Whatnot founder: This is the future of e-commerce

Key Takeaway

When entering a crowded market, start with a narrow niche where you can create an experience incumbents ignore. Today, pick one customer segment, identify its biggest unmet need, and manually solve the supply or demand side yourself before trying to build a full marketplace. Whatnot began by acting as the seller, authenticating Funko Pops, sourcing inventory after purchase, and using community influencers and referral giveaways to build buyer demand before opening the platform to outside sellers.

Episode Overview

Whatnot cofounder Grant LaFontaine explains how the company grew from a scrappy Funko Pop marketplace into a live-commerce platform valued at roughly $20 billion. He shares its early marketplace hacks, the decision to start in a narrow collectible niche, the power of live selling, and his leadership philosophy of relentlessly reducing complex claims to simple, verifiable truths.

Full Transcript

Transcript of Whatnot founder: This is the future of e-commerce from My First Million. Auto-generated from episode audio; may contain minor errors.

you built a company that is worth $20 billion. But just to put that in perspective, that is more than if you add up the entire market cap of Wendy's, Under Armour, Hertz Rental Car, Harley-Davidson, American Airlines also. Isn't that bananas when you hear that? Yeah, I think it's absolutely nuts. ♪ I feel like I can rule the world ♪ ♪ I know I can be what I want to ♪ ♪ I put my all in it like no days off ♪ ♪ On the road less travel never looking back ♪ What I find interesting about you is that you went from a kid who was working in a deli, almost failed out of high school, to now you've built a company that is worth $20 billion.

In all honesty, I try not to focus on the number, because if you focus on it, it sort of seems obscene, and then you're like, well, I've done a lot already, I pat myself on the back, but I think we're pretty early in what we're doing. And so I just try not to think about it and just sort of look at the problem ahead and put one foot in front of the other. Yeah, we started this thing six and a half years ago, there's still a lot of work to do.

Yeah, I remember, because you may not remember this, but we were on a phone call, and I was like, hey, this is a great idea, I'd love to invest. And you were like, ah, I don't know, we got kind of, it's already full. And I was like, oh, but I'm such a great guy. And then you were like, we'll see, and I didn't follow up. And that not following up cost me, cost me dearly. I actually do remember. Say more. I wrote it down in my diary that day.

Grant, what happened from your perspective? Yeah, yeah, you tell the story. Yeah, so what happened? I mean, whenever you're like one of the, we've had rounds where we've been a hot company and we've had rounds where we've not been a hot company. Sort of like seeing the full spectrum of things. And once the rounds closed, all we really want to do is go back to work. So I remember talking to Sean, and I'm like, oh, I should probably follow up with him. And then I just got busy with work and didn't.

And I think, in my head, I sort of felt bad, because I think I should have done something, but I don't know. Well, listen, I've been a fan. I was a fan before. I'm still a fan now. Now I'm just a bitter fan, which is a unique place to be in. And we should explain what the company is, right? You're the founder of Whatnot. What's amazing is you've built a large company in a space that I think most people would have found very small and unusual.

Unusual, it's almost like a stack of unusual behaviors. We'll just give a kind of quick summary, which is if you open up Whatnot today, the app, you'll see people selling all kinds of things. It started off with collectibles and these little Funko dolls, and then opening up packs of cards and stuff like that. But now you can buy anything. Sam, I don't know if you know this. You can buy crazy shit on Whatnot. I bought a crab this morning. It was like a fisherman fishing, and he's like, oh, I got these crabs.

And then he's like, you can buy this crab right now. Bought a crab. He's like, great, it's gonna be sent in the mail to you. Congratulations, Sean. And there's a crab coming my way now. And that's, I don't know what just happened, but I have a crab coming in the mail. The seafood's incredibly good, to be honest. Like, I actually eat it. I eat it like very regularly. It's my favorite category. It better be, because I'm telling my wife I bought internet crab, and I don't know if she wants that to be in the house, but I got internet crabs coming my way.

You saw where it came from. You don't know what you're getting if you go to the supermarket. That's true. That thing came off the boat. Well, the person who was doing it, their profile shows how many they've sold, and it says 3,300. Her username's a shout-out to ilovecrabs. So ilovecrabs, she sold 3,300. Yeah, this crab pack I bought, whatever, is $34. She's made over 100 grand selling crabs on the internet. Like, this is unbelievable. Yeah, last week I had a full crab boil brought to you by whatnot.

I can't tell if Sam is dumbfounded or his internet connection has dropped. He's made the same face for the last 30 seconds. I want crab, but I don't understand how on earth you could start something like this, because a marketplace like this seems like probably the hardest business to start. I think marketplaces are probably the most durable and also the most challenging. And when Sean originally told me this idea, it might've been four years ago. You might've been two years in. I'm like, yeah, that sounds cool, but these are impossible.

How did you get your first, let's say, 1,000 sellers to even use the thing? Because I'd imagine that's harder, sellers, not buyers. Yeah, I mean, in the early days, it was all sort of hard. I think for us, the reason we did it is because me and Logan, who started it, we'd only ever spent our careers in consumer internet and working on two-sided platforms and marketplaces. So the idea of starting a B2B business sounded way more painful than starting a consumer marketplace to us, just because of what we knew.

When we first got started, we didn't even have the live component. And so we had to get immensely creative. And so initially, we had a value prop of we'd authenticate whatever was sold. Can you do it like a movie scene? So you and Logan, you're sitting somewhere, you have an idea. Who says the idea? Where are you? What happened? And then how long from there to the first go live? So there's sort of like two founding stories, depending on if you talk to Logan or you talk to me.

They're both technically true. So I'll go back to the first one, because Logan will be annoyed if I don't tell it, which is Logan and I are in Japan over the holidays. And we were both sort of fed up with our jobs. And we'd both built companies before. So we prefer to sort of like focus on building things. And we're drinking in a bar in Tokyo. We're like, let's start a business. And we bought like 50 domains. And we knew we were gonna, we were like, let's start a marketplace business.

