Fatty Tuna’s auction network draws chambers

BOULDER – Using Fatty Tuna Inc.’s online reverse-auction technology, businesses belonging to the Boulder Chamber of Commerce could by year’s end be part of a virtual marketplace made up of nearly 50 chambers from around the nation.

Boulder-based Fatty Tuna promises that as this marketplace grows, member businesses will exercise unprecedented power to leverage favorable deals on an array of goods and services. Its reverse-auction software will introduce to vendors a universe of previously inaccessible customers while giving buyers the chance to extract from vendors the lowest price possible through a competitive bidding process.

“Our business model is to help other companies and organizations with Web interfaces to provide their members with a low-cost e-commerce tool,´ said David Chuang, president and chief executive officer of Fatty Tuna. Chamber members can join the network, which Fatty Tuna has branded the Fugu Network, by visiting their respective chamber’s Web site, into which Fatty Tuna seamlessly blends its reverse-auction engine.

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In a reverse auction, buyers post requests for products and services and the maximum price they are willing to pay. Vendors who have those goods or services are notified by e-mail and begin to bid on the request. Each successive bid must be lower than the previous one. At the end of the auction, the length of which is set by the buyer, the buyer receives the three lowest bids by e-mail and then chooses the winner.

The network began last month when both the 1,850-member Boulder Chamber of Commerce and the 10,000-member Pennsylvania Chamber of Business and Industry signed on. Fatty Tuna will be announcing three more partnerships in New Orleans Nov. 5, and Chuang is “very confident” that another 43 will be plugged in by the first of the year.

The company would not name additional members, but Joe Tancredi, Fatty Tuna’s vice president of business development, said two of three new chambers are statewide chambers of commerce, like the Pennsylvania chamber, and have more member businesses than city chambers do. Fatty Tuna has also signed a contract with one non-chamber member, the Los Angeles-based Web portal HelpCity, which will expand the network by another 3,000 members upon its launch.

Colene Van Winkle, vice president of member services for the Boulder chamber, is impressed with the Fugu Network idea and sees it as a way of attracting more members to the chamber. One advantage of the network is that, because most chamber of commerce members across the country are recognizable neighborhood enterprises, the anonymity of the e-commerce universe is removed.

“The nice thing for them is that these are brick-and-mortar companies,” she said of her member companies. “The whole thing with the Net is that you have no way to know who you are dealing with. This way you do.”

Tancredi said the Fugu Network would bring certain companies into an e-commerce world they may have previously shunned. “The chambers are offering a service to some older businesses that might not be too tech-savvy,” he said.

In the Fugu Network, the buyer pays nothing to put in a request, while the seller must pay a fee of up to $1 to bid. While the seller must be a member of one of the various chambers that make up the network, buyers can be anyone, though they will also mostly be chamber members until Fatty Tuna decides to market the network to a wider audience.

Fatty Tuna charges nothing to equip chamber Web sites with its reverse-auction software, making its money instead via a revenue-sharing agreement with the chambers whereby it takes half the value of each bid fee. The chambers get the other half.

Fifty cents in revenues on each $1 bid fee might lead some to question whether there is enough cash flow to sustain the company. Lu Cordova, president of the Colorado Technology Incubator (CTI), an organization that helps local technology-based start-ups, provides the company subsidized office space and advice. She anticipates that this is just a starting point for Fatty Tuna.

“The revenue model for Fatty Tuna will evolve,” she said. “Fifty cents a bid is not a sustainable model, and they know that. In the beginning, it’s about building supply and demand. It’s a great way to build a marketplace.”

Chuang, a graduate of the University of Colorado at Boulder, came up with the idea for running a reverse-auction service when he was chief executive officer of Boss International, a leading distributor of golf shafts. Frustrated with his company’s procurement headaches, he felt there had to be an easier way to get parts.

“I was wasting five or six hours a day with this,” he said. “I knew what I wanted and what I wanted to pay.”

Fatty Tuna, which was incorporated in June 1999 by Chuang and three friends, spent the last two-and-a-half years quietly inventing its technology in the basement of a house in Boulder and then in the offices of the CTI, which it joined in January 2000 (known then as the Boulder Technology Incubator). The company employs eight people.

It first developed its stand-alone reverse-auction Web site, www.fattytuna.com, which Chuang said doubled as a beta-test site for its more ambitious Fugu Network. Chuang self-funded Fatty Tuna until the company received an undisclosed sum of private corporate financing this past summer. Chuang would not disclose the company’s revenues.

“In terms of the funding, they’ve been luckier than most,” Cordova said.

Chuang came up with the Fatty Tuna name after experiencing a hankering for sushi one day.Contact John Aguilar at (303) 440-4950 or e-mail jaguilar@bcbr.com.