From Brushstrokes to Millions The Journey of Bill Lederer And The 200 Million Dollar Exit of Art.com

Speaker 1: 0:00

Today on the Uncomfortable Podcast, we have Bill Lederer. Bill was introduced to me by my good friend and fellow domain broker, alan Dunn, who is the owner of NameCorp. Bill and I spoke over the phone and realized that he lived about 45 minutes away from my house. We decided to meet in person and, for the record, I have never recorded a thing in my life, but I bought a high-end camera and brought it with me for the interview. It might look a little bit like a deposition, but I did the best I could.

Speaker 1: 0:28

Bill was working a corporate job and moved back home to Chicago to take over his family art supply business that had a handful of employees. That was not online Now. It was the 90s, so who was? Bill had big plans and aspirations for the business, but it took a radio interview in Rockefeller Plaza where, after a one-hour discussion, the DJ could not remember his company name. That's when he knew it was time for a change. The problem was that those who had invested in his company did not see the same benefits the perfect domain name would bring to their business. Additionally, bill had to find a way to convince the current owner of Artcom to sell it to him. Hear his story and how this decision, amongst others, ended up leading to a 200 million plus dollar exit. This is one hell of a story. I loved recording every minute of it. Thanks for listening.

Speaker 1: 1:31

Today, on a very special episode of the uncomfortable podcast, I have traveled to st petersburg to meet bill letterer, founder and founder and the leader of isocrates.

Speaker 1: 1:42

As chairman and ceo, he is a global C-level digital media and marketing services executive with extensive consulting, founding, building, turnaround expertise in both entrepreneurial and established companies, in mad tech, programmatic trading, data and analytics, advanced TV and online and mobile video, internet and e-commerce, advertising, marketing and information services services. That's a lot of things. Bill has served as a divisional ceo and or c-level executive with kantar, wpp, tns and getty images. He was a founder and ceo of e-tailer artcom we're certainly going to talk about that and a programic media trader, media crossing, and is a former board member for public and private companies, including WPP Digital, kantar Digital Rewards Network, major universities and non-profits. He has an extensive work experience in the Americas, europe, india and Israel and he was an adjunct professor at the New School Graduate Program in Media Management and is the co-author of the leading industry textbook, media Selling, the fifth edition. You're a very accomplished man and thank you for your time today.

Speaker 2: 2:55

Thank you, looking forward to it.

Speaker 1: 2:56

All right. So there's a lot to go over here and, as we talked about before starting the show, is that we like to kind of hear a little bit about your background and then and then get into what you know you're up to now. So you know someone like yourself. I think a lot of people don't really always see the struggle to get where you are and they see c-level titles and they see you know you're a professor at a college, a a very accomplished author. You know you've started a lot of very popular businesses. You ran Getty Images for a period of time. You know why don't you tell us your story about how you got there and how you accomplished a lot of these things?

Speaker 2: 3:35

Well, let's see. Thank you, let's see. It doesn't feel like I've accomplished a lot of things. It definitely feels like I'm on this journey and I had a lot of experiences.

Speaker 2: 3:48

Let's see, I think all of this began a little bit out of a state of envy and curiosity. For me, as a digital entrepreneur, this really started by watching a fellow who was working at a firm similar to one that I had been working at on Wall Street, where he and his wife left to go to Seattle to go sell books on the World Wide Web, and I saw that happening in real time and saw Bezos stand up Amazon and start selling books. I saw Bezos stand up Amazon and start selling books and I'm to CD-ROMs with music and DVDs. It immediately, I think, I understood that business model and where that was going and said, okay, what would be another category that perhaps would have higher margins and a little bit more barriers to entry? It might be another attractive area within B2C where I could leverage skills that I had developed working on Wall Street, being a quant, doing data and analytics and working with technology, and I picked prints and posters. I thought that the web was not intrinsically text-based, but that instead, with ultimately ubiquitous bandwidth available and having it be very cheap which I thought would be the case that it's really sight, sound and motion. It was just a matter of time for this to evolve.

Speaker 2: 5:41

When Amazon started, people thought, well, this is a text-based medium. I'm like sound and motion. It was just a matter of time for this to evolve. When Amazon started, people thought well, this is a text-based medium. I'm like no, no, no, no, it's not text, it's going to be sight, sound and motion. It's just a question of how fast this innovation can diffuse across society. And I picked prints and posters. I picked something visual where you needed a lot of selection, where the supply chain didn't quite already exist to be able to do fast fulfillment and where there's a little bit more barrier to entry, and I was very fortunate. I got in early, but I didn't get in with artcom. Like a lot of entrepreneurs virtually all of us we learn by making mistakes. Very few of us come out with perfect business plans and they're executed flawlessly and it works exactly the way that you thought that it would. Very rarely does that happen. So in my case, I started ArtUframecom and it was pretty good.

Speaker 1: 6:43

How would you spell that? Sorry to interrupt.

Speaker 2: 6:44

A-R-T-U-F-R-A-M-Ecom, and the time frame was May 5th of 1998. Okay, and we launched, and very quickly we discovered that people were not comfortable to use a credit card to make a purchase on the internet. And boy, it sure takes a long time to load these images online if you're a consumer. And how many clicks you had to go through to get through the shopping cart to make a purchase. And they may or may not have an email address. Let's just say that these were early days on the World Wide Web, not to mention the fact that I was running another company at the same time, and so my wife was putting up with me, letting me essentially reinvest our limited resources into this new business, and we did a very steady five orders a day on average through the course of the late spring and summer of 1998.

