Eric Baker: Why being thrown out of offices may mean you're onto something huge

Eric Baker: If you’re going to do something that’s going to try and change the status quo, you’re going to get people telling you why it doesn’t work and you’re going to get a lot of rejection and a lot of naysayers. And I think if everyone got people telling them yes, then everyone would be doing this and it would be easy.

Talia Goldberg: Welcome to Wish I Knew, the show about the revelatory aha moments that founders, CEOs and leaders discover along their own business journeys and why taking risks leads to growth. I’m your host, Talia Goldberg.

Today’s guest is Eric Baker, the co-founder of StubHub and founder and CEO of Viagogo, who has quite a story to share full of redemption and resilience. And resilience is a word you’ll be thinking about quite a bit as it’s a major theme in today’s episode.

Our story starts at a moment in time where the entire world was experiencing a wave of resilience, and this was right around the turn of the century in the year 2000. We made major headway and space exploration.

Speaker 3: On the threshold of a new era in space, the first crew of the International Space Station arrived at their new home for the next four months.

Talia Goldberg: Tiger Woods became the youngest player ever to win a grand slam in PGA Golf.

Speaker 4: And the champion golfer for the year, Tiger Woods.

Talia Goldberg: And all the while, the internet was reaching the pinnacle of the .com boom. Which is where we find our guest, Eric Baker, who right around that very same time in 1999, was raising money to develop a groundbreaking internet based idea, a ticket resale company called StubHub. Eric came up with the idea for StubHub when Silicon Valley was bursting with life, when then little known entrepreneurs like Jeff Bezos were first making their tech debut.

So Eric moved west and spent two years at Stanford’s Business School where he recruited his co-founder and he started building his ticketing company. It was all going great until it wasn’t.

One day after years of work, Eric was fired from his own company. Talk about having a ship on your shoulder. And this is where the theme of resiliency comes into play. Instead of backing down, Eric took a big swing to find redemption in life after StubHub by moving to Europe and starting a rival ticket resale company called Viagogo. Eric had a long way to go in recreating his success at StubHub by starting Viagogo, all while navigating his broken relationship with his former company. 

And at one point the company went from selling $6 billion worth of tickets a year to being shut down all around the world. So to find out the truth behind Eric’s grit and resilience, I’ll let my colleague Jeremy Levine take it from here. Jeremy is a partner at Bessemer and originally invested in Viagogo in 2012. But Jeremy and Eric actually go way back.

Jeremy Levine: Eric, welcome to the show. And I want to go back to your first job after college at McKinsey. I know that was your first job after college, because that’s where I met you 27 years ago. So can you talk to me a little bit about why you took that as the first step in your career?

Eric Baker: Sure. I wanted to go into business. Both my grandparents had been entrepreneurs. My mother’s father had a job during the Great Depression and he quit his job to learn how to build homes and build a real estate firm. It was obviously a really risky thing to do at that point in time, but he did it and my father’s dad was one of over 10 kids and he brought himself up by the bootstraps and then built a company that ultimately he was able to take public. And so I think being able to see that people had had success as entrepreneurs and being able to work outside the system, I think was extremely helpful and inspirational. And so when I graduated from college, I was really, didn’t really know where to start, but was thinking you could either go into investment bank or consulting back then McKinsey was a management consulting firm, and so it certainly seemed like a much better alternative than working around the clock at an investment bank.

Jeremy Levine: I was going to tease you and say you took the lazy way, but I know you too well to know that you’re far from lazy. But did you know you were always going to start your own business?

Eric Baker: Yeah, I think I sort of always felt that really I’d like to create something and I’d like to basically be my own boss. And I’d always thought that if you want to ultimately build a business, you need to first build up knowledge, contacts and access to capital. So those were sort of the three things that I was trying to maximize and learn along the way. And I thought that starting at McKinsey would be a great place to do it because I would get exposure to a lot of different things in business. I’d get to meet really interesting people, McKinsey certainly as a great network of alumni and said that they’d have other exciting people there. And obviously from an access to capital standpoint, even down the line, it’s always, if you’ve worked at good places and you’ve met good people, it will lead to access to capital. And that actually ties in with contacts because, as you said, you and I started at McKinsey out of college together and here you are as one of my big investors today.

Talia Goldberg: After two years at McKinsey, Eric then went on to spend two more years at the private equity firm, Bain Capital.