And we bought all these like random domains. Did you have an idea or just straight to the domain? You know, you're drinking in a bar. And so it's like, one of our initial ideas, which we did actually sort of do for a couple weeks, was we'll build like a better full service, which is a horrific business idea, by the way. But that's what we initially started with. That's like in the starter pack of entrepreneurs. It's like Craigslist is so ugly, I could do better. Yeah, the economics just don't make any sense, right?

And so you're selling all these used goods that are basically worth nothing, but you need to be able to spend a bunch of money in order to make the user experience of Craigslist better, like be able to do. So sort of like, I'll give you an example. I've talked to hundreds of entrepreneurs on this podcast and I've got a bunch of takeaways, but one of the big ones, one of them that shocks a lot of the people out there who are product nerds, which frankly, I am myself, is that oftentimes in order to turn something that's going kind of good into something that's absolutely amazing is to fix the marketing, not the product.

And in particular, fix how many people know about the product. That's like the big thing. It's called attention. Say it with me, attention. And so this team at Starter Story, they put together a free guide. They call it the $1 million attention guide. It's this pretty amazing 39-page document that's filled with 15 tactics to get eyeballs on what you are building. And so there's even a 30-minute recording from Pat, who's the founder of Starter Story. He has interviewed hundreds and hundreds of entrepreneurs, so he's able to put this together, do a bunch of research and experience.

And so if you're interested in getting more attention, which frankly, you should be, everyone should be, then you should click the link below in the description or scan the QR code right here. You know, we're in Tokyo, we buy these domains. Some of the domains are like random domains we're gonna use to like SEO hack, like used Peloton and, you know, you name it. Like we've had like 50 domains. We were sort of growth hacking our way into the business, even at that stage. So anyways, then it comes to sort of like fall of 2019, and we were sort of like, all right, we're gonna make the plunge.

Logan left his job, started to work on what became whatnot. And the early division of labor was sort of like, Logan's gonna build it, and then I'm gonna like do everything else. And so we're like, all right, we're on the full service Craigslist. And one of the bits of full service Craigslist was gonna be like, we're gonna be able to do deliveries. And so I'm like, all right, let's go figure out. I did like the envelope on, you know, on an app can be like, yeah, maybe they're there.

And then I start calling all the delivery companies. So I go on LinkedIn and I LinkedIn all of these people who run delivery businesses, like the guy who runs delivery at Bob's Discount Furniture, the guy who runs delivery at like all these other companies. And I take calls with me, I'm like, how much does a delivery cost at scale? And so like, how much is each leg and how efficient is it? And they were nice enough, they sort of told me. And with after doing two of those calls, like this just doesn't work, like the cost per delivery relative to the value added on the used item is just, there's no margin there for the business.

Then I'm like, oh shit, need to find something else to do. And at that point in time, it was Logan. We brought on an engineer already and then we had half a designer. So the team was sort of like three and a half people. Can you give a little perspective to your financial situation? Because we have a lot of entrepreneurs to listen, but we have a lot of people who want to start. So like, you're talking about hiring people already. Did you have funding or did you just have like $100,000 saved up?

What was your financial situation to do that? Yeah, probably, I don't know, a hundred, $200,000 in the bank. Okay. Not including my 401k. Did you wire that over to the company? And you're like, all right, now we have $200,000. That's what we can hire with. Check by check. I just started to go like, the implicit agreement was, I'd be willing to spend up to that amount of money doing the business before I raise money. And so like what we did early on. So our first engineer was actually based in Brazil.

It was a guy that Logan used to work with and had known really well, who was like super talented, but he's in Brazil. And so it's much more cost-effective there. He's kind of difficult to work with. So he's like really talented, but really challenging to work with. So you can get them on the cheap and then you give them some good equity. And then the designer, we just gave him equity. We're like, do the branding, do all of our designs. We'll give you equity in the business, which obviously has turned out well for both of those folks.

And so, yeah, we're sort of doing that 24 hours until like doing diligence on delivery costs. I'm like, oh shit, we have to change this business. And by the way, they're building it. So we have, even to this day, we try and have an immense bias to action because you just learn things by doing things. So even if you're wrong, as long as you're willing to admit you're wrong and then change direction, it's totally fine. So Logan and Gustavo were building the backend, like the order system and some of the front end and go everyone, hey, everyone, I don't think this idea is gonna work.

I'm gonna try and find something else. We're like, it's okay. We got to build a payment system anyway. So as long as we're doing a marketplace, we'll keep building. Which we're like, all right, yeah, we'll still do that. And then I was just going around the internet looking for other marketplaces that I thought were really broken. And I kept coming back to eBay, which is, you know, back in the day, I used to sell on Yahoo Auctions and eBay. It was like prepayment processing online. It was Pokemon cards.

And so- You recognize this bad boy? I don't know if you can see it. Is that the holographic Chansey? It's a holographic Chansey. This is your- You guys did your diligence. I bought this off you 20 years ago. Our paths crossed. I bought this for $10. Yeah, I remember that $10 money order. Definitely one of those like, making money as a first time when you're a kid, and like- It's the best. Something special about that, yeah. So I kept on, you know, going through marketplaces and coming back to eBay, and then like everything that was trending on eBay was collectibles.

And I could see all my friends were getting back in the collectibles. And then me and Logan start making trips to all of the comic book shops in LA. And they're like packed. They're full of Funko Pops. And so I go over and got this amazing idea. We're gonna go and change and build a collectibles marketplace. And let's focus on Funko Pops. And here's all of the reasons. Well, what were the reasons? Because the way that you're describing this is very unsophisticated. And maybe it was that unsophisticated.

Because like if a normal person's, they'd be like, well, eBay seems like they're doing collectibles pretty good. Like a marketplace is, I would imagine, all about liquidity, meaning the perfect amount of buyers and sellers and there's stuff there. And so like what was the metric or the signal where you said this is actually attainable? Or was it just, I wanna build a business, this might work, let's just see what happens? It was probably a little bit of both. The initial sort of data or research we used to inform it was at that point in time, you could pull the sales by every single category on eBay.

There was a tool, I think it was called Terapeak. And we went across every single collectibles category and plotted the sales and collectibles through time and how it was growing. And in every one of these categories was like going gangbusters. So there's clearly a broader trend happening in the market. And when you looked at it then, there were more Funkos being sold on eBay than comic books, which is one of the reasons we ended up choosing comics, or sorry, Funkos over say comics or a bunch of the other categories.

