From Startup to Exit
Welcome to the Startup to Exit podcast where we bring you world-class entrepreneurs and VCs to share their hard-earned success stories and secrets. This podcast has been brought to you by TiE Seattle. TiE is a global non-profit that focuses on fostering entrepreneurship. TiE Seattle offers a range of programs including the GoVertical Startup Creation Weekend, TiE Entrepreneur Institute, and the TiE Seattle Angel Network. We encourage you to become a TiE member so you can gain access to these great programs. To become a member, please visit www.Seattle.tie.org.
From Startup to Exit
The founding of OfferUp, a conversation with OfferUp founder Nick Huzar
Today, we have invited Nick Huzar, the co-founder and former CEO of OfferUp for more than a decade. He is currently operating as a board director, brand evangelist, and advising the CEO on strategic projects. Nick's experience lies in building two-sided marketplaces from the ground up. Through this, he has raised over $380M in financing from leading investors including A16Z, TRowe, Tiger, Allen.co, GGV, Coatue, and more. He is currently focused on simplifying the complexity around climate change via my weekly video podcast @ www.stufftv.org. Additionally, he will ride anything with a board (wake surf, skate, wing foil, snowboard..).
1 in 5 people over the age of 14 used OfferUp in 2021. OfferUp now facilitates billions of dollars in transactions every single month. They most recently branched out from shopping and now have a marketplace for local jobs as well.
Brought to you by TiE Seattle
Hosts: Shirish Nadkarni and Gowri Shankar
Producers: Minee Verma and Eesha Jain
YouTube Channel: https://www.youtube.com/@fromstartuptoexitpodcast
Welcome to the Startup to Exit podcast, where we will bring you world-class entrepreneurs and VCs to share their hard-earned success stories and secrets. This podcast has been brought to you by Thai Seattle. Thai is a global nonprofit that focuses on fostering entrepreneurship. Thai Seattle offers a range of programs including the Go Vertical Startup Creation Weekend, Thai Entrepreneur Institute, and the Thai Seattle Angel Network. We encourage you to become a Thai member so you can gain access to these great programs. To become a member, please visit www.seattle.tai.org.
SPEAKER_02:Good morning or good afternoon or good evening wherever you are. I am Gary Shankar. I'm on the board of Thai Seattle and a serial entrepreneur based in Seattle also. It's a pleasure to start our first podcast. I'm doing this with my co-board member Sherish Natkarni, a serial entrepreneur and a two-time author. And his latest book, Winner Take All, is on Marketplaces. And we are excited to have our first guest today, and Sharish will introduce him. Shirish, great that uh you've written this two, you've written two books now. Now you've become a serial author, not only a serial entrepreneur. Thank you, Shirish. Go ahead.
SPEAKER_03:Thank you, Gauri. Hello, everyone. My name is Shirish Nadkari. I'm a serial entrepreneur and board member of Thai Seattle. We are very pleased to welcome Nickuzar to our show. Nick is the co-founder and former CEO of Offer Up for more than a decade. He is currently operating as a board director, brand evangelist, and as an advisor to the CEO on strategic projects. He's also raised a ton of money, over$380 million in financing from some leading investors like A16Z. And Offerup is a uh huge platform for used goods. It turns out that one in five people over the age of 14 have used OfferUp. And OfferUp now facilitates billions of dollars in transactions every single month. So that's a little bit of background about Offerup and Nick. So welcome, Nick. Thank you for having me.
SPEAKER_01:I look forward to this conversation.
SPEAKER_03:Great. So um let's start by um uh having you tell us a little bit about uh Offerup and its founding. Uh how did you come up with the idea? Um especially given that you know when you started Offer Up, Craigslist was totally the dominant 800 pound gorilla in this market. And he says, you know, once you create network effects, it's very hard to display somebody uh who's the you know the marketplace leader.
