Pop quiz: Name an e-commerce platform in the Greater Vancouver Area with $141 million in annual revenue and less than $20 million in recent financing, preparing to IPO in 2016. Now that you’ve eliminated all the usual suspects in the “Will they or won’t they?” IPO speculative frenzy, was your answer Cymax? Probably not. But why not?
Asked for an explanation, CEO Arash Fasihi offers, “Nobody knows about us. We’re probably one of the largest tech companies in Canada that nobody’s heard of.”
The Burnaby furniture e-tailer, founded in 2004, has mostly grown organically.
Like any technology company, Cymax was founded to provide a solution for a problem in its founder’s life, namely buying furniture online, which back in 2004 was surprisingly difficult to do.
From 2004 to 2011, the company enjoyed slow but steady growth, after which point Cymax saw hockey stick growth, 36% year over year, generating $1.38 million revenue per employee, mainly through leveraging a high-margin third-party services model.
Allowing furniture retailers and online partners to use their e-commerce platform while listing on large marketplaces like Amazon and Walmart means that Cymax gets paid and consumers can connect with offerings during every inflection of their buying path.
Regardless, even the thriftiest of boot-strappers have got to take on funding at some point in order to scale. So Cymax is in the process of closing an $18 million round of funding.
“We’ve been a company that has reinvested profits to fuel our growth,” says Fasihi. “Unlike other e-comm or retail companies in the United States or Canada who are burning cash, millions and millions of dollars, our company was bootstrapped until 2011. Total capital injected into the business before this round was less than $10 million. We built a $140 million business with $10 million capital, completely organically.”
Fasihi will be presenting for Cymax at the CIBC Emerging Technology Companies conference in Toronto on May 12.
Cantech Letter spoke to Arash Fasihi by phone.
How did Cymax get started?
My wife and I were in the market to buy a TV stand. Before that, we had a software company selling e-commerce software to retailers. So that TV stand, we couldn’t find it in Canada. We tried to source it from the States. I found a distributor who’d ship the product, and I told my wife, “Why don’t we make a website to sell TV stands?” So we added 60 products to the site, launched our first website, called Audio-VideoFurniture.com, and did search-engine optimization for it and left it there for roughly six months, in June 2004. Until December 2004, nothing happened. And in December, we got our first sale. Then, pretty much every day we started getting one or two sales, and I looked around to see, “Why are we getting these sales?” It was due to our ranking in the search engines. We were #1 for the words “TV stand” on both Yahoo and Google. From there, we started adding more products and then people and we’ve grown the business to be $180 million this year.
In 2013, your revenues were already at $100 million. That’s quite a lot of growth in just one year.
Yeah, last year we had good growth, and this year we’re projecting to do about $180 million.
And in 2013, you had 85 employees. Has that grown, too?
Yes, now we’re at 142.
Wow, that’s pretty significant growth. So, 2004 was a long time before the advent of mobile e-commerce and all that. It seems like your competition right now, in terms of e-commerce, is Amazon, are they not?
They are. If I look at the business and how we evolved, we started competing with a company called Wayfair, out of Boston. They went public last year. That first website, where I found my product that I wanted to buy, was a Wayfair store called Racks & Stands. So they had Rack & Stands and we had Audio-Video Furniture. They started adding a lot of products into different categories, and that’s what we did. Until 2011, the path that we had was to carry everything under the sun as a drop-ship model. And in 2011, we decided to alter our path, because that requires an extensive amount of capital. We decided to shift our model to selling home decor and home furnishing products. When you look at our category, the number of SKUs in it, we currently carry about 80,000 SKUs. We have one of the largest selections of furniture online. But they’re hard to stock. They have different varieties. Just the lighting category has 50,000-60,000 SKUs. It’s not easy for Amazon or other competitors to stock the products.
“We’re probably one of the largest tech companies in Canada that nobody’s heard of.” – CEO Arash Fasihi
In terms of background, what sort of pushed you a decade ago towards e-commerce?
