Get Big, Get Small, Get Lucky: Why EVO Media Was Ready When Opportunity Came Calling

8/16/11Follow @curtwoodward

When the customer that would transform their business came calling, the entrepreneurs behind Seattle’s EVO Media Group weren’t exactly flying high.

After a $1.5 million fundraising round and a period of rapid hiring, the three-year-old startup was confronting an intractably slow economy and a target market that wasn’t generating enough sales. EVO was forced to cut staff—again—as it looked for a way to wring more money from its flagship website-building service, DevHub.

Things were about to get better. In October, EVO got an unsolicited lead on not just a new customer, but a whole new line of business, when a major phone directory company contacted the company to ask if DevHub was available as a private-label service.

Uh, yeah, they could handle that. Less than a year later, the private-label business is the primary revenue source—about half of revenues now, and growing every month—and has EVO on the road to sustained growth and higher profit margins.

The customers in DevHub’s sweet spot now are businesses like domain registration sites or yellow pages directories, which can offer website-building services as a way to land more small- and medium-sized business customers of their own. Those bring a lot larger base all at once than DevHubs’s old method of upselling a free product to small website or blog owners.

“We’re really targeting and talking to companies that have these captured bases of probably a minimum of 5,000 small businesses,” co-founder Daniel Rust says. “But we’re flexible, as long as they have a market or a base sort of idea. Right now, we’re working on rolling out a new implementation in New Zealand with a partner that’s going to start doing franchised website building.”

Rust and his co-founder, Mark Michael, sound cautiously optimistic that they’ve hit upon a strong, sustainable business at this point. But they’re also not shying away from the difficult lessons of the past few years, offering a remarkable frankness that might serve as a warning to young entrepreneurs bewitched by tales of swift success and seven-figure checks.

Right now, they say, EVO costs about $20,000 per month to operate. Contrast that with the biggest-spending days, when the company was burning through $120,000 to $150,000 a month. But here’s the rub: All that spending and a staff of about 20 allowed EVO to crank out the newer version of DevHub in about six months’ time, leaving the startup poised to jump on the biggest opportunity of its existence when the private-label inquiry came out of the blue last fall.

“I think about that all the time. God—how do you spend two million bucks in two-ish years?” Michael says. “But at the same time, would we have had the solution when we got basically lucky to be able to fill that order?”

EVO has a goal of getting 1 million sites served by its private label platform in the next 14-18 months, and each site can bring EVO average revenues ranging from 50 cents to $4 per month. To harken back to an analogy from 2009, when investor and chairman Jeff Schrock said EVO was “ramen profitable,” Michael says the company is now working with flank steak.

That’s not the only change. Michael and Rust are now manning the positions of co-president, after third co-founder and former CEO Geoffrey Nuval moved out of managing the company. He’s now in a senior business development role with EVO, although his LinkedIn profile indicates Nuval also is also working on a different company in California.

Rust and Michael are comfortable working together. Now in their late 20s, the pair were high school classmates in the Tri-Cities area of eastern Washington and attended college at Central Washington University, in Ellensburg. EVO Media is just the latest in a long line of the pair’s entrepreneurial projects over the years.

They’ll probably keep experimenting with new projects, something similar to what you see investor Alex Algard’s WhitePages.com doing across town. One well-known EVO side project is YearlyLeaf, which pulls together a customer’s entire year of Facebook activity—posts, photos, everything—and prints it in a stylish, Moleskine-style commemorative book.

DevHub also has room to grow, with businesses eager to put their stamp on Facebook pages, Google Places sites, and in mobile channels. Rust says the next wave of DevHub’s offerings will give users the ability to push their business out through all those different types of channels with a seamless front-end.

“We want to keep it pretty lean. Our technology doesn’t need a lot of maintenance; our team’s pretty small now. We could probably scale up now to very large numbers without bringing on more staff,” Rust says. “We’re hoping that we can capture a couple dozen deals, be the top in the market of the private label business, and kind of just scale it up. It looks like a good path, and it’s not going to require a lot of headaches.”

“Seattle’s the greatest place on Earth to build a world-class company,” Michael says. “I always say ‘Paris, Rome, Seattle.’”

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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