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Buying Control Back from VCs: Jason Robbins, CEO of ePromos (Part 6)

Sramana Mitra: You had a $5 million round. You were pretty much profitable. What are some of the major inflection points?

Jason Robbins: The $5 million basically almost disappeared. By the time money came in, the investors wanted a CEO that was known in the marketplace so they then can then raise the next round of money. We literally paid $50,000 to Spencer Stuart, which is a head-hunting firm. We were paying money. Then we needed a COO. We hired a COO so he could manage all the legal spending so we can convert into a C Corporation and develop stock option plans.

Before you knew it, we weren’t focusing on the business because we’re spending all of this money. It was very different from what I ever did. Another big lesson is the number of employees. >>>

Buying Control Back from VCs: Jason Robbins, CEO of ePromos (Part 5)

Sramana Mitra: On the website, you would provide the designs that your suppliers were able to build against. You would provide that catalog and fulfill through that supplier network.

Jason Robbins: Exactly right. You would come to my website and you’d say I like that. You would upload your logo. I would send your logo to my supplier. They would blind-ship and drop-ship it to you. Then I would pay them. That’s the whole industry and that’s the industry today. We have hundreds of suppliers to choose from that have high-end and low-end items that follow retail trends. If you do the math and look at the revenue stream, we would have needed another round which we subsequently got in order to feed the burn rate.

We had the dot-com crash. The bubble burst right after we got our $5 million round which was a year and a half after we got our $1.2 million. The $1.2 million is from angel investors and family. Literally, these were high-end people. They were throwing $25,000 and $50,000 without actually thinking what this company is going to do. From there, I have tons of lessons for entrepreneurs. Today, I own 100% of the company. >>>

Innovating in Fintech: Jason Hogg, CEO of Lending.com (Part 7)

Sramana Mitra: What did American Express do with it? Did they keep the card? Since 2009 on to 2015, what happened in the business?

Jason Hogg: American Express actually created Serve, which is their reloadable prepaid product. We were also, at that time, early in the mobile and smartphone game with money transfer and other transaction capabilities. Serve is active there as well as it’s hooked into the American Express network. We ended up shutting down the Revolution card network in lieu of American Express’ network because they have over 7.5 million merchants already in the network. We plugged into that. Now, people have cards that are accessed anywhere American Express is accepted. We did a deal with Walmart that resulted in an alternative banking product called Blue Bird. >>>

Innovating in Fintech: Jason Hogg, CEO of Lending.com (Part 6)

Sramana Mitra: Chronologically, where are we? What year is this?

Jason Hogg: We’re midway through 2007. I’ve done my raise in 2006. In 2007, we had gotten the customer base that I was just describing to you both on the credit card and the peer-to-peer side. We completed a $50 million B round at that point in time. We ended up, I think, giving one of the keynotes at one of the earlier Web 2.0 conferences in September or October 2007. We were off to the races at that point in time. We continue to grow the network. We did  a whole series of partnerships with ATMs.

I’m a professor of entrepreneurship and innovation at Cornell. One of the things that I always tell entrepreneurs is, “In so far as you can get customer distribution through partnerships and the ability to plug into large ecosystems, you have a radically higher probability of success than you do if you’re trying to get one customer at a time essentially.

Sramana Mitra: No questions, but it’s not easy to do. >>>

Buying Control Back from VCs: Jason Robbins, CEO of ePromos (Part 4)

Jason Robbins: Eventually, I took a little bit of what I knew from the promotional products business and a little bit of what I knew from catalogs and the website I wanted to build, and I started ePromos.com. That was a business that was designed to create a website with merchandise and start finding the new generation customer who would appreciate the ability to shop and look at products on the web instead of having to get a catalog or have a salesperson visit you. I knew the web was going to popular. I was able to develop a site that people would eventually want to come to.

Sramana Mitra: What year did you start ePromos?

Jason Robbins: That was around 1997 to 1998.

Sramana Mitra: What else that was similar or compatible in the industry at that time? Were there other things you were looking at? >>>

Buying Control Back from VCs: Jason Robbins, CEO of ePromos (Part 3)

Sramana Mitra: Why did you want to do that? That made no sense to me.

Jason Robbins: I know. I just felt that it was tough out there. Real estate is the long-term play. Now, I’m basically chasing a stock I sold. If I stayed at Goldman Sachs and didn’t bother about getting my MBA and dealt with the fact that I was doing operations work when part of me was saying, “You’ve got to do that high-level stuff that everyone is doing.” I left because I didn’t have a high-level job, and I was being treated by the people above me very poorly. They were being treated poorly by people above them who were younger. You had these young traders making a lot of money treating these mid-level people very rudely. They’re older and more experienced. Then those people would get me to do work for them.

If I stayed at Goldman when it was 5,000 people and not 30, I wouldn’t have to work again. One of the lessons I guess I have for people is stick with things. Stick with it. I’m not saying stick with an idea if it’s not working, but if you’re an entrepreneur and you’re doing a product and the first product doesn’t work, then find something else and stick with it. It’s the enjoyment of developing the product and finding how to fit the key into >>>

Innovating in Fintech: Jason Hogg, CEO of Lending.com (Part 5)

Sramana Mitra: What does that mean? Are we talking about a regular credit card issued that’s your card?

Jason Hogg: It was a Revolution card. We had our own brand and our own network. When you walk into a CVS and you see a MasterCard, Visa, and AmEx sticker in the window, you would also see a Revolution sticker. Our angle of attack was we had a differentiated business model because we said, “Traditionally, you’re getting charged 2.5% to 3% and we’re going to charge you only 0.5%. We need help getting customers on to the network.”

Instead of the issuing bank providing the funds to market and get consumers, we actually work with the retailers, and the retailers provide benefits. For example, Murphy’s Oil gave 10 cents off a gallon every time you used a Revolution card. They put displays on top of their gas pumps on how to apply for a card. We co-opted and worked with the retailers in order to expand the network. It really became a matter of making sure >>>

Buying Control Back from VCs: Jason Robbins, CEO of ePromos (Part 2)

Jason Robbins: Frankly, I didn’t like my job. It was very clerical. I wanted to do more higher-end things that required me to think. More than one time, I was told, “You’re paid to do and not think.” I really wanted to improve my job and improve the organization. When they’re making $20 million a year, they don’t care that you’re going to save them $100,000 in operations. I became friends with the developers. This was before the time you could open two different programs at one time and switch between them. I helped develop software. I said, “Can you enable me to do this?”

Lo and behold, over time, my 14 hours a day was reduced to 8 hours with just keystroke changes that I was able to make. Then they gave me more work. I was back to 14 hours. I went back to the developers. I just kept doing programming with the developers so that I could make my job easier and go home earlier. I said, “I have a really good skill for finding the challenges in the operational system and fixing them with software.” >>>