Capital Efficient Entrepreneurship: Bonanza Co-Founder Mark Dorsey (Part 6)

Sramana Mitra: Now we’re still in 2010. In the last six years, what has happened to the business? Where has the growth come from?

Mark Dorsey: In the past six years, we’ve attempted to rebrand ourselves into a fashion site. We kept Bonanza but we also created a second site for handbags exclusively. What we learned is that the fashion industry is a very difficult industry to succeed in. The people who are currently competing in that space have very deep pockets. That was one project that we tried and failed in. That didn’t work out well. We upped our focus into everything but the ordinary and what we were really good at. We continued to scale our business. >>>

Bootstrapping a Two-Sided Marketplace to $10M: Sal Akbani, CEO of Gateway Classic Cars (Part 6)

Sramana Mitra: Why Kentucky?

Sal Akbani: Because it was closer and safer, and I only had so much money to spare.

Sramana Mitra: How did that pan out?

Sal Akbani: Really well. It’s one of our best-performing showrooms for the last four years. >>>

Capital Efficient Entrepreneurship: Bonanza Co-Founder Mark Dorsey (Part 5)

Sramana Mitra: How did revenues scale? How long did it take your to hit $1 million in revenue and how did that ramp?

Mark Dorsey: I would really have to go back to the archives to check. You would think that that would be a major milestone that would be layered into my mind. I would say that as far as revenue goes, I would think that we would have hit $1 million within the first year.

Sramana Mitra: $1 million not in gross merchandise value. I’m talking about revenue. >>>

Bootstrapping a Two-Sided Marketplace to $10M: Sal Akbani, CEO of Gateway Classic Cars (Part 5)

Sramana Mitra: Would you say, looking back, that was not the right market to go into?

Sal Akbani: It was actually a good market. We just didn’t know what the heck we were doing.

Sramana Mitra: What do you think, looking back, did you not do or were not doing right?

Sal Akbani: Managing. We were poor managers.

Sramana Mitra: Poor people managers or poor marketing managers? >>>

Capital Efficient Entrepreneurship: Bonanza Co-Founder Mark Dorsey (Part 4)

Sramana Mitra: Help me understand the timeline now. When did you create this member program so you could keep the servers going? What year did you switch to being able to charge final value fee? What year did the membership program really start generating significant revenues?

Mark Dorsey: We launched the beta in June of 2008. The article came out in September of 2008. The membership program to buy more servers was launched in December. We started to realize significant amount of revenues a week after we started the program. To us, being able to buy another server was significant. That was significant revenue to us. >>>

Bootstrapping a Two-Sided Marketplace to $10M: Sal Akbani, CEO of Gateway Classic Cars (Part 4)

Sramana Mitra: We’re now at the end of 2000. You’ve got this model that is validating. You’re starting to make a little bit of money with which you can pay yourself. What are the next key strategic moves and what were the next key inflection points in the business?

Sal Akbani: The next strategic move came in 2004. By late 2003, I had realized that we had basically saturated the market in St. Louis and we weren’t going to get any more inventory. We were not even getting a dollar for dollar return. We decided that we probably needed to look at other markets. I researched and came up with 38 additional markets that were equal to or larger than St. Louis. Then I wrote a business plan and started acting upon it. In 2005, I established my first remote showroom in Charlotte, North Carolina.

Sramana Mitra: Is that a part of the growth strategy? >>>

Capital Efficient Entrepreneurship: Bonanza Co-Founder Mark Dorsey (Part 3)

Sramana Mitra: How did you mitigate the constrained budget?

Mark Dorsey: I’m really proud of this. It’s something that we take a lot of pride in. We identified that we had a very rabid seller fanbase who were willing to do whatever it took to make our company the most successful marketplace online. Realizing that, we created a guerrilla marketing group. We called this group the Bonanza Action Club. We invited the top 50 members of our site. >>>

Bootstrapping a Two-Sided Marketplace to $10M: Sal Akbani, CEO of Gateway Classic Cars (Part 3)

Sramana Mitra: Your site operates as a two-sided marketplace except you store the inventory.

Sal Akbani: Yes, and we have currently 14 plus 1.

Sramana Mitra: What does that mean?

Sal Akbani: We have 14 active ones [warehouses] and we have one more coming up in Denver on June. We’re currently also working in Scottsdale to open our 16th [warehouse]. >>>