Speaker 1: 7:44

So, speaking of your wife, real quick and sorry to interrupt, so you were in New York as a quant, so you were doing I was in Connecticut as a quant.

Speaker 2: 7:53

Okay, I wound up moving to Chicago to look after my family business and my dad who was getting sicker and sicker. And when I came up with this idea of artuframecom, I was living in the northern suburbs of Chicago.

Speaker 1: 8:11

So when you were obviously probably making a quite a decent living. You're an intelligent person in the corporate world, you know working at a financial institution and you go to your wife or you say I want to quit and open an art business which you involved in art at the time, or you just kind of studying it. Was it on a?

Speaker 2: 8:27

whim. I was involved with art supplies and picture framing materials, which was our family business. It was not prints and posters, but prints and posters are often sold where art supplies and picture framing is sold, so I was aware of it as a tangential part of my professional life.

Speaker 1: 8:46

So when your father became ill, did you take over his business and help him during that time?

Speaker 2: 8:51

I absolutely did not, knowing that he was ill with a terminal illness and that I was going to lose him shortly. So I had no idea. What I did know was that I would go to see my customers, who were largely retailers, sometimes mail-order catalogs, wholesalers. Invariably I would watch consumers having a tough experience in stores and with mail-order companies and I would observe and say, oh, I think the Internet could probably do this a whole lot better. And I would make that observation quietly to myself, talk to my customers and say have you thought about having a presence on the Internet? And 100% of the clients said what are you crazy? No one's ever going to buy this online for any number of reasons. And I said well, you know there's a lot of success right now in the book business on the Internet. Why wouldn't prints and posters and framing of prints and posters be done online? But no one shared my interest or enthusiasm for the likelihood that that would happen.

Speaker 1: 9:53

Okay, and when you brought this up to your father, when you were taking over the business that you were going to kind of bring it online, or to your other family members, what did they think about?

Speaker 2: 10:02

it. That would never have been a possibility. First of all, my father passed away in 1996, so this would have been the beginning of Amazon and I wouldn't have talked about it with him. But my father was a Depression-era guy and the idea that you would be involved with a negative cash flow startup, the idea that somebody would be making these purchase decisions on the world wide web, that just that they really wouldn't fit for somebody who had come from that generation. So in some ways, I really didn't want to lose my dad and my business partner under any circumstances. But the fact that he wasn't there to say no and would allow me to be able to reinvest my earnings in this crazy enterprise it wouldn't have happened while my dad was still around, and I'm too respectful a son that I wouldn't have gone against his demand that I stick to the way the business had always been done. So he wasn't there to say no and my mother, as it turns out, was there to say yes.

Speaker 2: 11:09

So my mother heard what I was interested in and she said oh, this makes perfect sense to me. There's just two things. The first is I said oh great, mom, so you're supportive. Oh, yeah, she said I think you're really built for this. Whatever this industry is going to be, this is, this is you. But there's just two things. I said yes and she said well. The first one is don't screw up the family business. We work awfully hard to get it to where it is, so don't, don't mess that up. And the other is please don't ask me for any money yeah, so there you go.

Speaker 1: 11:39

At least she was very upfront and honest about that.

Speaker 2: 11:41

Well, that was always my mother. So we got started with Art you Frame and I think your listeners might appreciate this. I had a seminal moment at one of those lightning strike moments that really was very inspirational. And the story is this it was September of 1998, I think the beginning of September and I was doing I just finished an interview with CBS Radio Network in New York.

Speaker 2: 12:11

I was at Black Rock on 6th Avenue and the interview had gone fine. The interviewer said you know, you're really great at this. This seems to be an industry you're really comfortable with. You're a fun interview and I really wish you good luck with. He just spent the last hour talking to me about ArtUFrame and ArtUFramecom. I'm getting on an elevator, elevator doors are closing and he's stammering. He cannot remember the name of the internet site that I run that he'd just been interviewing me for an hour about. So as the doors closed, I realized I have a brand problem and I said to myself I am not getting off this elevator until I fix this problem, because if this guy can't remember, that means nobody else is going to remember either and all I can say is Luckily, the building was 80 stories tall because you had time to think about it, right?

Speaker 2: 13:09

I was on an upper floor. I had the time to think it through and as the elevator doors opened, I got that look from New Yorkers waiting to get on the elevator. That's a famous look that anybody who's ever been to New York has had, which is sort of that insistence of hey, you're holding me up, you know you're in my way because I'm not getting out of the elevator. I'm still thinking through the resolution and finally what comes to me is it's art. Stupid, keep it simple. Stupid. He remembered the art. He didn't remember the U-frame. Just keep it simple. It's art, artcom, that's it. And so these people are looking at me. Door is open, I'm on the ground floor, it's time for me to get out, and on my mind is get to a phone. So I get out of there. People look at me, give me a dirty look as they're getting into the elevator and I go out and this will tell you how long ago it. I walk out onto Avenue of the Americas, 6th Avenue, and I go to a payphone. Remember payphones.

Speaker 1: 14:09

Oh yeah, I remember those yeah.

Speaker 2: 14:11

So I go to a payphone. I made a collect call to the office back in Chicago and I said who owns artcom? And that began an ordeal.

Speaker 1: 14:22

So, before the ordeal begins, to paint the picture for everybody listening, including myself, when you made that phone call and you said you called the office. How many people worked for you?

Speaker 2: 14:34

do you think at that time, At Art you Frame, we probably had about maybe 20 people, Maybe 20.

Speaker 1: 14:42

Maybe 20. Maybe 18 to 20. And before you went online, was it about the same size company and working with the vendors, or no?

