By any measure, 2008 was a tough year to start a business. That year, Kwame Kuadey, Founder and CEO of GiftCardRescue, was working in corporate America, earning his MBA from Johns Hopkins University’s Carey Business School, and was laid off. Kwame never met a problem he didn’t like, though, nor neglected to examine for business potential. And, he was prepared and confident, having already identified and researched a ubiquitous problem and recognized a multi-million dollar opportunity: Consumers cannot return unwanted gift cards to retailers. One hundred billion dollars in gift cards were sold in 2014; the data show that 10 percent of gift cards go unused, languishing and expiring in American wallets.
Kwame is the 2014 Ernst & Young Entrepreneur of the Year® winner in Maryland for Consumer and Technology Services, which celebrates his success with GiftCardRescue.com, the “trading floor” online space where gift cards are bought for up to 35 percent off and sold for up to 92 percent cash back.
Q. In 2008, you were laid off. Where did the confidence come from to start your company?
A. As you said, I was laid off, and the urge to start a business had been there for a long time. In 2008, I had reached a point where I was frustrated with my career in corporate America. I was working for Citigroup, and I had been itching to get out. The interesting thing is that I had started GiftCardRescue while still working for Citigroup. However, I faced the problem that a lot of people face in this situation, working for a big company. The money is good, and it’s very hard to just peel yourself away. And, at the time, we were also expecting our first child. There were financial obligations that made it very difficult for me to leave and start – and focus – on a company full time. When I was laid off, I looked at that as an opportunity, as a sign to exit. When you start a company, at some point you need to put all your resources into it. I realized that “now is the time for it.” If I don’t do it now, there is not going to be another time where I’m forced to actually go out there and spend time to build a business.
Q. Where did the idea for GiftCardRescue.com come from?
A.The idea for GiftCardRescue actually came from a friend who had a lot of gift cards that he didn’t know what to do with. I think that’s a common problem. Mention gift cards to people, and they’ll take out their wallets and show you gift cards they have accumulated. My friend said he had “all these gift cards and wouldn’t it be nice to go somewhere and sell them.” So, that triggered something in my mind.
At the time, I was doing my MBA at the Carey Business School here at Johns Hopkins. I decided to take the idea as one of my school projects and just run with it. I had that safe environment to be able to flesh out the idea, do the market research, and understand what the space was about. Then I realized, you know what, there’s something here. Gift cards is a multi-billion dollar space. A hundred billion dollars in gift cards were sold last year.
I realized this was a big market, and there was a liquidity problem. If you don’t want or have a use for a gift card you’ve received, you can’t take it back to the retailer. That’s where the opportunity came for me. After I did the research and realized there was a big opportunity, it was a no-brainer. I knew I had to do this. The question was when and how.
Q.In 2009, you appeared on ABC’s Shark Tank, a show where entrepreneurs pitch investors. Tell me about that experience.
A.Well, I always say that Shark Tank was kind of the turning point for GiftCardRescue, because at that time, I had started with a brand new idea. People were going on Craigslist and eBay to sell gift cards. There were a few other people who had also started similar businesses, but nobody was really getting traction. The problem we all had was getting the word out.
I got a call actually from Shark Tank, and they told me, “We’ve started this new show. We think you’d be great for it, and we want you to audition.” They sent me a bunch of questions, I shot a video and answered them and sent it in, and I was invited to the show. It’s one of those things that for a small startup business, you cannot pay for. Being on national television with millions of people hearing about your new idea and being able to tap into that national audience is priceless. A 30-second commercial on ABC is probably a million dollars, and here I am for eight minutes pitching my idea to a national audience. I mean, it really, really turned the business around.
Q.What happened after you received a commitment on the show?
A.I received a commitment from Robert and Kevin. They were going to invest $200,000 for 50% of the business. I eventually ended up turning that offer down after the show aired. The reason – I think that I went on Shark Tank too early. At the time, we were going to do $100,000 in sales for that year. We were a very tiny business. To give up 50% for what I considered was an angel round was then going to lead to other problems at the end. We’ll have to raise a Series-A at some point, which will require more money – considerably more money. Therefore, if I’m taking $200,000 and offering 50%, maybe once we get to Series-B, Series-C, I may even lose control of the business at that point.
I have nothing bad to say about the show. It really helped us from a publicity perspective. I think it’s a great show for people to go on if they want to get their word out, if they want to get investments. I think timing was too early and that’s why I turned down the offer.
Q.You have been self-funded in the first couple of years, with angel investments, and now you’re looking for Series-A.?
A.Yes. The first three years were bootstrapped with my own funding, credit cards, borrowing from friends and family. Two years ago I took some angel money from a company called Interprise Partners. They’re locally based here in Columbia, Maryland. That was the first institutional money that I took. We have also gone through some bank financing, but we are an inventory based business, you know. We have to acquire the inventory, the gift cards, from people, pay for it upfront, and then resell it to somebody else. Our growth rate went from $250,000 to $2,000,000, to 4 to 6 to $10 million. If you’re growing at that rate, you’re going to need funding to be able to hold that kind of inventory. We think that the permanent solution is raising some equity, and so this year we’re getting ready to do a Series-A.
Q.Are any of your competitors venture funded?
A.Yes. Actually, there are probably three big players in the space, and I’m considered one of the players. The two other ones are funded. And, there’s a new player in this space that just raised $56 million. So, there is a lot of activity in this space. A lot of interest. Gift cards are, as I said, a huge business. And, now with digital gift cards, it’s even growing faster. We’ve seen a lot of activity and I think that bodes well for us because we can go out there, tell our story and be able to raise money.
Q.We see that one of your advisors was Clarence Wooten. Tell us how you connected with him and what role he has played in the business.
A. I got connected to Clarence Wooten out of Johns Hopkins. We’re both Johns Hopkins alumni. I think he was presenting at a startup event and I was really impressed with his take on business. He approaches business how I have seen it, how I have been through it. He’s focused on delivering a quality product using technology. Even though we are an online retail space, we’re using technology to deliver our service. That’s how we connected. I asked him to be an advisor for the company. He was pivotal in helping us move from what was pretty much a first iteration of the website to a second more robust iteration of the website. That relationship has been very helpful.
Q. What in your background has “made you an entrepreneur?”
A.The desire to create things. I enjoy the building process. I’m always looking out for ideas. When somebody’s doing something, I’m always trying to see what else that can be applied to. Even when I’m traveling or watching television, my mind is always roaming. Being able to find a niche and be able to build a company in that niche is something that is very appealing to me. Of course, it’s easier said than done. There’s a whole host of things that you have to go through, but the creative process, the building process, is pretty much what draws me to entrepreneurship.
Q. Other than raising capital, what is your biggest challenge?
A. My biggest challenge outside of raising money is people. In a startup space, you need to hire people that buy into your vision. A startup environment is very different, obviously, from a corporate environment. It’s getting people who understand this is going to be a rollercoaster ride: we’re all going to ride the highs and the lows together. It’s very unnerving for some people, because they like structure. They want to know that everything is just going to go in this particular direction, and we are telling them that we’re going to go another way.
Being able to hire the right people who would then come in and run with the vision that we’re trying to create has been the biggest challenge. We’ve been very successful at it to an extent, because I like to hire generalists. I hire people who have the qualities – entrepreneurship, drive, hunger – and then I bring them on board and let them find their niche. That has been the most successful way of bringing in the right people. I’ve realized that when I hire people for a specific role, sometimes it does not work. I may bring someone in for marketing, and then if I see they are good at sales, I’ll move them to sales. That has worked very well.