It was between Funko and Pokemon were the first two categories. There's demand, people wanna buy used Funkos. Yeah, there's huge demand. And then the sort of taste element of it was, we just felt like the product hadn't changed in 20 years materially, and it felt like it should. And when we thought there was something around social, we didn't really know what it was, but we just sort of felt there was a, with sort of this broader trend in collectibles, which was really driven by people our age who had money, getting back into things that were nostalgic from childhood.

And the fact that there just hadn't been a lot of innovation in the space that probably should have had more innovation. And we could sort of squint and imagine there's a much better social experience around this where you discover new things, where you chat with people who are into the same things as you. And then we, yeah, we just took a leap of faith. When we started the company, one of the things we always said is we're not a sort of vision driven company, so we're a user driven company.

So we were never beholden to like our idea needing to be like the idea. We were always going to try the thing, make sure we were building a great user experience, and if users didn't love it, we were always willing to just change. Why do you think that's important? Because I think the media, movies, TV, magazines, they love the visionary founder, the one who saw it before anybody else. And it's sexy, as the founder, you also want to be the visionary founder. And the most iconic founders, Steve Jobs was, I would say that was like, the attribute that was associated with him was this sort of like taste.

People don't know what they want, but I will see what they want. I know what I'll do. I'll put a thousand songs in their pocket, that sort of thing. Why do you think it's important to kind of highlight the other way? When we said we were sort of a customer driven versus vision driven company, it didn't mean that we didn't think there wasn't any value in having an idea for how you want to build the future. You have to know which direction you're heading in. It was more of this idea though, that no matter what it starts and begins with the customer, if you have this amazing idea for something and customers do not want it.

that, you're dead to rights. And so if you're thinking about stack ranking these things in terms of what matters and what is of greater importance, of course, it's the customer, no matter how great your vision is. And I think one of my lessons that's been even more solidified from running Whatnot is stories are sort of BS. A lot of stories in terms of business are really a mechanism to convince people to follow you versus something of real substance. The things that matter actually have much, much, much more depth to them.

And so I think the visionary founder just sounds good. What would be an example of a kind of popular myth, but the actual substance is something different? What would be an example? I'll give you some in the context of Whatnot where things that just like in the early days sort of feel better, but actually, you dissect these things, they should have worked in a different way. So one of the things like really early on with Whatnot was investors were very nervous to invest in a Funko Pop company.

So there was a point in time when we launched our first live auctions product and we're growing like 100% month over month. And we talked to a lot of the well-known investors and they're like, Funkos, I don't know about that. That's a small market. Investors want to invest in these big, giant markets and look at how big Apple is and Google is. But the reality is when you dissect history, all of those companies started in an incredibly small area. And almost every great company starts an incredibly niche or small area and then takes that and catapults it forward.

Because if you're a four person company like we were in the early days, you can't compete in a mass market. It's almost impossible to drive a ton of consumer value in a mass market. So instead, what you have to do is you have to compete in a small market, build a really great user experience for a smaller subset of people and then expand it. Isn't that how eBay also started? It wasn't the first thing like a Pez dispenser, but then wasn't it like, weren't they also very niche at the beginning?

They were incredibly niche. I think that the real story from what I've gathered from folks, so there's two founding stories there too. One is allegedly made up for PR, which was the Pez dispenser one. The real one was like the first item sold on eBay was a broken laser pointer, a sold to a broken laser pointer collector. And the PR just didn't want eBay to be known for like broken junk. And so told the Pez dispenser story. But yeah, there's a lot of these things that like at first service value, a thing sounds good, but actually there's a lot of specificity to doing it right.

So don't go after big markets, don't hire big fancy executives, don't necessarily hire people because they've worked at big fancy companies. There's all these things that sort of at surface level sound good, which are actually largely incorrect. The PayPal story is kind of like this, right? So you have, Elon has his vision for X and he's like, it's going to do everything a bank does on the internet. It's going to be lending, it's going to be mortgages, it's going to be checking accounts, savings accounts. And that's what the vision was for that.

And then here was PayPal, this little tool for eBay sellers, it's like this kind of the niche within the niche. And he kind of resisted it actually for a little while. And then they finally kind of gave in and was like, well, that's what the users, that's where the demand is. That's what the users want this for. And like, of course now PayPal can do a lot more than it did when it started, but it went after that very small market initially and finally rejected the founder vision idea going in.

There's always exceptions to the rule. So I never say, you know, definitively, that's the way to do it. But I can tell you in that every consumer success case that I'm aware of, the pathway looked like that. Trey Lockerbie I'm looking at the March 2020 web archive. I think, how into the company are you in March 2020? Elon Musk It's like four months in. Trey Lockerbie Okay. I'm looking at the website on web archive. It looks pretty good. It says, browse fandoms. So I guess that means like different niches of Funko.

So you can look at sports, Star Wars, Rick and Morty. And if you click on it, I'm not sure if it will show you, but it looks like you have sellers on there. You're only four or five months in, but it looks like a lot of sellers are on there actually. And it even has staff picks, like you guys are curating some cool ones. How many sellers were actually on there and how did you convince them? And also feel free to admit if there's any black tactics there.

There's a statute of limitations. Yeah. Preston Pysh Hey, let's take a quick break. You know that feeling when strategy is done, the brief is written, everyone's aligned, and you realize someone still has to sit down and actually create all the content? That someone is usually you and it's due tomorrow. Well, the breeze assistant from HubSpot can help. It works right inside HubSpot. You can draft a campaign copy, blog posts, emails, all in your brand voice, all using your actual customer data. So you don't create just content, you create content that converts.

Check out HubSpot.com, the agentic customer platform for growing businesses. There's some unique tactics at play. I think by March 2020, we probably did have in the hundreds or maybe 1,000 sellers at that point. So the way we got things going is so classically with a marketplace, you have a chicken egg problem. How do you get sellers if you don't have buyers? How do you get buyers if you don't have sellers? So the way you solve that is you solve for one side of the equation. And so we were initially the seller on whatnot.

