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August 31, 2006
Angels Back Hitflip's Cross Border Ambition And Growth At Home
Hitflip, an online DVD and CD trading exchange, turned down venture capital offers this summer in favour of raising capital from a syndicate of angel investors. The one year old firm, which employs 20 in Cologne, did not disclose the amount raised, but told us that it was a single digit million euro amount, enough to fund its expansion into Austria and the UK, to invest in scaling up its platform, and to take a bigger chunk of eBay Germany's DVD and CD business.
We interviewed by email Hitflip's 26 year old co-founder and CEO, Jan Miczaika (he's on the right here), about Hitflip's digital media swapping platform. Read on to find out what Hitflip is all about, its growth plans, and who its backers are.
He describes Hitflip as a website "rich with data, recommendations, and other peoples' opinions for finding and discussing new media products".
When a user "finds something interesting, press one button, and you receive the products hassle-free and without being afraid of ripoffs". The price is "almost free," he said, adding that listing an item on the exchange is free. When a trade takes place, the receiver of the item pays 99 Euro cents. The sellers' items are valued and exchanged based on a points system.
Hitflip's traffic puts it ahead of competing online service providers in its niche, both those that rent DVDs and those that provide an exchange platform, says Alexa, while Nielsen shows similar numbers for both DVD rental startup Amanga [now owned by Glowria] and Hitflip, Miczaika added.
To grow quickly now Hitflip will have to beat eBay in the pre-owned digital media niche in the German market. Miczaika says that eBay has 90,000 listings at any one time in the DVD area. His firm has about 45,000 titles.
The challenge is convincing those that would normally sell on eBay or similar auctions sites to use Hitflip's trading platform instead.
The idea of an online trading platform is not obvious to most consumers. "When someone wants a DVD or CD, normally one wonders where to get the best price for a DVD, probably Amazon or eBay. Trading is a latent demand, not something one actively looks for," said Miczaika.
He sees the new eBay Express service as validating his firm's alternative approach, that it shows that "eBay recognizes that the auction/fixed time model is not right for everyone".
But Hitflip will also have to do better with the number of sellers and buyers that find each other. "More of [eBay's] transactions close, but we are getting there. A key point is that it is not always to the benefit of the consumer to simply close the transaction regardless of the closing price" said Miczaika
In addition to directing his team's growing the market in Germany, Miczaika is launching in two other European markets, hoping to have at least one new country online by October.
He's looking at potential acquisition targets, but said that he would ideally like to acquire a "complete team with deep local expertise and networks", not necessarily one that is already running a similar company on another technical platform.
"We are tracking a number of possible acquisition targets. What we would be buying is traction [an installed base of users or customers]. But I don't really think buying another platform makes sense for us right now. Getting
consumers to migrate from one community platform to another is hard. So while we are open for discussion, what we are looking at is finding complete teams for new countries," he said.
Miczaika is counting on his private backers to face some of these challenges. He's already had help from Oliver Samwer, formerly of Jamba and Alando, with the marketing controlling system.
Some of the others, mainly successful tech entrepreneurs that made their fortunes either floating their technology ventures, or selling them in so-called trade sales, include Bernd M. Michael, the former European CEO and now advisor to Grey, the second largest advertising agency in Germany, Hans-Ruedi Heeb, a co-founder and early CEO of Esmertec, a developer of mobilephone software, Peter Schüpbach, CEO of Genevalogic, Gerrit Schumann, founder of element 5, an ecommerce software firm acquired by Digital River and Lukasz Gadowski, founder of Spreadshirt. Two companies, brains-to-venture, the corporate finance boutique and Net AG also took minor stakes.
Posted on August 31, 2006 07:19 AM | Posted to Early stage | News And Updates | Online services | Permalink
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