Speaker 2: 14:47

No, it was smaller, smaller business Because we weren't in the art and framing business. We were in the art supplies and picture framing materials business. That's a business that was structured very differently, so it was a smaller business.

Speaker 1: 14:59

Okay, and then were you sourcing the things you were selling online from the people that you were selling to before and using the community?

Speaker 2: 15:06

We weren't online at all. There was no online presence. I had no experience online. I had never done anything online. I hadn't bought, I hadn't sold nothing. I'd spent a lot of time on porn sites and CDW and CD Universe and Dell and a few others, but I really was not an internet person until that time that I spent getting Art Uframe online.

Speaker 1: 15:33

Uh-huh and all right. So you called the office and who's in the office that you called at the time? What was the structure of the business?

Speaker 2: 15:39

I should clarify the reason I was on the porn site was strictly for the business. I was there to study the business models, that's it.

Speaker 1: 15:46

I mean things that I've read is that porn has been a pretty big industry that has advanced the internet immensely, I think, with video and pictures and downloading and yes, it's hosting and things like that. It's been very, it seems that way. Yeah, of course, it's always about research. So you call, call your co-worker, or who is the person that you called in the office to say find me, the owner of artcom.

Speaker 2: 16:13

I called I'm not sure who I called. I called somebody in the office. They looked it up in the ICANN registry to determine who had the domain and it turned out it was something called Advanced Rotorcraft Technology. And I'm thinking Advanced Rotorcraft, it's a helicopter consulting business doing defense industry consulting and I'm like I got it ART, like that's crazy. Oh well, they're clearly not benefiting from the highest and best use of that domain, yep, they're clearly not benefiting from the highest and best use of that domain, yep.

Speaker 2: 16:50

So I called California and advanced rotorcraft technology. I said may I speak to the president? And the immediate response I got is our URL is not for sale. Stop bothering us. And I said oh, oh, wait a minute, I'm. I don't know what this is concerning, but I'm I'm trying to speak to the president of the helicopter consulting firm. I don't know what you're saying. She said people bother us all the time. They call here and they they want to buy our domain and URL and it's not for sale. And I said, well, that that's good to know, but that's not why I'm calling, which is, of of course, why I was calling. But clearly I was going to get past her if I said, oh, that's unfortunate Yep. So instead I get through and a fellow says you know, hello. He introduces himself and I said you know, before I talked to you about the purpose of my calling. I said it was a curious thing. I called and I hear that you hear that your URL is not for sale. And I said what's that all about? So he begins to tell me the story that he had registered the domain when it was ARPANET and he was doing work in the defense industry. Never occurred to him that this would have any commercial value.

Speaker 2: 18:02

But as the internet began to become a viable channel for media and marketing, all of a sudden people seemed to care. So in time frame this is 1998, and he said this is just a nuisance. And he said, man, every single day. I said, oh, so it's really disruptive to the business. He goes. Yeah, he said man, he said uh, every single day. I said, oh, so it's really disruptive to the business. He goes. Yeah, he said you know, we're like a helicopter consulting firm. We get maybe a phone call a day, but with these guys they call all the time. It's really a problem. They said, oh, uh, that that's unfortunate.

Speaker 2: 18:37

I said, well, you should probably get rid of the problem, so it makes your life easier. And he goes well, how the hell am I going to? Said I don't know, get rid of the domain, I guess. And he goes yeah, I could do that. But he said my email is tied to the domain. And I said, well, I'm sure somebody could give you like a redirect. And he said yeah, it's sort of a pain in the neck. I said which is a bigger pain in the neck to set of an email, forwarding email, or these constant calls that you're getting". And he goes yeah, they send me email too, and they're really bothering me. They send mail.

Speaker 2: 19:12

And I said, well, it seems to me that you ought to try to get rid of the nuisance. And he goes Well, how would you do that? And I said I don't know, except one of their offers. He goes, yeah, he goes. I don't know how much it's worth, but it's got to be a lot. He goes.

Speaker 2: 19:25

I said, well, how much traffic do you get? Well, he knew his traffic. And he told me and I did some quick math and I'm like okay, this is one of the most valuable domains in the world, interesting. The price that would be paid essentially is like buying permanent advertising, you're going to get all this traffic. So I said, well, maybe I could help you out. And he goes how? And I said you know what? I'll buy the domain from you, I'll take it off your hands. And he goes really, you would do that. And I said, well, how much do you want for it? And he said, oh well, geez, it's gotta be worth I don't know at least half a million dollars. I'm like that's nuts, that's a crazy number. And it actually wasn't that crazy because of the amount of traffic it was getting.

Speaker 2: 20:13

And it wasn't. They weren't doing anything to promote it, it wasn't, you know, they weren't selling anything there that was relevant and he goes well, of course. Yeah, no, I'd take less than that. So we worked on what that number might be.

Speaker 1: 20:27

He still has no idea why I'm calling.

Speaker 2: 20:29

He thinks I'm calling about something to do with the helicopter and he goes. But you're not going to pay me that kind of money. I said you know what I'll do. I'll wire you $10,000 right now for a nonrefundable deposit, giving me the option to purchase at that price for a limited period of time, could you do?

Speaker 2: 20:49

that he said yeah, I mean, I said do you have a good use for $10,000? He goes. Yeah, he said he goes, but don't you wanna talk about helicopters? And I said well, let's finish this discussion first so we work it out. And I said so, do we have a deal? And he said yeah, put it in writing. He said but I'm a man of my word. And he said you send me the money and you can send me paperwork. He goes okay, now why did you call? And I said well, I hate to sound like a total scoundrel, but it occurs to me that this is really a good idea, this artcom. And he goes well, do you have a business that you would use it? And I said not yet, but I'm hopeful. But I said I'm a man of my word and I literally got off the phone. I sent him the $10,000. Simultaneously sending him the contract. I'm not sure which got there first, but I took care of both of them at the same time.