And so all of the early inventory was us. Now, obviously, we can't own 28,000 Funko's. So what we did is we would go and authenticate them. And by doing that, that gave us additional value to add to the customer. And then when someone would purchase them, we'd go and buy it from a number of like 100 different stores online. I have like a team of people in Brazil who would help me hunt down the right Funko Pops. Oh, so they didn't exist then. It was just photos of them.

And you're like, but I'll go out, find them, and I'll buy them. Yeah. I mean, it was a little more, there's a little bit more to it than that. So one of the things that we did, I don't know, there's like 100,000 Funko Pops out there. It's like an obscene number of Funko Pops. And so you do have to be able to secure them and secure them at a reasonable price and be able to price them at a reasonable price. And so we ended up having to build a pricing algorithm.

We basically scraped all of the sites that had various Funko Pops and then looked at the amount of liquidity in each version of the Funko Pop. And based upon, we'd sort of set a liquidity floor, because if that thing had like one liquidity, one sold over a 90-day period, you're never gonna be able to secure it. I forget what the liquidity floor was now, but let's just say you had to sell 10 over a 30-day period. We'd use the past 10 sales plus the amount of liquidity per item to then be able to price it at a reasonable price, such that we could then go and resell it authenticated, and then make sure we could actually secure it from one of the sites.

And then did you buy Google Ads for the buyer? Were you buying Google Ads or posting on Reddit or something to get the buyers? There's two tactics that we initially used. So tactic number one was we partnered with a bunch of the Funko Pop influencers on YouTube. So I can remember in December calling up every Funko Pop influencer and they're like, who is this company? I don't trust you. I found someone that I knew from prior world to work with, and that was sort of the starting place.

So that was tactic number one. Then tactic number two was we built this sort of viral Funko Pop giveaway mechanic in the app. So if you're into collecting anything, the thing that you most want to collect are like the Grails or the Chases. So if you're into sports card, maybe that's rookie Tops Chrome LeBron. If you're into Funko, maybe that's like the Tony the Tiger flock Funko Pop. And what we would do is once a week, we'd give away like a $500, $1,000 Funko Pop. And in order to be able to enter, you would have to share.

And we sort of built these mechanics where you could sort of have like unlimited sharing. So someone could sign up with your referral link. Someone could sign up with your code. You could share it on Twitter. You could share it on Instagram. And each time someone used your link or your code, they would get an extra ticket in the raffle. So it gave this like, it sort of encouraged everyone who wanted to win it to share it with everyone that they knew and keep on sharing it.

And so we basically took over all the Funko Pop subreddits, Facebook groups, et cetera, because we were giving away the best stuff. This is basically stuff. This is gritty internet entrepreneurship stuff that everyone, Sean and me, everyone listening who has an internet business, everyone has done something where it's like, ah, we're just going to like do this and do this. And maybe I won't want to tell everyone like 10 years looking back. So it's really cool to see that that was only six years ago. Now you're worth $20 billion.

It even extends. We had Mike Posner, the music artist who did I Took a Pill and Ibiza on. And I think a lot of people didn't even listen to the episode because it's like, oh, it's like a musical artist on our business show. But he had this amazing story that was just like any other entrepreneur where he was in college when he was trying to be an artist. So he realized he could post onto, he wanted to be on the top of the charts of iTunes, but that's where like Jay-Z and Rihanna, whoever were at the top.

He realized iTunes had a iTunes U section for like college lectures. So he's a student. So he called the guy, he hustled to find the guy who controls that board. He's like, I'm a student. Can I upload audio to that? And he became the number one on iTunes U. Then he emailed all these campuses being like, I'm number one on iTunes, parentheses, U. People didn't realize the distinction. He got booked for gigs. And then he had all his friends at other colleges and fraternities. He was in a fraternity.

So he said, great, everyone in this same fraternity in every college on this day, change your profile picture to this picture just to create some mystery. Like what is that? And then people went and hunted down that, oh, it's about this album release. And that was the start of his music career. He growth hacked his way to success there too. And I love these stories. As a founder, the front door is not always the only way in. Yeah. My theory has always been the same, which is if you try and copy the obvious pathways, you're basically going to get stonewalled because you don't have the resources.

In the early days, everyone wants to spend a ton of money on paid ads. We spent virtually no money on paid ads in the early days. It was never going to be an effective acquisition channel for us. We spend an obscene amount of money on paid ads today. But you have to get your way there. And each step of the way sort of unlocks new and interesting things. But I do think in the early days, you have to find unique advantages that other people aren't going to be able to leverage.

Do you remember when you first started doing the Grails giveaway? Because some part of you has got to be nervous. You're giving away things that are worth thousands of dollars. Did it work right away? Did it take a few tries? Do you remember the math? The first time it worked, were you like, holy shit, this is like 10 cents a user or whatever. Could you take us back? Yeah, I do remember. The first one was definitely a flop. So we gave away this $500 item. And I think there were 104 entries total in the raffle.

Maybe that's like 30 or 40 accounts or something like that, and no one purchased anything. Which we're like, uh-oh. And we had no money for the business back then. It was all coming out of my bank account. So like, oh, this is painful. And I'm not working. So the bank account's dwindling at that point. Yeah, I think there's always just a sweet spot between when do you know a thing's actually... When have you proven a thing wrong that it's not going to work? And when have you given it enough legs to make it work?

And so for us, it was like, okay, well, now we have all those accounts who joined, and we can send a push notification. And when we do the next one, and then the next one, they're going to be encouraged to share out to more people. And so if we can see that in the next one, we can go from like 100 to 300, maybe there's a pathway there. And so I forget what the second one is. 250 sort of rings to mind. So maybe it wasn't exactly 3x, but it's 2.5x.

And so you start to get this exponential on it, and then you can sort of make the math work. Was the number of sellers, like the metric where you're like, we need more sellers, more sellers, more sellers? Well, back then, it was just us as the seller. And what we were trying to do is we were trying to build a buyer base, because we couldn't add any seller other than us, because no one was going to purchase anything from any of the new sellers, and they weren't going to stick around.

