The Startup Story - Dave Bolotsky

Dave Bolotsky: Hi, this is Dave Bolotsky, founder of Uncommon Goods, and this is MY startup story.

Every wildfire began with a spark. Every superhero has an origin story. And every single startup has a moment that they point to as their beginning. And every founder has a purpose that drove them in the midst of all obstacles. THAT is The Startup Story.

[00:28]
James McKinney: Welcome to another episode of The Startup Story. I am sure you've seen the meme online about how 2020 is such a unique year because February had 29 days due to leap year, and how March has 342 days due to the quarantine. I don't know about you, but I am completely lost in this quarantine. I've lost track of all of the days of the week. The only thing I don't lose track of is Tuesday, because that is when we release a new episode of The Startup Story. And just last week I announced the launch of Startup Story Live and that registration is open and free to everyone.

If you've been around The Startup Story then you know that in February we announced a large, in-person event that was going to be held at the global headquarters for the NFL's Dallas Cowboys. Well, our very unlikable 'Rona, as in coronavirus, messed those plans up completely. So now like most entrepreneurs do, we are taking lemons and making lemonade, lemon meringue pie, and even limoncello because our livestream event is going to be amazing. Startup Story Live is now a two day livestream event with over 14 hours of incredible content to help you re-engineer and rethink your business. I know how much the shutdown due to coronavirus impacted The Startup Story so I feel the challenge you're dealing with.

For that reason, I reached out to so many in my founder network that have built incredible businesses and asked them to join us for Startup Story Live. My hope in inviting them was that they would give us practical and tactical advice that we can take into our business. I'm not talking about self- proclaimed thought leaders; I'm talking about real founders who built real businesses providing real tactics directly to us. And it's 100% free to register and attend the two day livestream event. This is about entrepreneurs supporting other entrepreneurs. Look, here's a quick snapshot of just a few of the founders who will be live with us to help strengthen our business.

Jamie Schmidt, the founder of Schmidt Naturals. Jamie attended a local recreational class on how to make her own shampoo and deodorant and in just seven years she sold her company to Unilever for hundreds of millions of dollars, and she started her business during the greatest recession the US has ever seen. You have to believe she's going to be bringing some real tactics for us to navigate this current crisis moment.

We're going to be joined by Matthew Arevalo, the cofounder of Loot Crate. Loot Crate was created out of a local hackathon in southern California, and within three years of that hackathon they grew to $100 million in revenue. In their prime, they were shipping close to 500,000 boxes a month. Matthew believes, and this is unbelievable, this is where next level thinking comes in with our founder partners, Matthew believes that any business can capitalize on a membership or subscription revenue model, and he's going to share how to bring that model into your business. Tell me you would not have liked to have had that revenue stream during the quarantine?

Of course you would have and that is the type of real practical and tactical advice that will be provided at Startup Story Live on May 14th and 15th. Look, there are 14 unbelievable founders that will be joining us on May 14th and 15th and you can check them all out at startupstorylive.com. It's free to register and every founder who is speaking accepted the invitation because they want to see your business become stronger in response to this virus crisis. Do not miss out on this unbelievable opportunity to learn from some incredibly brilliant entrepreneurs. Register for free at startupstorylive.com today.

One last thing. I've been a little lax on reading the reviews that people are writing so I have some catching up to do. The first one was written by Bullhorn Brad and he gave the show a five start rating in iTunes and wrote: "Great inspiration for people starting a business or running one. And if you're thinking about starting a business, checkout thenamingbook.com to learn how to create a great name." Thank you for the review Bullhorn Brad, and I hope people will check out thenamingbook.com. All right, now let's jump in to this week's episode.

[04:19]
Our guest this week is Dave Bolotsky, founder of Uncommon Goods. Uncommon Goods is an online marketplace to connect makers and their creations with shoppers looking for truly unique goods. Let me be clear, when I say unique goods I truly mean unique. This is the place you want to shop when you need to a buy a gift for that person in your life that you struggle to shop for because you can't think of anything good. In fact, with Mother's Day just around the corner you might want to visit uncommongoods.com to find her something truly special. This place is unbelievable.

Now, aside from the incredibly clever items that they sell direct from the makers, what makes them so unique is that one of their key sales strategies is to leverage catalog mailers. Yes, you heard me correctly, an internet retailer leverages catalogs. It's unbelievable! In fact, my kids love looking through the Uncommon Goods catalog. Now, I lay all that out there because I just want you to know that you are in for an absolute treat with this episode. Dave's story journeys through the birth of the internet and e-commerce as well as the dot com bubble and even the events of 9/11. But before we get too far ahead of ourselves, I should probably stop talking and let Dave get us started at the very beginning.

[05:32]
Dave Bolotsky: When I was a kid, I would say that I was entrepreneurial but I don't know that I would use that term. So I collected baseball cards and created my own little baseball card catalog and was selling baseball cards with descriptions on lined paper, and that was when I was in elementary school. When I was in high school, I started my own lawn mowing business called Dynamo. Put an ad in the paper and mowed lawns in the neighborhood. So there was definitely that entrepreneurial spirit. When I was in college, I ran the university record store and turned it around from a money losing to a money making business, but it also shows you how old I am. It was vinyl records and audio cassettes. It was pre CD.

[06:24]
James McKinney: You know, the reality is that makes you incredibly cool because vinyl is a big deal right now.

[06:30]
Dave Bolotsky: I still have my collection.

[06:32]
James McKinney: Some of the breadcrumbs of life we can see kind of pointing to where it is that you got to, especially when you talk about your baseball card collection and putting it on lined paper with a description, I mean very catalog-esque if you will. But I have to ask as a former baseball card collector myself, is there one card that you remember that now you wish man, I wish I still had that one?

