

Octopart, The Little Startup That Hung In There - jagira
http://techcrunch.com/2011/05/18/octopart-the-little-startup-that-hung-in-there/

======
jmtame
Octopart was the first company that came to mind when I thought about writing
_Startups Open Sourced_. Having not heard about them for a while, I wanted to
know what they were up to and writing a book about it was a good excuse to
talk to the founders firsthand.

Here's an interesting part about their decision to drop out of the PhD program
at UC Berkeley to do Octopart:

 _Q: When did you decide to drop out?_

We wrote the first line of Octopart code during my third year in grad school.
We launched a prototype as soon as we had something ready. The prototype was
awful. The logo was an octopus drawn in MS Paint and the prototype took 20 or
30 seconds to return results; we launched as soon as we had something ready,
and by launch, I mean we just emailed friends and family and told them, "Hey
we're working on this electronic parts search engine, here is a link." We
basically did that to motivate ourselves. We knew that as soon as we got it
out there and told everybody "We're working on this company," we would
actually have to have something to show for ourselves. We figured, with the
prototype, the more embarrassing the better—it was an incentive to make the
product better.

Around that time, Y Combinator was organizing a funding cycle so we decided to
apply. Sam came out to Berkeley and we filled out the application. We didn't
think Octopart was very good so we weren't planning on getting Y Combinator
support. We didn't even think we would get invited for an interview. But we
got invited and we went out to Boston. We met Paul, Jessica, Trevor and Robert
and, that night, Paul offered to fund us.

Sam made the decision to drop out of grad school before we even applied to Y
Combinator. His last day at CU Boulder was actually the day before the Y
Combinator interview. I was closer to graduating and I really wanted to finish
my degree so I was planning on doing both Octopart and grad school.

After we got YC funding, I took off for Antarctica to deploy the calibration
device for my experiment. While I was there I worked on Octopart at night and
when I got back I kept doing both Octopart and grad school. But by the end I
was basically going into the lab and working on Octopart, almost exclusively.
It took me a while to admit that I wasn't actually doing grad school anymore.
I was just doing Octopart, except that I was working on it while sitting in my
windowless grad student office.

 _Q: Was it your involvement with YC that finally convinced you to drop out of
grad school?_

At that time, Paul and Jessica would take all of the YC founders out to
dinner. We met up with them at Jessica's favorite restaurant in Berkeley. We
had a really nice conversation and towards the end of dinner, Paul asked me
point blank if I was committed to Octopart and, I don't know, the question
caught me off guard.

I told Paul that I was fully committed and he responded, "Well, as long as
you're still in grad school, investors aren't going to invest in your
company." I had been working on Octopart for six months already and mentally I
had already gone all-in on the company. Before Paul's question I hadn't
thought about how my decision to stay in grad school would cause somebody to
think that I wasn't entirely committed.

The dinner with Paul and Jessica was on a Friday, I remember, and I said to
myself, "Okay, this weekend, I'm going to figure out what I want to do; it's
going to have to be one or the other." On Monday I went in to the lab and told
my advisor that I had to drop out.

~~~
sriramk
He worked on Octopart in Antarctica? That is pretty awesome.

~~~
andres
In grad school I worked on IceCube which is a neutrino telescope at the South
Pole. The detector is an array of photomultiplier tubes embedded in the ice
underneath the Pole. At the time I was mostly working on electronic devices
for calibration and measuring ash layers in the ice.

When we got accepted to YC I thought I was going to finish my PhD and work on
the startup at the same time (ha!) so I kept working on the experiment. I went
down to Pole for a month before YC to deploy the devices I was working on.
While I was there I also worked on Octopart around the clock. Sam was actually
in Argentina at the time so we would both log into our server in Berkeley to
ychat when the satellite link was up. Somehow the timing worked out really
well and I flew back from the Pole just in time for the first YC dinner.

------
thaumaturgy
I really like this new theme on TechCrunch today, giving some attention to
under-reported startups doing it "the old-fashioned way". I know it can't
last, because it won't get as many page views as other articles, but it's
nice.

I'm really looking forward to having an excuse to use Octopart. I've only
occasionally had to find electronics bits and pieces in the past, and it's
always been a pain in the ass. Thanks for building something people need,
guys.

------
waratuman
This is my favorite YC startup. I remember in college trying to design and
build my computer. It was just awesome to have all the parts, data sheets, and
price in one spot. Sure beets an excel sheet, keeping track of data sheets,
and going everywhere to find every last part! Glad to hear they hung in there
and are doing well!

~~~
andres
Thanks so much for the comment. It's great to hear that hardware hackers find
Octopart useful. We have a lot of ideas on how to improve Octopart and now we
can finally implement them.

------
noonespecial
I've been a hardware hacker since I could walk. Finding and actually obtaining
any parts at all in the 80's was excruciating. Even in the bad old days of the
web, datasheets and even pricelists seemed to be the locus of some very
unseemly rent-seeking activity.

I can't even begin to say how awesome octopart seemed when I first discovered
it. Even today, when I go looking for a part I find myself stopping and _not
believing how awesome this is._

~~~
nitrogen
_datasheets and even pricelists seemed to be the locus of some very unseemly
rent-seeking activity_

I once made the mistake of paying $10 to subscribe to a datasheet web site
because they seemed to have the full tech specs (i.e. register layouts) of an
IC I was reverse engineering (see <http://myhd.sourceforge.net/>). It turned
out to be the same marketing materials I had downloaded from the chip vendor's
web site.