Eric Baker: I went there and I learned a ton about finance, which would really help me in my future career as an entrepreneur I think. But again, I knew I wasn’t aspiring to be a private equity partner, it wasn’t for me and I wanted to start a business. And the concept for StubHub came to me when I was working at Bain Capital before I went to business school and I went out to business school then with the sort of express intent of hopefully starting that business.

Jeremy Levine: Interesting. So tell us a little bit about how and when the idea came to you standing in the shower, sitting on the toilet. When did it hit you and when did you realize, wait a minute, this is when I’m going to spend serious time on?

Eric Baker: Well, I always was trying to think about different business ideas. Usually what I found is that it comes through experience more than locking yourself in a room and saying, I’m just going to come up with the best possible idea in the next two hours. So in the case of StubHub, it was the spring of 1999 and I was working at Bain Capital and my girlfriend at the time wanted to go see the opening of the Lion King. And so in order to get tickets, you basically had to pay through notes. It was either wandering around Times Square or ultimately what we did is pay a ticket broker and it seemed highly inefficient and at the same time the internet was taking off and eBay was really taking off and there were marketplaces. I thought, gosh, there’s got to be a better way for the resale of tickets. The more I looked into it, discovered it’s a real market and it’s a real opportunity. And so it just got me excited to pursue it

Talia Goldberg: And pursue it he did. While Eric was at business school at Stanford, he decided the best way to fully realize StubHub was to recruit a co-founder.

Eric Baker: I was determined to get my degree, so I thought, okay, well I’m not going to drop out of school. But I approached my co-founder, recruited my co-founder, and said, look, I have this great idea and it’d be great if you know someone would drop out of school and he’d push it full time while I’m finishing in school. And to his credit, he was willing to do that.

Talia Goldberg: Eric’s classmate and co-founder was Jeff Fluhr, and together they tried to raise money for StubHub. At one point, someone recommended that Eric speak to a man named Fred Rosen who served as CEO of Ticketmaster until 1998 and see what he thought about their ticket resale idea. Who knows, it could have been an investment opportunity or at least the start of a new and valuable relationship.

Eric Baker: And I just called this guy up and Fred ultimately just says to me, he’s like, Eric, all you need to know are four words. It will never happen. It will never happen. And he was very emphatic about it. So that was the type of thing that we were dealing with. I was thrown out of the NFL offices, I was thrown out of team offices. This is terrible, scalping, we don’t want to be involved with it. So there was a lot of resistance and mindset change, which I think any entrepreneur goes through.

Talia Goldberg: Being thrown out of offices left and right became a major lesson in one critical area, the importance of perseverance and resiliency. I mean, it’s cliche but it’s true for any entrepreneur, you just got to keep moving forward.

Eric Baker: And if you’re going to do something that’s going to try and change the status quo, you’re going to get people telling you why it doesn’t work and you’re going to get a lot of rejection and a lot of naysayers. The more you do it, the more you get inured to it over time. It is possible to change things, to launch something. Don’t think that you’re lesser than or you don’t know as much as some other people. And I think that the more you do it, the more you realize. And then what you want to do is as you’re successful, try and keep that humility because otherwise you turn into the status quo. But for the most part, if you’re trying to change anything and do anything new, you’re going to get people telling you it won’t work, it won’t happen, and you’re going to get people telling you no. If everyone got people telling them yes, then everyone would be doing this and it would be easy.

Talia Goldberg: Luckily, Eric’s perseverance did pay off and eventually he and his co-founder Jeff, started to raise some money. Although, as Jeremy will soon tell us, it quickly became a pretty strange time to be building a website online.

Jeremy Levine: So you raised money for the company, and this is now 1999 or early 2000 and I guess shortly thereafter, kind of the world imploded the .com bubble burst and all of a sudden anything that was related to the internet, nobody wanted to touch it. But you kept at it. Did you ever waiver, did it change? Did it adjust the way you took to entrepreneurship when suddenly the world no longer thought it was such a popular thing to do?

Eric Baker: So yes, when we raised the first capitals after the Nasdaq had crashed, I think the NASDAQ crashed quite a bit for the internet bubble by April of 2000, everyone sort of fled. They were no longer interested. A lot of people were like, why are you doing this internet thing? It doesn’t make any sense. So it was definitely a time where you had to really believe in it and you had to push to persevere. So if you were doing it because you thought it was a quick buck or just the popular thing to do, it definitely washed those people out. I think the other lesson was that a lot of great companies were created in that environment because it drove down the cost to labor and the cost, stupid competitors went away. And you get a real opportunity if you can get through that valley, so to speak, to build a really lasting business.

