iCracked: The World's Repairman for iPads and iPhones?

Image: Eric Millette for Forbes

Say again? Forsythe wants an iTech repairman in every city of the world in two years

We want to grow 20 percent month-over-month for the next 36 months,” says AJ Forsythe into a nearly drained iPhone 5S as he paces a seawall overlooking San Francisco Bay in Redwood City, California. It’s the kind of boast iCracked’s 25-year-old CEO likes to camouflage in tangential asides, like describing the cat-themed conference room planned for the company’s new 25,000-square-foot office. Or the $100 worth of fried chicken someone bought that morning after hacking into his credit card. Or the life-size oil painting of his older brother Chip that will be commissioned and hang in iCracked’s offices if Forsythe loses an undisclosed bet.

Don’t mistake the Ritalin-deprived detours for a want of focus. Forsythe is all business. He’s just booked a last-minute red-eye to London to work on the UK market, the latest target for iCracked, which runs a network of 470 “iTechs”—iPhone and iPad repair professionals. Customers summon a rep via the web for common snafus as a cracked screen, water damage etc, and meet in person at a pre-arranged spot. You can usually get your phone back the same day for an average charge of $99.

What started as a dorm-room hobby in 2010 has exploded into an enterprise with iTechs in 43 states and 11 countries and 43 employees in the corporate office, who work mostly in operations, product development, customer service and marketing.

ICracked broke even on $9 million in sales last year, up from $1.9 million in 2012. Forsythe conservatively predicts $30 million this year—“if we all do our jobs correctly”. His math may not be perfect (based on December results, 20 percent per month gets you to $43 million in sales in 2014), but the manic pursuit of growth is real. Forsythe has already mastered a classic entrepreneurial lesson: Building on one success to launch another—and another.

In October, he introduced a buyback programme for old or wounded iOS devices: iTechs offer prepaid debit cards on the spot, and iCracked flips the mended phones via eBay or foreign wholesalers for a profit. Forsythe hopes this business outstrips repair revenue in 2014. Never mind that Apple introduced a trade-in service last August. He plans to start an insurance programme by year-end.

Forsythe grew up wrestling, not writing code. He speaks in a deep, gravelly voice that still carries a bit of Texan twang from six years spent in Dallas. The rest of his childhood kicked across the country every two or three years, following his dad’s banking career. “It sucked as a kid,” he reflects, “but it gives you a pretty holistic view of things.”

After high school, he followed his brother Chip to California Polytechnic State University on a wrestling scholarship. Two grades older, Chip had switched majors from kinesiology (the study of movement) to viticulture (the study of grapes) after mistaking an educational wine tour for a party bus one weekend. By the time AJ arrived on campus, Chip was making wine from the leftover yeast and sediment of local wineries.

A psych major, Forsythe helped his brother plant a two-acre vineyard during freshman year, then started a honey business after taking a class in beekeeping. When that failed, he tried a distillery, then looked into importing 25,000-litre casks of Russian vodka through Alibaba.com, the Chinese online marketplace. That didn’t pan out. At one point, he bought a new iPhone screen for his broken mobile and fixed it himself.

Though a helpful skill for his own mishaps— he’s broken his phone nearly a dozen times since—he didn’t think to turn it into a business until an uninspiring career fair in 2010. “I threw out all of my résumés and started making neon-coloured iPhone repair flyers on Microsoft Paint,” he recalls, and got five phone calls the next day. He charged students $75 a pop for repairs at his kitchen table.

That summer, he teamed up with Anthony Martin, a recent UC Santa Barbara grad, to co-found iCracked. Flush with profits from Campus Radar, his textbook-rental startup, Martin invested $10,000, and the two spent the next year trying to recruit students as iTechs. Didn’t happen. Says AJ: “We would cold-call these guys, and they’d be like, ‘No, I don’t want to fix iPhones.’ ”

Before graduation in 2011, Forsythe and Martin teamed up with Leslie Lambert, a graphic designer, who replaced his amateurish flyers. They soon racked up $40,000 in credit card debt for replacement parts and packaging supplies, then moved to a rented basement in Sunnyvale.

Martin nudged Forsythe to apply to Y Combinator, Paul Graham’s Silicon Valley startup accelerator. They missed the first interview while on a trip to China, bombed the next. But Graham saw big promise in the kid: “AJ seemed to me more of a Rockefeller than a Steve Jobs. He’s not some sort of tech visionary, but he has immense energy.”

The programme’s $150,000 worth of seed funding proved a “godsend”, and the company expanded from 60 iTechs in January 2012 to 125 by that spring. Forsythe raised another $500,000 from SV Angel, moving into a 3,500-square- foot office in Redwood City.

Typically IT veterans, iTechs are a select group: Fewer than 1 percent of the applicants survive three interviews and a background check. They meet customers 30 to 50 times a week to fix and purchase phones, earning around $60 per repair and $25 for buybacks; iCracked makes money selling them replacement parts at a 20 percent to 40 percent markup or marking up purchased phones for re-sale. The company also sells do-it-yourself repair kits for $20 to $150 each, some 35 percent of sales.

Forsythe’s quest to transform iCracked into the “AAA of smartphones” depends on an expanded iTech network—even putting one of his guys in every city in the world over the next 24 months. “Well, every city we have demand in,” he clarifies. That’s still 2,300 metros.

Does Forsythe really want to compete with AppleCare or insurance from Verizon and AT&T? “There’s this crazy thing called convenience,” he contends. Two years of AppleCare costs $99, plus $49 to $79 per repair via mail, often leaving customers sans device for a week. Forsythe thinks folks will gladly pay a monthly fee in return for free, on-the-spot repairs. Apple sold 51 million iPhones in the most recent quarter. “If you control the life cycle of these devices,” he says, wide-eyed, “that’s crazy awesome.”