Tim Draper of famed Silicon Valley venture capital firm Draper Fisher Jurvetson has listened to hundreds of pitches from start-ups over the past few years, but only three put themselves forward as alternatives to the online marketplace eBay.
“I was surprised when he told me that,” says James Chong (pictured), founder and chief executive of Wigix, the fourth eBay challenger to cross DFJ’s path.
Wigix’s pitch was impressive enough for the VC firm to lead a recent $5.3m funding round for the Bay Area start-up and for Mr Draper to take a seat on the board.
“EBay has been sitting on its laurels, this area is in real need of innovation,” says Mr Chong.
He spent 11 years at Charles Schwab and the last five setting up its accounts site, before establishing Wigix a year ago.
That explains the financial bent to the marketplace that differentiates itself from eBay by treating items very like company stocks.
EBay started out by offering collectibles, unique items, which goes some way to explaining the site’s sometimes rambling search results.
Wigix argues that most items for auction are now distinct commodities, such as an 8Gb iPod Nano, and they can be found and their market prices tracked more easily by users and search engines when they have their own page and even their own stock-ticker symbol.
Wigix uses the bid/ask principles of buying and selling shares and makes it possible to show current market prices for these commodity items. It says this allows real-time trading and combats the problems on auction sites of shilling and sniping.
A My Wigix section allows users to keep lists of their own possessions, see the market value of them and even name a price at which they would be prepared to sell them.
This gives a notional boost to the liquidity of Wigix’s marketplace. In theory, items may also never leave the marketplace if someone buys something from another user and leaves it on their public list of available items.
Wigix employs around 30 people in offices in Oakland and Beijing, China, but it is encouraging users to help it by suggesting different SKUs and taking ownership of category and product pages. They can earn a cut from advertising on the page and even sell ownership of it to anyone bidding.
Extra features allow users to submit reviews and manuals and ask others about what they think of products they own.
Wigix’s organisation of its auction site makes a lot of sense, but it is likely to be under-represented in items that are hard to classify, such as collectibles and jewellery.
The real test will be whether those items trading as second-hand goods in various conditions can be turned into commodities and traded like stocks and shares.
At its public beta launch on Tuesday, the site was slow and seemed short of inventory, despite its claims of having 500,000 items available.
Nevertheless, it may benefit from dissatisfaction with eBay and its fees structure. Wigix has no listing fees, free trading below $25, a $1.50 fee for buyers above that and a 2 per cent fee for sellers up to $1,000, then 1 per cent above that.
That’s a lot easier to understand than eBay’s complicated explanation of its charges.
