Interview Published June 19, 2000
Rich Bergsund, Ideaforest.com
Ideaforest (www.ideaforest.com), the arts and crafts site started in bainlab, the Bain & Co. incubator, recently received a second round of $21M. Rich is President & CEO of the company, and most recently was a partner at Bain in their LA office. I spoke a little bit with Rich about the site and its goals.
BK: What's IdeaForest all about?
RB: IdeaForest is about inspiring and serving creativity. Our goal is to inspire our customers with great arts & crafts and other creative project ideas and step-by-step instructions, and enable them to easily purchase the materials they need. Today, crafters often get ideas from magazines, but magazines don't sell them the materials they need. They can buy their materials at the arts & crafts store, but stores are limited in their ability to merchandise inspiring projects -- you have to walk all over the store to find the goods you need for each different project. Our mission is to combine the point of inspiration with the point of purchase, making it easier for the customer and growing the market in the process.
BK: How are you different from all of the other arts and crafts ecommerce sites popping up?
RB: We are very different from the other arts & crafts e-commerce sites. Our partnership with Joann Stores will enable us to reach millions of consumers more efficiently. Joann is already selling $1.4 billion worth of fabrics, crafts and home accents per year in 1100 stores in 49 states. They have a 57-year-old brand (which we have the on-line trademark license to use) and 5 million registered customers in their database. They are 20 times as large as even the largest arts & crafts distributor, and by sourcing through them we will have access to lower cost goods. All this adds up to lower customer acquisition costs, higher gross margins, and less inventory risk than our competitors.
We also have a strategic relationship with ValueVision, a leading televised shopping network of 31 million households. Starting this fall, we will jointly produce a weekly TV show to feature our content and sell arts & crafts projects. This is another way to access the passionate arts & crafts consumer and serve their creativity.
We have 9 celebrity crafters working with us on an exclusive basis, including Carol Duvall of HGTV's Carol Duvall Show, and Carol Scheffler, the arts & crafts expert on the Today Show. These people bring their project ideas, newsletters, chats and other content to our site and to our ValueVision show. They each have thousands of loyal fans.
We are also well capitalized, having just closed $21 million in second round funding. According to my sources, IdeaForest has more funding than all our competitors combined. We will be using these funds wisely and sparingly to build a profitable business that can sustain itself. Our investors are committed for the long haul, and have deep internet experience and have many companies in their portfolios that can be good partners for IdeaForest as we grow our business.
We have a great team of over 60 people hard at work to make IdeaForest the best creative destination for our customers. Our Chairman of the Board, Jack Bush, was president of Michaels for 5 years, growing them from a regional chain of 100 stores to a national chain of over 500 stores. Jack has helped us identify and attract many other retail and arts & crafts industry veterans, who know how to convert visitors into buyers. We also have deep expertise on our team in the areas of fulfillment, customer service, editorial, marketing and technology.
Our competitors are less well capitalized and are trying to build on-line brands from scratch, without the benefit of a brick and mortar partner. This is an extremely expensive proposition that we don't think will pan out in the end, especially in today's more rational capital markets. One or two of these companies have already gone out of business, and I expect the shakeout to continue. The exception will be some of the small, niche players, and we are already working in partnership with several of these that add either breadth or depth to our own product offering. Finally, I expect Michaels to be a player, but they will find it dilutive to their earnings per share to make the kind of investment that building a world class e-commerce capability requires.
BK: How did you decide to start the company, and what's your experience in this space?
RB: While I was at bainlab, we spotted this opportunity because we saw a $10 billion arts & crafts market that was not being served on-line. Arts & crafts customers are passionate about their creative pursuits, and are hungry for content and community that can be delivered effectively on-line.
As far as my experience, I spent the last 13 years with Bain & Company, the global strategy consulting firm, and was a Partner in Bain's Los Angeles office focusing on e-commerce, retail and consumer products. From an arts & crafts perspective, my experience is as a user. I have three young kids that I craft with. My Dad was an accomplished artist, and my Grandma, at 91-years-old, is an avid quilter who uses the internet each day to check her stocks. I am excited about building a resource that can help people spend their increasingly scarce time in meaningful ways -- somewhat paradoxically, IdeaForest is about using the internet to help people get back to basics.
BK: How does your relationship with Bainlab work?
RB: bainlab is the division of Bain & Company that launches and provides seed funding to new internet ventures. My Partners at Bain and bainlab are active supporters of IdeaForest through providing access to their networks, resources and intellectual capital. In addition, Dave Sanderson, founder of bainlab, is on our board of directors.
BK: What's the biggest challenge your company faces in the next few months?
RB: Conversion of on-line visitors into buyers. Several of our competitors have failed due to poor conversion rates. We will be leveraging our on-line merchandising expertise as well as the combined experience of Joann Stores, ValueVision, our on-line affiliates, our celebrity crafters and the many portfolio companies of our investors to ensure that we give our visitors compelling reasons to buy.
Copyright (c) 2001 by Benjamin F. Kuo. All rights reserved.
May not be reprinted without permission.