Michael Acton Smith: How I made a million with a drinking game

University chess club pals Michael Acton Smith and Tom Boardman "always talked about setting up a business when they graduated". In 1998, a year after they had left university, they hit upon a plan. "At the time The Gadget Shop was very popular, so we thought, why not make an online version?"

They both "quit the day jobs" and moved into Boardman's parents' house in Cardiff. "Tom's mum cooked for us and let us use the attic as an office so it kept our costs down to virtually nothing." For the first few months their website, Hotbox.co.uk, only sold a handful of items. "We were an unknown website with a poor product offering." After six months the pair were getting desperate "we couldn't live in Tom's mum's house forever". That's when they hit upon a new product idea. "We were drinking in a pub talking about chess when we saw some guys downing shots of tequila. The idea for the 'Shot Glass Chess Set' was born."

The pair looked up local factories in the phone book. "We didn't have the money to pay up front, but luckily they agreed to give us 30 days' credit on the first batch of 100." When the parts arrived, Boardman and Acton Smith put them together. With Christmas approaching, they contacted the local press. "Amazingly, the papers took up the story and we got loads of publicity." Site traffic rocketed and they soon had to ramp up production.

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Turnover went up from "around £20 a month" to £25,000 in December. "We realised things were getting big and we hired a couple of friends from university to help us grow the business." In 1999 they moved to London offices and managed to raise money from venture capitalists. "The dotcom boom was in full swing. Two young guys in ill-fitting suits were able to raise half a million pounds for a business that had only just become profitable." Venture-capital backing had other advantages. Boardman and Acton Smith were advised to drop the name 'Hotbox.co.uk' Hotbox.com being a popular US porn site. So newly named Firebox.com hired fresh staff and sourced new gadgets. "We realised it was much easier to find an established product than develop a new one from scratch." What's more, copycat firms had started replicating the chess set "with a much cheaper manufacturing set-up".

Then, in 2000, the dotcom bubble burst.

"At first it didn't affect us our sales rose regardless." But with costs mounting too, in 2001 the firm posted a £400,000 loss. Attempts to raise more money from venture capitalists were met with "a firm no". The duo realised they had to cut costs and let staff go. The strategy worked Firebox "bounced back" and turned a profit in 2002. "From then on we made sure we sourced gifts that people couldn't find in the shops or on other sites." They also hired copywriters to improve their website "we wanted people to stay on for as long as possible" and create a fortnightly newsletter. Last year the site boasted sales of £13m and profits of £1m.

At 36, Acton Smith now also runs the children's gaming/social-media site Moshimonsters.com. "We are bringing out our own new goods this year Firebox will be one of the first sites to have them."