Jeremy Levine: Makes sense. By 2003, 2004, it had become a real business and then eventually you left. And so what happened? Tell us the story around why you left and what happened next.

Eric Baker: So I’d always focused on the external stuff, fundraising, the deals, strategy, and my partner Jeff, was really doing the internal operations. But once we had difference of opinion, he’s like, look, if you don’t like it, you can quit. And I’m like, well screw you, you can fire me. And so that’s basically when we had a differences of what he determined to do. And so I had no employment contract, I owned all my stock outright, I had no non-compete, no nothing. And so shockingly they just said, hey, you’re fired. And I was free to do whatever I wanted.

Jeremy Levine: Is there anything you wish you knew about how to pick a partner in the first place or is a lesson entirely different?

Eric Baker: I think a couple different things. One is that you really should be thinking through success and down the line and understand how you’re structuring things and what you’re doing. And so I structured it so that I had owned all my founder stock outright and I said to my partner, Jeff, I said, hey, look, you’ll vest over four years, but once you’re done vesting on a little bit more stock than I do. And I structured things so that the majority of founder stock would control the board. And I thought that would protect the founders from the external investors if there were issues. And I never really thought through what happens if I have an issue with my co-founder. And then once that happened and I had differences with my co-founder, that’s that. Things in partnerships sometimes will go south, either when things are really bad or when things are really good, you just have to be very clear eye to understand what can possibly happen rather than not thinking about it.

I also think there’s a difference between having multiple partners and starting something. You can have people who help you build something, but I think that it certainly became important to me that as I did with my next endeavor, that I was in control of my own destiny the next time I was going to do something like this.

Talia Goldberg: Coming up after the break, as one door closes, another one opens. And for Eric, this means a seismic shift in his founder journey.

So, at this point in our story, Eric has moved on from StubHub, but was ready to pivot and rebuild. And as it turns out, leaving StubHub might have opened up one of the biggest opportunities in Eric’s career.

Jeremy Levine: So knowing how the story ends, I might think of that moment back in 2004 as a bit of a blessing in disguise. So tell us what happened, what did you do next?

Eric Baker: Obviously, this was not a happy thing. It’s like, gosh, I’m fired from my own company and I still own all my stock and it’s going to be successful, but that’s not how you want it to end. And I thought that I was going to travel the world was my plan and then start another business having nothing to do with tickets. And so about a month after I’d left, I was making plans to go to London and I thought I’d buy some tickets to go to a soccer match, a football match as they call it, or a concert, and I’ll use the StubHub of Europe. And lo and behold, there was no StubHub of Europe and I said, gosh, this is a great opportunity. I guess what I’ll do is I’ll move over there and start the StubHub of Europe. And so that’s how it all started.

Talia Goldberg: While Eric was off in London creating the StubHub of Europe, StubHub was being bought by eBay. And fast forward a bit to 2012, Viagogo has grown significantly, but it wasn’t growing fast enough, nor was it generating enough profit. So, it was at this time where Eric was working really hard to convince investors like Jeremy and Bessemer to become investors in the company to fuel Viagogo’s growth.

Eric Baker: I think the common thought, it was always like you can either grow or you can make money but you can’t do both. And that might be true for some businesses or whatnot, but basically I think if you look at the greatest businesses that have really had game changing business models and whatnot, they oftentimes they’re able to change the world and they print money. Then of course there are many great businesses where you invest for a long time like Amazon, but Amazon ultimately makes money. So it didn’t really compute and I think we had a very high valuation, and externally people would tell us this is great, but it sort of felt like it wasn’t. And so one of the catalysts was we’d brought in someone to run operations and this person did not work out and that was supposed to be the big step function up. As I drilled down into the operations and we really looked at it, just realized if you simplify things and you say, are we delivering the core value to our customer as best we can and do all that while we’re trying to, we should be able to grow revenue and we should be able to reduce our costs.

I mean, which sounds awfully simple, but that’s what we did. And so the team did a great job putting our nose to the grindstone and within the course of less than a year, the business was growing faster and went from loss making to profit making and growing.

Jeremy Levine: I remember being astounded ’cause I think in the time the business was losing maybe $2 million every single month, and within a relatively short period of time it was making something like five to 10 million a month, which was a staggering turnaround. And so what exactly did you do when you noticed the company was in trouble, it wasn’t growing, it was losing money? I recalled you kind of re-interviewed people, but can you tell us a little bit about that?