SPEAKER_01:Yeah, well I think like most entrepreneurs, I believe that you have to kind of have this this passion for a problem and you can't get it out of your head. And so for me, I had uh just happened to be where I was in my life. I had done startups before. In fact, the startup I had before this, I was sleeping on an air mattress. Like they're a lot of work in the early days. Uh so I had no plans on starting another company. Uh but my wife and I had bought a house and we had a room full of stuff. Most people have like that junk drawer in your house. We have we had one of those two. Uh, but I also had a room full of stuff. And when she said she was pregnant, I go, this is awesome. And I go into dad mode and I'm gonna stand there. I'm in there the doorway of this room and I'm gonna sell all this stuff. And I'm looking at this room saying, This is gonna take me forever to clear this room out using Craigslist. And I looked down at my phone, which is like the first uh my first iPhone was like the second gen iPhone. And I just kept doing like this. I'm like, why can't I just take a picture? Like I have this device in my pocket now. And if you're familiar with life pre-smartphone, uh the option on Craigslist was like 15 minutes, right? You had to take a picture of a camera, you had to tether it up to a piece, you know, computer, then you had to upload it. Uh and so I just thought, like, huh, I think that part could be easier. And then I think I closed the door. I didn't even post anything on Craigslist and I went about my life. I just kind of forgot about it. But it kept nagging at me for months on months on months. And so I'm kind of out there looking for a job because I left my previous startup, and my here I have my wife that's pregnant, I have no income, and she's working at Microsoft. So I didn't want to be a deadbeat dad. I'm like, I have to get a job. But after about five months, and I was already kind of sketching this stuff out, and I kept thinking about, I said, well, I think we're all gonna have these smartphones. Um, and if and I think the cameras are gonna get better, and I think we can look at the problem um and reimagine it. And so if you look at Craigslist, it was built in an era of the PC, which made sense. That's the tools they leveraged. But if you look at the smartphone, you can take all that complexity and make it far more efficient. So my belief was we would have these devices, we could leverage the cameras, we could leverage the maps, we could leverage payments, we could do all these other things and remove a lot of friction. So my belief in the early days was because of this platform shift, we could rethink local commerce as we know it. Um, now most folks in Seattle thought we were nuts. Uh you're like, you're crazy trying to disrupt Craigslist. Nobody's been able to do that. And my my view was I don't care if we convert a single Craigslist user because I I did a lot of homework and talked to a lot of people. And my conclusion was there's a lot of people that just don't use it that much because it's not worth their time or they're scared of the trust and safety, especially women. Women were very scared of using Craigslist. And so um I just felt like, man, we got to go all in on mobile, and we got to be the simplest and most safest way to do local transactions. And so we just built the whole company around that, you know, that belief. And I also like to say at the end of the day, yes, we are definitely a second-hand marketplace, very dominant in that. Long term, though, that was never the vision. My vision was to become the platform for local commerce full stop. Because you think about it, where's all the stuff going? Like, where's all the Amazon stuff going? And what's happening is value is growing all around us. Like our homes are actually getting bigger, we're actually having less kids. A quarter of the US population with two car garages can't even park in their garages anymore. And so that's what I want to get after. Is like I want to remove a lot of friction and do it as as simply as we can, and and as a result, we should unlock value locally. And that's that was the belief 10 years ago. It's still the belief I have today.
SPEAKER_02:Nick, uh, I love the story about sleeping on air mattress. I still advise uh young entrepreneurs you're going to run out of uh liking ramen noodles and air mattress. So you better have a plan that that involves eating real food and real mattress. So I love that story. You know, you and Sharish have a common thread that I'm just picking up on. And um the you both pivoted on mobile. Sharish, you did it for email, right? After your experience with Hotmail, you said, hey, I'll I'll do email. And you pivoted, although he was in a pre-uh smartphone era, uh black uh the BlackBerry era, uh, for those who may remember on the podcast. Um and this uh you pivoted on what was the ubiquitous nature of smartphone, both where hey, if I give information uh on the devices you will you'll carry, right? Uh at that point, uh, even though Craigslist was the 800 pound gorilla, people had used it for very specific points of interest, not for hey, I I just gotta sell this, that, you know, they they hadn't come to that point yet. When uh you in the early days, did you see the momentum as soon as people uh as soon as you introduced it as an app that uh because it's still the app itself the app economy itself was growing? So now what was the inflection you saw in Offrap saying this is real? I there's more for entrepreneurs out there because they all need an inflection point to kind of uh tell themselves, hey, this is the real thing. And sometimes they don't get it, or sometimes they don't see it. What was yours uh in your case at Offra?
