Monday, July 19, 2010

A Lesson in Patience and Perseverance

Just prior to the turn of the century business-to-business net markets were all the rage.  Also called online exchanges, these dot com darlings proselytized a shift in how buyers and sellers in industrial markets would conduct commerce.

They loaded up on venture capital at frothy valuations and, in the case of Verticalnet, an online exchange even ventured into the public markets.

Then it all came crashing down soon after the market correction in March 2000.  Some net markets attempted to reposition as enabling technology companies, yet most burned their funding and quietly shuttered.

Bill Angrick’s Liquidity Services has quite a different story.  It begins the same with the company’s creation in 1999 with about $100,000 in capital from its founders. 

Yet, Liquidity Services sidestepped the fall.  Today, the company maintains a healthy standing on NASDAQ, sports 30 consecutive quarters of profitability, has nearly $400M in annual revenue, and manages a cash balance of $68M with no debt.

“Although there is a lot of romance in business-to-customer models, B2B (business-to-business) is the grunt work of the economy,” Angrick told a gathering of executives at an Association for Corporate Growth networking event last Friday.  “We have found online auctions conducted through our Web site an effective way to price niche goods.” (Photo courtesy of ExecutiveBiz.)

Angrick presented four reasons why Liquidity Services as been perhaps the most successful net market to be spawned during the dot com era:

1.  Founders maintained ownership of the company and did not sell out to venture capitalists too early.  Liquidity Services did raise $20M in equity funding from ABS Capital Partners in 2004, yet soon filed an S1 registration with the SEC.

2.  Demonstrated patience and perseverance in the execution of the business plan.

3.  Positioned the company as a services business, rather than a technology provider.  This helped keep everyone at Liquidity Services focused on delivering value to buyers and sellers.

4.  Get to cash flow break even, if that means sacrificing top line revenue growth.

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