And so the early days was about getting enough demand on the platform, such that we could open up selling. And so I think we launched the platform in December 2019 was when we launched our app. And then we didn't open it up to our first seller until I think towards the end of February was when we started to have enough demand in the marketplace. And even then, we did another hack, which was anytime a seller would come on, whatnot, they'd get our audience. And then we figured out a way to cross-list it across other marketplaces using our whatnot account.

Which is like another classic thing, right? That's what Airbnb did. That's what a lot of people did. That's what I did when I had a miniature marketplace. You post on Craigslist. Yeah. And so between our demand plus the demand for other marketplaces, we got to a place where we were able to retain sellers and then slowly get that flywheel spinning. And it probably didn't take a lot. It's probably like if you just get a sale within the first X hours or days, you'll stick around. Did you find some metric like that?

I think our data was too sparse. And we were just like, I don't know, let's just try and get them as many sales as we can so that people stick around. It took us a long time to get the precision around the metrics that mattered and retained and kept people coming back. We definitely weren't that sophisticated back then. How many transactions happened in the first 12 months? And did that account for any meaningful revenue to you guys at all? So sort of the journey for us was December 2019, we started it.

And I bet you we did 30 sales. Pretty grim numbers. 30 in the first month? 30 sales. Yeah. That's pretty exciting. One a day. That's exciting. Yeah. So the way it actually went was the first week of December, which was the first time we were all full time on whatnot, was one sale. And the second week of December was one sale. And then I managed to work with a Funko Pop influencer the third week of December. And then we got like 30 sales, something like that.

of them we priced incorrectly. So there's a bunch of the sales where people finding mispricings in our algorithm and taking us to the cleaners. It's like selling a $500 Funko Pop for $150 because the liquidity bit of the equation wasn't very good. So that was December. And then in July of 2020 is when we launched our first version of Alive. And that's when the business really started. Where did that insight come from? Because it sounds like the insight for Funko came from looking at data and trends on eBay.

The second big insight, which was live selling, where'd that come from? So when we first started the business in January, we went through Y Combinator. So originally we were in LA and went up to San Francisco to go to Y Combinator. And we thought we were doing well, the business was growing, etc. And then we went to fundraise in the middle of COVID as a Funko Pop marketplace. Everyone hated our business. By the way, why did YC bet on you? God damn, YC's good that they bet on you guys when nobody else would, one month into a Funko Pop marketplace.

What the hell did they see? They were very smart, to be honest. And they bet on us many times throughout our journey. When the business started to take off, they were tremendously helpful and helped put in more money into the business ahead of when many of the other investors, who you would know their names, were passing. The thing we were really good at and are still pretty good at is we have pretty good taste, and we know how to execute. And so if ever we said we were going to do a thing, we did the thing.

But that first YC interview is 15 minutes. What could you have shown them in that first 15 minutes? I don't know, they either flip a coin. We had pretty good backgrounds relative to what we were doing. I see. Wait, that's a funny line. We had good backgrounds relative, meaning, there's no way someone this smart is working on something so silly. Surely, that's a sign. Well, I guess Logan was running engineering at pretty large resale marketplaces. I worked at Facebook. I worked at YouTube. I'd started a company before, got acquihired.

We weren't hugely known commodities, but clearly had a background for doing things. We built our product for the YC interview in a week. We built it and launched it and pushed it live so that we had something and could talk about real stuff that we had done. So yeah, we just went all in. You want to hear my notes from when I talked to Grant and I was looking at investing? By the way, these are my personal notes. Looks like a soccer dad. Quiet intensity, humble confidence.

He seems like a serious person who's actually doing this. I don't know. Those are my things that I wrote. I love the ending. I wrote, winner energy, we should invest. Soccer dad, huh? He only heard one thing. I knew he would only hear the one thing. Get him, Grant. Don't take that shit. I like that. But dude, the reason why I'm being kind of naggy about timelines is because you're describing being like, my bank's dwindling. I'm just trying to make this work. We only got 30 transactions in the first month.

But what's insane is that I think it's something like 20 months later, you raised money at a billion-dollar valuation. Is that right? That's probably about right, yeah. So the rate of growth is astounding here. Do you remember, how much funding did you raise? And how many employees did you have at the time? So we came out of YC. We raised probably $250,000 out of YC, maybe a little bit less. It was a bunch of people who knew me and felt bad for me. Maybe they were like scout checks and some stuff like that.

So I think we had a few hundred thousand dollars in the bank. At that point, we brought in one more engineer. And then before our seed round, we probably got to like six and a half folks. So March, when we came out of YC, we did probably $20,000 to $25,000 in sales, total transaction volume. Then we did our seed round in, I want to say like August or September. That was sort of like the business started to inflect when we launched live. Like growth went to like 100-plus percent month over month.

And probably in September, we did $250,000 to $300,000 in sales. So it's like 10x. That's gross volume. Yeah, our take is probably like 10% of that. Then, you know, continued to inflect up. By December of 2020, we sort of ended the year at $2.3 million in total sales. And the number of employees in the business would have been, I think, about 17 or 18. Then we closed the following year. Then we closed the following year at $168 million. $2 million to $100 million plus. $163 million.

And we would have closed that year at about 100 employees. Wow. So 10x employees too. And then, so the following year, we did a billion in sales. What happened? How did you go from $2 million to $163 million, $163 million to $1 billion? What happened? The core live experience we built. This is really fun. And on the seller side, you know, transformational for business building. And so if you're a seller, what was happening to you was you were very quickly starting on whatnot. And again, it's not for everyone, but for, you know, a lot of the people who invested deeply and tried to build a really large business, whatnot was a bigger channel than anything else you'd done.

And that was also a time like this is during COVID. And so you'd have people like, hey, I had a comic book shop and people stopped coming in. Now I'm on whatnot and my comic book shop is doing more sales on whatnot than it ever did in the physical brick and mortar shop. I'm closing down my brick and mortar shop. You had the COVID forces everything online, but then you had the benefit of if I'm selling a niche thing, I'm going to find more buyers when I use the sea of the internet versus just whoever's in a five mile radius, 10 mile radius of wherever my shop is.

So that helped for sure in that first year. Yeah, I mean, COVID definitely helped, but you know, our business has continued to do, you know, incredibly well throughout COVID. So I think anyways, the core value was there. And then I think we had a really good team. It's like the first 30 people we hired at whatnot are lights out good. And we knew we figured out how to... Like the big unlock was sort of how do you launch multiple categories? And what is the mechanism for doing that fast?

