Harvard graduate left Wall Street to start CustomInk T-shirt design business

By Thomas Heath
Washington Post Staff Writer
Sunday, October 17, 2010; 5:15 PM

"Everyone at Harvard is inventing something or starting a new business in their dorm room. Harvard undergraduates believe that inventing a job is better than getting one."

- From the movie "The Social Network"

Marc Katz didn't get the entrepreneurial bug at Harvard. He grew up with it in his home near Philadelphia, where his father built and sold businesses.

When the Harvard graduate walked away from a promising Wall Street career at age 23 to build an online T-shirt company called CustomInk, he was already bitten.

"I wasn't really scared of failure," said Katz, 34. "I grew up with entrepreneurship in the house, for better or for worse.

"Dad had ups and downs in his career. He is very resilient and real smart and very hardworking. I didn't think consciously about it at the time, but in retrospect it set an example as an entrepreneur."

Katz owns a big chunk of CustomInk, which grosses $70 million a year, is profitable and employs 280 people at its casual McLean headquarters. It occupies 50,000 square feet that once housed offices for Sunrise Senior Living.

CustomInk is where you go if you want a dozen T-shirts for your family reunion, your small business, your religious group or your student association. Picture 50 T-shirts emblazoned with "The Smith Family Reunion" or 150 baseball caps marking the local 5K fundraiser.

Its business model is built on efficiencies and on customer service that simplifies the process for selecting and decorating custom T-shirts. Most of the company's costs don't kick in until an order is placed. CustomInk representatives talk to customers at length, walking them through the process and assisting with design. The company has artists on staff to help special requests.

"We're nuts about customer satisfaction," Katz said. "We get that."

CustomInk displays its uncensored customer responses on its Web site and on a wall outside Katz's office.

Katz's biggest challenge is figuring out how to fire up revenue growth, which has dropped from an impressive 50 percent a few years ago to the low double digits in the recession. It's not going to be easy. CustomInk competes with a pair of well-funded competitors with experienced venture capital firms behind them. CafePress is backed by Sequoia Capital, and Zazzle has Kleiner Perkins in its corner.

Katz always had an entrepreneurial bent. While his friends worked summers caddying or landscaping, he ran his own business tutoring in math and SAT preparation.

The physics major became a telecom analyst for BT Wolfensohn after graduating from college in 1998. But he knew he always wanted to be an entrepreneur, even as he labored on mergers and acquisitions on the 33rd floor of a Lower Manhattan office building.

At the time, the world was mesmerized by the "go-go dot-com mania," Katz said, "and there was such a sense of urgency to do your thing before someone else does it."

After considering a couple of online and telecom ideas, he and a couple of former classmates teamed up on CustomInk. Their business plan targeted smaller entities such as social groups and community organizations instead of big corporations that had giant contracts from big shirt companies.

In search of a software engineer, he jumped on the Harvard Computer Society Web page and found a resume he liked from California. The engineer became a business partner.

Although his father had reservations about CustomInk - "He told me it was the best business plan he ever read for a bad business," Katz said - he signed on with a small investment and helped mentor his son as the company grew.

Funding came from family and friends. The lead investor came from BT Wolfensohn, who brought along a string of others. By limiting investment fundraising to about $1 million and using profits to fuel expansion, Katz and his 15 or so shareholders have been able to hold on to sizable ownership stakes.

They launched the company in March 2000. They moved to the Washington area because it was cheaper than New York and because Northern Virginia had a reputation for cutting-edge technology.

"It seemed like a good place to establish ourselves as a national business, which we knew we wanted to be," Katz said.

To save money, they slept on air mattresses on the basement floor at the home of a co-founder's sister. They sublet office space from a law firm in McLean that helped them incorporate and do the legal work for financing. They also secured a production facility in Manassas.

Then they got down to business. Katz believed the key would be to make the company's Web site as user-friendly as possible and to create a realistic-looking shirt design that would make people want to buy it.

"We put a lot more effort into making sure the design you created looked right and natural and real, so people could really see what they were going to get," Katz said.

They found vendors for making shirts and creating lettering through various Web directories, finally getting a core group of reliable companies through trial and error. They studied search engine marketing, learning how to pay for Web page positions.

A plan to partner with student groups on college campuses misfired when students failed to follow through.

The aha moment came when revenues hit $25,000 for the month of January 2001.

"We knew this is a real business," Katz said. "This wasn't our friends and family placing pity orders."

The company grossed $1 million the first year. That tripled to $3 million in 2002. The company turned its first profit in 2003 on gross revenue of $7 million. CustomInk grossed $61 million last year and expects to be above $70 million this year.

Katz has his eye on getting up to $250 million in revenue. To do that, the company will need to expand its North American customer base to Europe and overseas markets.

That's what Facebook did.

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