The founders of Proxibid look back on their 15 year journey from Dot-com dream to high-growth startup.
Even for people who lived through it, it’s hard to remember what technology was like around the year 2000. No wi-fi. No cloud. No smart phones. Nearly everyone was still accessing the web via dial-up services.
But Proxibid founders Joe Petsick, Ken Maxwell, Andy Liakos and Andrew Letter (who has since left the company) saw an opportunity in a huge industry that nobody was paying attention to: Auction houses.
“The live auction industry at the time was well over a trillion dollar industry. But not many people interfaced with it all the time so they weren’t aware of it,” said Petsick.
Auctions in the 1990s were basically functioning as they had for thousands of years, and the geographical limitations of traditional auctions made scaling impossible. The market was highly fragmented with few dominant players.
“We thought adding this tool could really disrupt the space and at the same time open it up in a way it had never been exposed,” Petsick.
“You can’t build this”
The Proxibid team was pioneering truly real-time online streaming between the U.S. and Europe in an era with major latency issues that don’t exist today.
“A lot of the people we were interfacing with at the time said, ‘You can’t build this. Maybe in a few years you could build this. But now? Don’t bother. The technology doesn’t even exist,’” said Maxwell.
Anything streamed online had large amounts of buffering built into it—a non-starter for a live auction. Proxibid was attempting to do real real-time streaming that would work on a 56K modem.
“If we were to have even a multi-second delay, it could impact our ability to function correctly,” said Petsick.
What’s more, the European auctions themselves occurred in buildings that were many centuries old and not wired at all for technology.
The Proxibid team had to be on site with a jury-rigged solution.
“Sometimes the best connection we had into the building was bare copper wires,” said Maxwell. “We were literally creating a termination point with bare wires going, ‘I hope the computer isn’t going to blow up when I connect the cable.'”
They did whatever it took, which sometimes meant burying hundreds of feet of cable in the ground without insulation or essentially building the World Wide Web on the fly.
“We were stringing wires across streets to make the internet happen in buildings where it didn’t even exist,” said Maxwell.
The fact that they were even able to pull it off seems miraculous in retrospect.
“We were plugging into a computer to launch a piece of software that have never really been used. We had no idea if anyone was going to be on the other line. It was the first auction for most of us. And the auctions were being conducted in a language we didn’t speak,” said Petsick. “Outside of that, it was pretty easy.”
In its earliest iterations, the Proxibid team set up a mobile phone in front of a $5 microphone.
“We set a cardboard box over it to keep the noise away,” said Petsick. “That’s how we streamed the audio to the internet.”
Another version included eight walkie-talkies placed strategically throughout the auction hall.
“During the auction if we had a break [in audio] we had to run out, quickly switch the [AA] batteries, check and make sure the channels were set, and rush back to the computer so we didn’t miss any lots,” said Liakos.
And all of this was done on a Windows 2000 PC.
“The stability of Windows was so bad that we were rebooting the machine just to complete a sale,” said Maxwell.
To solve the problem, one person on the team would be running the auction, while another person was getting a backup computer ready.
“As soon as it crashed, I would lift the computer up and Ken would slide the other one over,” said Petsick. “He would get that one ready again while I took over the auction. Most people had no idea that there was just a few second delay.”
One time a Proxibid employee placed a bid as a joke, thinking that the person on the other end would see who it was and just delete it. What they didn’t know was that the on-site team had handed the controls over to one of the auction employees.
“He ends up accepting the bid, we end up accidentally buying a $30,000 bucket truck,” said Maxwell. “We owned a $30,000 bucket truck within our first couple sales.”
Making ends meet
The four founders had incorporated Proxibid in July 2001, just as the Dot-com bubble was bursting.
“A very difficult time to raise any kind of money,” said Liakos. “There were many times that Proxibid didn’t happen.”
Not only were they trying to build a tech company in the middle of a tech crash, there was no organized venture capital in Omaha at the time.
“There was no one to turn to for the help you need,” said Petwick.
Even so, the founders made a commitment to their employees early on.
“When we started hiring people we made a collective decision that there would never be a time that a hire misses a paycheck. But that frequently meant that we would miss them—a lot,” said Petsick.
In 2003 they hired Bruce Hoberman as CEO to give direction to the company going forward.
“When we brought Bruce on, we all took pay cuts to keep things going,” said Maxwell.
Bringing on Hoberman allowed Petsick, Maxwell and Liakos to continue to focus on their individual strengths in growing the business.
“We all realized this was not the Dot-coms of 2000-2001 where you launched and in 12 months you sell your company and walk away millionaires,” said Liakos. “We realized within the first year that this is going to take time. A lot of potential, but a ton of work.”
A different kind of disruption
Today around $4 billion dollars worth of merchandise flows through the Proxibid platform annually. To put that in perspective, Sotheby’s did $6 billion in 2014. Christie’s did $7 billion.
Although Proxibid does not publish its revenue numbers, the company has had continued double-digit revenue growth for the last several years. In 2015 the company received its first institutional investment from Primus Capital. They also announced a partnership with eBay.
The company now supports 198 full time employees and is led by CEO Ryan Downs, previously from eBay and PayPal.
Perhaps the greatest global impact of Proxibid has been the way their company has saved small auction houses that would have folded years ago. Many auctions over the years have told Proxibid that they saved their company.
“Most disruptions usually occur with someone trying to replace the main players,” said Petsick. “We did it differently. Our disruption was to really help prop up the existing players but change the way the world interacted with those people.”
The future of Proxibid
As the company moves ahead, they are focusing on how to bring their expertise with high-value items to new ways of thinking about e-commerce.
“We are becoming an engine to power transactions in spaces that were traditionally offline,” said Petsick.
Million dollar transactions require constant innovation in things like security and buyer validation.
“The average item on eBay goes for $40,” said Petsick. “Across our categories it could be several thousand dollars. That’s a different transaction requiring a different set of tools.”
The founders look back on 15 years of hard work with some astonishment.
“When I look back, I think, ‘I can’t even believed I did that,” said Liakos. “‘That was crazy.’”
Ryan Pendell is the Managing Editor of Silicon Prairie News.