And as you start to launch multiple categories on Marketplace, people in each one of those categories start to cross pollinate. And everything that you had working in one category sort of compounds across all the categories. What did you have to change about your personality to grow? Because you went from being a very scrappy guy doing everything to being the CEO of a company that's worth a billion plus dollars. What had to... You've just compressed a lot of personal growth in a very short amount of time, I'd imagine.

I think probably people overemphasize the like, I need to change because I'm a leader of a large organization. Because I think they look at certain models of what success looks like at really large companies. And those are sort of like stoic, slightly stilted people who operate in a corporate manner. And there are definitely things that you have to learn and adjust as you go. But I would say I actually just generally try and be me. And the nuances to that, of course, though are... And by the way, I had to learn this.

I thought I would have to change more. I think one of the mistakes we made early on in the business was just trying to be too corporate, for lack of a better word, which is like hire some executives from well-known companies, hire people from well-known companies. And it's sort of like one of those things where the story sounds good, but the reality is often a lot different. Because you'd sort of go like, oh, you ran such and such at this big company, you must know what you're doing.

And that actually turns out to be like broadly incorrect. Like, no, someone needs to know and be able to sort of articulate in specific detail what they're doing and how they're doing it. So one of the biggest lessons that I've learned through the history of whatnot is to just be really maniacally focused on what the problems and opportunities are. And don't let anyone necessarily tell me what the right pathway is into those problems. Because running whatnot, I tend to have a much, and my team has a much better grasp of what the nuance and context around those things is.

And so be focused on what we're trying to achieve, and then be really, really nimble around how to achieve it, as long as we know the details around it. Okay, now back to your question, what do I have to learn and change? So one was actually not to change too much, because actually, we're pretty good at what we do. Again, we got really lucky, but there's also a reason we were able to take advantage of the luck. Then the things that I had to personally adjust is, the company's 1400 people today, as an example.

And you do need really good systems and process to run a company at this scale. And so you have to learn how to like, one of the products you end up building is, I call it my operating system, how do I run the company to make sure that we're moving in the right direction, we're making good decisions, and we're executing it really fast pace. So I had to learn how to construct an operating rhythm across the business. There were certain points in time in the business where the accountability wasn't high in enough, growth drifted, people's focus drifted, and we had to fix that.

We're a pretty straightforward group of people. We always have been. If you went into the early slack of whatnot, when someone did bad work, we'd be like, you did bad work, this is bad, let's fix it. And as you get bigger, the 1400 people at whatnot, there's a bunch of people who sort of know me as the person on Zoom they've seen in a team meeting and a title that would scare people. And so I've had to soften my approach to try and get the best out of people.

And again, because we always want to get the best out of people, you want to get the best work, you know, what would have worked in the early days, be like, yo, this sucks. We got to do better. Someone might cry today. If I do that, we don't want anyone to cry. And so you just sort of have to like, know how to flex a little. Again, you don't want to be dishonest, and you don't want to be like this fake person, but you have to know how to flex, get the best out of people.

I think those are probably my biggest things is just like, be maniacally focused on the problem. Be conscious of the context and around how other people are going to view things and adjust that to make sure you're getting the best out of people in the company. There's so much corporate gobbledygook from people. I think most of it's bullshit. It's all about like, what's your problem? How do you solve your problem? How do you do it in the best way? You, we've kind of coined this term.

We call it like, aw shucks success. Like if you read Warren Buffett's book, you learn that even though he has this attitude that he, this image that he's like, oh, I just, you know, I just hold forever. And I just buy good companies. And you're like, oh, anyone can do it. And then you read about them and you're like, oh, well, you were a math prodigy at a very young age. And you've been like, you're just super high IQ and patient. And you have this beautiful temperament.

With you, you have that same thing where you sort of are like, you kind of have this Canadian Midwestern energy where you're like, you know, we're just, I think we just made decent decisions and we got a little bit lucky. And then, but the reality is, is that there's like personality traits or something underneath there that is like world class. And it's very clear you have that. What would you say your reports would say or investors would say this guy's world class at blank? I think one of the coming back to like my distaste in stories, one of the faults in human behavior is people tend to follow stories and they tend to follow other human beings.

One of the things that I consider myself lucky with is I've obviously learned a shrine has been over six and a half years, but I was put in this situation and there will be plenty of other people if they were put in the right set of situations would be able to learn. So that's, you know, the luck element. The things that I, I think we're, we're pretty good at are getting to the root. So when you like what is actually happening here and how do we know?

So seeking the truth maybe as a, as a, as a simple form. And so one of the things that always breaks at whatnot is our discovery systems as the company grows and grows and grows, you get more and more supply and you're balancing all sorts of like competing objectives. You got to make comic books succeed and you got to make women's fashion succeed. You got to make fresh food succeed and you got to make the UK succeed. And we have this feed that recommends people all of these things.

And our discovery team is very studious. They'll go really deep in the data. They'll AB test a bunch of things. I'll see something, a metric go down in the business. And I'm like, this looks like a discovery problem. I've seen this before. I'll talk to the team team. Like, no, we tested it. We know exactly what's happening. I'm like, now, how do you know exactly what's happening? Walk me through every little thing in the system. So what's happening to this seller? Have you gone and looked at every individual seller?

How impressions have changed for that seller? How that's happened across category? How it's happened across country? How many lost this much in impressions? How many gained this many? Because just because the AB test, as an example, so AB tests are notoriously bad on network systems. So if you like AB test a thing, you change the feed, which means you change what users see. And then people all of a sudden start to go into different streams. As they start to go into different streams, the sellers will behave in different ways, which means you pollute both sides of your AB test, as an example.

There's an example where we start going through all this and we sort of get to the bottom. We dissect every bit of seller behavior and like, okay, well, maybe these sellers, their discovery changed a little bit, but these ones increased and increased engagement. I'm like, well, I'm looking at the metrics. The metrics say everything went down on a macro level, even if it's not in your AB test. How do you actually know that? Then we plot the elasticity curves of those sellers. We actually see that there are certain parts of the platform where if you, even if you improve buyer engagement, if you take away certain impressions from certain sellers, their businesses shrink more than the engagement increases it.