[06:51]
Dave Bolotsky: I still have them all.

[06:53]
James McKinney: Really?

[06:54]
Dave Bolotsky: Yes.

[06:55]
James McKinney: Is there a gem in that collection?

[06:57]
Dave Bolotsky: I had this dream when I was a kid that I would have children and that they would be into baseball cards, and I have two sons, and neither of them care about baseball cards. So now I'm hoping maybe I'll have grandchildren and live long enough to share my baseball card collection with them. I have yet to toss any of them.

[07:19]
James McKinney: That's awesome. So when we think to your entrepreneurial leanings, that's very entrepreneurial, especially running an ad for a lawn business in the middle school and high school years. Were your parents entrepreneurs? Where did you get this from?

[07:31]
Dave Bolotsky: My parents were not entrepreneurs. It's interesting, I say that, they both were kind of government workers. My father worked for the United Nations, my mother was a social worker. But my father did start his own catalog. He was an art collector. He was a photographer; that was his vocation. That's how he started working for the United Nations, and he actually created a catalog of etchings and lithographs, and he had I would say for a couple years a small business doing that. Post retirement he created a website and has been selling some of his prints, but really more as a hobby than a business. But my grandfather, my father's father, had a candy store-

[08:22]
James McKinney: Oh, there we go.

[08:23]
Dave Bolotsky: … on the lower east side downtown Manhattan, so he was perhaps my best example of retail in my genes.

[08:30]
James McKinney: And I knew it had to come somewhere. Again, just in the short time we've had together I can just see retail all over your fingerprint, right throughout your entire journey. And so your grandfather, did you grow up in that candy store? Were you summer labor in the candy store? What was the connection there, besides just relational?

[08:47]
Dave Bolotsky: I was very close with my grandfather. I'd go on vacations with him. His wife, my grandmother, died relatively young so I became his travelling companion, but I didn't spend a lot of time in the store. I would always enjoy it, kid in the candy store who wouldn't? But it wasn't, I never worked there and didn't spend a lot of time.

[09:09]
James McKinney: Excellent. So when you come to the end of high school, it's one of those natural chapters in life and you talked about you had a lawn service business that you ran in the paper. At the end of high school, what is your memory as far as what you wanted to do post high school? It's a natural chapter, we're closing one, we're entering a new one. What did you think you wanted to do?

[09:26]
Dave Bolotsky: I wanted to start my own record label.

[09:29]
James McKinney: Really?

[09:31]
Dave Bolotsky: Yeah.

[09:32]
James McKinney: So you were a musician then?

[09:33]
Dave Bolotsky: No.

[09:34]
James McKinney: No?

[09:35]
Dave Bolotsky: Record label… no, record label as in Atlantic Records, Sony Music, what have you. So no, I was not a musician. I was a huge music fan. I was a DJ in high school, college, and after college for a bit. And so my idea was that I would work for a record label for a year or two after college and then start my own record label.

[10:00]
James McKinney: Obviously we're not talking to you today because of a record label you created. What happened that that didn't come to fruition? Because you worked at a record store, so it seems like there were some steps there.

[10:11]
Dave Bolotsky: Yes. No, in high school and summer college I worked at a used record store. College I ran the university record store, I was a DJ on the college radio station. I applied to lots of record labels in 1985 when I graduated from college, and none of them wanted to hire me. I was too idealistic to use connections. So a friend's father was a senior exec at a record label and I didn't want to ask her for help because I felt that I should get the job based on my own merits. I've since been disabused of those naive notions of how the world works, but at the time that was my framework.

[10:55]
James McKinney: Excellent.

[10:56]
Dave Bolotsky: I didn't get hired by a record label. And I would also say that as I got older music became a little less important to me. I still love it, still listen to it, but it went from kind of being my life to being a smaller part of my life.

[11:14]
James McKinney: Now obviously those changes, those thought processes we have, come from somewhere. Was it the disenchantment with the money that was in the record industry? Was it the challenges you saw in trying to get in? Was it responsibilities and financial burdens? What were the things that you started disconnecting yourself from that dream?

[11:33]
Dave Bolotsky: I could subtitle it "How I learned to love Madonna." I was sort of a punk rock, new wave music fan. Growing up, The Clash was the only band that mattered. When I started working in the record store in college and then running the store my senior year, my appreciation for what was commercial started to challenge my appreciation for what I loved in music. It did start to take… when your hobby becomes your job, it can take some of the joy out of the hobby. I felt a little of that happening.

[12:20]
James McKinney: And I know there's always that transition in there. So as you started to disconnecting yourself from the dream of owning a record label, what was that first, and I'm going to use air quotes, "real job" that you had out of college?

[12:33]
Dave Bolotsky: It was working as an assistant to a retail industry analyst on Wall Street, so I was essentially a financial analyst, financial assistant, doing number crunching of companies financial reports and attending meetings, and reporting back to my manager. Then over time began, at her encouragement, began doing some of my own independent research on companies.

[13:07]
James McKinney: Incredible. It's interesting. Of the 61 or 62 episodes that I have released, there's probably only been one other founder that I can see from childhood to current venture how it was just destined to be, the first being Larry Namer, the founder of E! Entertainment Television. I saw media and cable from the very beginnings of his early days and his story, when he's laying cable in the sewers of Manhattan, to obviously selling E! Entertainment Television for billions of dollars. And you yourself, you just see retail just woven throughout your entire story, even up to the point where you're with a firm on Wall Street. How long were you there with that firm?

[13:48]
Dave Bolotsky: So that was First Boston which is now known Credit Suisse. I was there for almost two and a half years, and then got recruited by Goldman Sachs and was there for another 12 years.

[14:03]
James McKinney: In the same focus, retail?

