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.

Building Businesses in Aftermarket Designer Merchandise: ShopWorn CEO Richard Birnbaum (Part 1)

If you haven’t already, please study our Bootstrapping Course and Investor Introductions page. 

Richard has built several business in the “shopworn” designer merchandise segment. Learn more about the business through his journey.

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?

Richard Birnbaum: I grew up in Brooklyn, New York. I was born into a family of merchants. My father taught me at a young age that everything is about value. Even when we’d go to a diner as a kid, he couldn’t go on raving enough about what a great deal it is they’re offering us. He’d say, “We get a salad. We got Jell-O for dessert.” He instilled in me, at an early age, that it’s all about value and giving the customer a great deal.

Bootstrapping With A Paycheck to YCombinator and $10M Series A: Ryan Chan, CEO of UpKeep (Part 7)

Sramana Mitra: What kind of numbers did you do in 2016, 2017, and 2018? What was the ramp in terms of free users and paying users? What was happening?

Ryan Chan: We’ve been growing very fast. We’ve hit a true nerve in this market and the completely underserved industry. Over 2,500 paying companies use UpKeep. Each company could have anywhere from a single user to several hundred users in their UpKeep account. Again, we literally had zero about three years ago, which is nuts.

Bootstrapping With A Paycheck to YCombinator and $10M Series A: Ryan Chan, CEO of UpKeep (Part 6)

Sramana Mitra: You have $10 million in the bank. You started hiring sales people and started putting a process together.

Now, let me reask the question. What was the repeatable sales process?Was it that you started putting in a process to take all the leads? Are the free users categorized by companies, company size, and so forth and started having people call those companies?

Ryan Chan: I’ll tell you our story. I think every story is different. So we have always been 100% inbound. We’ve got a freemium product, basically meaning that people can sign up for the app, download it, and use it for free forever.

Bootstrapping With A Paycheck to YCombinator and $10M Series A: Ryan Chan, CEO of UpKeep (Part 5)

Sramana Mitra: Kevin was also doing YCombinator?

Ryan Chan: I was part of the YCombinator class of winter ’17.

Sramana Mitra: But you didn’t hire him through YCombinator. You hired him and brought him into your YCombinator membership.

Ryan Chan: Right. We went through YCombinator. It was an amazing experience. I got introduced to this world of technology, venture capital, growth, and startups.

Bootstrapping With A Paycheck to YCombinator and $10M Series A: Ryan Chan, CEO of UpKeep (Part 4)

Sramana Mitra: What did you learn as you went through the customer base, started getting to know the customer base, understanding the customer base, and understanding who’s converting from free to premium?

What did you learn in terms of who were the ones that were really important for the business from a segment point of view?

Ryan Chan: I had this belief very early on that it is the technicians or the end users that we are building the products for. Our entire product is centered around the maintenance technician.