Speaker 1: 21:42

So at this point in time, you took over your dad's business. You're growing it into something from 5 to 20 people. You're going down to New York doing a radio show talking about it. So you obviously had momentum. You're totally all in on the business.

Speaker 2: 21:56

Yes.

Speaker 1: 22:00

This is right, so you obviously had momentum. You're totally all in on the business. Yes, this is 1999. 98, 98, 98. Yep, how the hell are you going to come up with 490?

Speaker 2: 22:05

000 more dollars after you sent them. Yeah well, we agreed on a number under 500 000 but it was uh north of 450 000.

Speaker 1: 22:12

Okay, but how did you know? Even like even now, that's a wholeload of cash. Good question.

Speaker 2: 22:17

All right. So what do you do when you don't have the money to purchase something that's of value and there's a sort of a story associated with it? Well, if you're a digital entrepreneur, you're a creative person who doesn't take no easily and who has a lot of passion and stick-to-itiveness. So I wrote a business plan and I got my ass out to California and I was fortunate to have Benchmark and SoftBank agree to fund a business where use of proceeds would include the purchase of the artcom name and that's how I would pay for it that I would have other people's money pay for allowing me to exercise the option to buy the domain. So that's how I figured I would do it. It was going to be using other people's money in the context of a business plan, taking Art you Frame to another level.

Speaker 1: 23:22

So how does a person from Chicago who isn't in the circles of VCs an art? Guy get to two of the bigger VCs in the world, who are the most popular ones, even get an appointment and then get them to give you money?

Speaker 2: 23:39

How does that even happen? That's an excellent question, thank you. So this is not easy. You're gonna have to be prepared to hear no or get no response, where they go completely silent. Or sometimes they say yes and then they say no, or they just go silent after saying yes. There's a lot of bumps along the way. In my case it was cold outreach to Benchmark. There really was no other way to do this, both for myself and someone that I hired. We basically blitzed Benchmark, focusing on getting their attention. Interestingly enough, they have a different view of things. I think those principles of benchmark today would say oh well, you know, we thought of guy. But I have a different memory of it and my memory was a constant barrage of outreach to get their attention, which ultimately ended up in a phone call, in a meeting and interestingly enough, they really weren't paying much attention to the idea of buying the artcom name. I didn't know that. I thought that this was going to be like one of my key assets.

Speaker 1: 25:01

Yeah.

Speaker 2: 25:02

It turns out that that's actually not what they were thinking. They made their name and their money in fund number one, investing in eBay. So, in the case of eBay, what does eBay mean? It could mean anything. So their thought was well, you don't need to have a special name or URL to be successful in the consumer Internet. The product and the consumer experience should be enough. And I disagreed. I thought this is a case where we had the right brand at the right time. So what wound up happening was that we were able to close on the financing.

Speaker 2: 25:35

By the way, we got SoftBank because Benchmark introduced us to SoftBank. Benchmark accepted and then declined the deal and introduced us to SoftBank. Softbank called Benchmark and said "'Thank you very much, "'we love the guy, "'we love the deal, "'we want the whole thing, "'we'll take your allocation as well as our own'". And then Benchmark said to hell with that. It's our deal. So we wound up getting the two of them, which worked out fine until we had the first board meeting. And at the first board meeting, our Benchmark partner said I've thought about it and I really don't think the money should be used to buy the URL. So I don't support using our money to buy the URL. Let's go all in on television.

Speaker 1: 26:20

Which is definitely the way it was in the 90s, without a doubt.

Speaker 2: 26:25

To give everyone an idea, we're talking about the fourth quarter of 1998. Among other things, that period of time was known as the beginning of Black Friday. It was the beginning of this huge online push for Christmas shopping, but at the time the general feeling was well we'll use traditional methods.

Speaker 2: 26:51

And I thought no, no, no, no, like we've already proven that digital advertising and digital marketing works for our time, for for our business, but you've got the ability to buy this block of traffic and this name and this is extremely valuable and way undervalued at that price. It was very clear that we had, we had, a complete win, but it was every. It was clear to everyone except our board of directors. Most of the board members thought well, you know television, that's what other? We had a complete win, but it was clear to everyone except our board of directors. Most of the board members thought well, you know television, that's what other people are doing, it's what eBay was going to be doing. We'll go with TV.

Speaker 2: 27:27

And this was a case where the charismatic, visionary founding CEO, who actually had a control of the board from a voting standpoint, said yeah, we're going the other way. We're not doing television, we're going to buy the Artcom name and we're going to be a marketing presence, not spending so much time and effort and money offline. That purchase of Artcom was the making of that business and subsequently, in the various versions of Artcom, was the making of that business and subsequently, in the various versions of Artcom as a business that have happened subsequently. I would say it certainly is a very key asset.

Speaker 1: 28:06

So at that time I don't know I'm too young to remember how VCs were then but today, when I hear about a VC investing in a company, it's usually not anything to do with artwork, because artwork like that posters, frames, things like that isn't very sexy. It's not a new technology, it's kind of I don't want to say it's boring, but it's just a standard, regular business. And so if they're not going to let you run with the domain, why would they even bother to give you money when any other art, larger art supplier out there they could just go and work with them with more of an established business model and more shops carrying and more you know, more power behind it and a more experienced management team. That's what I don't understand.

