I started the business in 2008, with a couple of friends. We quit our well paid jobs, and ploughed the bulk of our life savings into MadBid.com. It was a risk, of course it was, starting a business always is, but we knew we were onto something.
After eBay and Amazon there had been so very little innovation in eCommerce, and being a bargain hunter myself I wanted to create a better product, something that was fun and offered real value. I ran the numbers, capturing just a small fraction of the UK’s $100bn eCommerce market would make MadBid a significant business.
We took risks from the outset - with less than 1,000 users we invested 10 per cent of our capital in a Mini car to auction on the site. Although the Mini auction lost us revenue by selling for just £6.83 and earning us less than £600 in returns, we received noteworthy publicity as a result. This publicity not only increased our visibility but also the credibility of our fledgling business and its potential.
We also matched another 10 percent of said capital into online advertising. This taught us an important, if somewhat painful, lesson in cost versus value. Now we trial any new advertising channel with a fraction of what we spent previously. Calculated risk is the heart of success, particularly when you’re launching a new business, there’s no way around it. But one must always have an optimum outcome in mind. The trick is to take more good risks than bad ones and to learn from your mistakes. Human evolution demonstrates how miscalculations can destroy you, business is precisely the same.
Our business model quickly paid off, and in 2010 we received $6 million from the Skype co-founder Niklas Zennström through his VC fund Atomico Ventures. This gave us the capital we needed to take our winning formula abroad. We now operate in 10 European countries including the UK, Spain and Germany, as well as six non-European markets.
Like all successful businesses, though, we’re constantly evolving, and we've now managed to create an offer which doesn't entail any risk for our customers at all. MadBid.com offers our customers the opportunity to win sought after products such as iPhones, designer bags, tablets and even cars through fast-paced auctions. Winners save up to 89 per cent on the list price of items and if they’re unsuccessful they can use the money they’ve spent in auctions in the MadShop, offering customers a risk-free earned discount - where they can either buy the item they were originally bidding for, or another of our great value products.
Our goal is for the MadShop to be the best value eCommerce store in the UK. We’re not there yet, but we’re edging closer. We’re focused on creating a fun experience for our customers, consistently adding value for them, it's a vital part of what we are. Our customers love bargains, and they come to the site to find a wide variety of brand new products. Risk is good, it’s fun, but you need to be consistently rewarded. We try to live our brand both in and out of the site, and I suggest you do the same.
Like so many things in life, successful risk in business is largely about hard work and getting the details right. This dramatically increases your success rate. That means reading that contract one more time, although it’s already 1am. It’s also referencing that supplier using three references instead of one. It’s about being brutally honest with yourself about your own failings. We continue to take calculated risks. Some pay off, some don’t. But we have bold ambitions and we can’t achieve them without continuing to take risks.
I recommend, if you’re not already doing so, that you learn to take calculated risks in your business too. Handled correctly, it’s truly a formula for success.
By Juha Koski, managing director of MadBid