SUSAN ADAMS, FORBES (APR 20, 2017)
In 2008, Toronto native Ben Zifkin was searching online for a scarf to give his wife as a present. Frustrated that the product descriptions differed on every site, he got the idea for Hubba, a business-to-business platform that connects brands with retailers. Launched in 2011 and operational as of 2012, Hubba, which has recruited 50,000 brands and retailers, is especially attractive to niche brands.
Thus far, Hubba has targeted eight categories, including sports and outdoor gear, baby and children’s toys, pets, and personal care and beauty. But it’s also signed on massive consumer product companies like Unilever and Procter & Gamble. On the retail side, Walmart and Target use Hubba as do hundreds of specialty retailers. Zifkin, 40, has raised more than $50 million in venture capital, and though his 2016 revenue was less than $5 million, he’s modeling Hubba on LinkedIn: Offer the platform for free until users become dependent, and then charge for enhanced features. In this interview, which has been edited and condensed, Zifkin explains why he thinks he’ll hit $100 million in revenue by 2020.
Adams: Where did you get the idea for Hubba?
Zifkin: I was trying to buy an Alexander McQueen scarf for my wife but all the data I could find online was inconsistent–different colors, different sizes. This was in 2008 and I knew this was going to be a big deal in the future. I thought, commerce is a simple formula. There’s a product, a transaction and there’s fulfillment in any purchase. There were multibillion dollar companies like PayPal and banks that owned the transaction part and Amazon was in the fulfillment world but nobody owned the product information.
Adams: Don’t brands like Alexander McQueen own and supply product information?
Zifkin: They do but there’s no single place to go and get it. Alexander McQueen tells you one thing but there are also 20 different retailers that say 20 different things about the scarf. We wanted to be the single source of truth. If you’re Walmart, you could have 5,158 suppliers but there’s not one place to get their product info and make sure it’s correct and consistent.
Adams: How does Hubba work?
Zifkin: The brands are our customers and our job is to help them move their business forward. On Hubba they can connect with retailers that can carry their products, with influencers who can get their name out there and connect with other brands to learn things from them and maybe even market and do things together
Adams: Can you give me a specific example of one of your customers?
Zifkin: The Bear & the Rat. They make peanut butter bacon frozen yogurt for dogs. We say go put all your info on Hubba. We’ll help matchmake you with 20 retailers.
Adams: Are you promising just to help brands keep their product stories straight? Or do you help them find new retail clients?
Zifkin: We help brands find new clients. Our technology tells retailers which brands they should care about most. We make recommendations based on the buyer’s behavior, what similar buyers like and what influencers are saying. Buyers can also hunt for brands using an advanced search.
Adams: How does Hubba make money?
Zifkin: Step one is a freemium model, a data platform with two empty buckets. One is for products and the other for retailers. Step two is we have several revenue models. There are advanced features that cost $150 a month per brand. You can get analytics about the people viewing your products, additional ways to tell your story, enhanced brand pages. We’re about to start to turn on some of these features. We’re also a network where brands can log in and see what other brands are doing on our newsfeed where we also have sponsored content.
Adams: Had you mapped out your revenue plans before you launched?
Zifkin: We took a different approach. We knew there was a monopoly opportunity. There’s only one LinkedIn.
Adams: Why would you charge a small brand like The Bear & The Rat the same $150 you’d charge a huge corporate brand, and why would a small company want to pay that fee?
Zifkin: Our core demographic is craft brands. There’s a massive revolution in the brand and retail world with unique craft brands like organic cotton baby toy company Maud n Lil out of Australia and Coeur, a niche triathlon apparel company. If you’re a sporting retailer, what’s going to differentiate you is not whether you carry Nike and Reebok, it’s these cool, up-and-coming brands that you don’t know about yet.
Adams: You’re making a big bet that brick and mortar is going to survive.
Zifkin: Brands used to care about getting into Walmart and wish that Walmart would give them a 10,000-unit order. But now, instead, they want 1,000-unit orders from 10 unique retailers. There are also pure play ecommerce sites like Evo for sportswear.
Adams: But doesn’t everyone just want to buy everything on Amazon and not have to bother going to a bunch of different sites or, for that matter, to stores?
Zifkin: Most craft brands don’t want to be on Amazon. The ability to be discovered is cost-prohibitive because they don’t want to pay to come up higher in search rankings. What’s great is a curated store on Main Street in Portland, OR. But without Hubba, I couldn’t get there.
Adams: How do you get brands to join Hubba?
Zifkin: They used to have to pound the pavement, send samples to get into stores. Put yourself on Hubba and thousands of retailers will come to you. That’s like wizardry to them. We’re also a network with viral effects. We seed a company and they invite their friends.
Adams: How does that work?
Zifkin: A dog food company might know a dog toy company and retailers might invite their brands.
Adams: What were your startup costs and how did you raise the money?
Zifkin: I put $1 million of my own money into the company in 2012 and our first seed round was in early 2014, for $3.1 million, and then with significant inbound interest we had an $11 million series A in the fall of 2015 and in our series B, we closed an investment from Goldman Sachs Investment Partners for an undisclosed amount [reported to be $45 million.]
Adams: What are your revenue projections?
Zifkin: We’ve always believed we could do be IPO-able. In 2017 we’ll add more value and lock in dependency on the platform. By 2020 we think we can get to $100 million in revenue.
Adams: Where does the name Hubba come from?
Zifkin: We’re a hub of information and it’s an easy name to remember.
Adams: I don’t see how Hubba solves your Alexander McQueen scarf problem, unless you persuade every Alexander McQueen retailer to join Hubba.
Zifkin: That will happen soon enough.