Business is like sports, says Michael Rubin, a co-owner of the NBA's Philadelphia 76ers and the NHL's New Jersey Devils: Losing hurts. But with the right team and strategy, pain moves you toward a championship.
That knowledge gets you moving faster. And timely trades can move you closer.
Rubin says he was getting bored and anxious about the biggest business units in his too-sprawling e-commerce company, GSI Commerce, when eBay offered to take the publicly traded King of Prussia-based firm off his hands for $2.4 billion in 2011; eBay also let him buy back the pieces he wanted, like the pro- and college-sports gear online seller Fanatics, for $500 million.
He was eager to leave eBay with GSI's online sales, delivery and marketing software for Toys R Us, Dick's Sporting Goods, Ralph Lauren and many more. eBay wanted that business to help it compete with Amazon.com - and was uninterested in Fanatics and the other consumer lines Rubin wanted to keep. "Everything aligned," Rubin told a packed Ritz-Carlton ballroom at the Greater Philadelphia Alliance for Commerce and Technology's IMPACT conference on Tuesday.
Who won that deal? Many GSI clients grew less lucrative for eBay as they set up their own online systems and mobile delivery. Pressured by investors, eBay last week completed the sale of Rubin's old company to a consortium of private-equity firms, for just $925 million, a fraction of the 2011 price.
This deal could have more winners: Bargain-hunting private-equity investors, eBay veterans and some of Rubin's old GSI lieutenants are betting big on his cast-off players, which they are splitting into four new teams:
The eBay Enterprise retail shipments and payments business, and most of the remaining King of Prussia staff, are being combined with a Georgia-based rival, Innotrac, into a single company with 7,500 workers at 27 warehouses in North America and Europe, by private-equity investors Sterling Partners and Longview Asset Management.
This business will get a new name - still under wraps - after the Christmas shopping rush. King of Prussia-based eBay Enterprise boss Tobias Hartmann will run the combined firm, with Innotrac founder Scott Dorfman moving to the background as a board member.
eBay Enterprise Marketing Solutions, which builds back-end software for online sales, search, marketing and other services for more than 1,000 retailers including GNC (vitamins), Kate Spade (fashion) and Grainger (industrial parts), has been taken over by a group including GSI/eBay veteran Michael Jones, and London-based Permira Funds.
Jones built Pepperjam, the group's predecessor, as a pioneering affiliate-marketing software firm in the early 2000s. He continued to run the group after Rubin bought the firm, and later for eBay. A Villanova University and Law School graduate, Jones said he plans to run the firm from Wilkes-Barre (he lives in nearby Dallas). The group employs about 100 there, another 100 at GSI's old King of Prussia base (he's seeking new space nearby), and around 200 in the group's Bay Area, Arizona and other offices.
Wilkes-Barre, really? "People here never leave," Jones said. That's enabled him to build a loyal and expert software and corporate marketing staff from interns and recent grads from Wilkes University and nearby schools, including a software team headed for the last 10 years by Wes Hablett. By contrast, "In New York or San Francisco, it's really hard to keep people."
Jones and his investors are buying up other firms that fill niches. This week he plans to announce the acquisition of Digital Net Agency, which specializes in search-engine optimization and affiliate marketing, with client-friendly, pay-as-you-sell pricing.
Newly independent and with a budget to grow, "I'm over the moon," Jones told me. "My goal is to run this business and take it public," competing with the big New York and West Coast retailing-software shops, as social media shifts marketing and ad spending and the way consumers buy.
Magento Commerce Technologies, an open-source "omnichannel innovation" retail software platform developer in Campbell, Calif., run by former eBay executive Mark Lavelle and also backed by Permira, is also spinning off from eBay.
Magento counts giant firms from Nestle to Burger King among its clients, and promises to "disrupt the legacy technologies" that still dominate retail purchasing.
eBay Enterprises' former customer relationship management (CRM) software business, with offices in Boston and other cities, has been sold to New York-based Zeta Interactive.
For his part, Rubin says he's "in heaven," trying to build Fanatics, which he says expects $1.3 billion in sales in 2016 at the expense of chain stores that include his former GSI clients.
Rubin says he can deliver $20 profit to pro leagues and colleges on a $100 team jersey sale, nearly triple what they pocket from shirts sold in malls and big box stores. "We are dramatically changing and disrupting the industry," he told the crowd. "We have to pull the industry along."
He has a vision, the most important thing in business, Rubin says: "I'm trying to kill the [retailers], buy the [team] rights, and build this huge organization" to arrange everything from manufacturing to custom market research to delivery. "It's a lot of short-term pain, but it's the right way to build for the long term."
NOTE: Michael Rubin’s quote about competition has been edited to clarify that he was referring to retailers.