Speaker 2: 28:53

So at that moment, if you think about what looked like it was successful on the internet in these B2C companies, it didn't appear that the name was going to be that important.

Speaker 2: 29:05

It was more like did you have first mover advantage? Did you have focus? Did you have an extreme maniacal focus on the customer experience? Back then, more established companies were thought to be more like an anchor and so, for example, why would Michaels be more successful at this than we were? There are many reasons why those more traditional retailers moved too slowly. You know why didn't Barnes Noble catch up to Amazon and beat Amazon in the book business and never got close? So I think that the story then, as it is now, is a small group of incredibly focused individuals.

Speaker 2: 29:50

In my case, I had some domain expertise within that particular industry but I mean, I was working 18 hours a day, every day, seven days a week, completely and totally focused on absolute customer joy. We had an incredibly positive experience from the consumer standpoint and that really drove the business. It wasn't the advertising we were very good at affiliate marketing and other things but I would say it was the execution of the model. It was pretty flawless, tough from a profitability standpoint. In the near term it became a very profitable business but, like many Internet companies, it had to go through that very early discovery process. But by the end of the first year we were hitting 14 million in run rate revenue and the business was clearly on fire. The ultimately we monetized by selling to get images in a stock transaction. But the alternative was to go to a B round which was heavily oversubscribed in a nine-figure pre-money valuation. God bless them.

Speaker 1: 30:59

So let's back up a little bit. So you get artcom, you have the board meeting, you get what you want. You're the petulant young guy with the older board that you said nope, we're going to do it my way. You get the name? How long did it take for you to prove that you were right? When did you start to see the numbers? Well, I'm actually changed.

Speaker 2: 31:22

I was very fortunate. So basically within 30 days I had complete total proof positive that we're headed in the right direction. A lot of it had to do with timing. So by the time we had the board meeting and I executed the purchase of the domain in full, we did some redesign of the website, which was already underway. We bought a database called ArtPrintIndex that allowed us to be able to be really the only comprehensive database of all the prints and posters published in the world. That allowed us to be both a wholesaler and a retailer.

Speaker 2: 32:04

When we put those pieces together, it was all within 30 days and we hit Thanksgiving of 1998. The day after Thanksgiving, all the DNSs around the world updated from ArtUframe to Artcom. We did 500 orders that day after Thanksgiving of 98. We did 15 orders the previous 24-hour cycle. Oh wow, the website never did less than 500 orders a day from then on. So it was a very, very fortunate experience. A lot of good things happened and we knew within 30 days we had a total win on our hands. So then, as an entrepreneur, the next two challenges become okay, we need to go raise a new round. Okay, we need to go raise a new round. And the immediate response from the board was we're not going to accept less than a nine-figure pre-money value, because you clearly have got a big win here. For us, that was one challenge, so now I've got to go focus on going out and telling the story to a new group of people, as opposed to running my business.

Speaker 1: 33:13

Yep.

Speaker 2: 33:15

So second issue is we became an apparent success to everybody else as well. So then you're getting everybody in the world wants to do business with you, including wanting to acquire you. So it becomes this massive distraction to hey, I'm just at the beginning of trying to build my business and I've got all this stuff I want to execute in the coming year. So had a lot of ambitious folks around us and a lot of options, a lot of ways that we could have gone wrong, but we got lucky again in terms of steering towards a good outcome. The ultimate challenge in that period of time became the board really would like to do another round, a B round, with a monster valuation. And I had come from Wall Street before all this and have a pretty good sense of cycles and the lack of the danger of extrapolating on things. And I said, if we do a B round, these people are gonna need a venture-like return on their investment. How likely is it that we're going to get public or sold within a few years? That's going to give them that return. What's the likelihood of that? And then sort of, if we don't do it, what's the implication? And I looked at the stock market and I said the market's not going to stay like this this incredible B2C frenzy that was going on in 99 and I said I don't think this is gonna last more than a year, or two at most, and it looks like I'm gonna be the last guy out of the boat.

Speaker 2: 34:47

Meanwhile, I had been looking at Getty Images as a company and I'm like, oh my god, this company is so well positioned to do well in a digital economy, but they have three or four things they need to accomplish. Maybe I could help them to accelerate the transition that they need to go through. So one plus one equals three. That might be an interesting stock to have and I wonder if I could help them to make that transition and if I'd be better off to be a minority shareholder in a public company that's got solid revenue, profitability and it's going to benefit from tremendous positive transformation.

Speaker 2: 35:30

So we ran this process where we're looking at these different alternatives. There was no investment bankers, just me and the board figuring things out, and we wound up going with Getty Images. The business was sold. For those of us that took the stock and held it, we wound up exiting an evaluation that wound up being worth just under a quarter of a billion dollars for a business that did two million in revenue in the first 12 months in business Wow. And we sold it on the one-year anniversary exactly the one-year anniversary of the day we started taking revenue.

Speaker 1: 36:08

What do you think your dad would have said about that?

Speaker 2: 36:10

Well, I think he would have had me sell the business a hell of a lot earlier. You think so Definitely. I don't think he would have seen the risk that I had to take every day in that business and say, oh my God, what are you doing? I'll give you a small example. One of the things about the Bezos set as a standard for the rest of us was that consumers thought that if they placed an order, they should get it shipped pretty much immediately. Yep, they weren't thinking about what's happening with the supply chain, they just figured the logistics are. It ships right away. Well, let me just tell you, if you're gonna have 120,000 prints and posters in your database that's fuelable by the consuming public and they wanna put a credit card through and they think they're gonna get something immediately you better be a genius, because otherwise you're gonna go out of business.

