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Monday, March 29, 1999
 
1999 Small Business profiles

Azazz: Wall Street isn't the only road to success for a high-tech start-up

by Helen Jung
Seattle Times staff reporter

President: Jay McGoodwin
Location: Azazz, Kirkland
Number of employees: 25

The fairy-tale ending for a high-tech start-up seems to be a successful public offering with investors snapping up shares of the company.

But as Jay McGoodwin, 44, will tell you, Wall Street isn't the only road to success.

McGoodwin, president of the Kirkland-based Azazz online department store, was looking for a way to build on his company's success, debating whether to take the company public or look for another company to buy it.

It's the kind of decision many successful small-business owners face as they look for ways to grow and the cash to do it.

But a public stock offering wasn't the answer for a young company such as Azazz. Just 3 years old and not yet profitable, Azazz instead was acquired last month by theglobe.com of New York in a stock-only transaction worth about $18.5 million. Azazz continues to operate from Kirkland under the same management.

Meanwhile, the acquisition gave one of the company founders, John Naylor, the freedom to leave the company, spend time with his family and launch a new business venture.

"Anybody can make money," Naylor said. "But thinking about something and creating it and someone having enough faith to buy it - that's the reward."

The sale gave Azazz the financial backing it needed to finance its growth as well as instant exposure to the 3 million-plus members who frequent theglobe.com's Web site. Theglobe.com tries to promote an Internet community by providing information, entertainment and interactive chat.

McGoodwin, who remains president of Azazz, joined the company in 1997 after a career in venture capital.

Azazz started in April 1996, launching its Web-based department store later that year. The site sells brand-name, higher-end products, from Swiss Army sunglasses to polar fleece shirts, pasta machines and snowshoes.

Sales have been growing at a rate of about 500 percent a year, although McGoodwin points out that on the Web, "Everyone starts at zero."

Actually, Azazz started even below zero. It focused its early days on building the necessary infrastructure - collecting a good mix of products, having some products on hand in an Auburn warehouse, lining up manufacturers, get the shipping procedures and other systems in place to do business before snagging customers.

It now has more than 200 vendors selling products in 14 categories from clothing to gourmet items. Azazz hopes to add another 25 people to its existing 25-worker staff.

"Our ultimate goal is to make this the best shopping experience customers have ever had," McGoodwin said. But figuring out the right steps along the way has required strategic thinking.

Deciding whether to go public or be acquired wasn't the only debate. Even the question of whether its name fit its mission came up, leading the company to change its name from Factorymall.com to Azazz, thinking the new name conjured up more exciting and high-value connotations.

"There seem to be forks in the road all the time," McGoodwin said.

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