We realized that we were a technology company that happened to sell furniture. And what we decided to do last year is to offer the platform that powers Cymax.com to help other retailers and vendors to benefit from our technology in a highly fragmented and traditional brick-and-mortar market. So we introduced a subsidiary called Constant Retail, in August last year. We now have multiple vendors and retailers on the platform. We closed an $18 million round of financing four weeks ago, and we’re going ahead to basically change this industry.
So the solution you’re providing, is it really office furniture or is it a white-label retail platform? Can anybody use it to sell anything online?
No. Our core competency is in furniture and home decor over 50 pounds. We have built our own proprietary freight tools that we’ve built that allow us to move packages at very low cost across North America. That proprietary freight and logistics platform, as well as our ERP and e-commerce platform, is what we actually offer retailers and vendors.
Is it exclusively North America?
We are just at the early stages in North America. Once we close our round with Frind Holdings, we’ll start adding more people to our IT team. We’ll have huge opportunities here in North America, but there is no barrier where this could be used. As long as they’re moving and they can plug the freight rate into our system, it can work for any carrier or industry. Another industry it could be very helpful for is the appliance industry. Anything that is heavy, like above the 50 pound mark, is the sweet spot for us.
Okay, but it’s more like discrete packaged goods, more than say cargo?
That’s right, this is ready-to-assemble and fully assembled case goods. Because our algorithm allows special handling, we can move a China cabinet from North Carolina to California within seven or eight business days, and do a full white-glove delivery to the customer, into the home, unpackaged, put it in their room, in the shortest time.
So, what you’ve built out is a supply-chain mechanism. It’s not a brick-and-mortar operation.
No, we’re just online. And we don’t stock anything. You’re absolutely right. What we’ve built is a supply-chain technology that connects the vendor who has the products to the end consumer on Cymax.com directly. Also, we allow third-party retailers with a brick-and-mortar store, or vendor, to leverage the same technology platform and supply chain network to get the product from Point A to Point B.
So it’s a digital marketplace.
Yes. Everybody can use the same thing that we’re using, the way they like to use it. Also, if you go to Amazon.com or Amazon.ca or Walmart.com, we’re actually partnered with all of those guys. We move a lot of packages for them, as well. So our back-end system basically participates in these various marketplaces and we handle a lot of the back-end fulfillment and we’re a big player on pretty much all of these major players’ U.S. marketplaces.
Is this part of the white-label solution, or is it a partnership?
It’s a partnership. When a consumer searches for a product, Cymax carries one of the largest selections, but a customer may want to buy from a brand that they recognize, which is Amazon, Walmart, Sears or any of those guys. We participate everywhere. Our goal is to help a transaction anywhere the customer has a touchpoint. So if they want to buy direct from Cymax.com, we offer a very good selection at a really good price. If they buy it through marketplaces, we’re still there. And if they decide not to buy from us or the marketplace and they want to buy from their local retailer, we power the website of that retailer.
“We realized that we were a technology company that happened to sell furniture.”
At $140 million, there are companies quite a lot smaller than you who are talking about IPOs and taking their companies public. Are you exploring your options there financially?
Absolutely. We’ve had discussions with a range of potential investment partners in Canada and the U.S. We are targeting the end of 2015 or early 2016 for an IPO.
What do you see in the next two to three years, as far as what you want to concentrate on?
Basically, we are the largest pure play online company in the Furniture/Home Decor category in Canada. Cymax is focused on continuing to expand our product offering in terms of adding more major name brands to provide the widest selection of furniture and home decor possible to our customers. We will be doubling our IT team in the next six to 12 months to accelerate development of our subsidiary, Constant Retail to power retailers and vendors across North America.
So you’ll be expanding your workforce?
We’ll definitely grow our employees and are focused on getting some specific areas of talent filled out, mainly on the tech side of our organization.
In Vancouver, a lot of people talk about the hiring crunch around certain talent specifications, like developers and programmers. How are you finding that?
The core downtown is pretty tough right now, because everybody is tapping the same talent pool. Last year, we decided to move outside of downtown. Our office is in Burnaby, and we’re capturing a different talent, that doesn’t want to live downtown. They’re more living in a suburb, which has helped us. We have hundreds of résumés every week from people wanting to join the team.