Speaker 2: 36:56

On the working capital requirement of carrying the inventory, because at that time the distributors didn't carry inventory. A distributor in the print and poster business meant that you had the right to resell something, but typically they weren't sitting on physical goods, or at least extremely limited inventory. So you had huge supply chain issues about how are you going to get from the original image to something that was shippable the same day or the next day to the client by UPS or FedEx. And there were a lot of things there that we had to figure out in order to be able to make this work. Essentially, you don't want to choke on your working capital, your inventory. So how do you know what merchandise to carry when nobody's ever done this before? So there were things, because I had come from the domain where I had a leg up from the beginning on the deals. I negotiated the inventory. We carried what we didn't carry, what we had other people carry for us, lots of things like that. How do you ship a single framed piece of art without it breaking?

Speaker 1: 38:02

I mean, how would you like an 80 inch diagonal or 60 inch piece of artwork sent to somebody?

Speaker 2: 38:09

Just even a 24 by 36. That alone, when I first entered the business, ups and FedEx wouldn't give me an account to ship. They wouldn't give anybody an account to ship a single frame piece of art. They wouldn't allow it. That was the standard corporate rule was no, there's too much breakage yeah.

Speaker 1: 38:27

So I worked with a cupcake company to acquire a domain and I asked why aren't you shipping more? And they said it's an absolute nightmare shipping cupcakes because most of the time they get the cupcakes and the frosting is a mess.

Speaker 2: 38:38

And then the customer complains and you say well, how the hell are we supposed to ship cupcakes unless you freeze them? But if you freeze them.

Speaker 1: 38:44

They don't work. People don't like thawing out cupcakes.

Speaker 2: 38:48

I can tell you that there were hundreds of these things that occurred along the way. In the beginning I couldn't get people who were publishers in the print and poster business to actually give me a commercial account. They thought that if I scanned the images and put them online, somebody would scan or take down the JPEG and reproduce it themselves, and they wouldn't buy it. I said do you have any idea what the quality of that is? It doesn't work that way, but that's what they thought. Then they thought well, you're going to cherry pick us. You only pick the you know the best of our things. I said no, I'll take everything. Give me everything that you've got. Then they thought oh well, there must be a scam involved.

Speaker 2: 39:27

The only way that we could start the business after 29 days of trying to get the leading publishers to supply us and none of them would publishers to supply us and none of them would was we had to agree to take every image of one particular publisher had. We would scan it, annotated, it would be in the available in the database. And he said no matter what I send you, it has to be there. And I said absolutely so. He sends me everything that he's got and we've got to scan it and put it online. Well, about one out of every 20 images was completely pornographic. Are you you?

Speaker 1: 39:55

kidding.

Speaker 2: 39:56

Hardcore. Hardcore gay porn. Wow, had no idea. Had absolutely no idea. So about a week later he said well, where are we? I said it's all done. And he said I don't see it online. I'm on your website, I don't see it. He said I'm going to let everybody in the industry know. You know you're not a man of your word. And I said no, it's there. I said give me a skew number. So he gives me a skew number, I type it in and I said it's right there. And he goes what are you talking about? I said type it in, he goes. Oh, he said well, how come I can't find it? I said well, that's not my problem, it's on there. He goes. Wait a minute. He said it's on there. Well, if I type in, so, and so he goes, it doesn. And I said oh well, I guess it's not annotated in the database to be able to do that. But I said if they know what they're looking for, they'll find it. Yeah, he goes. Oh, you're a very tricky guy.

Speaker 1: 40:45

Yeah.

Speaker 2: 40:45

And I said I'm a man of my word.

Speaker 1: 40:50

I did exactly what I said I would agree to do, do you?

Speaker 2: 40:52

think he was trying trouble getting distribution for his pornographic posters. Okay, so he was trying to find an alternative distribution channel. Okay and so, but he said he goes. You are a man of your word. He said you're a very good businessman. He said it's okay, you can use our name. So I immediately recontacted all the people that turned us down and I said we have this extremely well-known distributor who are now carrying their images. And they said, oh, okay. And so we got pretty much everybody else.

Speaker 2: 41:29

But man, those first 29 days in business, that was tough. We didn't have the artcom name. We didn't. You know we UPS and FedEx wouldn't give me accounts because I was shipping out of my home. At that time you weren't allowed to be able to do commercial shipments out of a home. Oh, really, yes, they wouldn't because the truck wouldn't come. And then, when they did come, they said, oh, this is a framed piece of art. We can't do individual framed pieces. So I had to re-engineer everything to figure out how to ship it without breaking it. And you have to make money so anybody can do something to redesign a package so it doesn't break, but you have to do it in such a way that it's actually you can make money because you, if you over engineer it, all the money will. All the profit will be tied up in the packaging. So there's tons of those issues.

Speaker 2: 42:17

The rebranding of the business was absolutely critically important to the success of the business in that period of time and it became an incredibly important asset. Should I have sold the name instead of leasing the name when we sold the business and sort of kept a long-term right to the name? That's a possibility. It wasn't in my thinking at the time to do sort of a hong kong lease hold the name, lease it for 99 years and have it come back to me in 100 years. I guess that's something that we could have done. But uh, no, no regrets the power of a name boy. The real test was not that. The real test was for me, as a founding CEO, to sit in a board meeting, our first board meeting where there was a real test of the confidence the board had in me, for me to say, no, we're not going to spend the money on television, we're going to buy this URL, when at that time there was really no proof statement that that was going to be such an important factor in the success of the business.

