by Tim Jahn on December 21, 2010
When Joe Petsick and his co-founders came up with the idea of bringing live auctions online 10 years ago, they didn’t have any companies to look to for an example. They were pioneering a new industry with their site Proxibid.com and they were going to be the example.
Today, they have $2 billion of inventory going through the site and are doubling in size every 12-18 months. I interviewed Joe Petsick to learn how he and his co-founders paved the way in online live auctions and the challenges they faced along the way.
Joe Petsick: My name is Joe Petsick. I am one of the cofounders of Proxibid. Proxibid in a nutshell created a software application that runs on the Internet that allows a traditional brick and mortar auction company the ability to broadcast that auction in real time so that people can bid in that auction in front of a computer, in real time just as if they were sitting in the front row of that live auction event itself.
Tim Jahn: And what made you want to bring auctions online in terms of broadcasting live auctions?
Joe Petsick: It’s interesting but like many things in life, it wasn’t necessarily a goal or something that we aimed to do. It was just circumstances through life brought us into situations where I started doing some work in and around the auction space and started to recognize some of the issues related the industry that I was surprised to see still in place. It’s an industry really at the end of the day that’s gone largely unchanged for thousands of years.
A live auction today is conducted almost exactly like it was conducted a few thousands years ago. They use the same processes, they use the same methods of recording the auction results, they use the same kind of bid calling and chanting, they use a lot of the same marketing processes. So it had gone largely unchanged; no one had touched it. So what I, what we were able to recognize early on is that it was an industry that was non-scaleable and highly fragmented. And we thought there was an opportunity there.
Now we were looking at it probably a little bit more narrowly when we did that. We just said, “Hey wouldn’t it be neat if there was an auction going on in France, lets say that you’d like to bid on and like to be involved in but you could do it by sitting in front of your computer?” And at time we were doing this was in the early, it was late ’90s, early 2000’s when this whole kind of concept was coming together.
And most people still at that time connected to the Internet via AOL. So there was another challenge ahead of us that if we were going to build this real-time application on the Internet which as if you might recall then, there wasn’t a lot of that kind of stuff happening on the Internet at that point. We needed to figure out a way to do this basically using a dial-up AOL account that with 2,400 bog rate or whatever that was, whatever they used to work with that in, that would allow someone to participate from a distance but have no lag at all in their ability to bid because it wouldn’t work, because the pace of the auction that it went through.
So we saw that opportunity and we realized that actually the other day what you needed to do to accomplish it, it wasn’t maybe as challenging as we initially thought. Because the information that you needed to send back and forth related to the bids from the auction location to the bidder wasn’t all that big. So that you could actually move it across the Internet connection pretty easily. So we actually built this whole thing coming out of the ground and coming out of a telephone connection.
Now today, I don’t know if there are that many people left that connect to the Internet via a telephone connection. So it’s obviously expanded our ability to do more with our tool. But really for us it was taking advantage of that opportunity that no one had touched this industry with technology in that there was something that could be done.
Tim Jahn: Your whole idea was to do auctions, I mean basically live video streaming online, right? How do you — I mean, and you just explained how you had that big challenge right up front where you don’t have the bandwidth, I mean, in 2000, ’99, AOL, there’s no way. To me, that’s a huge obstacle. That’s like a you can’t create this business obstacle. How did you overcome that?
Joe Petsick: That’s a great question. For us, that’s where we thought the opportunity existed right, because it seemed like it was extremely difficult to do. The reality of it was when when we boiled it down and we realized what we needed to do to accomplish it and broke it into the smaller parts, it wasn’t all that challenging. So we didn’t focus on live video right out of the gate for instance.
We focused on just how do you get bid data, real time bid data from a bidder to an auction company when they’re thousands of miles apart? Well that size of the files, that information that you need to send is so small that even over a slower Internet connection you can move that data back and forth.
As a matter of fact, I recall very early on when we were kind of working through the process to get there, we were at with an auction company in Germany who was interested in the technology but had difficulty believing that someone in the U.S. could click a button that would send a bid to them in real time.