[14:06]
Dave Bolotsky: Yes.

[14:07]
James McKinney: Unbelievable. So you're there for, I'm sorry you said 12 years right?

[14:11]
Dave Bolotsky: At Goldman, yeah.

[14:12]
James McKinney: So you're at Goldman for 12 years, really for a lot of people a dream job working on Wall street with Goldman Sachs. You're there for a long time obviously, probably climbed the ranks within Goldman Sachs. What happened in, if I'm going to date this correctly, probably '98 or '99 when you left Goldman Sachs? What was happening around that season where you started thinking that this wasn't going to be the long game for you?

[14:39]
Dave Bolotsky: So I never thought it was going to be the long game.

[14:41]
James McKinney: Oh, okay.

[14:43]
Dave Bolotsky: I paid for college myself by working and taking out student loans, and so I graduated owing money which was not something that was comfortable for me. So I thought I'd work on Wall Street for a year or two, pay off my loans, and start my own business. It wasn't necessarily going to be a record label, but it was going to be something. Going to Goldman Sachs was in direct opposition to that plan, and so I had gotten recruited by them. It was a significant increase in pay and significant increase in responsibility, and I remember agonizing over whether or not to do it, and I came up with an insight at that point which is in life we don't make the right or wrong decisions, we make decisions and we make them right. Meaning the path that you choose is not nearly as important as what you do once you choose that path.

[15:43]
James McKinney: Oh, I love that.

[15:44]
Dave Bolotsky: And so I sort of got over that hump of indecision, because I didn't have a business at the time to start, and thought I'd work at Goldman Sachs for a couple years, come up with the business idea, finish paying off my student loans, and move on. As you said, I keep moving up the ranks, became a managing director. Goldman Sachs was going public and it was a very tough time to leave when I did in 1999 from a financial perspective, because I walked away from millions of dollars there.

But what had happened was in 1995 I learned about the internet through a friend of mine who was a graduate student at the time, and this was before there were even pictures on the internet. It was all text based, and he showed it to me as a place that you could find unlimited jokes. And I remember going out to dinner with him and his then girlfriend, and just having my mind blown about this reservoir of information. At the time, I didn't connect it to retailing at all or commerce for that matter, it was more just for information.

As internet retail companies started arising, I went to my boss at Goldman Sachs and said, "Hey, I want to write about this. I want to be the expert in internet retailing," and he said, "Sure." And so I started following internet retailing in probably 1995, 1996 writing a lot about it starting in 1997. And I would sit across from entrepreneurs and say I would much rather be doing what they're doing than writing about what they're doing. I had pretty much made the decision in '97 or '98, '99 that I was going to do something related to internet retailing. I just thought it was the coolest thing that I had seen as a business development in my lifetime.

The question for me was should I take a half step and try to become a venture capitalist, because in some ways that's more similar to having been a research analyst, or should I take the plunge and start my own business? And at the time I also thought about working in the nonprofit world. I had been very active as a volunteer tutor and a board member at an education nonprofit, and one of the things that I thought about doing was actually devoting my life to that. Little did I know that I would combine my nonprofit and internet retail passions into an unprofitable internet retailer the first few years, but I used to describe my wife as somebody who works in the intentional nonprofit field, and I worked in the unintentional nonprofit field.

[18:41]
James McKinney: Oh my goodness. I love the fact that you were there and in the trenches of the early days of ecommerce as writing about it. What were some of the, because I'm trying to remember I think '98 was when Amazon first came on the scene for books I think it was. '98 right?

[18:56]
Dave Bolotsky: I think it was before that, yeah.

[18:58]
James McKinney: So do you remember writing about it? Any brand that you remember writing about that are still around?

[19:03]
Dave Bolotsky: I worked on eBay's IPO and I still have their so called deal toy from that public offering. I moderated a panel with Jeff Bezos when Amazon was starting out. I think this was '97 or so and there was a guy named Charles Stack of books.com. but yeah, there were eToys was a company that I looked at. Web Van was kind of coming up as I was leaving. So there are way more I would say ill-fated companies than successes from back then.

[19:41]
James McKinney: And starting an ecommerce brand today is vastly different than when you left Goldman Sachs to do this. As you have decided to leave Goldman Sachs and start your own, what was the idea that you had formed? What was it going to be? Is it the Uncommon Goods that we know today? And then what were those early steps? Because information also wasn't as readily accessible as it is today.

[20:09]
Dave Bolotsky: By the time… I decided that I was going to leave and start my own business in late 1998 and my initial idea was art supplies. So kind of a higher… the art supplies piece of Michael's store let's say, but a little higher end. An artist superstore if you will. And as I looked at that market I saw that digitally based graphic design was really eroding that market and most people that were looking at that market were looking it as arts and crafts, a Michael's type store. I went to a trade store for that in Dallas and silk flowers and scrap booking were all the rage at the time, and that was just not something that I could relate to. So I crossed that off.

I then thought of the idea of musical equipment. I had worked on Guitar Center's IPO, thought that could be a really cool online business, and just didn't feel ethical about trying to compete with a company that I had sort of had an insider's view of, since I had worked on their IPO. But I was thinking about sort of creative arts and somebody suggested that I go to the Smithsonian art show in Washington DC. I went down there and going to that show gave me the inspiration for Uncommon Goods. I saw a really inefficient marketplace between makers, artists, designers, what have you, and customers, and that this show would only pop up for a weekend in April. It wasn't an efficient way to sell and it wasn't an efficient way to buy.

I thought wow, you could put this online and have an incredibly efficient market. So that was the idea for Uncommon Goods in April of '99. I also had as part of the idea Etsy was part of my concept. Having worked on eBay's IPO, I thought oh we can have both our product and what I called artisan direct, and we would allow artists to post as well. But back in 1999 digital cameras were not prevalent and we ended up having to choose a path, and chose the company inventoried, edited assortment approach. The idea really has been pretty consistent on coming up on 21 years.