Speaker 1: 43:24

Yeah, I mean, but you obviously did it with such conviction and they believed in you to get you to that point anyway, so you deserve to be there. You earned their respect and, obviously, their money to do it.

Speaker 2: 43:35

Yeah, but I think the only reason it really happened this is for those of you that are founders it was because I negotiated in the investment for the Series A that I had two votes instead of one vote on matters like this until we got to the B round, and I think that my sticking to my guns with the attorney for the lead VC on this topic I think turned out to be a really important thing. I feel like sometimes the source of the money is not always right. Sometimes the guy who's closest to running the business may have insight that others don't. Closest to running the business may have insight that others don't and I felt like, hey, I better hold that vote, just in case I may need that vote so I can compromise on other things, but I can't compromise on that.

Speaker 1: 44:28

Yeah, let's back up slightly. You mentioned the beginning of the interview that people were having a hard time using their credit card on your site.

Speaker 2: 44:39

Right, or any site or any site?

Speaker 1: 44:41

Yeah, did you see conversions change immensely? I mean, if you're looking at your website and trying to make the customers ecstatically happy for 18 hours a day, one of the metrics you must be looking at is abandonment.

Speaker 2: 44:55

Correct. So in that particular website, I was really looking at two things. So definitely abandonment Correct. So in that particular website, I was really looking at two things. So definitely abandonment is one, but the other is did they leave any breadcrumbs behind in the form of saving the framed piece of art or the images that they were interested in in the gallery? So one of the things that I sort of created and invented with that business was that you could select your picture, pick your framing options, you could save it and come back to it later, and what we saw was people were abandoning for sure, but they were setting up a password-protected gallery which they were coming back to and coming back to, and one of the challenges with getting the venture capital money was they said what's wrong with you? You have all these people who are saving things and they're coming back, but they're not buying. I mean, like, why do you not know how to do your job better? Because and I said I think it's consumer psychology, I think there's actually they need to show it to their spouses or friends and that they want other people to see. And I'm thinking about it. It's a considered purchase, and many of these people have never bought online or maybe they bought a book or something. And I said I think it's actually just we're building up kind of a deferred momentum that it's gonna happen.

Speaker 2: 46:24

And during that time I came up with a phrase that it was rubber band, airplane economics. And they said what does that mean? And I said, well, you know, when you hold like one of these balsa wood airplanes, it's got a rubber band in the chassis and it's connected to the propeller and you're turning the propeller over and over and you're holding that chassis and the rubber band is twisting and twisting and it's building up this kinetic energy. It's sitting still, but what is happening is it's building up this energy that gets converted into thrust. When you take your hand off the chassis and you let go of the propeller, that thing is going to take off. You know, it's not apparent to anybody other than maybe the person who's watching and holding this thing that that's what's going on, but this energy is getting converted.

Speaker 2: 47:17

I think that's what happens sometimes with consumers. It's people who are not yet ready to buy. They're getting ready to buy and the challenge for all of us as entrepreneurs is sort of what does it take to encourage them? How do you induce the behavior that you're seeking, and sometimes it's a social thing, sometimes it's a budget thing, circumstances, absolute need.

Speaker 2: 47:42

There are all kinds of motivators, but in this particular case it turned out that what we know, with the benefit of hindsight, in the fourth quarter of 1998, that was the e-commerce introduction. That was the first time when business-to-consumer e-commerce really took off. It became a thing. So it turns out, all that hard work that I had put in in the previous year and a half, the negative cash flow, the challenges, the internal second-guessing, all that nudges I got from people that, oh Bill, you know he's crazy that payoff came, and usually it takes quite a long time for that to happen. It just happened in that period of time. It all came together and it would be easy to say that it's just the name, just the domain. But the domain was the fertile ground on which everything else was built.

Speaker 1: 48:41

It also takes the management team to execute and make it happen. So when you talked about spending the $450,000 for ARKcom right, and then you did the raise, how much was the raise and what percentage of the budget budget did artcom take up? Because I think that sometimes domain investors, who we're trying to acquire domain from you know, will see that this company has raised five million dollars and so they're saying, oh well, they could easily spend 20 percent on domain that they want from me and it's like well, no, they can't you know, or you know what, what is a fair?

Speaker 1: 49:19

what was the proportion for you guys?

Speaker 2: 49:21

so I'm doing this from memory, but I think um we're looking at uh pre-money value was probably around eight and a half million. We raised maybe eleven and a half million. Um, let's assume that we spent uh four,000 for the domain. So of the 11 and a half million, we're spending 450,000 on the domain Five percent or so okay.

Speaker 2: 49:50

Yeah, five percent, or another way of looking at it. In terms of the traffic it would be. Back then, the big thing that people were doing were spending money with AOL. You were becoming a partner of AOL. Maybe you'd be like a leader within a particular channel or merchandise category. What I spent was the equivalent of being a one-year partner of AOL in the if there was an art, art and framing channel, which there wasn't at the time. But if there was art and framing channel would be like spending a year of that money with AOL. Oh wow, so it was a. It was a relative bargain.

Speaker 2: 50:34

I think the key thing is it was the right name at the right time and where the name was the category. There's a lot of alignment there. I mentioned this because we're gonna talk about another area within the internet, which is artificial intelligence, and there are moments in time when there's very fertile ground available. It may not have been available in interesting and valuable before, and maybe not even two years later, but sometimes there's a moment and I think that you can agree that we're living in that moment with AI. Absolutely, we'll talk about that, but I think at that particular moment that was a B2C e-commerce era when everyone, both consumers and investors, were looking for who's the leader in the space, and we were fortunate. We were very fortunate and lucky to be alive during that period of time.