And so you have to look at these things on much larger time horizons and in different ways and so, you know the A classic way someone would approach that problem particularly a lot of our ranking companies are like social media companies Look at near-term engagement And you go, okay, of course, you're right You've done this before you've worked at facebook and google and wherever and I would go like I don't think how do you actually know? That everything's a little bit different Let's go all the way to the bottom and then we unearth like an incredible insight that will shape our discovery systems for the future So that would be like the example of like just going immensely deep into the problem I love how like two minutes ago.

You were like business is not that complicated And then you're like so we have you know, our sellers in our fresh food department So we plotted the elasticity curve, you know, it's like yeah, super simple beanie. We do the same thing. Yeah, it's great You sort of answered the question in a way where your answer is probably true You are world-class at that but the real answer is the way that you answered it You're just I think you are very smart and more so your rate of learning seems very very very high Yeah, look you you do have to learn fast But even even what I just described to you if you whittle it down to simple components All elasticity curves is is like what happens to a seller when you increase their viewership and then you decrease their viewership how much does their business grow and that's like, you know, if you're if you're running a platform where you Have a feed and you're sort of directing traffic around things It's probably a thing you should know and it's just it sounds more complicated usually less dizzy but actually like How much do businesses grow and shrink subject to the number of buyers that you throw in there put in their feed?

One of the things that tends to happen, you know, we hire all these smart people in tech there's all these like smart people they went to like all these fancy schools and What have you? And they like to be smart. They like to sound smart So they use big words and and the big words will just like obscure a bunch of things and so Off my job oftentimes is to try and get to like the simple sets of truth around things What is the simple sets of things what do we know and how do we know it?

And so if you start to use a bunch of fancy words, i'm going to make you explain it to you like i'm in you know, uh in middle school And if you can't explain it to me like i'm in middle school You probably actually don't know what you're talking about And I just will keep going and going and going until it can be explained. Uh, I love that I when I so we got acquired by twitch and I got to be at twitch for a couple.

Yeah, two years and uh, You know, I didn't I probably learned Uh many things some things not to do in the company some things, you know to do But one of the most important to do's was emmet was like this he would sit in these meetings and something, you know team would come in and they would say something and he would Ask them this exactly. Well, what do you mean? How do we know that? What does that mean? So no, what exactly did we do? Why why do we think that that was the right thing to do very simple questions questions, you know At a second grade reading level And then the answer would come back at a phd level then he would bring them back down.

No, no, hold on hold on hold on let's Walk me through this and then by the you know within 15 minutes. They've sort of been undressed You could realize they don't know they themselves don't know what the hell they're talking about They weren't trying to mislead. They just didn't really themselves get to the root of it Um, and everybody was taking things at face value and it was leading to bad decisions I loved it. I was like, this is amazing This is like this is finally like, you know, the the best work is happening in those sessions most people in the company hated it and they used to give them feedback all the time that this sort of Socratic method of of sort of debating almost like semantics and getting down to like the base level of things like talking in binary basically I do that with my wife i'm like Were you thinking of me when you made this meal because you know, I don't like zucchini No, I just want to know Uh, but anyways, I loved it and I it almost gave me I like that you said it here because When I saw him doing that and in a way gave me permission That like I didn't really fully do before that meaning a I didn't want to be a jerk But b I didn't want to be an idiot hired all these smart people.

They're telling me things that sound smart maybe I shouldn't get caught up trying to like Get you know base level understanding of this myself. And what I realized was no, no, no, that was actually a very good Value virtue to have inside of a company and when people knew that they showed up very differently to every meeting After the first few times that it happens Yeah, I think um one of the things that we've tried to do here is We try really hard for the culture to be about getting to the right answer and so If we find people sort of recoil From that we'll give them feedback and when I hire executives They I will let them know up front.

They're not beyond reproach Their methods are At best sort of neutral when they come in And so we've we've sort of built this team now who likes that way of working who's given Permission to work and seek the truth and go to the bottom And I think that's been I think if you don't have probably both of those It doesn't work. Well now that is a challenge of what we're hiring I don't we have like 500 people this year or something, you know keeping up with that But if you look at like my team of people my team i've been working with most of my team for four plus years now And then most of their teams are pretty similar.

And so you get like a really nice No, this is how we do things here This isn't meant to be mean this isn't meant to like understand the truth because it's quite unnatural to be challenged at that level of detail. Hey, can I ask you about that challenge because I there's two phrases and words that I really dislike one is first principles and two is contrarian Because typically the people who talk about that stuff Are either kind of dumb or they're smart, but they're an asshole when they deliver it You seem smart and you seem like a pretty kind likable guy Was there a person or a book or something that inspired you to be?

Disagreeable, but not rude because it's quite challenging I think for for me what I always try to do is imagine myself in someone else's shoes And imagine when I had certain stuff like this, you know happen to me and What would enable me to do my best work? I'm not saying i'm perfect at this. There are definitely times where I Am not as nice And where I will you know, you know sort of be at the end of my my level of patience I I try to make it few and far between but it happens One of the examples that sticks with me for a lot for a while is And it's actually one of the reasons I ended up leaving Facebook I was in this big product review With a bunch of very well known and very senior people And there was the thing I was bringing to a product review was was a project that I unfortunately got stuck on I did not want to work on And it was one of the most politicized projects across the entire business And you know I put together This thing and I spent boatloads of time because all these freaking vps would never agree with anyone It was just me running in circles like this And you get to the review and the guy who's running every basically just starts yelling at everyone And i'm like, you know what i've been up the past couple weeks till past midnight And I worked like hell on this And no matter who you gave this thing to it was going to be a absolute cluster You know now running my own large organization.

I see what he did wrong. I know what I would do differently But the way that was handled was never going to make me want to do more great work And so I basically at the end of that I was like i'm out of here I'm, not dealing with this And and so I just think about ultimately what you want to do. You want to get good work out of your organization and Being mean nasty or combative Will almost never do it. I know that you don't uh, You kind of said you don't like talking about numbers because you're like there's still a lot to do But of all the people who have done business which is like billions of people There's probably only like three or four or five hundred Who are worth over a billion dollars below the age of 40 and you're one of them?

