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Frugality Is This Startup's Ticket

Jeff Fluhr bristles at being called a dot-com CEO, even though he technically is one. Fluhr looks the part, too. Just 30 years old, he's wearing an untucked orange shirt with navy sleeves, baggy cargo pants, and a patchy beard. Sitting in his just-expanded San Francisco offices, it's hard for the well-caffeinated CEO of to sit still.

Like the stereotypical dot-com CEO of the 1990s, he attended Stanford Business School. That's where he thought of, a company that specializes in reselling hard-to-find tickets for everything from concerts to sporting events.

But there's something different about It was funded with less than $5 million and is still in business. In fact, it's growing about 300% per year. Fluhr recently talked with BusinessWeek Online Reporter Sarah Lacy about how his background in finance prepared him for the rough-and-tumble ticket business, how his company survived tech's implosion, and what it's like to compete with eBay (EBAY). The following are edited excerpts of that conversation.

Q: You had never worked in the ticket or event industry before, so what was your background before founding StubHub?

A: My first job out of school was at the Blackstone Group, which is a leveraged buyout shop in New York, doing financial analysis work. It was a great experience, and I learned a lot about business and how to evaluate companies within a competitive landscape. But I wanted to get involved with high-growth businesses. So I came out to the West Coast and was offered a job to help build the private equity practice at Thomas Weisel Partners. I worked there for about a year and then went to Stanford Business School.

Q: Did you have a plan when you left to go to business school?

A: Yes, it was to do my own thing. I wanted to spend the time at business school to figure out what company I was going to start. It's hard to do that when you have a full-time job.

I was aware of the secondary ticket market, although I'd never worked in it. I'd bought and sold as a consumer in the secondary market, and I knew the challenges (see BW Online, 2/3/05, "Ticket Resellers Aim to Be Top Draws"). As I started to think and do some research, I realized there was a huge business opportunity. It's a $10 billion-plus market, and it's not only decentralized and highly fragmented but also had a lot of hair on it. There were a lot of consumer-perception issues [about] getting scammed. I thought, "Wow, that's sort of interesting."

Q: Some people might be deterred by that "hair."

A: My reaction was the opposite. First of all, addressing those problems presented an opportunity. You can generally charge money to fix things. And it would keep other competitors out. If it were just a simple, easy thing to do, a lot of competition would be flooding into the market. I don't think GE (GE) is going to get into this business. In addition to everything else, it was an area where the Internet hadn't really had a big impact yet.

Q: What did you do that helped you survive the crash?

A: We didn't actually start and hire and raise money until after the crash. It was June or July of 2000. We had knowledge of the crash when starting the company, and knew we weren't going to be able to go out and access $50 million to blow on a Super Bowl ad. For the first two or three years, we were extremely cost-conscious. We negotiated every deal to the last dollar. We cobbled together small amounts of cash early on, and it was all about hoarding that cash. The bubble bursting actually helped us succeed. We had knowledge and wisdom of what had happened, and we weren't going to screw up the way others did.

Q: How much pressure did you feel to turn a profit?

A: Very much. We were very cost conscious. We had a head count of 25 people even a year ago, and now we have 100 people. We were very focused on keeping costs down and maximizing the revenue until we could show a profit and show that the economics of the business model worked. That it was not just a neat idea, but a real business. Because we started after the crash, we knew damn well the concept of just growing eyeballs wasn't going to make us rich in some IPO.

Q: Your biggest competitor is eBay (EBAY). What's it like going up against an 800-pound gorilla?

A: They are a big competitor and a smart competitor and a formidable competitor. I wouldn't underestimate them.

The good news from my perspective is we aren't banking on eBay staying asleep or being stupid or slow. They're not any of those things. But they are not going to go customize their business model for ticketing. Tickets are a very different product category. They are worth a lot -- and then completely worthless the day after the event. We have guaranteed fulfillment, integration with FedEx (FDX), and things they don't have. They need to focus on really moving the needle -- that's not going to happen if they build a unique business model for every niche.

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