Tobin Moore and Adam Vitarello were recent college grads when they decided to max out 37 credit cards and rake up $350,000 in debt to fund their startup, eSpot, a D.C.-based company now known as Optoro.
"Back then, you know, before the recession, they were giving out credit to pretty much anyone," Moore told DC Inno.
The idea for eSpot, a business that moved out of the garage to a storefront in Georgetown in the early 2000s, began after Moore watched his father struggle to sell an item on eBay. At the time, eBay was the predominant e-commerce destination on the Internet; it was an organization which introduced some truly innovative concepts that the larger industry has since accepted as standard—like verified seller accounts, shipping partnerships and dynamic pricing controls.
Despite those features, eBay's platform sometimes proved to be tedious and laborsome to use for the average person.
When Moore was attending Brown University he hoped to help his dad finally sell some old trinkets and other goods that were collecting dust in the attic. Moore's father, however, was a new user and without buyer feedback he found it hard to find buyers. Additionally, the Internet of the 1990s was a different beast from what it is today and he also couldn't decide on a fair price per item—looking up accurate prices was nearly impossible.
As a result of this experience, Moore believed an opportunity was available to disrupt the used goods retail market. Other people, after all, must be dealing with the same difficulties. And true to this belief, Moore and company quickly discovered their hypothesis was correct.
It is this incident that ultimately inspired the creation of Optoro, a local business that now employs over 100 people and has raised roughly $120 million from private investors, including cash from local firms Revolution and Grotech Ventures.
Last year, Moore and Vitarello received the EY Entrepreneur of The Year 2015 Award in the Emerging Growth category in Greater Washington, capping off what had been a big year for Optoro after raising a $40 million debt round.
The EY award also served as another milestone in a unique, semi-ridiculous and invaluably interesting journey that first began in the halls of Brown University.
Setting
Today, Optoro describes itself as a "cloud-based technology company" that develops software to optimize excess and returned inventory management and sales for retail products. That complex, PR-tailored definition, however, is rather new in the company's longer lifespan.
eSpot, as the company was originally known, had a slightly different directive that subsequently matured and evolved alongside its young co-founders.
Located at 3211 K St. NW, the original eSpot found itself in a slightly different Georgetown back then than what we know today. The store was manned by three first-time entrepreneurs: Moore, Vitarello and friend Justin Lesher. It specialized in the resale of high-end personal items, which on one occasion even included a sports car via eBay.
eSpot's founders lived in a decrepit eight-person, shared townhouse in Georgetown while they grew the business. They didn't pay themselves a salary for years.
The core business model boiled down to this: eSpot would price items, take photos and write up a listing, in addition to managing the eBay auction for their clients. They did not sell items valued at less than $100. The revenue model, with eBay as their vehicle, was based upon a 30 percent commission on sales up to $500, and 20 percent on sales above that.
Press was easy to find, with outlets like The Washington Post profiling eSpot on multiple occasions, allowing the three to network and meet others in the city's business scene. And that press also caught the eye of some early customers and investors, pushing business to their humble storefront. People, it became obvious, liked their story.
"Have you ever seen 40 Year Old Virgin? Remember that eBay store, where it was just a drop off location? That's what we were doing early on," said Moore from a leather-bound chair in his Chinatown office that overlooks the neighborhood's hectic Metro entrance.
Moore sits far back in his chair with one leg propped up on a separate desk chair, his leg covered in a large, black soft cast. Weeks prior he had torn his ACL while playing pick-up soccer with colleagues—"I guess this is what happens when you try to keep up with your 20-something employees," he said with an affable laugh.
The Evolution
Stepping back for a moment, it is important to realize how the used, returned, open-box and other excess goods retail market works today. In short, it continues to be largely run by middle men that transport, find buyers and inform partnering stores of deals. It was low-tech and to some degree, continues to be. Random warehouses for storage are central to this model. Optoro's software works to cut back on the number of destinations a piece must travel to before arriving at its new seller.
In the end, a significant portion of this sort of retail ends up in landfills, according to Moore, or at the best the original buyer makes just pennies on their inventory investment. Optoro, at its heart, aims to solve this problem.
Looking back, the transition from eSpot to Optoro began in the late 2000s. The name change became official shortly after eSpot's first-ever angel funding round in 2010. Between 2005 and 2009ish, eSpot was slowly transforming.
The aforementioned press that eSpot enjoyed eventually led to their first ever B2B partnership with a series of pawn shops in nearby Maryland. The pawn shop owners had seen The Washington Post story and were eager to find a way to sell all their excess inventory in a more efficient manner.
Pretty quickly it became obvious that eSpot could sell excess inventory and other used goods at a faster rate, with a better return, but the process was labor intensive. As a result, the team could only service a limited number of clients. The work was tough and the payouts were meager without the scale. Software became their inherent answer.
By coding some new tools, using a suite of software and customizing other already available enterprise e-commerce products, eSpot began to create the proprietary technology that would send them to stardom. Among other things, this software helped streamline the listing of items and with finding accurate prices—the software could crawl the Internet to find information. Other helpful features like picture editing, QR scanning capabilities, shipping calculations and price changing, were also automated by the software.
Pretty soon, more than just pawn shops were turning to eSpot for a digital channel to sell their excess inventory. The software continued to be a focus and eventually Optoro opened its own warehouse in Lanham, Md.
Meanwhile, the reliance on eBay quickly became an obsolete business strategy. It was obvious that Optoro's software and services could stand on their own, as a B2B, software as a service (SaaS) product for retailers. And with this shift, the transformation from eSpot to Optoro was nearly complete.
When Optoro scooped up a Series A $7.5 million raise in 2013, Moore said he felt validated. The company's direction appeared on track. But when Optoro raised their next round, a $23.5 million Series B later that year, that was when he allowed himself to believe in a grander vision.
Now, Moore carries that same vision into what will become a new office for Optoro, as the startup moves our of their current Chinatown dig to another D.C. office to adjust for a growing workforce.
