What Online Porn Taught Dee Agarwal

Image: Matt Furman for Forbes

Taking aim at his shoppers: “For every one screamer out there, we probably have 20 to 25 happy customers.”

Already 15 minutes late to his next meeting, Deepak Agarwal stands on a corner in Manhattan’s Diamond District, waiting for a hired car to whisk him 20 blocks south. The 29-year-old founder of a bargain-bin e-retailer called Nomorerack.com has just finished placing orders with a jeweller inside a stuffy, dimly lit fifth-floor office. Next up: A bedding merchant. Short and plump, Agarwal perspires in the late spring heat. A buzz cut makes him look like a teen; so do the canvas shoes, jeans and Oxford shirt with a flyaway collar. He grins as a black Suburban pulls up and a black-suited driver jumps out to open the door. “I’m a VIP customer,” he says with his trademark giggle.

Agarwal issues no instruction to hurry, knowing that people are waiting. Tough. Meetings begin when he shows up. The duvet suppliers know this as well as the jeweller, who waited 45 minutes for Agarwal to show.

They excuse his behaviour because no site moves its merchandise like Nomorerack. Since Agarwal, called Dee by all who know him, founded the company in November 2010, he has traded low gross margins (roughly 25 percent) for immense volume (more than 24 million items sold). Nomorerack sells cheaply priced tablets, knife sharpeners, rings, boxer briefs, sundresses and LED bulbs. Go to the site—or sign up and be hounded by e-mails—to find 50 percent to 80 percent discounts over other retailers.

If you believe Agarwal, sales have exploded from $9 million in 2011 to $340 million last year, when the company made an estimated $85 million. This year, he claims, revenue will surpass $700 million. Maybe. Maybe not. Nomorerack is privately held. Says Sucharita Mulpuru, an e-commerce expert at Forrester, “I’m not going to fully believe anything that’s not audited by the SEC,” assuming it goes public. Agarwal claims he has hung on to about 65 percent of the company through two equity raises that brought in $52 million from adoring, small-name investors. No one will comment on the exact valuation, but Agarwal offers up Zulily as a point of comparison, which on the face of it seems reasonable. If valued like that fast-growing e-retailer, Agarwal’s stake is ostensibly worth just under $800 million.

If these sound amazing, they are. Over the last three years, 2,670 customer complaints—mainly about shoddy merchandise, lousy phone reps and foot-dragging refunds—have been filed with the Better Business Bureau, which has assigned Nomorerack an “F”. That’s an extraordinarily high number, considering that Wayfair, with $915 million in sales, had 502 complaints over the same period. Nor does Wayfair have such active haters. Sites like Ripoff Report and Complaints Board bulge with angry testimonials; various Facebook groups such as Nomorerack Is Evil have proliferated. Agarwal shrugs. “For every one screamer out there, we probably have 20 to 25 happy customers.” Which still means 4-5 percent of his clientele despise him.

Then there’s his past, parts of which he isn’t eager to discuss. Agarwal got his start—and his nest egg—running a Philippines-based outsourcing firm and working within the pornography industry, becoming inextricably linked with a number of adult websites. When first confronted by these facts, Agarwal says, “There are a lot of rumours out there. I’ve read rumours about me being part of the Illuminati.”

Agarwal prefers the sanitised biography, which starts with his parents dropping him off to live on his own as a high school student in Orlando while they returned to India. After graduating in 2003, he says, he moved to the Philippines, where he launched Contact Center, an outsourcing company that did data entry and phone support. Four years later, he followed his girlfriend to her native Vancouver, British Columbia, then sold his business. In 2010, he launched Nomorerack with four people.

Matt Groover, a high school buddy, remembers the past differently. Teenaged Agarwal, he says, developed a fascination with porn. In 2003, he registered a site with a name suggestive of violent oral sex. Agarwal used an address in Sanford, Florida—the small ranch house where Groover lived and, for several years, collected Agarwal’s mail and deposited stacks of arriving checks. Groover still occasionally gets mail for Agarwal, though he’s tried to stop it and hasn’t spoken with Agarwal in perhaps a decade.

Over the next two years, Agarwal registered at least another seven sites using this arrangement, perhaps two of which are printable: Daddysfriend.com and DeeCash.com. The sites didn’t make skin flicks but mostly offered the kind of movies you would’ve seen in the theatres that once crowded Times Square. Back in the early 2000s people still paid for porn on the web, and the sites registered by Agarwal, say a couple of sources in the business, could easily have brought at least $10 million a year.

A former business partner emphatically describes Agarwal as the mastermind behind the sites. “He’s got balls you could see from space,” he says. One ex-rival, Jim Carter, claims Agarwal poached some of his best Filipino employees from his staffing company, which also serviced the adult industry. He has little fondness for Agarwal: “He’s a f--king snake.”

