Nine Startup Scaling Secrets from Eventbrite

1/24/11Follow @wroush

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an underserved market,” Julia Hartz says. “Many organizers were still [running events] using e-mail and Excel and paper invites and checks.” The new startup didn’t bother with beta-testing its online-ticketing service, which allowed users to sign up for an event and pay through PayPal (and later, Google Checkout); the service was live on the Web for all comers from the beginning. “Kevin worked on product development and strategy, I worked on customer support and marketing, and Renaud built the site,” says Julia. “We’d QA-test during the day and he’d build at night. It was just the three of us for two years.”

The rest, as they say, is history. In 2008 the company raised its first serious financing and grew from three people to 15. And in 2009, the ticketing business really took off, thanks in part to the galaxy of balls, parties, rallies, and other events surrounding the inauguration of President Obama—not just in Washington, D.C., but around the country. “That was a once-in-a-lifetime event,” Julia says. “There was no way to forecast what an incredible number of inaugural events would be hosted on the Eventbrite platform.”

This New Year’s Eve, the company reached the symbolic milestone of $400 million in gross cumulative ticket sales. It’s a little tricky to figure out how gross sales translates into actual revenue for Eventbrite; the company profits by charging event organizers a fee amounting to 2.5 percent of the cost of each ticket plus $0.99 per ticket sold. (For free events, there’s no cost to use the system.) In a recent blog post, Eventbrite said it sold 11,004,743 tickets in 2010, which would imply the startup collected $10.9 million in revenue from the 99-cent flat fee alone. In any case, it’s earning enough to pay a little more rent: the company is moving next week from its cramped quarters at 410 Townsend Street to an office three times the size at 651 Brannan Street.

Now on to some of the scaling lessons that seemed to emerge as the Hartzes told me more of their story—-things they either learned from their previous jobs and applied at Eventbrite, or have deduced since starting the company. If you want to build a fast-growing technology business these days, these might be some strategies to keep in mind.

1. Don’t take big checks until you absolutely must. “Xoom was a more capital-intensive business,” says Kevin Hartz. “To get off the ground in the money transfer business, given the risk of fraud and the cost of government compliance, we had to raise over $100 million. Coming out of Xoom, we had the mentality that we should bootstrap to cash-flow-positive and then look at funding, versus the notion of getting a lot of funding out of the gate. In 2008, we reexamined this, and asked whether we were going too slow, when we saw all these other companies taking big checks. Then the debt crisis occurred, and the economy crashed, and we felt we had chosen the right path by building a capital-efficient business.”

2. Pick the right team. As an investor watching the growth of PayPal, Hartz says, he “saw the power of really intelligent, high-caliber teams to be able to shift and find the right formula and grow really fast. They went through two or three different business models to hit on what became PayPal, were able to beat BillPoint, eBay’s own native service.” At Eventbrite, Hartz says, “We have spent a lot of time hiring and developing a particular culture that doesn’t just want to be challenged and be part of a disruptive market, but that … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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