And we literally had to set up a demonstration for them and put two computers by each other and let them click the bid button on one and see it show up as a bid on the other side of it. And not only did it take some time but they were looking very closely to make sure there were no wires connecting the two computers and had to come to some grips to believe it. So the reality of it was is that you’re right, it seemed like it was a big thing to chew and it would have been unless we would have broken it down into smaller pieces.
So now the video came later. Audio came behind that. And then when audio came, it wasn’t real time because there weren’t really any real time applications out there. Video actually was non existent on the Internet. I think the only places it was probably being used, it was being used at all was in pornography.
So there was really nothing that was driving the development of that tool at the time to the degree that it is being driven today, right, with YouTube and everything else it’s come across. Which has been fantastic for us because it’s allowed us to broaden the tools that we use to get people a richer experience when they’re bidding online.
Tim Jahn: So in that Silicon Prairie News interview, I was reading that you got to two billion dollars in sales in eight years. How did you do that?
Joe Petsick: Well what we did actually, there’s — what we got is two billion dollars in inventory that’s come through our system. What we did actually — we had to solve the proverbial chicken and egg problem right. If we wanted to build a utility and convince auction companies that we can help them grow their businesses, they’re going to want to wait to sign up until we know that we have the bidders that can give them the impact.
And the bidders aren’t going to show up until you have the content that gets them excited. So we realize the lesser of the two difficult components was going to be to go to the auction community and try to convince them that this tool was going to help them change something in their business. Because if you think about where an auction company typically was able to build its business before the Internet, it was very geographically protected. An auction company that was selling a certain type of equipment in a certain area typically had the ability to hold off its competitors if he build his list of bidders faster than anyone else could.
So if you wanted to sell a piece of agricultural equipment in central Kansas for instance, there was an auction company who had a list of the most bidders that buy that kind of equipment that if you took it to that auction company, they were likely to give you the best prices. But they were limited right, to the distance of which someone was willing to travel to participate in stuff. So we had to convince them that this is where it was going to go.
Now, it was an extremely difficult challenge. It probably took us a lot longer than a lot of companies might take when they’re evolving like this because we had to basically convince an industry that had gone and changed so long that not only was the Internet was not going away, but that this was not going to be just a great tool for them, this was going to be the future of their business; this was going to drive where things went for them.
And it understandably took some time to come to grips with that. And I would say to you theory not a 100% there. They’re still working through the process of understanding what this new landscape looks like for all of them and how each of them are going to adjust to working inside of it.
So creating that marketplace for us was about working with those auction companies and one by one literally getting them online and convincing them that there was value to putting their content online. And then, we hit that tipping point I guess where all of a sudden, auction companies recognized that you had to have a tool in your tool belt that differentiated you from the guy you were competing against.
So they were going to put their auctions online. And now it has continued to build to a point to where all of a sudden we recognized we have a pretty significant marketplace here. But there’s a lot of activity and inventory going through the system.
Tim Jahn: You bring up a good point. You were disrupting an industry that was so archaic. I mean, like you said auctions for thousands of years have really been the same. How do you even begin to try and convince the people in the industry that you have a tool that’s going to revolutionize and actually help them? I don’t imagine they’re jumping at the bit to get on board here. How do you even start?
Joe Petsick: No, and that’s a challenge that we didn’t maybe fully appreciate up front. Because here’s something we didn’t recognize and this is something that when I had the opportunity to talk to other entrepreneurs that I hope will help them when they’re getting started. We didn’t recognize necessarily out of the gate that we were not just creating a new business, we were creating a new industry. And that’s a much bigger challenge than just creating a new business. You have to answer and solve all the problems.
There’s no one to look to the left or the right to see how did they do this or how did they do that. Or you’re not taking a process that already exists and saying, I have a way to make it work better. You’re actually saying that I have something completely new that I believe I need to do and in that challenge, it probably came closer to costing approximately the opportunity to actually continue to operate than anything else. So we’ve got back against the wall so many times where we thought that it would be difficult for us to get through this.
But convincing them was really about demonstrating the tool to them and giving the opportunity to see it to help them go to their existing list of bidders that they already work with, who they were still having trouble getting to their sale because times were changing, peoples time was less available to go stand around at an auction all day. That they could actually — if they sent out for instance 1,000 flyers to their mailing list and 100 people showed up, there are still 900 people that you know are actively interested in what you sell that aren’t there.