Eric Baker: Yeah, sure. So we had someone who we’d brought in from a big prestigious company, and this was another thing that we learned and it looked like from central casting. And the classic thing to do was to say, we’re going to scale up our operations. So the first thing was that I’d given this person about a year to wanting to see how they would do and felt like I’m going to give them only way to do it. And I got 360 reviews at the end of the year and the team all wrote in their review about this person, he’s a disaster, he needs to go, this isn’t working. And then when I got his review, what he wrote was, the team loves me. It’s doing great. They’re right behind me. So it’s like, wow, this needs to be changed.

Talia Goldberg: And what Eric did to fix the problem was to first remove this particular person from the team, but then he did something novel. He started interviewing, well everyone.

Eric Baker: And you just go to people and you just say, what do you do? And oftentimes people will reply with sort of a title and they might say, I’m the intergalactic head of strategic planning. And you’ll say, okay, well what do you do? And they’ll be like, well, I strategically plan. Okay, let’s try it again. What time do you get in the office? What do you do day to day to day? And it’s very revealing because people, when you get them to describe what they do and then you really look at it, you can sort through a lot of folks who really aren’t focused on the right things and really aren’t doing much. And they’ll oftentimes just say, hey, it’s complicated. You wouldn’t understand. It’s like, well, let’s try. And so we were able to streamline a ton of stuff. Again, eliminating roles or functions or people is not about cost cutting, it’s actually the business would be growing faster and doing better economically, and yet you had fewer people. And that was sort of a real thing that was hard for people to get their head around.

A lot of people will talk about how big their head count is, and it doesn’t mean as long as it’s intelligently deployed and you’re always better off doing things, I think in a lean manner. In an intelligent manner, you get a lot more done with a very nimble, agile team of really, really extraordinary people than with a larger team that’s not at that standard.

Talia Goldberg: It was a classic case of less is more. And Eric was starting to see the fruits of his labor in pairing down his workforce and Viagogo quickly started taking over in Europe. But the original vision that he built at StubHub was still lingering in his mind. And he started thinking about how one day he wants to reunite his two companies StubHub and Viagogo, together at last. And while many investors in confidants seem to laugh this idea off, Eric proved everyone wrong in 2019.

Eric Baker: And so lo and behold, in February of 2019, a big activist shareholder called Elliott, the hedge fund, bought into eBay and they said, look, eBay, you need to make a ton of changes to your core business and you should spin off stuff which isn’t core, including classifieds business and StubHub. And so that was a huge moment because that meant that potentially StubHub would be in play.

Jeremy Levine: Suddenly there was this urgency to say, well, how on earth can you position Viagogo, which is while a fast growing company and impressive in its own right, still much smaller than StubHub, how do you position Viagogo to be the purchaser of StubHub?

Eric Baker: We looked at and we just said, if we were able to acquire this, we can create more value than anyone else who would buy it. And that’s really fundamentally because, first of all, you have industrial logic, which is you just taken the international leader with the US domestic leader, which makes sense for almost any industry. Two is you’ve got the fact that it’s even better because of all the improvements you can make. So we had built the business in the states before, we understood that business. Well, we said if we could just get this thing to work the way Viagogo works, we thought we understood how to get its market share back to its glory. 

And then I’d say the third thing, Jeremy, is that we just believed there’s a much bigger opportunity than just global resale and much more that we can do.

And so again, simplistically, given where we sat and everything we could do strategically, if we can create the most value, we should be able to pay the most for the company. And fortunately again, we had a number of great backers, like yourself, and we were able to put together the most compelling package to buy StubHub.

Jeremy Levine: And so I think it was around Thanksgiving 2019 when you proverbially shook hands or maybe signed definitive documents to buy StubHub for $4 billion. When did you first hear about a virus called COVID-19?

Eric Baker: I got a call from one of our investors and right around March 1st saying this is going to be really, really bad. And then I think it was around March 10th or 11th that the NBA canceled the game because the guy tested positive. So it sort of happened overnight. It’s hard to believe that back then it seemed like no one heard of it, that it was like maybe this will last a few weeks to obviously ultimately being locked in our basements in hazmat suits for a couple years. It was definitely crazy timing.

Jeremy Levine: So you just bought a company for $4 billion in cash and you’re now running a company that in combination sells something like $6 billion of tickets per year. COVID-19 emerges and all of a sudden your revenues went pretty close to zero.