---

[22:57]
James McKinney: Before we continue on with Dave's incredible startup story, I want to expand a bit more about the amazing opportunity that you have with startupstorylive.com. Many times I hear from listeners, and I mean many times as in every week, about how fortunate I am to sit with these incredible founders, to pick their brain, and to learn directly from them. And I'm not going to lie, I am. But that's exactly what Startup Story Live will provide for you. Every single founder will be live and there will be a Q&A session with each of them.

You get to sit with founders like Jason McCann of VariDesk, which has now been rebranded to Vari. Jamie Schmidt of Schmidt Naturals which she sold to Unilever for hundreds of millions of dollars. Matthew Arevalo, cofounder of Loot Crate which grew to $100 million in just three years and pretty much put the subscription box business on the map. Meghan Asha of Founder Made. Davis Smith of Cotopaxi and so many more. The list of founders that we have for this two day livestream event is unreal. This type of opportunity to get direct access to these amazing founders would cost close to $1000 in any live setting, but at Startup Story Live it's absolutely free. Yes, the entire livestream and Q&A opportunity is free for you. Don't let this opportunity pass you by. Visit startupstorylive.com for all the details and to register day. All right, enough of the announcements. Now let's get back to our episode.

---

[24:19]
James McKinney: That's unbelievable. So there's a couple things. My wheels are spinning a bit on your visit to the Smithsonian event. What were the items that you saw from this idea of unique artisan crafts to get to people to optimize the buying and selling experience?

[24:36]
Dave Bolotsky: Well the thing that I remember seeing was lots of customers. As a research analyst I would go into stores and what I would look for are shoppers. So I saw a place that was packed on a weekend day and it was really more talking to the people that were shopping there and talking to the makers, to the sellers, where I could see that there was this appetite on the part of shoppers that wasn't being met by traditional retail and if I'm buying you a birthday present and your birthday is in October, as much as I care about you I'm not going to be shopping in April for you. And if God forbid you don't like what I get you, the circus has left town in April and you're not going to be able to return it. I just saw a tremendous opportunity to put the product online without the kind of inventory risk that you would have trying to put it in a chain of stores.

[25:38]
James McKinney: So in order to avoid the inventory, the business model from day one was to get it from the maker and then ship it out?

[25:48]
Dave Bolotsky: Right. To me, the beauty of the internet versus retail is the internet and certainly as we started was one warehouse. Amazon has hundreds of warehouses but our idea was we were going to have one warehouse and millions of stores. The stores were back then desktop and laptop screens. So that was how we would limit the inventory risk. The product was in your bedroom or wherever your computer was and the inventory was in the single location.

[26:23]
James McKinney: Interesting. What was year one like for you?

[26:26]
Dave Bolotsky: So year one we started in the summer of '99. It was raising money. It was hiring people like crazy. It was finding space to locate the business. It was coming up with a name, working on the trademark, and losing lots of money. And attempting to launch the website in December and having it fail. That was 1999.

[27:00]
James McKinney: And 1999 having those challenges you're now rolling into 2000. I forget exactly what years we consider the bubble burst.

[27:09]
Dave Bolotsky: March 2000.

[27:11]
James McKinney: Yeah, so you're heading into that season with a business model that hasn't proven itself yet. I guess the business model has proven itself, your business hasn't proven itself.

[27:20]
Dave Bolotsky: The business model had not proven itself. Almost every person I mentioned the idea to said, "Dave, internet makes sense for books, commodity, product, you know what you're getting. It makes no sense for a handmade object that you've never seen before. Everybody needs to touch and feel it." That was everybody said it's not going to work because you need to touch and feel the product.

[27:45]
James McKinney: So the product you had is what people were having a hard time getting from an ecommerce perspective.

[27:50]
Dave Bolotsky: That and the fact that in 1999, 2000 the vast majority of internet shoppers were men and our product is more geared to women. We're happy to take anybody's money but 80% of our customers are women.

[28:11]
James McKinney: Oh, fascinating. That's so funny because most of the guys I know Uncommon Goods because of some phenomenal desk pieces. There are people that love it too. I first became introduced to Uncommon Goods through men, so it's interesting 80% is female. But I don't want to jump that far ahead just yet. So how did you navigate through that bubble burst? Because you had a business that hadn't proven itself. You're having a hard time raising money now. How did you get through that season? Was it just all self-funded? Was it debt? How did you get through that?

[28:42]
Dave Bolotsky: So we raised money. I put money in the summer of '99 to get the business off the ground. We raised some outside capital from friends and family. I had an advantage that I was working in the money world so I had some fairly well off friends and the internet in 1999 was a place everybody wanted to put their money. Fast forward to 2000 and we were contagious. There was certainly fear, not wanting to touch what we were doing. Fortunately, I had built really strong relationships and the vast majority of the people that invested in '99 came back in the summer of 2000.

The one personal challenge and joy I would say, but at the time it was also a challenge is that my wife was due with our first child in February of 2000, and basically she said, "Dave, you're not travelling before our son is due because if he comes early I will never forgive you." One of our investors, an advisor of mine had missed his first child's birth and he said he's never forgiven himself for that. So I was essentially not travelling for about six weeks and that was right before the internet bubble burst. So the plan was to go out and to get venture capital. I met with lots of venture capitalists. That was in Silicon Valley in Sand Hill Road, going up and down in March of 2000.