There’s a good chance that there’s a good chunk of them that would be involved in your auction if you gave them a more convenient way to participate. And the reality was that was true. So they immediately started to see, wait a second, I’m getting more of these bidders here, I’m getting more activity, I’m seeing better realized prices, my sellers are more excited about it. And then they were able to start using the tool to differentiate themselves.
They were able to go out in their very competitive marketplace and go to a seller or consignor and tell you, “I can do more than anyone else can do. I can do the flyers, I can do the radio advertising, I can advertise in the paper. But I also put it online and no one else can offer that or no one else is offering it. And if they are offering it, they don’t have the experience that I have with it.” So that’s really kind of how the process started. And then, like most good ideas when most people recognized it, it started to kind of build on itself.
Tim Jahn: What would be your number one piece of advice for someone who has an idea and they think it might be a new industry and they have no one to look to, they don’t — just like yourself, you didn’t have any examples of it being well done. What’s your one piece of advice for someone?
Joe Petsick: Is probably to do what we didn’t right. Which we didn’t talk to enough people about this process. We didn’t put our idea in front of enough seasoned business people. We didn’t use our network well enough. To answer this question, we were using our network for all the other things, right, to try to get access to other resources, to try and deal with the operational issues that we knew we were going to have to deal with, to go out and raise money and to get interest.
But what we didn’t do is we didn’t spend enough time talking to people about that aspect of it is help me understand this business from an outsider perspective and you looking and reading what’s going on here. Because what actually happened was a good year into this, we recognized that we were onto something, and we starting to get a little bit of attraction, it was working.
And actually things started coming at us pretty quickly and we were getting overwhelmed. And early on there was four of us and we were all guys in our mid 20’s who had never been through a process like this before, who quite frankly just didn’t have the experience.
And what ultimately wound up doing was realizing that we needed to get someone involved with us that had done it before. So we did something that’s actually not an easy thing to do for entrepreneurs, we went out and hired ourselves a boss. We actually brought in a CEO who had been there and done that. He had built his business before and had actually been retired because he had gone through the whole process. And it was very quickly into that process that he recognized this isn’t a new business venture, it’s more than that, this is a new industry.
This is — which is exciting because right, it’s not everyday that people get the opportunity just to have the chance just to start a new business. It’s very rare that you get the opportunity to start a brand new industry. And then actually build it to a point where it actually gets that critical mass and sustains itself.
So if would have been smart, if I could go back and talk to my past self, I would be telling myself, “You need to be talking to people like Bruce who we hired as our CEO much earlier and putting that in front of him.” Because it would have come up, they would have recognized the challenges from having been through the process of just building their business before.
Tim Jahn: Do you think you would have found the success you guys have now have no in creating the industry had you not gotten a boss?
Joe Petsick: No, we wouldn’t have. We would have, we would have screwed it up. To put it a better way, it was just so challenging, there was so much stuff coming at you. There was four of us, right. We ran into that paralysis by analysis. All four of us being invested into the company, all thought we needed to weigh in on every big decision where we could get a two to two tie over what the letterhead was supposed to look like and it could hold us up for a day because we thought that that was one of the most important decisions that needed to be made at that moment.
And also, we needed someone to properly evaluate our strengths and weakness from a very objective point of view. One of the first things that Bruce did when he came into the business was exactly that. And he asked each of us to kind of change the roles that we had, were playing.
You know, we had kind of appointed ourselves into the specific roles where we thought we all fit. And we were largely right but at the same point, there were some more pressing needs that needed attention well before we needed to worry about who the CFO was, right, or who the president was. And he put us in positions to help us draw on our successes, our individual successes that would most benefit the company. And again, that’s a hard thing for an entrepreneur to do because you have to give up control.
And one of the things we had to do with Bruce was we had to give him the ability to fire us. Because he would hold no, he would hold much less ability to impact the business if he could tell us to do something and then we’d go behind him and go, “Well, whatever, I don’t have to listen to you because there’s no consequence.”
So it was a big leap of faith and a big step for us. And I will likely go to my grave with it as being one of the smartest business decisions that I will likely have ever made. And Bruce is still here today. He still helps us now. The roles have changed dramatically but if we didn’t have him up front to help like that, it — we would have been our own worst enemies.
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