Speaker 1: 51:51

Looking back at it now through clear eyes and the dust has settled and you're not part of that business any longer. Do you own any other stock in Getty anymore, or have you sold all of that as well? No, I'm completely out, Completely clear. Other than you're saying potentially doing a 99-year lease of Artcom. Looking back at it, what do you think you could have done differently? Is there any regrets behind it or are you just happy with how it all turned out? Is there any regrets behind it or are you just happy with how it all turned?

Speaker 2: 52:18

out Well. I have a larger regret that I would share with Walmart, who's the owner of Artcom today, and that is, if God is good to you and you're lucky enough to have Artcom as a URL and you are the leader in this space, I think that the world deserves more than prints and posters and inexpensive art gifts. I think the art world is a big place and it would be great to leverage the potential power of the domain to be able to offer a gateway into other kinds of products and experiences. I didn't start the business on the basis that it was forever going to be a poster company. Artcom, relative to what we were, was aspirational. We're selling posters and we called it art, which is fine, it is, there's no problem but it's now more than well's. Now, more than 25 years later, I think it's time to embrace the bigger opportunity that that domain represents or could represent.

Speaker 1: 53:35

Do you think it's limited by Walmart? Because of the exact same issues you mentioned with suppliers and supply chain. If you're going to have a product on the shelves of Walmart, you better be able to keep up with the volume of the product they're probably going to sell, right?

Speaker 2: 53:54

And the distribution that they deal with. I think it's limited by the imagination and vision of the people that lead the business, vision of the people that lead the business. I don't think you could make arguments about how grounded is that broader vision in the narrower needs and interests of Walmart. But what I would argue is, if you sit back and think about this, how much better off would Walmart be if they open this thing up? They're only touching a small part of the potential.

Speaker 1: 54:23

Yeah, always there's a lot of assets that I see around that companies aren't using. I look at, loanscom is owned by Bank of America and I check it from time to time, usually about once a year. I've contacted them saying I have clients who would love to own this name or recent from you. It's just a dead page and it's amazing that they don't didn't even put through the biggest refinance boom, the lowest interest rates ever, sure, didn't put even just a lead generation page that was sent to their loan officers.

Speaker 2: 54:53

So it would seem that they should have a marketplace that's more like progressive Yep Right that opens it up and says, hey, we're going to compete with everybody else. Come here, right. This is the destination.

Speaker 1: 55:06

Yeah.

Speaker 2: 55:08

Come here, first Do something you know anything. It's strange, I think, if we start from the premise that all the wrong people in life have the power.

Speaker 1: 55:18

Yeah.

Speaker 2: 55:20

Unfortunately, it's usually not us. Yeah, We'll save ourselves a lot of stomach lining if we just recognize that things don't always work the way they should. Yeah, but for me, as an entrepreneur, I've always had this sense of. I've had this very strong reality, distortion field of how. But how should the world be? How could it be? And I've spent now the better part of my life pursuing what could be and trying to get some validation by the outside world that I'm right about things. And when it happens, that's great. It feels really good. It's like a comedian that's been killing connecting with his audience. But it sure takes a lot of hard work as an entrepreneur to make that happen.

Speaker 1: 56:10

Absolutely. You know. People see the success but they don't know how many times you failed to get there Correct and there's little failures. Yeah, there's big mistakes, big failures, big failures, and you know that gets you there.

Speaker 2: 56:22

I think clearly, for me the single best thing that ever happened was meeting my wife, and I've had the benefit of a long marriage to a loving woman who's put up with me and is, you know, in this thing as a co-venturer, as a you know she's been along for the ride, the ups and the downs and whatever challenges that I've had. A she's been there. And I think it's much harder for the spouse. I think you know there's a lot of endorphins and emotions and psychological stuff that carries me through. It's not so easy to share with other people and anyway, entrepreneurship is tough but if you don't have a partner, a life partner that's in it with you would make my life a hell of a lot harder and I never could have done any of these things without that support. So I'm lucky that I had the right mother who said go for it and don't count on my money. So it made me be a little more capital efficient, maybe because of that Of course.

Speaker 1: 57:31

And then a wife who didn't quit on me every time I faced some kind of significant challenge, and it's funny that you say that, because a lot of the other entrepreneurs that I've interviewed and then other people that I've spoken to in my life say the same thing.

Speaker 1: 57:46

It's a pretty common answer is saying that their wife is a major part of their success and that having a supportive family is just as close and as important as well. And I think in my experience my wife sees how and I'm sure he does too is just the body language and see how you're feeling after coming home after a long day, and just seeing the way you're acting and knowing that it isn't just you're tired from work, like something really bad's going on, or you didn't get that account, or your developer quit on you, or your website is hacked or something bad, or the good stuff comes home and surgery couldn't remove the smile from your face, and it's the highs and lows of entrepreneurship. And she's there celebrating it with you and crying with you too, at the same time, and feeling bad about it. And you're right, you can't having a supportive wife. She's there that you can tell her your true feelings about everything.

Speaker 2: 58:42

I think the other thing is having a sense of equanimity about things, not letting the highs get too high or the lows get too low. I've been doing this a long time now and you know when things are tough. I've been at this long enough to know that there's a light at the end of the rainbow, yeah. And when things are going great and everybody's telling you how wonderful you are and everything appears to be so wonderful, bad times are coming. Yeah. God is great about that. It's just you know you should not extrapolate on success.

Speaker 1: 59:16

Yeah, it's like things are too good right now. I need to prepare.