Swapdom CEO on Finding the Right Startup Investor
When Petros and George Georgopoulos finally perfected an algorithm that could engineer the trading of possessions among multiple participants, they knew they were on to something big.
The brothers, who are engineers and mathematicians, had struggled with this puzzle for years, unable to figure out how to orchestrate circle swaps -- in which a group of people trade unwanted items they own for desired things owned by others -- in the real world. For example, the site will allow a woman in Georgia to give a skirt to a woman in Nevada, who gives a sweater to a woman in Oregon, who gives a pair of shoes to a woman in Michigan, who gives a purse to a woman in Vermont, who gives a hat to the original giver in Georgia, thereby satisfying everybody's needs at once.
“We are trying to make a swapping or bartering economy more efficient,” says Petros Georgopoulos (pictured), CEO of the pair’s new venture, Swapdom. Bartering is traditionally a two-person affair, making its usefulness very limited in the internet age. But Swapdom's algorithm makes it possible for many people to trade items amongst each other, increasing the possibility of finding a beneficial bartering situation.
“Our technology provides efficiency that is orders of magnitude higher than the classic approach," says Georgopoulos. “In addition it allows us to provide the [simplest] experience for our users, who get exactly what they want without bargaining.”
While Swapdom is still researching the tax law implications of delving into arranging the bartering of services, the possible application of this circle-swap technology to business tasks could benefit small business owners. For example, a graphic designer in California could provide services to a law firm in Connecticut, who would provide services to an accountant in Maine, who would provide services to the California designer, in a multi-business swap that comes full circle.
Tapping the Marketplace
Launched in November, Swapdom is a recent entrant into the so-called “sharing economy” space. Competitors include swap.com, BarterQuest, and NetCycler.com. Site users request items they want, offer items in exchange, and wait for Swapdom to organize a multiperson swap.
The business is gradually rolling out categories for swapping: Users can now trade clothing and kids’ gear on Swapdom.com. A household items section is slated to open up by June of this year, followed by sporting and outdoors gear in early autumn. Customers pay for shipping and a variable service fee, capped at $2.
The company is based in the brother’s native country of Greece, but Swapdom operates only in the U.S. This is to take advantage of the larger potential marketplace and more robust online shopping habits here, Georgopoulos says.
With nine staffers in the two countries, the company has just surpassed 10,000 user registrations and has swaps actively taking place, he says. As the marketplace grows, the swaps will become faster and more frequent: The algorithm can arrange more than 830,000 trades per million items.
Finding the Right Investor
Georgopoulos says he has learned many business lessons in the process of starting Swapdom. He found the competition for funding fierce, although many business ideas that other entrepreneurs touted as original and innovative were actually derivative, easily replicable, or not well thought out.
“A plea that comes from my experience is: Be very, very scrupulous with your ideas,” he says. “Is it really unique? Is it really something people cannot easily copy? If it’s not, you’re just adding to the noise.” To avoid this, Georgopoulos recommends testing your ideas with other people before pitching them to investors.
Georgopoulos cautions against accepting funds that fall short of the amount necessary to make the early stages of a business successful. For example, if you’re asking for $1 million, don’t accept $250,000, because that first tranche of funding won’t go far enough to deliver what your business plan promises.
“You need time [and] an investor who understands that. [You also need] patience, patience, patience,” he says, speaking from experience. “Things won’t happen overnight.”