Andale: Built to Order
Arthur Peter Schram
Monday, July 17, 2000

"Rock bands come in two forms," says Munjal Shah, co-founder and CEO of Andale Inc., which provides services to the users of online auction houses like eBay. "Sometimes it's spontaneous – a great bunch of guys get together and everything works out. Other times Rock Bands are manufactured – someone gets the band together and manufactures the group."

"We are a manufactured startup," Shah explains, suggesting light-heartedly that his team of founders make up the Backstreet Boys of the tech world. Jokes apart, the business model behind this "manufactured startup" has worked.

Shah and his team – which is made up of five other Indians entrepreneurs – got together in early 1999 with the intention of building a company but with no specific idea. They started with a field of nine ideas and narrowed it down to three before finally settling on the Andale concept – which they originally named "iSell."

According to Shah, working from a list of ideas allows for objectivity. "With only one idea," he says, "you've quit your job, you're burning through your savings, and you're not going to see the problems with the idea because you don't want to." Shah and his team chose Andale because the business model was simple. People would certainly use online marketplaces, and if they were going to be moving billions of dollars of merchandise they would need tools.

The "manufacturing" process began when Gunjan Sinha, founder of WhoWhere?.com and currently president of eGain, and Amit Shah, founder of PipeLinks and ZeitNet, introduced Munjal Shah to three of the Andale founders – Amit Gupta, Prashant Nedungadi and Rajiv Dutta. All three came out of the Indian Institutes of Technology and had done graduate work in the U.S. Shah met Vijay Chawla, the fifth founder, at Stanford in the celebrated IE273 class – which has produced Excite and a number of other companies.

Sinha, Amit Shah, and a group of six other angel investors – 6 of which were Indian – made an initial investment in the company.

Munjal Shah had previously founded the online entrepreneurial forum Round Zero with another group of Indian entrepreneurs - including Epinions co-founder Nirav Tolia. He had met a number of VCs as a result. It seems that funding the company was not a problem – just another carefully planned step in the manufacture process. "We were 7 and 0," says Shah, confidently. "Every investor we visited handed us a term sheet, even though we didn't even have a single line of code written for the product." The company received its first $19.6 million round of financing last October and has now raised over $60 million from investors that include Bowman Capital and Accel Partners.

Now, with 120 employees, and a merger with auction services provider Honesty.com, Andale, the "manufactured startup," seems poised to mirror the Backstreet Boys in at least one area – success. With an estimated $17.6 billion in annual transactions, the site is said to be the largest auction service provider on the Web by any metric.

The "manufacture" of Andale is a clear example of the value of networking in the tech world.