Octopart is like the million-dollar part spec databases that electronics
manufacturers buy just to have available in their design software, but for
free.

------
mb21
seriously not trying to be a downer, but doesn't this smack of starting a
company just to start a company? they all took $0 in salary in 2008, I wonder
if they are making live-able wages now in 2011. They took on their first
employee and maybe had to again cut their salaries to afford it? YC worries me
that it convinces everyone to start a company rather than go to school, work
for another company as an employee or follow a different dream. We're being
sold someone else's dream of "starting a company is the best thing in the
world to do". The talent pool is being severely diluted just like too many
expansion teams in a sports league. The end result? Less success for everyone.
I admire their persistence, but I wonder if Octopart is in a market where they
can build a company that can hire and pay the employees or maybe even generate
a larger lump of cash. I may not get the new model yet, but I still think that
revenue generation is the goal of a company. However, it's just roughly 3
years into their lifespan, so maybe they will eventually build a nice
business. I definitely wish them luck if this is truly their dream.

Or maybe it's just the experience of building a company that is the reward. I
don't know.

~~~
pg
There's nowhere I say that "starting a company is the best thing in the world
to do." I describe it as an efficient but intrinsically painful way to solve
the money problem.

"Imagine the stress of working for the Post Office for fifty years. In a
startup you compress all this stress into three or four years. You do tend to
get a certain bulk discount if you buy the economy-size pain, but you can't
evade the fundamental conservation law."

And far from trying to draw people out of school, we actually have a bias in
the other direction. We're very reluctant to fund students unless they seem
like they already want to quit.

~~~
kerryfalk
I haven't read anywhere that you have said that, but would you agree that
starting a company was the best thing in the world for _you_ to do?

My network of company founders is much smaller than yours but I think if I
were to ask them if starting their company was one of the best things they
ever did, and I know it to be true for myself, they most certainly wouldn't
say no.

I'm guessing that's also probably true of the majority, if not all, of the
Y-Combinator backed founders. Whether their company is still alive or not.

To answer the parent, starting and running a company through the fight in the
trenches _is_ massively rewarding but also massively frustrating in many ways.
I know I _can't_ give it up and do anything else and am sure I'm not alone. I
don't think anyone would try to sell you on the dream of diving into the
fight. It's something you have to want, it can't be sold.

Regarding the talent pool: HN is just the squeaky wheel and doesn't represent
the entire market so I would doubt that hackers starting companies is
negatively affecting the available resources.

~~~
pg
You mean as more than a way of making money? It depends on the type of person
you are, and what your ambitions are. If you're (a) the right sort of person
to start your own company, and (b) your ambitions in life would be best
realized in the form of a company, then yes. So e.g. Steve Jobs clearly has
(a) and as far as I can tell has (b), so for him starting a company was in
itself a good thing to do.

~~~
kerryfalk
Yes, I did mean as more than a way of making money. You've stated that you did
in fact start Viaweb to get rich. I know a few other founders that also
started companies as an attempt to get rich (I am among them) and continue to
chase more. But if I were to ask those same people, whether their companies
earned them wealth or not if starting their company was one of the best things
they ever did I doubt that the money (or lack thereof) would be much of a
factor. Realizing other ambitions (b) is a much, much greater factor.

I'm curious now though. The YC application tries to screen for (a) but doesn't
test for (b). Or at least, I didn't recognize that to be the case. Why is
that? Is it not just as important? I would think so as I think it's realizing
those ambitions that seem to keep people going and provide them with the
relentless focus on winning. Or am I wrong and you've designed the application
to screen for that as well?

 _Why_ a founder will continue to push seems as important as the _ability_ to
continue to push.

~~~
pg
Because (a) is enough. We're cool funding people who are doing it for the
money; the startup doesn't have to be their life's work.

~~~
kerryfalk
That's very interesting, maybe my perspective isn't quite accurate then as
your strategy has clearly already been successful. My thought is that to build
a large and successful company you _need_ to develop an interest that goes
well beyond the desire for money - but I haven't built a large company yet so
perhaps I'm naive. Thanks for the reply, pg.

------
staunch
There are only like 4 companies that sell these products. Why would those
companies bother giving Octopart a referral fee?

It's not like Octopart is going to remove their listing if they don't pay up,
that would hurt them more than the companies.

What am I missing?

~~~
sam
We're listing about 65 distributors right now. Early on we did remove listings
from distributors who didn't want to pay. Usually they would call back the
next day to make a deal. Sometimes it took longer. From what they tell me now,
we're providing a good return on investment.

~~~
staunch
Ah cool. Good to hear. Hoping you guys continue to do well.

