XMediaLab Session13: Sam Morgan from TradeMe
From the program: Sam is Wellington born and bred. After attending school in Wellington and a brief but unsuccessful stint at university, he started his career as an IT consultant for Deloitte Consulting. In 1999, Sam founded Trade Me – New Zealand’s largest and most successful Internet business. Trade Me now accounts for over half of all of the locally served traffic on the NZ Internet. Sam sold Trade Me to Australian media giant Fairfax for $750m in 2006. Sam is now the non-executive Chairman of Trade Me, an investor in tech start-ups, such as Sonar6, and is a director of NZX listed company Xero. Sam also has a portfolio of social investments, from funding the development of affordable medical devices for developing countries to supporting successful microfinance projects in the Pacific Islands.
When they started, they didn’t really have a specific number of listings or members that said they had ‘made it’. He showed a funny caricature of him getting a check for $700 million.
Design principles:
Principle 1: your customers are nothing like you. Hands up if you use Firefox or a Mac (most people put hands up) — no one else does.
Principle 2: Design for speed. One of the reasons why they’ve been successful, and, he believes, one of the reasons Google has been so successful as well.
Principle 3: Convention beats invention. You’re not allowed to innovate certain things, but you are allowed to innovate in others. Let’s talk about innovation regarding the automotive industry — shows car from 1929, you don’t really even know how to start the car because the conventions hadn’t been established. (Did he read my article about automotive design??? He’s practically quoting it.)
Web conventions:
- Logo: top and clickable
- Links: blue and underlined
- Go button on search
- Tabs represent containers of pages
Measuring what matters: they measure bids per minute, etc. Business is a conversion funnel: you put lots of people in the top and a few people coming out the bottom. You can think you put lots more people in the top, you get more people in the bottom, but that’s really inefficient. Shows the TradeMe seller process. The difficulty of each of those steps is what dictates how much comes out the other end of the funnel, and making those steps easier will have a massive difference on how much comes out the bottom.
They run a dating website — funny! He said it’s not really a good business because after three months, you’re either successful (in which case you leave) or you’re unsuccessful (in which case you leave).
Top 10 lies of entrepreneurs:
- Gartner says our market will be worth more than $50bn by 2011
- Our projections are conservative
- We only need 2% market share in the US (and China is all upside)
- We only need $500K to get to break-even
- No one else is doing what we’re doing (he says there are two reasons for this: one is that you haven’t looked hard enough or can’t read Portuguese, and the other is that people have done it and failed)
- Google is not in our space (Google is in your space)
- Vodafone is really interested in what we’re doing
- We have 2 customers in NZ, but the UK market will be huge (UK ten times size of NZ, so you’ll have what, 20 customers?)
- Our Deloitte valuation is 26m
- Flickr sold for $45m (when you normalize that to NZ it’s $400k)
What matters? Deep understanding, realistic growth plan, momentum, strong financial management, realistic fundraising strategy. Smarter capital is more expensive (shows a chart with cost of capital vs. smartness of investors — at bottom are parents –> uncle –> staff –> some guy with a vineyard –> professional investors.
Raise smaller amounts at lower valuations to avoid later pain. Talk to your folks first 
