#StartupsEverywhere Profile: Carolyn Thompson, Founder & CEO, Aravenda
This profile is part of #StartupsEverywhere, an ongoing series highlighting startup leaders in ecosystems across the country. This interview has been edited for length, content, and clarity.
Web-Based Consignment Inventory Software
Fully mobile-enabled and web-based software solution Aravenda provides consignment stores, pawn shops, estate sales, online sellers, and more with cost effective white label resale & reallocation solutions. We spoke with its Founder and CEO, Carolyn Thompson, about her journey starting and operating multiple companies, tax issues related to reselling, and what it would mean for her business if she had to proactively screen product listings.
Tell us about your background. What led you to create Aravenda?
I’m a serial entrepreneur—I've started seven companies and have sold three of them (one in the biotech industry, one in staffing, and one in general consulting) to larger ones. That’s the point of entrepreneurship—you’re able to develop a product, gain customers, grow exponentially, and eventually sell. This sort of growth is beneficial and preventing successful exits would be like squelching free trade.
Aravenda is my first software company, and I created it because of subpar software I encountered during my time running a resale store. We’ve had three offers to buy the company just this year, so we believe a successful exit is on the horizon eventually, but we have a lot more growing to do first.
What does Aravenda do?
Our software caters to resellers handling third-party items and facilitates payouts to the original owners. Whether users input items remotely or through a physical store, our end-to-end operation ensures a seamless process. If somebody wants to start their own version of Poshmark, for example, they can do it using our software. We have inbound shipping, we're the only one with an enterprise product in this space, and we have users in over 10 countries right now.
How do you navigate tax issues that may arise as a result of dealing with resellers?
Technically, resale items should not be taxed again, because they were already purchased previously. But now they're taxing the resale of the item, again. It is a big bone of contention for us, and it does vary by state. A consequence of this is that, in many states where there's no tax on resale items, a lot of people still end up paying tax no matter what. We are integrated with Shopify and Clover, so they calculate the taxes each store has to pay. For example, for every sale eBay makes money on, they have to pay taxes, so they collect the tax on every sale no matter what, and pay states’ individual rates.
Similarly, our partners are helpful for handling jurisdictional tax matters, which enables us to operate globally. One thing we do run into, however, is cross-border transactions in Europe and fees associated with those which pose challenges for resellers.
Finally, changes to 1099 tax forms could be confusing for resellers that we work with. For example, if you sell on eBay, they handle the tax payment, but if you receive the payout via PayPal, you will receive 1099s from both companies with identical information. None of our users have come to us with a complaint directly yet, but I would say this headache will be a big problem for small businesses, period.
Some legislative proposals aimed at stopping counterfeits would force resellers and e-commerce startups to proactively screen product listings and expose them to more litigation. What impact would that have on you and your clients?
I can see where brands who have a lot of money would want to have such screening in place and be able to afford it. But the small businesses can't—there are 26.5 million professional resellers in the United States alone that are reselling somebody else's stuff. They’re not in the business of figuring out and documenting where exactly each item came from. Most of those companies bring in under $500,000 in annual revenue, so they really are true small businesses, and it would create a burden for them.
Are there any local, state, or federal startup issues that you think should receive more attention from policymakers?
One big issue policymakers should address is mitigating the long-term impacts when your business—especially startups and small businesses like us and those we serve—is a victim of fraud. We had a company that was doing our payroll and they were doing a great job, until one payday when all of our checks bounced, revealing that the CEO had essentially embezzled all the funds. The CEO was caught, and is now in prison, but at that time, I had 30-40 people on payroll spanning across three or four companies and it was a mess to navigate. It was devastating, but unfortunately the consequences for us didn’t stop there.
Ultimately, the payroll company's fraud and mishandling of our funds extended to failing to file required tax paperwork for the first and second quarters of that year. Another firm ended up filing our second quarter taxes, but when we applied for the 2020 COVID payroll tax credit, the IRS withheld it because it still appeared that we had not filed our tax paperwork for the first quarter. On top of missing a credit we should have been eligible for, we got a substantial penalty for seemingly not filing our quarterly tax reports. None of this was our fault, but it posed significant problems for us, and it could even be existential for others. Policymakers should be sure to protect businesses from fraud so others don’t experience these headaches.
What are your goals for Aravenda moving forward?
In the short term, our goal is to conclude our funding round before the year’s end. Looking ahead, we’re strategically positioned to capture a substantial portion of the market share, leveraging the ongoing consolidation in the industry.
All of the information in this profile was accurate at the date and time of publication.
Engine works to ensure that policymakers look for insight from the startup ecosystem when they are considering programs and legislation that affect entrepreneurs. Together, our voice is louder and more effective. Many of our lawmakers do not have first-hand experience with the country's thriving startup ecosystem, so it’s our job to amplify that perspective. To nominate a person, company, or organization to be featured in our #StartupsEverywhere series, email advocacy@engine.is.
