Heroes in Business - Josh Chodniewicz, CoFounder art.com $300Million before selling to walmart, founder fundify.com

Episode Date: November 11, 2021

Secrets of startups. Josh Chodniewicz, CoFounder art.com $300Million before selling to walmart,and Founder of fundify.com is interviewed by David Cogan founder of Eliances and famous celebrity host of the Eliances Heroes Show broadcast on am and fm network channels, online syndication and on over 100 TV channels.   Chat Directly. Hire Quickly. Hirect is the first chat-based hiring Chat and interview candidates anytime, anywhere. Download the

Up in the sky, look, it's captivating, it's energizing, it's Eliance's Heroes. Eliance's is the destination for entrepreneurs, investors, CEOs, inventors, leaders, celebrities, and startups, where our heroes in business align. Now, here's your host flying in, David Kogan, founder of Eliance's. That's right. Are you ready for another incredible interview? I really appreciate, again, the ton of feedback that we get. Keep it coming.

You know the website, Elianceur.com, to check out past episodes. That's E-L-I-A-N-C-E-R.com. And of course, make sure you go to Eliance's.com. That ends with an S because it's the only place where entrepreneurs align. And thank you for the feedback that we continue to have when I interviewed the founder of Worth.com. So again, make sure that you check out those past interviews. All right.

So I'm super excited about our next guest. First of all, he is the co-founder. Are you ready for this? Probably the most easiest website to remember of all of the interviews that I've done and everything like that. Co-founder of Art.com. We're going to talk about his journey and what he's doing now, but you gotta check this out. Welcome to the show, Josh Chodnowitz.

You can reach him by the way at fundify.com, F-U-N-D-I-F-Y.com. Welcome to the show, Josh. It's great to be here. Thanks for having me, David. All right, so first thing I wanted to do is jump in and talk about Art.com. You're the co-founder of Art.com.

How in the world did you secure that domain name? Well, we didn't have the domain name when we started the business, actually. We started with the business. It was AllWall.com for the bulk of the beginning years. And Art was our biggest competitor. It had been Art.com raised 17 million in venture financing, ended up another two, 300 million that was pumped into that business through the Getty image, Getty family through Getty images, which was the previous

owner before we acquired the domain and assets from them for a song back in 2001, right after the dot-com crash. So your timing was then perfect. What made you, as far as to see the foresight of that, when everyone else is selling like crazy trying to get out of the dot-com era, you're going in? Well, the same reason that we started the business back in 94, 95, we knew the internet was going to be big. That was the big question. The biggest question we heard when we tried to raise our first little bit of money, which we never did, tried to raise $250,000 and people would ask, you know, what's completely unfathomable. To give some perspective, back in 94, one out of 800 Americans had an email address. So what does that tell you? That means if you have an email address, you have no one to email because you're the only person that has it. And so that had evolved, right? The technology had evolved and grown into something that we had believed it would become something where people would use it, you know, on a regular basis, of course, for so many different reasons.

And so for the same reasons that we started in 94, 95 were the same reasons that after the crash of 2001 that we said, listen, this is not going to just end. Technology is still going to be a part of this future. We see 20 years later that clearly it's a part of what we're doing and what we're part of every single day. And we just believed in that trend that we picked up something that was being mismanaged and I ran that considerably better immediately, took that asset of that company on and we immediately were profitable with taking that business on. And that's incredible.

And we're going to talk about a little bit further, too, of, you know, you kept things tight and where you actually ended up physically starting this business. Also, too, is I need to do a shout out to our sponsor for today. Chat directly, hire quickly using the first chat based hiring app for startups. That's Hirect.com, H-I-R-E-C-T.com. And you'll also see the link in our description below so that you can instantly, and by the way, no cost to you to be able to do that. All right. So let's go back, Josh, then, you know, you kept things tight at the beginning. You didn't go out and buy all these buildings and staff all these people. Where did you start it? We started in the basement of my parents' house. I was 19, 20 years old. My other co-founder, Mike Marston, he was at Virginia Tech getting

his computer science degree. He's the one who actually told me, he said, this internet's going to be huge. And that's when I responded with, what's the internet myself? And then started building upon that. But I was in the basement in New Jersey of my parents' house and doing the operations of the business. Right. Kind of trying to sell posters. I mean, it was it was nearly impossible back then to sell something online. For example, there was no shopping cart that you could just pull off a shelf and add to your to your website. You had to build that from scratch. Today, nobody does that. You don't have to because you can license that. It's freeware now, right? It's open source. So that's just one short example. Another one, you couldn't

