The real reason Wayfair’s IPO is such a big deal

<a href="http://www.shutterstock.com/gallery-70761p1.html?cr=00&pl=edit-00">Donna Beeler</a> / <a href="http://www.shutterstock.com/?cr=00&pl=edit-00">Shutterstock.com</a>
Donna Beeler / Shutterstock.com

The news today that Wayfair has filed the paperwork for its initial public offering is big news for the Boston tech scene. But the impact of the company going public may spread beyond the border of Route 128.

With Care.com going public this year, Boston got its first consumer facing tech IPO in a couple of years. While Care.com is a great company that provides a valuable service, many people weren’t too ecstatic that Care.com would be the first Boston tech IPO in a while to hit the public market, and, by proxy, represent what many locally feel is a surging innovation ecosystem. While Care.com is continuing to develop a vision of becoming the go-to site for parents, its stock has not fared very well. Today, shares of Care.com (CRCM) are trading for $8.47, down more than 64 percent from its initial price of $24.30.

Even before the Care.com IPO, the company that many were excited about in Boston for 2014 was Wayfair. The company finished 2013 with $916 million in revenue (with a $15.5 million net loss) and had basically completed a couple year period where, in a risky move, it had rebranded from CSN stores.

The belief that Wayfair might be the “pillar” company that many in the Boston tech scene had been seeking like Ahab sought Moby Dick was bolstered by brand spinoffs and acquisitions. The company recently moved to new offices in what could be considered the heart of Boston, at Copley place. Wayfair may already be too big for its new offices with more than 900 employees (they are hiring at a clip of 20-25 each week).

But through all the speculation, talk of IPOs, and an odd kind of hopefulness that the company would rise to carry the Boston banner, Wayfair remained pretty quiet, plugging along as it had from day one, continuing to grow.

It is precisely the HOW of Wayfair’s journey from its offices in the nursery of Steve Conine’s South End home to the filing of IPO paperwork that should be getting the most attention here, but it will probably be lost in the pro-Boston excitement of the whole thing.

The company is not your typical “tech” quick-rise story in the mold of the Facebooks, Twitters, and, even more recently, Snapchats of the world. Wayfair didn’t raise any money until it was almost ten years old. It did very little marketing until a few years ago. And it risked years of built-up search engine magic on one roll of the die, when it rebranded in 2011.

Wayfair is a business built for the long term, something that you don’t often see in these days of MBAs hell-bent on building startups and books focused on “Lean” business tactics flying off the best-seller shelves.

For a billion dollar e-commerce company, Wayfair is built in a manner that most 21st century gurus don’t see as the path to success: Grit, patience, endurance, marketing savvy, a razor’s edge bottom line, and faith.

Building an old school business in a new digital age

Shah and Conine met as undergraduates more than two decades ago at Cornell. After taking an entrepreneurship course together, they started their first company, a commercial Internet company called Spinners,  in 1995. Spinners was later sold to iXL in 1998.

Shah and Conine spent the next few years as part of iXL before setting out on their own to start a new business, a post dot com bubble e-commerce company called RacksandStands.com.

That company, which rose out the ashes of the dot com bust became CSN Stores, a network of SEO-primed websites as varied as Teak.com and Stool.com. By 2007 CSN Stores had over 250 different sites, and by 2009, it was doing more than $250 million in sales.

And then, in 2011, CSN Stores rebranded as Wayfair, a strong pivot from its history of SEO success. The risky move paid off, and coincided with the company’s first outside funding.

Up until 2011, Wayfair had been bootstrapped, and to help absorb the potential losses the rebranding, the company raised $201 million in a Series A and a venture round over a couple of years from Spark Capital, Battery Ventures, HarbourVest Partners, and Great Hill Partners.

Since, Wayfair has raised another large round of funding, $157 million from T. Rowe Price earlier this year.

With today’s announcement, Wayfair will probably go public this spring, looking to raise $350 million in its initial public offering.

Will the tortoise beat the hare?

The story of Wayfair’s multiple decade path to its monster IPO is one you don’t often hear, but is full of lessons for young entrepreneurs and founders of innovation startups everywhere: Manage finances with a surgeon’s precision, embrace calculated risk, bet on yourself, and don’t be afraid to change the vision.

The company grew because it thought long and hard about which area was being underserved in the Internet era, and figure out how to best connect customers with the home goods they wanted. As Wayfair co-founder and chief technology office Steve Conine said when we spoke earlier this spring, “In the early years, we were driven by where we saw an opportunity.”

“We really focused on the operations logistics, infrastructure, etc., and once we had that set, then we decide to figure out how to build a brand experience,” Conine added.

Build, build, build, then reap the rewards, that seems to be the Wayfair model.

In today’s world where tech founders aspire to be media superstars and money seems to be pouring into startups on both coasts, there are aspects of the world glamorized by The Social Network that are kept in the dark corners of the wonderful world of “startup life.” If you were to ask almost every venture capital-backed founder if he or she wishes they could have held off taking funding, kept control longer, not invited other voices into the boardroom, they would all probably say ‘yes’. They would also probably be out of business.

If Wayfair had taken on outside investors, and the advisors that come with that type of move, there is no way they would have ever been able to maintain their initial multi-site strategy and, what’s more, once they started making money, they never would have been allowed by investors to drop it all and rebrand.

But Wayfair proves that companies can still be bootstrapped and succeed. They also prove that Internet businesses built without updating TechCrunch on every single product iteration, minute acquisition, or extra cent of funding, not only exist, but are thriving beyond the noise of the online tech dailies.

Not to be too corny, but Wayfair is an old school business, in the mold of many of the companies that my grandparents’ generation admired. They played the game for the long term, overcame challenges, and focused on how to keep making the company better.

It was quite a risky move.

And its about to pay off in a big way.

(Oh yeah, young founders, remember this: Conine and Shah each owns 28.9 percent of Wayfair’s stock. I believe they are very glad they bootstrapped all those years.)

Dennis Keohane was a Senior Staff Writer for BetaBoston.
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