The Web has drastically lowered the barriers to starting a business. But that benefit has a flip side: established Web businesses are more vulnerable to competitors who can suddenly come up from behind.
That’s the story that may play out this year in the electronics recycling market. Last year we ran a couple of stories about Waltham, MA-based Second Rotation, whose website, Gazelle, set out to disrupt eBay’s business by buying up people’s unwanted electronics at a carefully calculated market price, then reselling them at a higher price. Now a couple of Yale undergrads in New Haven, CT, have launched another cash-for-gadgets site that sets out to disrupt Gazelle’s business, by making the buying process simpler and beefing up the eco-friendly spin.
The startup, YouRenew, launched in March. Its website is still in beta mode, and is evolving fast, but it does most of the same things as Gazelle: it allows users to search a database for specific items such as mobile phones, music players, digital cameras, game consoles, and DVD players, find out how much cash an item will bring ($78 in the case of my Xbox 360), and print a pre-paid shipping label.
But YouRenew’s site is designed to be simpler to use than Gazelle’s, with fewer forms to fill out and fewer pages to click through to finish the process. It also adds a stronger green element: for every gadget they sell, customers get to pick whether YouRenew will donate money to a domestic renewable energy project like a wind farm or to reforestation efforts.
“We’re trying to create a platform in which it’s easier to sell or recycle your old electronics than it is to throw them away,” says Rich Littlehale, YouRenew’s co-founder. “There are definitely players that have gotten quite of a bit of a head start on us, but I think it’s like the search engine market in 1999—there are many competitors and a winner like Google hasn’t emerged yet. So in building the website, the question we were constantly asking ourselves was, what aspects of the other sites out there are either too difficult or too hard to understand, and how can we improve on the model?”
For YouRenew, part of the answer was cutting out steps like making new users set up an account. “The other thing we’re really going for is trying to take over the green niche,” says Littlehale. “At a lot of the other sites, like Cell for Cash and Buymytronics, the emphasis is on the cash. Gazelle has the most robust and well-built platform, but the number-one thing they’re pushing is not green. The main tagline on their site is ‘Get Cash for Your Gadgets,” and ours is ‘Get Paid to Recycle.'”
That may not sound like a big contrast, but it’s upon such distinctions that brands are built. And Littlehale is counting on YouRenew’s donation policy—for every transaction, the company sends money out of its own pocket to either AmericanForests.org or CarbonFund.org—to further burnish its image.
Littlehale and his Yale roommate and fellow founder Bob Casey are taking a year off from school to get YouRenew off the ground. A native of Norwell, MA, Littlehale says he’s got entrepreneurship in his blood—his grandfather ran a furniture store on Beacon Street in Boston. His father is a longtime investment banker, but after two summers working for financial firms, including Lehman Bros., he says “I wanted to do something that was maybe a little more risky.” He also wanted to follow up on the success he’s had with the Party for a Cause Foundation, a non-profit he founded to help college students put on fundraising events. “We’ve had thousands of students at Yale and now Georgetown participate in events for charity, and that was exciting and gave me a little bit of a taste for entrepreneurship,” Littlehale says.
Of course, the key to success with a gadget-recycling site probably isn’t whether its founders have entrepreneurial spirit or green intentions, but whether it will buy the devices that people want to sell, and whether it will pay an attractive price. A quick check of YouRenew’s prices shows that they’re competitive with, if not superior to, Gazelle’s. (An 8-gigabyte iPhone 3G in good condition will bring $220 on both sites; but the Xbox 360 for which YouRenew offered $78 would only bring $37 at Gazelle.) Littlehale admits, however, that YouRenew needs to keep expanding the list of gadgets for which it’s prepared to make a purchase offer. “We are still playing a little bit of catch-up behind Gazelle in terms of finding your device,” he says. Gazelle also does a much better job of using the major search engines to steer people to its site, Littlehale says.
But YouRenew’s secret weapon may be its youth, small size, and low overhead. Littlehale and Casey aren’t taking salaries yet, which has enabled the company to launch and pay its programmers using a very small angel round. Second Rotation, by contrast, has raised $10.4 million in venture financing—money that comes with strings, like board meetings and reports to shareholders and lots of employees to pay.
“We realize we don’t have the capital base of a Gazelle,” says Littlehale. “But we think we have a good concept, and we think we are really smart guys and girls, and what we’re trying to do in the near term is really to get the site down, make it as easy as possible to use, and as green as possible…It’s not that we’re trying to wipe out the market and be the only player. It would be silly to think we could do that. But when there is a list of [gadget-resale] websites available to people, we want to be the one where people look at it as the greenest.”
