ICracked, a 4-year-old Silicon Valley start-up that repairs smartphones and resells used devices, will have so-called iTechs outside over 120 Apple stores in the U.S., letting customers know they can sell their iPhone 5 for up to $200, all by downloading an app.
"People wildly underestimate what they can do with a used device," said AJ Forsythe, iCracked's 26-year-old co-founder and chief executive officer, from his office near Oracle's headquarters in Redwood City, California. "We'll be educating customers about reselling devices after they upgrade."
It's all part of Forsythe's plan to turn iCracked into a one-stop shop for smartphone users to get the most critical device-related services after their initial purchase. The company, with fewer than 100 full-time employees, has more than 650 iTechs across the U.S. and in 11 other countries, who are effectively on call to fix broken screens, buy old phones and, as of last month, provide insurance.
Like Uber drivers, these iTechs are not salaried employees, but rather get paid per transaction. Whether in a tech hotbed such as San Francisco or Austin, or in the remote towns of Iowa, iCracked aims to blanket the country and globe with representatives so that any consumer requesting service from iCracked's mobile app has, in short order, a rep show up at their doorstep.
A report earlier this year estimated older iPhones worth $13.4 billion are sitting idle after consumers upgrade. Forsythe estimates that number is up to $15 billion, mostly stuck in sock drawers. That's value that consumers can easily turn into cash or plastic (iCracked delivers them branded debit cards).
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This is not the typical high-margin Internet business to which Silicon Valley watchers are accustomed. The profit from buying an old phone and reselling it is only $10 to $20, Forsythe said. And for the do-it-yourself crew, the company has custom-built repair kits manufactured in China, meaning it's in the costly hardware business. Plus, it spends a lot of time and resources selecting iTechs from a wide applicant pool, training them and then sharing the proceeds from each transaction.
Forsythe said that the warranty business will be critical. For $7 a month and a $25 deductible, consumers can protect their device with iCracked, instead of choosing a more established player like Asurion or SquareTrade. If it gets the kind of traction Forsythe expects, the company's overall gross margin, or the profit left after the costs of goods sold, can be 35 to 40 percent, he said.
The insurance plan is currently available only in California, but Forsythe said it will be available in 45 to 50 states in the next two months or so.
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"We want to own and take care of that customer's experience," he said.
Forsythe started the company after becoming an expert at fixing phones on the side while studying at California Polytechnic State University. He envisioned giving phone geeks everywhere the chance to make a living doing what they were already doing for free for friends and family. So he built the software to create the network and took iCracked through the Y Combinator incubator program in 2012.
Now, his company is fixing and selling tens of thousands of devices a month and expects to generate $1.5 million in revenue this month, he said.
Type "sell my iPhone" or "fix iPhone" into Google, and iCracked's site is prominently featured. That's how many people have found the service to date, Forsythe said. Many more are likely to soon find it outside their neighborhood Apple store.
—By CNBC's Ari Levy.