Eric Baker: It was pretty crazy because it was literally, I think they went down 95%. So I think the first thing is having managed through 9/11 and having managed through the great recession in 2008, 2009, you really realize that it’s all about managing cash and you need to understand what your cash position is, you need to be in a good position. So we never believe that it would be tested with something like COVID, but obviously as you say, losing 95% of your sales in COVID was the ultimate test.

Jeremy Levine: Were there any things that you found particularly helpful in guiding your team through this? I would imagine you had quite a few people who were freaked out saying, maybe I should find another job.

Eric Baker: People tend to overreact. This was obviously a scary time, but I think that there’s a things go in cycle. So the first thing is oftentimes there’s a saying every summer people forget how cold the winner is every winter and they forget how hot the summer is. The other thing, and I think it’s a Ray Dalio quote, but it’s something that every crisis in the moment feels like, oh my god, it’s a crisis or the end of the world. Now, this is an extreme case, but I think that created a lot of pattern recognition and trust.

And then the key thing is you just got to be transparent with people and be very clear about we’re going to do A, B, and C because of A, B, and C is just very logical that we’re getting to the other side. And I think if you can remain calm, if you’ve got a plan, if you shoot people straight, then everyone can pull together and get through. If you’re either in a panic or if you’re just full of it because you’re just giving nonsensical happy talk, I think it would be very hard to get to the other side.

Jeremy Levine: Well, you certainly got to the other side and the two businesses are now united as one, and you can reclaim the title and responsibility of CEO of StubHub, but it’s probably the most unique founding and reunification story in startup history.

At this point, I’d like to give our guests a chance to know a little bit more about you personally. And so I have three rapid fire questions for you. If you can just give me the sort of quick thoughts that come to mind as I say each one.

First, where can we find you on a Sunday night as you’re preparing for a Monday morning in the office?

Eric Baker: Probably watching football and following my fantasy football team with my kids now. It’s big pride on the line. Sunday night football is probably a good bet to catch me.

Jeremy Levine: Excellent. And what is your go-to pick me up to reinvigorate you or to find extra energy when you hit the wall?

Eric Baker: One that comes to mind is spending time with my kids and spending time with our boxer dog. I also like to play pickleball. So I think pick a ball is the future.

Jeremy Levine: We’ll soon be buying pickleball tickets on StubHub, I’m sure. Do you have a favorite quote or a mantra that you carry with you into your work?

Eric Baker: It’s got to be inspirational as opposed to something that-

Jeremy Levine: It could be funny. 

Eric Baker: Well, one of my favorite quotes is when we see folks who aren’t motivated at some of the places we’ve taken over and then there’s that line of college, coach says, son, I don’t know what your problem is. Is it ignorance or is it apathy? Says, coach, I don’t know and I don’t care.

Jeremy Levine: Touche. On the Wish I Knew podcast, we end each episode with a parting thought for our listeners as they embark on their personal and professional journeys. So I’ll ask you this question. Looking back at your time as a professional, starting as a McKinsey analyst right after college, up through today as the CEO of StubHub, what do you wish you knew either before it all began or any point along the way as it was unfolding?

Eric Baker: One is, I think you need to think big, you need to plan for success. You can’t get too caught up in any one moment, everything will seem like an emergency, but you’ve got to keep your eye on the big vision and you’ve got to figure out where it can go for maximum leverage and not get sucked into the weeds, so to speak. So I think again, I think StubHub would not have been sold as cheaply if people had maintained and understood the vision of how big it can become. I think that I’ve learned that when things are really, really tough, you’re going to get through it and just survive in advance. And when things are going perfectly, just be prepared. It’s going to go back down and know the direction at some point. And if you can keep yourself on an even keel, you’ll be right.

Talia Goldberg: That’s it for today’s episode of Wish I Knew. You can find and follow the show anywhere you listen to podcasts or at bvp.com/wishIknew. Special thanks to this week’s guest, Eric Baker for sharing his story and to Jeremy Levine for guiding the conversation.

Wish I Knew is a podcast by Bessemer Venture Partners. The show was created by our very own Karen Lee and Christine Dikers. I’m your host, Talia Goldberg. Our show is produced by the team at Philo Media. Our lead producer is Molly Getman. Our executive producer is Kate Walsh. We’re engineered by Evan Viola. Our theme music is by Terry Divine King at Audio Network. Additional Music by Blue Dot Sessions. And remember, if you’re thrown out of an office, you might just be onto something big. We’ll see you on our next episode.