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This article by Melinda Sherwood was published in U.S. 1 Newspaper on August 11, 1999. All rights reserved.

eBay for Business

It’s rare that a company snatches up 30 Fortune 1000

clients in its first 40 days of operation, but TradeOut.com, a new

online clearinghouse for businesses with excess inventory or assets,

has done just that.

"TradeOut is eBay for businesses," says Craig Fields, vice

president of eastern sales in TradeOut’s regional office at 223 Prospect

Plains Road in Cranbury. "Just about any corporation you can think

of has idle assets," he says. "We create an efficiency to

an inefficient model. They can focus on their core businesses and

we are a marketing arm or tool for a company’s excess."

Since going live on June 1, TradeOut.com (http://www.tradeout.com)

brought buyers and sellers together in transactions totaling nearly

$6 million, five percent of which goes in the pockets at TradeOut.com.

In a projected $300 billion market, nearly $300 million in assets

is already posted on the site, awaiting the highest bidder: everything

from unused printers to fiber optic cable, designer jewelry to hairstyling

scissors. Fields expects to dig up more goodies along the Route 1 corridor.

With electronic bazaars like eBay hitting a peak in popularity, TradeOut.com

arrives on the scene just in time. But CEO Brin McCagg says that his

company is more than just Internet hype. "We run this business

like a regular business except at hyperspeed," says McCagg, who

works out of the corporate headquarters in Ardsley, New York. "A

lot of web companies are younger kids who sort of race to the market,

rush to get their web site up, and then try to fix their problems

down the road. We built the full infrastructure and defined the business

model before we turned on the website. It was stealth."

McCagg, who holds an MBA from the Wharton School of Business and a

bachelors from the University of Vermont (Class of 1986), is pragmatic

in business. "This is not a toy company," he says. "We’ve

done it all before, we’re not guessing at what we’re doing." After

a stint as a Wall Street analyst, McCagg became an entrepreneur, opening

a factory in the Bronx for recycling electrical equipment with environmentally

pesky PCBs and CFCs. When McCagg left his business, Full Circle/Environmental

Technologies, in 1997, it was a $60 million publicly-traded company

with four factories and 150 employees.

When the entrepreneurial itch came again, McCagg resolved that his

next business should be Internet-driven. It was 1997, and McCagg didn’t

even use E-Mail and had almost no knowledge of the technology. "I

looked at over 40 deals. It was an arduous task."

Then someone handed McCagg the prospectus for eBay as he was on his

way to the National Electronic Manufacturers conference in Chicago.

Once there, he began quizzing representatives of major companies,

searching again for the business opportunity in other people’s problems.

"They said their biggest problem was excess inventory," says

McCagg, "and in my mind a lightbulb went off: why don’t we create

a business to business E-Bay?"

McCagg recruited fellow alumni from Wharton: Thomas Boyle, now vice

president of operations and strategy, and Peter Morin, vice president

of sales and customers service. The website developer, Peter Schilling,

is a former president and general manager of Cendant Internet Engineering

and has to his credit sites like NetMarket, RentNet, Match.com and

Century 21. He works out of the Cambridge office. With an initial

$1 million from 15 friends, and an additional $20 million from Caterton

Simon in New York, TradeOut.com was able to open offices in Ardsley,

South Texas, Los Angeles, and South America as well.

In the past 60 days, TradeOut.com has grown from a 10-person start-up

to a company with 85 employees and an international sales division.

The marketing department is pushing the pre-IPO company in 70 different

trade publications, and through a mass mailing blitz. There are plans

to go public in October or later, says Fields.

The sales team is busy doing their part too. When a consignment item

goes up on the site, they go to work calling companies that are likely

be interested in the deal. "If you look at the trend in E-Commerce,"

says Fields, "folks are realizing that the traditional method

of doing business is very important. To just build a site, and hope

people show upon it, is very difficult."

TradeOut.com does the matchmaking, but sellers and buyers finalize

the terms. Sellers post unused assets for a mere $10, and sit back

as the bidding begins. Once the highest bid comes through, TradeOut.com

washes its hands of the deal — taking a five percent chunk of

the highest bid — and industry professionals deal with details

like inspection of goods.

It is not the first e-bazaar to bring commercial buyers and sellers

together, but TradeOut.com is the only business taking a horizontal

approach to exchange. "In retrospect it looks glorious," says

McCagg. "It was an industry I thought I could get into where there

wasn’t competition. It’s relatively easy compared to running my last

company. It gets me nervous when I say it, but I don’t know any competitors

right now."

— Melinda Sherwood