Bonanzle Raises $1M from Angel Investors, Plus Three VC Firms, to Expand Its Online Marketplace
The motto of Bonanzle is “everything but the ordinary.” That about sums up the latest news from this Seattle-area startup, which has built a fast-growing online marketplace for niche items and collectibles. I learned through the grapevine that Bonanzle founder Bill Harding has closed a $1 million funding round led by angel investor and venture capitalist Geoff Entress, with participation from a long list of well-known angels around town—plus three prominent venture firms.
It’s a small deal, a classic angel investment, but it’s particularly interesting for this reason: Seattle-area venture firms Voyager Capital (led by Entress) and Ignition Partners (Michelle Goldberg), plus Bay Area firm Matrix Partners (Josh Hannah), have all invested in the deal. All together, the venture firms put in less than half of the total funding amount—but presumably they will be watching to see if this is something they want to put more money behind.
“I have not seen it before. It’s something unusual,” says Entress, who has joined Bonanzle’s board. “Probably an example of the experimentation” that VCs are doing around “how do you play at this earliest stage, especially when a lot of these companies don’t take much money.” (Venture firms usually need to put in a few million dollars to make it worth their time.)
And here’s a partial who’s-who list of angels participating in the deal: Dan Shapiro, formerly of Ontela and Photobucket, Andy Liu from BuddyTV, Kelly Smith from Inkd and Curious Office, Kevin Saliba from Imagekind and CafePress, Ben Elowitz from Blue Nile and Wetpaint, and Chris DeVore of Founder’s Co-op. Let’s just say that’s a lot of investor firepower for a $1 million deal; the closest thing we’ve seen might be when all the tech investors in town agreed to back TechStars, which opens in Seattle this fall.
I first wrote about Bonanzle on April Fools’ Day, 2009. But this company is no joke. Founded in 2007, it started out as a Craigslist-like service for local sellers, but shifted to become a national, social online marketplace. Bonanzle rolled out its public site in September 2008 to connect buyers and sellers of collectible items like comic books, posters, and jewelry. Its key advantages over others in the sector are its social features—buyers and sellers can send messages to each other in real-time—and the fact that it focuses on rare, used, and hard-to-find items. The company has been profitable since February 2009, and its sales have quadrupled in the past year. Its site now has more than 3 million items for sale, a quarter-million registered users, and almost 2 million unique monthly visitors. All without taking any outside investment.
So why take the money now? A year ago, Harding told me the company was “waiting for [an investor] to make an offer that shows us they understand the vision of Bonanzle and will work with us to make a plan.” Well, it sounds like he has found the right group of investors and expertise. For example, Matrix Partners has deep experience with companies like eBay and PayPal. And the track record of the Seattle-area investors speaks for itself.
Harding says the new money will allow him to hire two more developers, a designer, and a product manager, to add to the current team of three full-timers and a handful of contractors. “It’ll still be a small company,” he says. The key is to “provide users with a really strong support experience and a really bug-free user experience” in online shopping and selling, he says. “Bonanzle was unique, but lacking a lot of basic things it needs to grow.”
For example, Harding wants to “continue to streamline the communication between buyers and sellers,” he says. “It’s already working, but it could work a lot better.” That means things like making it faster and easier for consumers to sign in and get started on the site. Harding also wants to build Bonanzle’s credibility through buyer protection programs (like eBay and Amazon have). “The key thing you have to establish is credibility from the first click on the site,” he says.
Lastly, Harding wants to put some more resources into better metrics—getting a more detailed picture of how people are using the site. “That would be useful for us to design the optimum buying experience, and useful for sellers to optimize their listings to get buyers to actually buy, and get Google to notice the listing,” he says.
One thing I wanted to ask Harding about: the strange, cult-like comments about Bonanzle left by consumers on Xconomy, among other sites. People either seem to love it or hate it, in equally irrational ways. Harding says eBay gets similar kinds of comments, and admits that some of the vitriolic response can be “a little bit weird,” given that sellers are always free to change the site they’re using if it’s not meeting their needs. As he explains, “The people who are passionate about the site are the sellers. They’re coming to the site every day, and their livelihoods are built upon the success of the site.” Those who leave scathing comments tend to be people who’ve been suspended from the site for bad behavior (not delivering products, not paying fees, that sort of thing), or those who don’t like how Bonanzle has evolved, he says.
I also asked Harding about the issue of giving up some control of the company. “I don’t want to make every decision by myself,” he says. “If you’re going to divest some control, people like Geoff [Entress] and Dan [Shapiro] have some of the best opinions you can get around Seattle. I like the idea of divesting some responsibility.”
In terms of where the company fits with broader trends, social commerce is certainly an active area. But Bonanzle is different from sites like Addoway and Storenvy, which focus mostly on consumers buying things from friends and posting sale items to Twitter and Facebook, or 1000Markets, which focuses on small business sellers. The closest model is probably Etsy, which sells handmade items to a global community and has been growing successfully for five years.
To that end, it sounds like Harding wants to expand Bonanzle’s marketplace in a smart and careful way. “The way I’d like to see the company grow over the next couple years is similar to the pace it’s grown so far,” he says.
Will his new investors let that happen? Entress, for his part, says Bonanzle “might stay profitable, or maybe it’s an even bigger opportunity, and we want to put more gas on the fire to take this thing really big.” He adds, “We could have raised a lot more money than we did…but this is as much money as we need right now. This will enable us to boost the hiring while still keeping us profitable. One of the reasons the venture firms are interested is we might raise more money down the road.”
One thing is clear: Harding and Bonanzle are definitely out of the ordinary in the startup world. As Entress puts it, “He’s one of the unique entrepreneurs who’s been able to respond to changes in the environment, and changes in what the customer wants.”