A guy with pull: at a 2010 networking dinner

Agarwal denies he ran or owned the porn sites. Instead, he says, Contact Center provided designers to create ads and programmers to ensure the ads drove the traffic to the porn websites. So if Dee Agarwal didn’t own sites like DeeCash.com, who did? “There were various owners of various businesses,” he says. “To ask me who owned what is a broad question.”

Whoever owned and controlled the sites, they developed a bad rep within a seedy business. Former business associates and rivals say the websites engaged in so-called cross-selling, in which customers signed up for one site while inadvertently registering for several others, and also in what erotica executives call “banging credit cards”—relentless overbilling of customers. “I personally was never involved in any kind of fraud, any kind of credit card banging,” says Agarwal. In another matter, a gay-porn production company, BluMedia, sued both DeeCash.com and DeeDevelopments.com (a Nevada company once registered in Agarwal’s name) over alleged trademark infringements on BluMedia’s “Broke Straight Boys” videos. BluMedia never received a response.

Again, Agarwal denies any involvement in the lawsuit. He does admit Philippine authorities raised questions about his business—presumably opportunistic bureaucrats looking for a handout—and stresses he never paid a bribe. A Federal Trade Commission spokesman would confirm only that it had received a complaint about Agarwal, who says he isn’t aware of any investigations.

Agarwal insists he was out of the adult industry when he hosted a 2010 networking dinner in Vancouver that featured a couple of marquee names: George HW and George W Bush. He says he met the 43rd president at a talk Bush gave in Calgary and claims he impressed him with his entrepreneurial verve. “If you reach Bush and ask him, I’m sure he’ll recall the dinner and me,” says Agarwal. A Bush spokesman wouldn’t comment.

Once in Vancouver, Agarwal fashioned a new identity as an ecommerce impresario—and went to some lengths to conceal his past. “He cut off contact with everyone,” says his former business partner. His LinkedIn profile merely says he founded and runs Nomorerack, and doesn’t include his picture. He isn’t on Twitter (“I really haven’t had time”) but is on Facebook—again without his photo. The porn websites are no longer registered in his name.

Nomorerack launched just before Black Friday in November 2010. Agarwal and his girlfriend (now fiancée), Melina Ash, corralled a small team to help pick products as well as design the site. An early hit was a Zhu Zhu Pets toy hamster. A mention on ABC’s The View in early 2011 gave the site a lift.

The move to New York City in April 2012 gave Nomorerack greater access to suppliers and employees. Investors followed. On the heels of a $12 million Series A round led by Asian ecommerce company Gmarket came a $40 million Series B funding dominated by Oak Investment Partners, a small firm in Greenwich, Connecticut, and HTV Industries, a Cleveland holding company. They all express confidence in Agarwal and praise his lean, capital-light company. What do they think of his earlier enterprises? “There’s nothing wrong from a business perspective,” says Ronak Khichadia, who invested in both rounds.

The New York office of Nomorerack doesn’t pulse with the electric vibe of startups. While a skeletal bride drenched in blood—an apparent Halloween leftover—greets you near the door, the real lifelessness lies inside, where dozens of hushed engineers and other employees tap-tap on keyboards. There’s no one at the ping-pong table or using the dartboard. A pile of empty boxes and returned socks crowd one corner. Sitting at small desks, 20 or so buyers source products and upload descriptions before turning the operation over to a series of algorithms, which place the most popular items at the top of a nearly endless stream.

Nomorerack maintains no inventory of the goods sold on the site. It collects the money, books the selling price as revenue, then pays the supplier. The company charges a flat rate of $2 to ship but doesn’t fulfill the orders. Suppliers log in to retrieve a list of the orders they need to fill. Agarwal makes such good use of advertising on social media that Nomorerack earned some praise from Facebook COO Sheryl Sandberg during a quarterly earnings report.

But it’s also earned the scorching enmity of many customers. “I placed three orders with them totaling close to $2,000, and they refused to replace the five items missing or refund me the money totaling $333,” says a typical complaint. Others say the products are incredibly shoddy. Many gripe about how tough it is to send something back.

Agarwal’s customer-service SWAT team is outsourced half a world away in the Philippines. They dial in from home. They’re on call 24 hours a day and, supposedly, respond to every e-mail usually within 30 minutes. Nomorerack, he says, has made improvements, stretching its return policy from 21 days to 30 days. Shoppers are still grouchy.

So is Agarwal, at the end of 55 minutes, deflecting questions about porn and Nomorerack’s challenges. The constant flicker of the motion-sensor lights in his conference room add to his annoyance. Gone is the candy bowl where he often helps himself to Nestlé Nerds. Gone, too, is his customary giggle. The interview ends abruptly. Says Agarwal, “I’m actually late for a meeting.”