------
juiceandjuice
Hah, I remember using all the way back to 2007 looking for special types of
terminals from Keystone Electronics that were ridiculously hard to find
because they were for some ancient 3/16" thick phenolic. Newark ended up
having them, but Digikey and Mouser didn't. (I'm also a physics grad)

------
nl
I'm kinda surprised this got YC funding.

I meant it's a good idea, but ultimately it's an affiliate marketing play
right?

The main barrier to entry is getting good SEO (and I guess becoming known as a
direct source) - there doesn't seem to be huge technical barriers.

Affiliate plays can be highly profitable, but I never thought that they were
all that attractive to investors.

~~~
nitrogen
Their search system is unequaled in any of the electronics parts sites I've
used (Mouser, Digikey). That probably qualifies as a technical barrier.

~~~
nl
I'm not an electronics expert, but I know a fair bit about search
implementations.

I'd be guessing the partname->vendor price matching thing is non-trivial
(because I bet the vendors all use different names and product codes). But
it's not _that_ hard.

The search itself is something that could be replicated fairly easily by
someone who knew what they are doing.

~~~
sudonim
The tech doesn't seem that complex, but successful businesses aren't about
ideas, or technology. They are about applying technology to ideas and getting
people to use it. The hard part to replicate of what octopart did is the
'putting all the pieces together' part.

~~~
nl
Well yeah.

But "we put the pieces together" isn't a defensible advantage. Once one
company has done it others can easily copy it (with less skill) unless they
have something that makes it hard to copy.

Here's some common defensible advantages:

1) Technical. Google developed a technically better search algorithm than
their competition and stayed better long enough to become dominant in the
market. (That market share in turn allowed them to build a massively
profitable business).

As discussed, I don't think Octopart have a technical advantage.

2) Network effects. Facebook had better network effects (and more reliable
technology) than their competition.

Octopart doesn't seem to use network effects anywhere.

3) Business relationships. Microsoft leveraged its existing business
relationships with computer manufactures in operating systems to build market
share in web browsers by stopping them installing Netscape

Octopart doesn't have enough market power to do this.

4) Capital. Netflix offered movie studios enough money to make streaming
attractive, which other companies had never been able to deliver.

Octopart doesn't have a capital advantage

There are other defensible advantages, too, but I'd be interested in knowing
which applied here. What's to stop me hiring a bunch of cheap coders, copying
Octopart and then beginning a race-to-the-bottom in terms of profits?

PG has replied to my initial comment and said that they have broader long-term
plans. I think that's good, because I stand by my initial comment: I'm
surprised this was attractive to investors.

------
OmarIsmail
It's amazing that a growing company from 2007 is considered "vintage". Just
goes to show you that the timescales when it comes to web startups is highly
compressed.

------
braindead_in
I remember spending hours and hours on DigiKey and Mouser looking for the
right components for the prototype we were building. It's a huge pain.
Especially the low value resistors and capacitors. We later found out that we
should have fist checked if the parts were available before we did the design
(the design itself was from reference design provided by manufacturer's,
outdated). I wished Google would get into Electronics Part searching. But then
it's too niche an area for Google.

------
colindowlingq
Congratulations to the team. It is always worth celebrating when perseverance
triumphs.

I was somewhat critical of Octopart when TechCrunch first wrote about the
company years ago. My opinion was that there were already a number of similar
sites that boasted the same features but (at the time) had MORE distributor
listings. This continues to be the case.

In my opinion, if Octopart is interested in massively increasing usage then
they should find a way to market to the enterprise side of things and not just
hobbyists. Most all of the buyers I speak to on a daily basis (and the buyers
employeed at our semiconductor distribution company) use OEMSTrade or Find
Chips dozens (if not hundreds) of times every day. Furthermore, there are
still a number of distributors that are not published by these two sites
(Samtec, for example) that are increasing their footprint in the CM community.
One place for differentiation - and a chance to "win" the sector - can come
from adding some of these lesser known yet very important distributors to the
network.

Regardless, congratulations on the hard-earned success. Best of luck in the
future.

------
nicpottier
Here's one of their pages:

<http://octopart.com/at90usbkey-atmel-682670>

Interesting that their look and feel is pretty spot-on Google Apps. Probably a
wise move, I'm sure by now customers grant a bit more trust to sites that
'feel' like Google, whether they realize it or not.

Glad to see a little startup like this making it though, good for them for
sticking to their vision.

------
hxf148
Hanging in there is key. I have found that sometimes you have to dig deep and
hold on to the good idea that with good work everything will work given enough
time. Something I have reflected on after three months at
<http://infostripe.com>

------
pbsurf
I've tried Octopart but always go back to <http://www.findchips.com>

In any case, congrats to the Octopart guys.

~~~
sam
I'd love to get feedback as to why you prefer findchips. You can email me at
sam@octopart.com.

------
Hisoka
What's Octopart's backup strategy if Google somehow punishes their site in
their next algorithm change (ala so many other innocent sites during the Panda
Update)? I bet 80% of the traffic comes from search engines. If those 80%
leave, it's game over in terms of revenue and partnerships.

I think Octopart should somehow develop a strategy for returning visitors that
doesn't depend on search engines.