I think according to forbes you're worth like two or three billion dollars Surely there's been a moment where you're like, this is pretty awesome. Have you had a a moment like that? from from time to time It's it's nice to to reap some of the rewards of what's been built, you know It's really nice to be able to take care of my family and take care of my family properly And yeah, look i'm it's it's not lost on me that that like In six and a half years we've been able to build something, you know, pretty massive Millions of people build businesses or hundreds of thousands of people build businesses on whatnot making billions of dollars You know 1400 people at whatnot a lot of people have been there for the entire journey Um, yeah, you know, it feels good but also I think we still have a lot that we want to do and and again, I I sort of You know you get a little I don't want to get complacent and so from time to time i'll have a you know I'll reflect for about five minutes and be like wow, this is pretty insane.

But then you know, i'm I'm in my 30s still there's 1400 people who came to work at whatnot that I have high accountability for Raised a billion and a half dollars from investors who we have high accountability for and so um You know, it doesn't do me any good Batting myself on the back that doesn't get me to the next step sam I'm gonna start saying that I take care of my family. I take care of my family properly I'll let you figure out what properly means.

I'm just gonna start using that ever. I I enjoyed that one That was good. You said you had a good quote. You said if you think you're moving fast, you're probably not What do you mean by that? Yeah, almost everyone who says they're moving fast is moving slow if i'm being honest if you have to talk about it You're moving to you're moving too slow If you even have time to think about it, you're moving too slow And frankly you can always move faster, right? Today's podcast is brought to you by my friends at mercury.

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Yeah bars of silver bars of gold um Like, you know like from the mine like who what's happening? I mean, you know huge range, um could be anywhere from like a coin shop to You know, there are there are like mints that like mint coins and Cutting out the middleman and just selling direct on whatnot. Is that the kind of the idea? Uh, yeah, some some of them are do you think there's an opportunity like, you know with twitch? For example people built stream labs. They built other like tools and and companies on top to service the Ecosystem that you weren't that the platform wasn't going to build What do you think is a kind of good tool or business that somebody could be doing on top of the growth of whatnot?

Yeah, I mean I think so just stepping back like a macro level I think you're going to see over the next decade that live commerce will be 30 plus percent of all of e-commerce It means there's just like an absolutely enormous market. What is it today? I mean you take the top Three biggest players in the market across like us and europe you're probably around 30 billion Something something like that. Sorry, but just to show the the percent you said it's going to be 30 That means it's currently it's currently at what like how much room do you think there is a single digit percentage?

Okay, so it's got a 5x from here at least I think 20 30 30 x plus okay, and the comp is sort of like what's happened in china and asia So in asia, it's in china. It's about 40 percent of e-commerce And and if you looked at you know, the growth of whatnot the engagement the platform Sort of looked like it said that towards that direction And so, you know, that's that's a market in the hundreds and hundreds if not You know a trillion dollars into the future if you go outside of china and so there's just going to be a there will be a ton of opportunity, so The biggest live shopping businesses are going to like the people who are selling are going to do About billion dollars plus in revenue like our biggest seller probably does a couple hundred million Do you say your biggest seller is doing nine figures well well over yeah many multiple nine figure sellers Selling what?

Collectibles fat, you know, we have brands doing tens of million hundred million in fashion. But are these like, um These are not individuals. These are just like large companies. What is what's going on? Like I guess give us a hero story The best it's probably like the the biggest are people who probably started as like individuals Or maybe like two or three on whatnot and just took advantage and grew it So like the operation the biggest operation that I can think of Started initially as like three or four people It's now probably 150 to 200 people almost completely built on whatnot And they're just like really savvy business people who sort of jumped on the live um shop and train um and build a really large business and so if you you know, if you sort of imagine a future where there's Five, you know three four hundred billion dollars in sales in the u.s.

Off of live There's going to be an immense number of of really large businesses built and like the biggest sellers in in china Will do a billion dollars plus a year as just like an example Um, then there's there's a bunch of peripheral services around there. So one of the things we're starting to see is um, like wholesale marketplaces directly supply Supplying our sellers is a really big opportunity because they need a lot of inventory um, i've i've definitely seen a couple of wholesale marketplaces get pretty substantial fundraisers and uh I know a huge chunk of that growth is off the back of whatnot as an example So I think there's there's a lot of opportunity around helping these people source really great supply And then you're sort of starting to see what they call mcns around this stuff.

So Multi-channel networks, which is a bunch of people who specialize In helping people run their their live shopping businesses So I think all three of those will will probably see a proliferation over the next decade. This is nuts. I you're just I didn't realize I knew what whatnot was I've used it I did not I guess I I'd saw the numbers, but it's kind of like now that I see what you're saying. I'm like This is insane. This is so much bit like originally when Sean first told me about this I had the reaction.

I imagine a lot of people did which is like this is silly. This is small This this is nothing like it like a multi tens of billions at our company But this is insane and I understand why you have helped to lead it there Sam You should start you should start your denim shop on whatnot. Yeah, I buy I buy a ton of I'm a eBay power user I buy a ton of I collect old denim. It's very weird, but I guess I got to start using what not It's a popular popular Segment, do you have any hobbies?

Do you like any weird stuff now that you see all these other weird things that people buy and sell do you have any? Interesting hobbies. I still collect things but you know nothing like obscene I've sort of been collecting type one photos, which are like original photographs That's probably one thing I've been purchasing most recently and then other than that my hobbies are pretty pretty tame I'm Canadian. So I still play hockey Sean. You had a good read on him, man Winter energy I told you Coming on man.

This is fun Yeah, thank you guys for having me as a really fun conversation. You guys made it. It's super fun. Well, thank you We appreciate you. That's it. That's the pot Well, I know I could be what I want to Let's travel never looking back. All right, let's take a quick break. I want to tell you about marketing school It is a podcast that is part of the HubSpot podcast network And it is run by Neil Patel and Eric Su and these guys are both marketers who are running businesses And so if you want real-world tactics from practitioners who are actually out there in the field doing it This is the podcast for you.

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