Can You Scale a Business in Phoenix: YES
Some time ago, I wrote a column about Sourcely, which at the time was buying and selling used mobile phones. You may remember that the four founders, Nima (CEO) and Shad (President) Nojoumi, Matt Roldan (CCO), and Justin Finkelstein (CTO) are childhood friends, and have been building businesses together since their teens. By this time in their lives, they’ve formed a very cohesive team.
They all moved to Phoenix to work for GoDaddy, and after a few years of learning from that company, they left to start another company, Sourcely. They bootstrapped their startup with their life savings. They had to stay pretty heads down at the beginning, because they had a business model that required purchasing used cell phones and holding them in inventory. No one really wants to finance inventory, but only by jumping on opportunities to buy large quantities of product could they continue to grow. So last year was pretty much a needle-threading process for the young company.
But they are in an area that is bound to grow. It’s called “re-commerce,” and it means what you think it does. There are a billion iPhones in use globally, and every one of them will have a second life after you trade yours in for a new model, whether that’s repair, refurbishing, resale, or recycling. Eventually, Nima says Sourcely will commercialize every aspect of a wireless device in its secondary life cycle.
But to get to that $16B market of buyback and remarketing of mobile devices, Sourcely had to start by focusing on the $5B niche cell phone repair market.
So they pivoted — decided to shift their business model to become a leading SaaS, parts and solutions supplier for cell phone repair companies — and they became cash flow positive within months, and are now on pace to have a $10MM run rate next year. That’s called traction.
After the pivot, Sourcely was able to raise $1MM in debt from Brad Robertson and Court Coursey at Tomorrow Ventures, along with other investments from executives at GoDaddy and Cornerstone OnDemand. Note that this is largely local investment, which Nima hopes can continue to be the case as they go to the next round.
What does Sourcely provide for those cell phone repair companies? First, it helps them acquire customers, using the digital marketing and advertising skills the founders learned at GoDaddy. Sourcely has also moved into wholesale parts distribution, refurb of devices and LCDs, buyback and remarketing of used devices from both enterprises and retailers.
Where will the company go next year? Well, probably they’ll move to a much larger office, because they now have 20 employees. And they’ll enter the consumer market. In 2017, Sourcely hopes to provide ten different services to the cell phone repair market, and since the company has a 50% cross-sell rate among its 400 clients, that should be, by comparison to last year, a walk in the park.
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