A Dotcom-era dorm room startup finally gets its exit
This article first appeared in Term Sheet, Fortune’s newsletter on deals and dealmakers. Sign up here.
The business world’s obsession with tales of tech startups and entrepreneurship is typically focused on very specific kind of success story: The kind where startup founders raise giant piles of venture capital to fuel hypergrowth, and then ride said hypergrowth to an IPO or sale. But there are plenty of other paths to success. Not all of them involve venture capital, and some end up earning more money for their founders in the end.
Blaine Vess is one example. He founded Student Brands in 1999 out of his dorm room at North Central College in Illinois as a way to allow students to help each other study. At the height of the dotcom boom, he asked a family friend to invest in the company so he could hire a developer. The friend instead gave Vess an important piece of advice: Learn to program and build out the site yourself. Soon his site, Oppapers.com, was earning around $400 a month on ads, which felt like a small fortune for a college student in the 90’s.
Vess kept the site going through the dotcom crash and college because it had few expenses. (Students would email in Word documents of study guides and Vess and his co-founder would manually upload them; they eventually built tools to automate that.) In 2005, the company switched to a paid subscription model and earned $60,000 in its first year. By 2007, Student Brands was making more than $1 million in subscriptions, operating out of a house in L.A. (After college, Vess moved there to take a marketing consulting job with New Line Cinema.)
By 2011, Vess’s college side hustle was successful enough that he decided to finally “professionalize” it by renting an office, hiring a 25-person team, and putting processes into place. Along the way, Student Brands snapped up a number of educational tech services, including fellow Web 1.0 products Monografias.com and Bartelby.com. The company now operates more than 20 sites.
But Vess missed the early days of building things from scratch, so in 2015, he hired Thomas Swalla, a formerly COO of Savings.com, to be the company’s president and he became chairman. Last year the company made $20 million in revenue. When Barnes & Noble Education approached the company this year with a desire to expand its digital presence, Vess took the opportunity. On Thursday, the company acquired Student Brands for $58.5 million in cash. Vess says he believes the company “has landed with an absolute perfect partner going forward.”
With no outside investors, Vess owned more than 80% of the company, earning at least $47 million on the sale. (Swalla and his co-founders, Chris Nelson and Todd Clemens, owned minority stakes.) He achieved a better personal payday than the founders of some venture-backed buyouts with price tags that were twice as high. He also avoided the pressure to achieve Silicon Valley-style hypergrowth, which is designed to produce all-or-nothing results. Under that model, startups find out very quickly if they are a wildfire or a bright flame that burns out quickly. Vess opted for a 17-year slow burn.
Now, he’s getting a taste of Silicon Valley-style priorities as part of the country’s most famous accelerator program, Y Combinator, with his new travel tech startup, Solve. The company provides airport services like expedited immigration and customs, transportation, and baggage assistance to international travelers in 500 airports. Costing $100 for two people in cities like Bangkok and $225 at London Heathrow, Solve’s service has appealed to business travelers and older travelers using travel agents, Vess says.
Y Combinator has given him a new perspective on how to grow a company. He plans to raise some outside capital from “strategic angels,” or people that can offer specific industry expertise. Solve, which was self-funded until it joined YC, has been earning revenue since it launched in February. Vess is not quite ready to adopt the Valley’s mentality of growth above all else.
“I think I’m probably more cautious about raising money than some other people because we don’t necessarily need it, and it’s just not the metric I’m looking at, as in ‘We raised $X million, okay, we’re successful now,’” he says. “It’s really just the beginning.” After 17 years, Vess says he has developed a healthy understanding of the ups and downs of running a business. “It definitely keeps me grounded.”