Basically what I was hearing from a number of them was, "Dave, B to C is over. You need to do B to B." And I said, "I don't have any expertise or any interest or any passion in business to business. I've spent my career in business to consumer, I think this is an opportunity. Just because B to C has gone out of fashion does not mean I'm not going to pursue it. It may mean I'm not going to get your money," and that is lo and behold what happened. So I went home empty handed with a newborn child, but was able to go back to our existing investors and raise enough money in June of 2000 to keep the company afloat. But we then had to cut staff from about 35 people over the next year and a half down to about 5 people so it was a brutal time.

[31:31]
James McKinney: Wow so you staffed up quickly from your launch in April of '99 to we'll say June when you had to start doing the cut. Wow.

[31:40]
Dave Bolotsky: Yeah. We had a number of competitors that had raised I'd say between $30-70 million. I felt it was a game of musical chairs and I didn't know when the music was going to stop but I knew it was going to. I had written a report about the internet right before I left Goldman, sort of a comprehensive piece with a number of other analysts and talked about when is the bubble going to burst. But we decided, I decided to grow the company quickly and it was a stupid decision, and a lot of people paid the price for it by losing their jobs and something that I take responsibility for.

[32:24]
James McKinney: So the speed in which you grew was because you were trying to keep pace with competitors in the market?

[32:29]
Dave Bolotsky: Correct. It was the logic of first mover advantage. Seeing that Amazon and others were staking out territory and not wanting to get left behind.

[32:42]
James McKinney: In 2001 and we'll say closer to 2002, what changed in your business to help stabilize it?

[32:51]
Dave Bolotsky: So the first thing we did was we went old school. Well, it was the… well, yeah I guess in some ways it was the first thing we did. So we finally got the site up and running in the summer of 2000. This is before Google. There was a website goto.com which was the first page search site. It might have been Bill Grose was behind it. We were able to bid on keywords for a penny each, two cents, three cents, and so we started with paid search but it wasn't getting a lot of traction.

The big thing that everybody was doing was these marquis deals with AOL. It was millions of dollars. These ecommerce company stock prices would go up when they would sign a deal with AOL. We went down to meet with AOL and the prices they were asking it was just not economic and I was not playing a shell game in terms of hey, let's impress the world, throw away all this money, and then get a higher valuation from somebody else. We had to make money. So AOL did not make sense for us.

We thought hey, let's try a postcard, let's try a package insert. Let's do a mailer that's like a four sided direct mail piece. We were trying these different direct mail pieces, trying paid search advertising and wasn't getting much traction. Our head of marketing came to me one day and said, "Dave, we're paying for these postcards. You could print and mail a 32 page catalog as long as we're willing to do 100, 200, 300 thousand of them. We can do them really cheap." And I said, "Yeah, but Mark I wanted to start an ecommerce business. I don't want to start a catalog business. That's old school. We're the future." He pushed on it and I came around. I said, "You know what? Let's try it."

And so in the fall of 2001 we launched our first print catalog, a 32 page catalog, and that really is what saved the business. We did it at a time, 9/11 had just happened, we lost internet connectivity, we were running the business on literally a 56K dial up modem for something like six weeks. It was a challenging time getting our catalog done through all that. Obviously much more serious issues going on than our business, but we managed to prevail, launch the catalog for Christmas of 2001 and was really off to the raises. It was still company was losing money. Lost money in 2002, finally made I think it was a $38,000 profit in 2003.

[35:50]
James McKinney: And would you attribute that profit, a significant increase in revenue, because of the catalog efforts? What did that do for the business?

[35:57]
Dave Bolotsky: Definitely, yeah. The catalog was 80% plus of revenue for the first few years.

[36:07]
James McKinney: For my listeners, for clarity, the catalog was driving people to your site to place the order?

[36:12]
Dave Bolotsky: It was driving people to the site and we were happy to take the customer's money any way he or she wanted to give it to us. So we had mail order so we would get checks in the mail and we took phone calls. We did not have a sophisticated telephone system so during Christmas when we would get slammed, we would literally have customer service team members taking three or four phone calls at a time, grabbing different handsets and putting people on hold.

[36:44]
James McKinney: It's like one of those telethons.

[36:46]
Dave Bolotsky: And the warehouse was in the same space as the customer service center and it was kind of like a boat where too much water would fill on one side and you'd all move to the other and start bailing. So when we'd have too many orders all our customer service reps would go out into the warehouse would start picking and packing orders, and when the call center would get too busy we'd have the people from the warehouse move into the call center. We would all answer phone calls. So it was sort of kept together with chewing gum and chicken wire.

[37:18]
James McKinney: Oh my goodness. And you said your first profitable year was 2003, correct?

[37:22]
Dave Bolotsky: Yes. It took four years for the business to make money and I think it was six years before I drew my first salary.

[37:29]
James McKinney: So I have to ask this question because you launched in a very challenging season of our economy and globally with 9/11. There's a lot of things that were adding weight or adding an incline to your effort that a lot of people probably wouldn't even understand in today's market trying to launch a business. Knowing, especially you didn't take a salary for six years, during that season was there any part of you that was just like this just is not worth it, what was I thinking?

[38:02]
Dave Bolotsky: There were plenty of times where I said what was I thinking. I felt terrible guilt around laying people off whose only sin was believing in the business and believing in me. And I also felt a tremendous sense of responsibility to my friends who had invested in the business. So there was a lot of what the heck have I done thinking, but also in feeling of responsibility. There was certainly a lot of self-doubt, like is this going to work, am I capable as a CEO or am I just play acting. It got real pretty quickly when we had to downsize. It was a very trying time. Also starting a family, which all respect the business, is a heck of a lot more important.

