has a huge backing from many companies around the world. It has a vibrant community of developers.

Building Two Open-Source Startups in a Row: Sysdig CEO Loris Degioanni (Part 2)

Loris Degioanni: While I was in New Zealand doing the internship, a professor from the United States texted me saying he’s working in the field of packet catcher. He found WinPcap. He would like to invite somebody from the research group to do research in the United States. I was in New Zealand, so I couldn’t go.

I told this professor that I had to pass the opportunity and find somebody else. The professor told me, “Don’t worry. I’ll wait for you. Finish your work in New Zealand.” In particular, the professor was working for UC Davis. I finished my internship in New Zealand.

Building Businesses in Aftermarket Designer Merchandise: ShopWorn CEO Richard Birnbaum (Part 6)

Richard Birnbaum: When I gave you the example of their cost of goods at 8% of retail, nothing is a secret. If we’re able to buy aged inventory from the stores, depending on the brand, deal and condition, it’s worth paying anywhere between 15 cents to 35 cents on retail price.

We’re giving a terrific value to the consumer. The brand is selling more goods to the authorized dealer. We’ve made ourselves the first and only official partner of the brands who are sanctioned to sell their goods online. We’re selling the latest, the greatest, and the best, but it’s at full retail. Maybe you’ll find a 10% coupon online. We’re offering a tremendous value to the consumer.

Building Two Open-Source Startups in a Row: Sysdig CEO Loris Degioanni (Part 1)

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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?

Loris Degioanni: As you can tell from my accent, I wasn’t born in the United States. I was born in Italy. I was born in a unique part of Italy. I was raised in a little town called Menaggio in one of the mountain valleys connecting Northern Italy and Southern France.

Building Businesses in Aftermarket Designer Merchandise: ShopWorn CEO Richard Birnbaum (Part 5)

Richard Birnbaum: We also noticed that the brands were beginning to end distributor contracts and were setting up their own distribution companies in the United States. For example, their cost of goods on an item was 8% of retail. Their biggest cost is not the cost of goods. It’s the marketing and advertising. It’s the romancing of the product.

Their business model was basically working on about 70% margins. Their cost on the goods would be 8% of retail. Then they would sell the goods to their offshore distributors for about 30% of retail. Those distributors would go out to the retail stores and wholesale for about 50% of retail. Some brands have 45% offline discount. That’s the way the model is built.

Building Businesses in Aftermarket Designer Merchandise: ShopWorn CEO Richard Birnbaum (Part 4)

Richard Birnbaum: Even though distributors around the world were back-dooring the goods into the United States through e-commerce, I personally believe that the brands just closed one eye. It gave them deniability. The deniability factor is very important for them because when the dealers would start to complain, the brand would say, “We have no idea how they got the goods. We didn’t sell it to them. We have no idea how they got it.”

The fact of the matter is, of course, the brand knew how they got it. They got it because they sold it to a distributor who gave them false promises. The goods ended up exactly where the goods weren’t supposed to end up.

Building Businesses in Aftermarket Designer Merchandise: ShopWorn CEO Richard Birnbaum (Part 3)

Sramana Mitra: This business started with you taking consignment inventory. Is that how you continued or did you switch to buying inventory?

Richard Birnbaum: The next step was going to the 47th Street in Manhattan and checking out all the different vendors. I was trying to learn the distribution model of dealers of these great brands of watches. They were selling at discounted rates, but they weren’t authorized dealers.

Building Businesses in Aftermarket Designer Merchandise: ShopWorn CEO Richard Birnbaum (Part 2)

Richard Birnbaum: We realized that the garment business was not for long term. We were buying back in the late 80’s. We were buying designer goods in the United States. We were buying Tommy Hilfiger, Calvin Klein, and Ralph Lauren. Back in those days, e-commerce was not what it is today.