Goldstar, now the fifth biggest ticket seller in America, started during a carpool.

In 2001, Rich Webster, Jim McCarthy, and Robert Graff were working together at a start-up called Kiko. “We lived near each other and worked about 20 miles away from work, so we car-pooled,” says Graff. “That start-up was a classic dot-com bubble flame-out. We raised and spent more than 10 million dollars in VC money, ‘pivoted’ every time an investor had a ‘big’ idea, and never launched a product. I think at one point there were 80 employees and 0 customers.”

Meanwhile, Graff was helping out a friend at a different company that was also headed downhill. That company did online “papering” (i.e. giving tickets away for free to fill a venue). During one of their commutes, McCarthy and Graff started talking about the flaw in the ticketing business. “No venue wants to be told that their product is worthless, and no customer wants to go see a show that’s unsellable,” explains Graff. “So we had an idea. We’d do the same thing, but we’d target the best entertainment. The most popular shows have unsold inventory too, and instead of charging the venue to give it away, we’d sell half-price tickets online and actually pay the venue. In October of 2001, we agreed to do it. The website launched in February.”

After leaving a start-up that blew millions of dollars without ever accomplishing anything (Graff: “too many angels and VCs calling the shots and no real focus on the product”), the founders worked hard to avoid funding on their new project. “We purposefully didn’t want anyone else’s money because we didn’t want their advice. We started with $1,000 and immediately paid $800 to the state,” Graff says.

“We purposefully didn’t want anyone else’s money because we didn’t want their advice.”

graffHe did the product development, programming and sys admin. McCarthy did the marketing and customer service. Webster did the venue outreach. The workload split worked well. Graff (right) says, “Luckily, the three of us have very different skill sets and, combined, we had almost all the skills we needed — except design. For that we called upon a friend to do us a favor, and when the business started to look real, we gave him equity.”

For almost the first year, the company was just the three founders. “We worked from our homes and got together a few times a week,” says Graff. “We then got a tiny office with three desks so we could work together. Now with 50 employees, about half our staff works in our office and the other half from home.”

A different approach to tickets
Goldstar’s approach contrasts with other ticket sellers. Conventional brokers buy high-demand tickets and sell them at a premium, sites like let people sell tickets at market prices, eBay lets them auction to the highest bidder.

Goldstar, on the other hand, goes after leftover seats – to sports, theater, concerts, comedy, and more – and sells them at half-price. Venues cover costs and use the unsold inventory as a marketing tool to reach new audience. Customers get to try new things without the risk of paying full price. Graff says, “When we get people to go out and see a show or band they wouldn’t normally have gone to, it’s a win — a win for us, for our member, and for our venue.”

According to Graff, the company sold almost $40 million in tickets last year and has about 1.5 million customers. It’s partnered with MLB, Cirque du Soleil, NBA, Broadway, the Improv clubs, Ticketmaster, Live Nation, and more than 5,000 other venues and ticket suppliers across the country. It’s grown 40-50% annually for the last several years and expects to match or beat that this year too. The company also plans on adding about a dozen markets this year and is constantly acquiring new partners.

The founders have no interest in exiting either. Graff says, “There’s really no planned ‘end’ for something like this, unless you’re explicitly planning to sell. And while we do get inquiries about that, nothing so far has seemed to make sense compared to just continuing to build the business.”

Attacking Ticketmaster
A key aspect of the company’s early strategy was taking on the industry’s reigning giant. “For the first few years, we picked a fight with Ticketmaster,” says Graff. “They claimed exclusivity and blocked their customers — our venues — from working with us. We never played the exclusivity game. Our partners can leave at any time. We work hard to keep them, rather than engaging in legal shenanigans to try to force them to stay. And now Ticketmaster is a partner of ours. In fact, I think we’re the only authorized third-party website that can sell Ticketmaster inventory.”

Forging its own path helped the company avoid the anger that’s often targeted at ticket sellers. “The ticketing industry has a bit of shady element,” says Graff. “People hate brokers. People hate Ticketmaster. But people love us. It pays to be the white hat.”

Goldstar 101
The Goldstar workplace is a streamlined one. “Our goal as a company is to get people to go out more, so we don’t have a foosball or ping pong table,” Graff says. There’s no Xbox 360. We don’t do laundry or have a cafeteria. Everyone works hard and gets home to their lives. I’ve previously been at jobs that required 60-80 hours a week. We don’t do that. We work smarter, not longer. But we also have fun. Employees get comp tickets to shows. Plus our venues are constantly inviting us to some great events, so we go out a lot too.”

All employees get trained across the company too. Everyone sits down to do customer service work during their first week. Everyone hears how the venue relations team works. “Everyone learns ‘Goldstar 101’ to make sure we all share the same values,” explains Graff.

Graff’s advice to other starters
First, if you’re going to start a business, make it your business. Don’t take capital or lose control of the company before it’s even off the ground, because if it fails — most do — you’ll never know if, done your way, it would’ve been a success. It’s relatively easy to get money for a start-up, but usually the founder is risking a lot more: his time.

If someone wants to buy your business using mostly an earn-out, that’s not buying your business, that’s hiring you on commission.

Finally, be patient and focused. It takes time to build a business. Know what you’re trying to do, and do it. Pivot only if it becomes so stupidly obvious; otherwise, you’ll just pivot in circles.

Why is this cross-training so helpful? “A number of our teams are entirely remote. This early training helps introduce everyone to the rest of the company,” Graff says. “It also makes everyone empathetic to each other. As a new employee, you learn to appreciate the expertise of others. When a programmer is helping customer service resolve an issue, the programmer can sympathize with the customer service agent who is talking on the phone to a frustrated customer. In a lot of ‘enterprises’ you find that one team is seen as more important than the other, marketing or sales usually. We don’t want that culture. If any one group is more important than the other, it’s our customers.”

Graff says A/B testing and a focus on data is a big part of Goldstar’s success. “Lots of A/B testing makes it easy to ignore opinion,” says Graff. “People tell us our emails are too long. Testing shows they’re just the right length.”

The company also avoids putting any third party ads on its site. “People tell us we can make a little extra money by putting ads on our site. Everything on our site is an ad for what we sell. We make more money from people clicking deeper-in than we would from them clicking out. Pass on that advice.”

“You gotta get it right”
Owning the whole experience is another challenge for the company. “Our business is hard. People buy tickets from us, make plans and drive to a venue. If it goes wrong, they’re mad, and just giving them their money back doesn’t fix it. They might’ve paid a babysitter or been embarrassed on a date,” Graff explains.

The site offers tips on what to wear, where to park, and more. Above, suggestions for the Toyota Grand Prix of Long Beach.

“Our median response time to customer emails is under 10 minutes most days. Like most sites, we have member-contributed reviews and photos. But we go beyond that and have tips on what to wear and where to park, little things that make your night just a little bit better. Our editorial team writes copy and checks all the details of an event. If a show’s cancelled, we email and call the customer to make sure they don’t waste time going to the venue, and we give full refunds.

“In our business, you gotta get it right. From the very beginning, we knew we were selling a half-price ticket, but it couldn’t be a half-price experience. We want our members to have a better experience than if they paid full price.”

This Medieval Times/Goldstar video offers a look at the Goldstar office and team.

(Note: Goldstar’s Robert Graff answers reader questions in the comments section.)

Nights Out in New York Just Got Cheaper [NY Times profile of the company]

This is part of our “Bootstrapped, Profitable, & Proud” series which profiles companies that have over one million dollars in revenues, didn’t take VC, and are profitable.