[38:57]
James McKinney: Yeah. As we've spent some time together, in my mind I just keep saying the phrase high moral caliber, high moral caliber. I just have to ask the question, you've said many things that have just put that thought in my head that you are a man of high moral caliber. A company of your size with the success you've had, it isn't something we see all the time. It's out there but not something you see all the time. So I have to ask what is it about whether it be your upbringing, your life, whatever the case maybe, where you have this threshold of I'm not going to go into the music ecommerce business because I was privy to Guitar Center's IPO, the guilt and weight you bear from letting people go, and obviously the honoring of your family for being there for your firstborn's birth after somebody said it's a regret that they had their entire life or since. What is it that guides you from a principle perspective throughout everything you do?

[39:59]
Dave Bolotsky: First of all, it's kind of you to say that and I hope it's true, but I would say my parents really are the ones who instilled the values that I had. I think they've by and large lived them.

[40:15]
James McKinney: So when you're navigating through, whether it be them in your head, whether it be your upbringing, those are the things that you just go back to as you're making these decisions?

[40:24]
Dave Bolotsky: Yeah. I mean ever since I was a kid, I've always thought about right and wrong, and tried to do the right thing.

[40:35]
James McKinney: Do you find it challenging in the midst of entrepreneurship and especially in the technology space and ecommerce?

[40:41]
Dave Bolotsky: It's not hard to know what's right. Having said that, there are certainly gray areas. We share customer names in catalog rental. So in other words, if another catalog sends out books to customers, catalogs to customers, and certain customers buy from them those so-called prospects are names that the company can rent to other companies. When I started the company, I didn't want to do that. I thought that was unethical. I would say that that is a gray area because from an environmental perspective, I think that's a tremendous thing to do.

I can mail a million catalogs to unqualified, random addresses across America and what a waste of natural resources to do that versus a more targeting mailing. But there is that privacy tradeoff where you're sharing your customer's address to another company. There are gray areas. There are compromises. But I've worked really hard. The lowest paid worker in our warehouse earns $17 an hour. There are a lot of things that we try to do as a business that I would say is ethical. But yeah are there gray areas? Sure.

[42:12]
James McKinney: You know it's interesting, either I am a fan of loopholes, either I have less of a moral caliber, but as you're talking about the name rentals and the catalog renting space I think that's the mail order version of the algorithm. It really is. From Google search space and Facebook and everywhere else. Our data is propagated all over the place and in the mail order space, it just happens to be a little bit more direct if you will.

[42:38]
Dave Bolotsky: Yeah. No, it's not unlike re-targeting which again is a little creepy.

[42:45]
James McKinney: Yeah.

[42:46]
Dave Bolotsky: But it's also effective and efficient.

[42:49]
James McKinney: Now 20 years into the business, investors are usually looking for an exit of some type. Have you bought your investors out? Are the original investors still on board?

[43:02]
Dave Bolotsky: So it's a mix. We bought out about 25% of our early investors about three years ago. So we raised money in '99, 2000, and then the last fundraise was 2003. So in late 2016 or 2017 we bought out about 25% of the outstanding outside shareholders. We may do that again. Really depends on the company's capital needs at the time. But yes, we have had patient investors.

[43:45]
James McKinney: Yeah, yeah. So in 2006 you draw your first salary. The internet goes crazy for the next 10 something years, even still even to now. The industry has changed quite a bit. The barrier to entry for ecommerce brands is significantly lower. Shopify comes on the scene in 2011 I think it was, which then anybody at this point can set up an ecommerce store. All of this growth in the technology space, and specifically ecommerce. Has that had an impact with the business of Uncommon Goods? Because now makers can go direct if they want or now there is Etsy.

[44:25]
Dave Bolotsky: Yes. I think every year it gets more challenging. There was a point when customers were leery of putting their credit card online and the growth of the industry, and to a certain extent competition was good for us because people became more comfortable shopping online. That point has long since passed and Amazon going to one day free shipping, Etsy going to free shipping, to your point folks being able to open a Shopify store or go direct to consumer, a lot of Facebook and Instagram advertising, it has made things more challenging. It's made things more expensive. Ad rates on paid search, ad rates on paid social have gone up significantly. Organic social used to be a meaningful channel and Facebook basically worked to monetize all that traffic.

[45:28]
James McKinney: Unbelievable. How much of your business is now still the catalog? Because I will say my household loves the catalog. So how much of your business is still the catalog?

[45:35]
Dave Bolotsky: It's still about half. We attribute close to half of the revenue to the catalog. It's a little like trying to unscramble a scrambled egg because you've got email. There are many touch points for the customer, but we estimate it's close to half our revenue.

[45:54]
James McKinney: When in your journey did you know you had a sustainable business?

[45:59]
Dave Bolotsky: I would say in retail you're only as good as your last transaction with the customer. On a certain level I don't think we ever have that or I never have that level of comfort. I think we constantly have to prove ourselves and we constantly have to improve. In terms of when I was confident that we could do it, it probably took about four years. Seeing the business actually make money and generate positive cash flow, that was about four to five years in.

[46:44]
James McKinney: Incredible. One of the hardest parts about starting a business is going from zero to one. Now you have a tremendous audience. You have products, you sell to consumers, you have data. And so I don't want to say the chances of failure are nil but they're definitely decreased from your early days because now you have an audience. How nimble is Uncommon Goods to adjust to the market pressure that comes from, again I go back to sites like Etsy or any other platform where makers can sell direct?

[47:21]
Dave Bolotsky: I would say we are not as nimble as I would like us to be, but I would say we are reasonably nimble. We've built a lot of code over 20 years and there's legacy code, so called tech deck, and so if we want to change something we have to think about all the different systems. We want to launch Apple Pay. Okay, well Apple Pay doesn't work if an item is on backorder, meaning it's not available to ship today, it's going to be in stock in three weeks. And so there are challenges associated with launching new technology.