charge credit cards online in any significant, easy way. For example, we could not get a license to actually charge credit cards because of all the implied fraud that might come from the internet, whatever that might be to people back then. And so we started the business as technically as a catalog business. And we thought of the online business as our technology catalog, right? Our online catalog of products. And although it was the exclusive, we didn't have a catalog at the time. We eventually did mail out exclusive, we didn't have a catalog at the time, we eventually did mail out to 13, 14 million people a catalog. But, you know, in the beginning, our catalog was the digital catalog online. So things are moving along and then you decide to

do what with it? Well, we did a lot of things, but where in the history are we asking? Because we started in 94 and we went through a lot back the year that we bought art.com. And then the following years, we ended up by 2002, 2003, we were Inc. Magazine. Inc. Magazine does the Inc. 5,000 fastest growing companies. We were number two on that list overall. The number one company had raised $150 million in venture capital, which back 20 years ago was an enormous amount of money. And nowadays, it's more prevalent. You see that more so. But we had grown without any capital raised at that point and built the business.

We did raise around a few years later uh so we raised uh 30 million and then additionally another 28 million through uh a merger with all posters.com which we then also owned and unbelievable yeah and built that business uh ended up in raleigh north carolina building that uh and then eventually moved it out to silicon valley which is where we we eventually were before Walmart acquired it. That's right. And I want to get into that. So again, we're talking with Josh Chodnowitz, co-founder of Art.com.

He ended up, he'll talk to you about the Walmart part because you're listening, watching me, David Kogan, host of the Alliance's Hero Show. Make sure that you go to see past episodes at Alliance.com, E--l-i-a-n-c-e-r.com for more incredible interviews all right so josh what is the deal walmart approaches you or you approach walmart i mean a behemoth of a company yeah so i think we went through several spouts of uh the business uh from perspective. Years prior, we almost sold the business to Michaels, the big arts and crafts store around the country. We had gone so far as to starting to think about filing an S-1 and actually taking the company public, but we've never gone and actually done that and built a business there. But yes, eventually it turned into a, I was no longer the CEO of the business. I'd left the day to day.

I was on the board and I was the longest standing member of the board of the company since founding it. And then through the acquisition there. And so that was really transacted by our CEO at the time. And but yeah, that was an introduction to Walmart. We ended up talking to them and it goes through a process of trying to make something happen there. Right. And trying to discuss what would happen, you know, and trying to turn it into an exit. All right. So you end up exiting that and you don't sit still. Yeah. Yeah. Well, for me, I'm really fortunate because I love what I'm doing.

I love building things. So I love building business. I feel like I'm an eight year old kid playing with Legos every single day. And that gets me up early and gets me to bed late and doing the same thing and building business, right? I had kind of what got me started with Fundify really was the fact that over the last decade, I've been making investments in startups. I have 41 startup investments. And as in total, those have been extremely successful, frankly, they've done very well. Although I've got 12 or 14 of them that have gone to zero. Several of them have done incredibly well and have paid for the entire portfolio alone. And so that led me on a journey of trying to understand

the startup asset class and investing in startups. Really, the only way way as of a few years ago that you could invest in startups is through a venture capital fund. Right. So you'd invest in a venture firm, which means you'd have to be an accredited investor, a high net worth individual, high minimums to invest. You invest in a venture firm and then they deploy capital for you and you earn part of those returns. And up until the JOBS Act came about and the new laws have been enacted, now anybody and everybody, as long as you're an 18 year old adult in the United States, you can invest in startups. And what that now changes, it allows you access to this asset class. But interestingly enough, there's no way to buy a piece of this asset class. And so that's what's no way to buy a piece of this asset class. And so that's what we are trying to do. We are building a business where at Fundify,

you can see opportunities. Our kind of mantra is to simplify startup funding. So we want to help startups raise capital. We also want to help investors deploy their capital, even if it's small amounts, as little as $10. Yeah, I want to talk more about that because we also have a lot of people both on both ends right now that are listening and watching investors that have money and startups that need money. So talk to us about on the Fundify. And again, you could go to what he's referring to is his company is a startup or not startup, but his company that allows you to invest in startups, fundify.com. That's F-U-N-D-I-F-Y.com. And again, you see it in the ticker symbol below. You'll also see it in the link. So make sure that you go to that. So let's first talk about the point is, is what's the qualifications? What does someone need to be

at to be able to be listed on Fundify.com to be able to accept funds from investors? So as a startup and what the requirements are for, first and foremost, Fundify is a regulated entity. Fundify Portal is an entity that's regulated by FINRA and the SEC, the Securities and Exchange Commission, which what that means is we have certain reasonable basis that we have to perform to make sure that any startup that comes onto the platform, we've conducted fraud checks and know your customer checks, AML checks, which is anti money laundering situations to make investments safer to a reasonable basis, at least through the requirements of the SEC and FINRA.

