The idea of good prices on quantity purchasing is nothing new, Shakespeare undoubtedly got a better deal on quill pens when he bought a year’s supply. But a New York startup has adapted the idea to the Internet age, automating and streamlining the volume buying process to allow people with similar needs to join together and save money.
When actBIG.com opens its beta site this week it will have three components, according to president and founder Stephen Tsai. Customers can join a deal in progress, craft their own deal or discuss the merits and drawbacks of certain products and services. As a result it becomes more than just a purchase, it gains aspects of a community. This is not entirely surprising, as Tsai took the idea from online newsgroups that seek to get aggregate deals, although in a rudimentary way.
The site has a “fill or kill” approach, according to Tsai. For instance, a certain deal may offer a $200 cell phone/ service package for just $20 if customers respond at a certain time. They must then commit to the sale with a credit card number on the actBIG.com site. If the deal goes through actBIG.com forwards the credit information to the vendor who handles fulfillment.
At the end of the process, actBIG.com shares a commission — usually 5 percent — with the person who initiated the deal.
“There is an interesting dynamic that kicks in when a group purchase gains momentum,” said Tsai. “There is a sense of collective endorsement that gives the sale a life of its own. We wanted to create a marketplace that captured that dynamic and doesn’t limit people in scale and scope.” Which means, quite simply, they don’t have to run around collecting checks in order to save some money.
The company raised $1.8 million in its first VC round, from Bert Ellis, Jeff Arnold, PS Capital (associated with the Blackstone Group), and other angels. Its second round is now in progress. “We have seen a tremendous amount of interest,” Tsai said of the fundraising process. “We found ourselves in the hottest space of e-commerce.”
“Aggregated purchasing is a terrific business model that is indigenous to the Web,” said Jarrett Collins, managing director of NeoKarta Ventures in Cambridge, MA. “There is no way to aggregate business without a common platform. Another aspect we like very much is the ability to focus on items that are not necessarily the least expensive. It does a disservice to consumers to say they only care about getting items cheaply; in fact, they are interested in any number of attributes. And this model allows them to get what they want at a lower price.”
IN A NUTSHELL
Company Name: actBIG.com
Address: 222 Fifth Ave., Third Floor, New York, NY 10001
Contact email address: [email protected]
Web address: www.actbig.com
Employees: approximately 20
Total Funding: $1.8 million
Investors: Bert Ellis, Jeff Arnold, PS Capital (associated with the Blackstone Group), and other angels.
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