We decided two years ago that with everybody going to free shipping, we had been a holdout on free shipping. Our shipping costs are greater than our company profits and during the Christmas season, we're capacity restrained. We have a very hard time keeping up with demand and so the idea that hey, we're just going to give that shipping way for free when we don't have the ability to get a lot of incremental volume never seemed like a wise move. So we decided about two years ago that we were going to launch our version of Amazon Prime called Uncommon Perks. For less than $15 a year we offer free shipping. We got that up and running within I would say six months or so. That's been a very successful program. We have about 50,000 subscribers to that. It's been a big part of our business the last couple of years.

[49:07]
James McKinney: Do you foresee building that program out to be more than just shipping?

[49:11]
Dave Bolotsky: We're looking at it. The big change that we're going to make right now is we're going to do what everybody else does which is offer customers a free trial of the program. That's what Amazon does with Prime. You get a free trial when you sign up or Spotify or Pandora or what have you. So we're going to offer that this year. But we've thought about free gift boxing or free gift messaging. There are other things that we've contemplated. We do offer early access to product.

So a special product that's coming out, we will email our Uncommon Perks customers first. We also have a program called Better to Give where we've donated over $2 million to nonprofits. The customer gets to choose at checkout which nonprofit that we donate to, and we make a double donation to any Uncommon Perks customer that chooses one of our Better to Give partners.

[50:13]
James McKinney: Incredible. Where do you see Uncommon Goods in five years?

[50:16]
Dave Bolotsky: Hopefully still here in Brooklyn. I would say you know the biggest change that I'm seeing is that we have an opportunity to have deeper partnerships with the creators, with the makers. So if you want to do your own marketing and do your own shipping, and do your own customer service Etsy is a great channel. If you are a creator who wants to focus on creating and let us handle the marketing, let us handle the shipping and the customer service, we can be an amazing partner. I think it's tougher and tougher for makers to get noticed.

I mean one of the advantages is yeah, the barriers of entry have come way down. Anybody can open their store, and that means that everybody opens a store and now you're competing for the customer's limited… you know customers don't have any more attention today than they had 20 years ago. There's just a lot more competing for their attention. To your point, we do have established channels. We do have established customers. We have the capital to put marketing to work. We create demand whereas I would argue a company like Amazon does more to fulfil demand very efficiently.

What we're focusing increasingly on is being a better partner to the creator, to the maker. We've always mentioned the names of the artists and designers, helped build their brand. We're working increasingly on helping get product made. We have a product development team. We have manufacturing partners that we work w. and nearly 40% of what we sell is only available through Uncommon Goods exclusively, and a lot of that product is developed in partnership with independent makers and designers. I see that proportion growing to 50% and then higher. Because ultimately what reason are you going to have not to shop at Amazon? It's got to be something that you can't find at Amazon.

[52:32]
James McKinney: When it comes time to you retiring and stepping out of the business, what would you like to see from Uncommon Goods that when you look back on your 20 plus year journey of building Uncommon Goods you're like that was worth every bit of the sweat, every bit of the tears?

[52:50]
Dave Bolotsky: So I'm not ready to hang up my spikes just yet.

[52:52]
James McKinney: Of course.

[52:53]
Dave Bolotsky: But honestly I'm seeing a lot of it. So the gratification from seeing people on our team grow and develop, and achieve personal and professional success. Folks who work in our warehouse on a seasonal basis have become successful computer programmers for the company, have worked in merchandising. So I would say that growth and development of our team number one.

Number two, reading letters from our customers who get joy and give joy from the products that we offer that they haven't seen elsewhere. Also from the makers. I think helping them, there are a number of people who say hey, I would not have been able to quit my so-called day job were it not for the orders that Uncommon Goods placed.

And then also I would say the impact that we've had as a force for good. So we became what's called a B Corp back in 2007. We were a founding company to take the pledge of social and environmental responsibility. That's kind of been in our DNA from the beginning. We've never sold any products that involve killing animals. No leather, feather, or fur. And tried to have a positive social impact. Some of the things I feel best about is our successful advocacy in New York State for raising the minimum wage and also for mandated paid parental leave. So those are a couple of things where were I as an individual to advocate for them they probably fall on deaf ears but because I run a business elected officials and media outlets are more interested in what I have to say. I think that we were able to positively impact those two important developments.

[54:53]
James McKinney: And again, it just points back to that high moral caliber. This has been incredible. As our time comes to an end, there's a couple questions that I ask every founder. The first one is do you believe that anybody can be an entrepreneur? Or do you believe that you are born with that skillset? And you've been through a lot, so I'm really interested to hear what you have to say about this.

[55:17]
Dave Bolotsky: So I think some of it depends on how you define being an entrepreneur. You can be an entrepreneur of one and manage yourself, and I would say I think anyone or almost anyone can learn what it takes to be an entrepreneur. The learning curve may be… so it took me four years before I was able to make a profit and I had sort of every advantage imaginable. So it could be that somebody might take 20 years to make a profit. I don't know if they can hold their breath that long or just keep their day job and do it on the side, but yeah I have a lot of belief in human potential. So I think with number one, two, and three the right level of determination and then curiosity and willingness to learn and be mentored, I think pretty much almost anyone can do it. But what "it" is, the scale may vary based on their skillset as well as luck.

[56:25]
James McKinney: Excellent. Absolutely. So the last two questions, the first being about gratitude. As you look back along your journey, there are people that have contributed to your success, behind the scenes or on the front line. I believe that if we forget the people that contributed, if we forget the shoulders that we're standing upon we'll begin to think we did it ourselves and isolate ourselves, and that will inevitably lead to our failure. So when you look back along your journey who are the people that you point to with immense gratitude for their contribution to your journey?

