Start five companies.
That's what Kevin Ryan, founder and CEO of Gilt Groupe, intended to do after leading DoubleClick, the online advertising platform, to a $1.1 billion sale. And in the three years following that sale, from 2005-2007, he did exactly as he'd intended. But despite Ryan's previous entrepreneurial success, he never imagined that one of the five companies he'd start would change e-commerce forever. That groundbreaking company, Gilt Groupe, an upscale members-only flash-sales site, was a success from the moment it launched, and it wasn't long before the company would become the hottest start-up in New York City. In its short four-year lifespan, Gilt Groupe has broken the record for highest grossing revenue in Silicon Alley history, according to their founder. So how did a company that was once just a measly idea among four others mature into Silicon Alley juggernaut?
The story of Gilt Groupe's success might not be as incredible, if DoubleClick hadn't previously held the Silicon Alley revenue record. By surpassing a benchmark with Gilt Groupe he'd previously created with DoubleClick, Ryan proved that his natural gumption for growing a startup was a perfect match for the contentious culture of New York City and its startup scene. I've done the same thing since 1996, which is start and run Internet companies, says Ryan.
In 1996, he joined the online ad-platform DoubleClick, first as president and later as CEO. Under Ryan's leadership, the company eventually became the backbone of modern online ad delivery. I built [DoubleClick] up from 10-or-20 people up to 2,000 at the peak, he says. And 1,500 when it was sold nine-years later. With Ryan as its CEO, DoubleClick became one of the largest online ad-sales sites in the world. In 2005, the private equity group Hellman and Friedman bought DoubleClick for $1.1 billion, and Ryan left the company soon after. Three years later, the PE group sold DoubleClick to Google for $3.1 billion. By the time Google had bet its advertising future on DoubleClick, Ryan's talents were already clear: When Ryan sets something in motion, it tends to stay in motion.
Now, as CEO of Gilt Groupe, Ryan is once again building a scalable and lasting business model in a short time span. As Ryan and I chat in a small conference room at the company headquarters, both hunkering into plush brown leather chairs, the dim yellow lighting accenting the earth-toned decor to create a warm and intimate environment, Ryan remains entirely personable. He's a well-tailored man with salt-and-pepper hair, wearing a perfectly fitted shirt and jacket, and is particularly attached to the soda in his hand, likely because he's had a busy day. He speaks in quick bursts of extremely potent sentences. Not a single breath is wasted. He reveals only the right details. He's straightforward, far from boastful about any of his accomplishments, and appreciates an inquisitive mind. Though the idea for Gilt Groupe was his, he's quick to give his business partner Dwight Merriman, former CTO at DoubleClick, credit in their five-company project, which is now identified as the strategic council AlleyCorp.
We did this together, says Ryan, reiterating the importance of his business partner in the five-company venture. We started five companies and what happened was that we thought a lot of them wouldn't work--turns out a lot more worked than we thought. Still, despite the many successes, it was evident from the beginning that Gilt would be a standout among the companies. It was so successful, in fact, that the two entrepreneurs ditched their initial plan: Rather than having Ryan serve as CBO in the beginning and eventually move to chairman, instead he became CEO. Gilt Groupe expanded swiftly because of it. As for the rest of the companies they started--Business Insider, ShopWiki, 10gen and Panther Express--all but two remain under the AlleyCorp umbrella. But even with Business Insider and 10gen still receiving counsel from AlleyCorp, Ryan's focus at the moment remains on Gilt Groupe.
His main concern is positioning, though he believes Gilt has already grabbed hold of a specific sector: There's not as much competition as you'd think. People seem to lump all flash sales sites together and assume they're the same, says Ryan, expounding on the idea that Gilt's flash sales are not the same as other brand's. I would guess out of the 6000 brands that we [partner with], that somewhere around 1-2 percent have ever been on [our main competitor's site]. It's just different positioning.
Ryan's perception of Gilt Groupe's positioning is firmly planted in the way that he's able to see the start-up world take shape: What you find is that, where there's a new sector, there are a bunch of competitors, and then it consolidates really quickly, he says. Are there five Amazons? No. Are there five Akamais? No. Are there five DoubleClicks? No. Actually, in each case, one player very quickly became the largest player.
As for the largest player in upscale e-commerce, he believes Gilt Groupe has already staked its claim: In our space, absolutely. I think we're probably about the size as most of our competitors combined, and we started at the same time, don't forget, says Ryan. People think we're the first one because we're the largest, but we actually weren't. We all started within a three-month period. And now, it's very hard to enter the space.
The reason it's hard to enter the space is because Ryan was able to discover something before anyone else in America had. It occurred to him in April of 2007, when he was walking by a pavilion on 18th Street that was frequently used for sample sales. He saw a long line of women standing outside the door of a venue, like fanboys waiting outside the theater for the latest Star Wars film. He asked what they were waiting for. They told him: It was a Marc Jacobs sample sale.
[I realized] that even though there were two hundred people in that line, there were probably tens of thousands of women who would actually like to be in that line, says Ryan. There are women in Kansas and there are women in Westchester who aren't going to come an hour down to [wait in line] and there are even women a block away who are working [that want to be there]...But if I can bring [the sample sale experience] to your desk, and you can get online and see it, you'd probably like to do it. He explains his interest from a more scientific perspective: It was the one form of shopping that the Internet had not developed yet, he says. And so I thought, this is a good idea.
Ryan combined his epiphany on 18th Street with a model he'd seen working in Europe. As the CEO of DoubleClick, he was managing offices in 25 countries. He traveled a lot. We were calling on all the Internet companies, says Ryan. So, it was my job to know what was going on in the Internet sector, everywhere. One of those places was France, a country Ryan lived in from 1990-1993, which is when he became familiar with Vente-Privee, a site that offered luxury items at a discount using flash sales. I had known about that model for at least two years, says Ryan. I don't know why I started thinking about it more and more.
The fundamental seeds were planted. Ryan called up his friend and former CTO of DoubleClick, Merriman, and they started looking for a CTO to build the site. They eventually found one, and brought in others with a background in fashion to support the team. The website launched in 2007, but only as an invitation-only site dedicated to women's apparel. Interest grew, and so did the company. Soon, Gilt Groupe was curating several categories of items. In just four years, they've grown to 1.5 million customers, all of whom are tied to an email address, which allows Gilt to track their interests and purchases for even further personalization. The data they're able to collect also allows Gilt to tailor the experience to each individual user. For instance, if one particular customer buys a lot of sweaters, they may receive deals for one-of-a-kind or limited edition sweaters. On top of that, those who spend more than $10,000 on the site are offered other special items. The curation and tailored offerings, according to Ryan, are only getting better over time.
I think it's an enormous opportunity, and I think the fact that we've gone from zero to 925 people in just four years gives us real critical mass, says Ryan. We're getting better at what we do. Costs go down. We have a really have good idea of what's going to sell and what's not going to sell. When we started, we had no idea. You just learn a lot.