Not many Stanford Business School graduates end up becoming ticket touts. But Los Angeles native Eric Baker, 35, has a particularly expensive and inconvenient encounter with a tout to thank for the big idea that would eventually make him a million. In 1999, he was in New York, looking for tickets to see The Lion King. "I remember having to pay through the nose. It was ridiculous $500 for a ticket with a face value of $100, from a tout on a street corner on Broadway. There was no way to know the real price of the ticket and no way to know who you were dealing with. So, I thought, my gosh, there must be a better way of doing this."
And that's when he got the idea for StubHub. "eBay [the auction website] worked well for items that are not time sensitive, such as an antique table," he says. "But if I wanted to see Madonna on one night only, I wanted to have my ticket on time."
He got together with Jeff Fluhr, a classmate at university, and launched StubHub from "a very dark room" at the back of the Stanford Campus in 2000. It wasn't the best time to launch an online business the Nasdaq crash of March 2000 "made it very challenging to get funding. So we had to cobble together half a million dollars from friends and colleagues" to pay the software engineers to design the first website, which used an ancient programming language and was put together with "rubber bands and scotch tape".
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They began charging commission of 15% on sellers of tickets and 20% on buyers. But their main selling point arrived when they recruited new investor, ex-Superbowl winner Steve Young. He helped them to sign up baseball and other sports teams. "The teams acted as partners, whereby they'd tell their season-ticket holders that they could use us" instead of going to a tout or "scalper, as we call them".
Recruiting the Seattle Mariners and then the Arizona Diamondbacks, they sold $1m-worth of tickets in the first year, and continued to expand, helped by a series of advertisements on sports radio. In 2002, eBay offered $20m for StubHub, but with the business still growing rapidly, they turned it down. However, in 2004, after a disagreement with Fluhr over the future direction of the business, Baker left StubHub, but kept his 10% stake in it. In 2006, eBay returned, and this time bought the company for $307m. "It was only the second-best thing to happen to me that year though, because then I got engaged to my wife."
Two months after leaving, Baker saw that the concept of ticket resale was not unique to America. "All the problems in getting tickets for a Yankees game are no different to going to a concert in London or Berlin." So he decided to go it alone, with a new venture called Viagogo. Launched in 2006 with $50m in venture capital funding, it's now the largest ticket resale medium in Britain and Europe. "We're not quite at $100m of sales annually, but we're pushing that. We're growing much faster than StubHub was at the same point." And as the largest shareholder, there's no risk of the same problems befalling him as happened at StubHub. "I don't have a partner here so, hey, I can't have a falling out."
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