[56:53]
Dave Bolotsky: I would start with my parents for instilling believe in myself and also the values. My wife for supporting me, putting up with all the craziness of the business. The folks who funded the business and our early board members, one of whom is still been a huge business advisor to me over 20 plus years. As I said the folks early in the business, we work crazy hours and it was super challenging in those early years, and everybody through the years. People working in our warehouse, working on our customer service team. I meet with every single person that we hire during the holiday season. We hire hundreds of people. I met with them in orientation and to your point about gratitude I say that our business literally is in your hands. Our customers experience is in your hands. This business is not about me. It's our team that's responsible for our success.

[58:01]
James McKinney: Oh, I love that. Absolutely love it. And our last q. you've talked about an entrepreneur needs to take guidance for mentors and seek that out. You talked about your business advisors poured into you for 21 years. I believe The Startup Story is a digital mentor for many because I hear it from my listeners on the things that they learn, the guidance they get, much like leadership books and entrepreneurial books are now. But we've been talking to tens of thousands of people up to this point. I'd like to bring the conversation down to just one, a mentor minute if you will.

And I like to do this as though you were having coffee with this person. Whether this listeners it the frustrated entrepreneur who has been at it for so many years and just not getting the traction that they thought because of the competitors that they see interesting he landscape or whatever the narrative may be, they're just frustrated about business. The cash flow is discouraging or maybe they haven't had a salary for six years, whatever the case may be. Or the defeated entrepreneur, the one who has been punched in the gut numerous times, about ready to call it quits. Or maybe it's the last one who's working that 9 to 5, got a book full of dreams and ideas, but some narrative as to why they can't move forward on their business. Whether it be the financial responsibilities, family, whatever the case may be. There's something that is blocking them from taking the next step to start their business. Whatever of those personas that you resonate with, I would like you to speak to that one person right now and what do you have to say to them as we end our time together?

[59:25]
Dave Bolotsky: So I would say first you have to decide what's most important to you. There's no right or wrong generic answer, it's what's right for you. You may make the decision that your family, your kids living in a certain house or going to a certain school is most important and if that's your decision, make that decision and stop driving looking in the rearview mirror. You've got to focus on the road ahead and say hey, maybe in 10 years I'm going to pick this dream back up, but I've got to focus on my husband and my kids and not on this entrepreneurial dream, or I want to do this and I've got to talk to my spouse and let me figure it out.

I think question number one is what are your priorities and decide whether or not it's the right thing for you to do today, and if it is then don't make excuses. The fact that there's competition out there is not the reason you're not getting traction. It's that you have not created a compelling enough alternative. So I would encourage you to get mentors, to look at the competition, look for inspiration, listening to podcasts like this one and others, look for role models. When I started the company and I was feeling sorry for myself at how bad the business was going and how tough it was, and woe is me, I read this book called Nuts, which was the story of Herb Kelleher and his founding of Southwest Airlines. I was having a tough time because it took me a year to launch the business. He couldn't fly a plane for multiple years because Braniff airlines was suing Southwest for airport rights. So there's always somebody out there who has got it way, way tougher than you do, and you've got to dig deep.

You've got to find it within yourself to have that drive and then seek out those people who can help you unlock that answer, whether it's through podcasts, whether it's through book, whether it's through looking at the competition, whether it's through dreaming, visiting stores, visiting museums, who knows what. But I would say there is joy in the journey and you have to focus on that. Focus on the challenge. When we go through challenging times as a company I say you know what, we're always going through challenging times. When we're growing 30 or 40% we've got to hire all these people, we've got to get new space. That's one set of challenges. If the business isn't growing you've got the intellectual challenge of how do you unlock that puzzle. So I would appreciate all the challenges. The grass isn't always greener on the other side. Appreciate where you are, have that gratitude, and roll up you sleeves and make it happen.

[62:38]
James McKinney: Once you've had a few moments to process all the value Dave brought us in this episode, please hit me up on LinkedIn, Facebook, or Instagram and share with me your thoughts on this episode. I said at the top of the episode that Mother's Day is just around the corner, and if you've been around The Startup Story for any length of time then you know how much emphasis I put on the idea that entrepreneurs support other entrepreneurs. For that reason, let's support Dave at Uncommon Goods by shopping at uncommongoods.com this Mother's Day. Or maybe visit uncommongoods.com to join their Uncommon Perks program which gives you free shipping and many other perks. Either way let's show up for Dave Bolotsky and Uncommon Goods in a huge way by visiting uncommongoods.com and ordering a product as our way of simply saying, "Thanks Dave for sharing your startup story with us." Remember, entrepreneurs support other entrepreneurs, so let's make this happen. And now for my personal ask.

The Startup Story community has been so incredible about sharing our podcast with others, but we have more stories to tell and more people to reach. We too are a startup and word of mouth is everything, so please follow us on Facebook and Instagram @TheStartupStory or on Twitter @StartupStory_. If you're on LinkedIn, please search for The Startup Story and follow our company page. LinkedIn is a really powerful way to raise awareness of the show. But the most impactful way you can help us grow our audience is to leave a review on Apple Podcast. Or if you listen to the show via Spotify, then please simply share the podcast directly from your Spotify app or wherever you listen to the show.

These simple actions can make a huge impact in getting these amazing founder stories out to the masses. And please make sure to tag or mention The Startup Story when you do share so that we can connect with you and say thank you directly. I'm so incredibly appreciative of the fact that you listen to the show each and every week, and I look forward to sharing these amazing stories with you every Tuesday with hopes of encouraging and inspiring you to start your story.

If you like this podcast and are thinking of creating your own, consider talking to my producer Danny Ozment. He helps thought leaders, influencers, executives, and authors create, launch, and produce podcasts that grow their business and make a real impact in this world. You can contact him today at emeraldcitypro.com/startupstory.