A startup located in Seattle, Washington, is part of the rapidly growing online marketplace for specialty items. Bonanza.com obtained $1,000,000 of funding in 2010 from a group of angel investors plus three venture capital firms.
Although primarily funded by the angels, interest in the Bonanza deal by venture capital firms reflects their increased participation in small early-stage funding. This may be a consequence of the prominent Seattle angel investors backing Bonanza. A principal in the lead venture capital firm has taken a position on Bonanzle’s board of directors.
After a 2007 start as a listing service for local sellers, Bonanza shifted to becoming a national online marketplace in 2008. Bonanza connects buyers and sellers of such diverse items as jewelry and home furnishings. The company focuses on used and rare items. A special feature of the Bonanza website is social features that permit sending chat messages in real-time.
The Bonanza website has 3 million items for sale and almost 2 million visitors per month. The company reports profitable operations since 2009 along with a quadrupling of sales in the subsequent year. This has occurred without any outside investment until the angel funding of 2010.
A company spokesman pointed out that Bonanza was waiting for investors who could contribute to the company’s vision. The track record of the VC firms and angel investors therefore is expected to add more than just money to Bonanza’s plans. The application of investor expertise is intended to move Bonanza to a new level.
Bonanza’s agenda includes hiring more developers and a product manager. By providing users with stronger content and design, Bonanza expects to create a better online shopping experience. One important example is streamlining the communication feature between buyers and sellers. Bonanza also seeks to add buyer protection programs such as those of eBay and Amazon.
To achieve these ends, the company raised only the amount of capital required right now. Its strategy is to remain profitable with steady growth. This explains the interest of venture capitalists as likely providers of further funding down the road. Boosting the company to greater heights is reserved as a future opportunity.
As part of this unfolding process, the founders of Bonanza have of course relinquished some control over the company. But they waited to divest their decision-making and equity to investors providing valuable input of both money and opinions for success.