And so we put those on. Those are our minimum requirements that we have for every one of the startups coming to our platform, which just means you got to do things the right way. And then we are evaluating those opportunities and seeing which ones are the ones that we want to offer to our community of investors. Right. And so we're looking for the best companies out there, but we're also looking for companies that are out there that are looking to raise funds and might not know how to do that. We're here to help

them raise the capital that they haven't been able to secure so far. And Josh, is there a certain amount that you take that they're looking to raise? Is it someone who's like, hey, listen, I only need a million or a hundred million? I mean, where are you at in that part? Yeah. So you can raise as little as you want upwards. I mean, I think the lowest that we've seen that people are raising $25,000 upwards of, we have campaigns that are, I've just launched that are looking to raise $5 million. And so through a regulation crowdfunding offering, you can now raise up to $5 million as a startup. We can also raise with a side-by-sea Reg D offering an additional $10 million, so $15 million in aggregate. Or if you need more capital than that as a startup, we can structure the offering as a Reg A offering, which allows you to raise up to $75 million through the platform.

And explain to us a little bit about, you know, there's other sites out there, you know, like the Indiegogos and how this is different from it, because with this, you actually own a piece of the company, correct? That's right. Indiegogo, Kickstarter, GoFundMe, those are companies that we would classify them as rewards-based crowdfunding platforms. So rewards, meaning you get something in exchange for the capital you put in, but it's not equity, right? You're getting, let's say you want this fancy bicycle that somebody's making that you've never seen before, and you want to pay $500 for it. Great. You pay $500 in advance and six months or a year from now, you'll get that bicycle.

Maybe, maybe you'll get that bicycle if they buy it, right? So the reality of that is you're taking equity risk on those sites with your capital, but you're doing so because you really have a passion for the product that's there and you want to get a piece of that. Now, what that also means is that no real significant investors come to those platforms and deploy significant amounts of capital because nobody needs a thousand bicycles. OK. And so now what that means is with the new law changes, the JOBS Act and what Fundify offers is the ability for investors or startups to raise money in a way that's consistent with the way that they've done it in so many years before, which is through equity. And we are an equity crowdfunding platform, which simply means it's

not just rewards based, but also the investor is earning an equity stake and buying an equity stake in the business. So if it becomes the next Uber, the next DoorDash, these great successes, the investor gets to participate with that large upside that might potentially come. Of course, those are no guarantees inside of those, but those are the types of things that people are looking for. And what's the, is there a minimum investment from an investor standpoint of how much to be able to put into a company? Yeah. So we have structured our minimums to be as low as we physically can make them so that just about anybody can get in. And the investment minimums are $10. They can be set higher by the startup. Some startups want to have higher

minimums, but we recommend the $10 minimum, which allows people to diversify their portfolio. For $500, they could build a portfolio of, $10 investments, which is fantastic. And you get a little portfolio, all these startups that you own a small piece of and get to watch that happen. That's amazing. And what other qualifications are there for the investor part? What other, are there background checks? Are there, what are their specific things? There are, there are potentially other things that we check for the investors, depending on the amount of the investment or where they might live, if they're international.

There are some basic things that, again, FINRA and the SEC require. So we walk through that. But generally speaking, a form of ID that shows you who they are and they're making it so that there's not a money laundering, if you will, and that we allow, again, really the requirements, you're 18 years old and you can make decisions on your own. You invest your capital. It's pretty simple. All right. Fundify.com. F-U-N-D-I-F-Y.com. Josh, what are some of the cool things that you've seen posted already?

Oh, goodness. We've got some great opportunities on that. We've got a company right now called Arc that is got a, it's a new, it's like a Zoom secure, they're trying to build a secure Zoom technology, which is interesting. We've got Capsule, which is a company that's trying to store your future, I'm sorry, your history of your memories in a way that's not stored just on social media. We closed a campaign for a company called Baby Barista and raised $150,000 from 88 investors for what looks like a Keurig machine, but for baby formula, for a baby. So you can, you know, while you're sleeping in bed, the baby's crying, press the button on your phone.

And while you walk over to your Keurig, your formula has been made in a bottle at the perfect temperature for you. And so there's really some cool things that are out there. Right now, we've got campaigns that are getting ready for companies that are installing electric car chargers, or we're selling stakes in equity stakes in soccer, minor league soccer teams. And there's so much going on and so many interesting possibilities of what's out there. It's exciting. Amazing, Josh. I love what you're doing. This is so cool. I'm going to definitely be checking it out too. Josh, you've created a better way for people to invest in startups. Some of the minimums are as low as $10. So make sure that you check it out.

You're creating the opportunity for these startups to build the next company. That's a hero, Josh Chodowitz. You can reach him. He's the founder of fundify.com. Go to fundify.com. This has been David Kogan with the Alliance's Hero Show. you