SPEAKER_01:Yeah, I mean I think it was in the early days. You're trying to, you're you know, the first chapter is always product market fit. And so what you know, we took a year, uh, me and my co-founder, and I think we found, you know, we found another kid uh a kid uh who who basically he had like five apps in the app store, and we had to talk to his parents about helping us to code. It was hard to find iOS developers back then, by the way. Uh so first code, by the way, when we started writing first lines of code, there was no Android phone. So it gives you an idea of where we are. So um, you know, so we're scratching and clawing and just coding seven days a week, right? And so I helped name and I helped basically design the apps, the name, the logo. I coded and designed the entire website. But keep in mind, the website was mostly a browsing experience. We used to get in these heated debates about posting on the web. And I said, no, no, we've got to go to where the puck is going. Stop going. That's horse and buggy. Like we're not doing that, right? And so I think we we enable it now, we maybe a few years ago for various categories. I don't even know if we still post on the web. Um, enable it for everybody still. Um, but you know, the first year was not about scale, it was about just getting the product out. And so, you know, early on, just keep shipping, ship when it's ugly uh and get it out to people. And so I used to harass my friends and family. Hey, play with my app. Of course, the challenge was they'd post and it just crickets, right? Nobody's on the other side buying anything. And so, you know, there was a lot of product iteration and feedback. And I used to sit with people and you know, they give me feedback, but I'd say, Hey, can I come over and watch you try to use the app? Right. So they'll use it and you're just kind of watching and see where they get stuck. And like you do have to do a lot of that and just kind of take that feedback and iterate. Year two is the hardest year I think we ever went through, and that was how do you get scale? And so in our case, um, you know, we really got focused on in our we're a local marketplace. So the number one, number one metric in a marketplace is liquidity. Like if you post and no one buys, then it's not a very good marketplace. So we really obsessed on that. We used to draw, we did like a 30-mile radius around our office. We were here in Bellevue, and uh, we said we have to win in this circle. If we don't win in this circle, then we're out of business anyhow. And so we just ran lots of experiments, lots of them failed, and then ultimately we were very persistent and figured out ways to do that, especially leveraging you know, Facebook and geo-targeted advertising. Like that, that's what really started to work for us, and we were fortunate that we were in their beta uh for mobile advertising. So we went from sucking wind for a long time to within like 90 days, the majority of people on you know Facebook on their mobile phone in Seattle had at least seen one of our ads. And we were getting installs for like a dime. And so we were able to be pretty aggressive pretty early on without a lot of advertising competition. And uh that's what really changed for us pretty significantly. And then, you know, we so we basically spent a year building product, another year figuring out gonna go to market in Seattle, and with that, then we were able to just kind of rinse and repeat throughout the rest of the country. Meanwhile, there's other competitors, by the way, that raised millions, um, and they launched across the nation. Um, and of course, you know, if one install comes from New York and your next install comes from Seattle, well, who cares? You're a local marketplace. So, you know, I remember my our team being a little freaked out at the time. I said, look, our discipline is in this circle. We have to win in this circle. And I think strategically, that's why we ultimately won't because we obsessed over liquidity. And I think, you know, the whole user experience from the time I signed up to the time I'm engaging, like we really obsessed over that you know shopping experience. Um, even comparing it to say Craigslist. I always thought Craigslist, even to this day, is is weird. Like, imagine walking into a Nordstroms and all you see is the tags with all the text on it. That's what shopping like Craigslist is. Versus Offer Up was designed to be like shopping at a Nordstroms, like you look at the cool items and then you dig further for deal. You know, I just felt like they had it all backwards. And so I think those two things are what led to our success, the product experience, and then how we moved uh to market.
SPEAKER_03:So, how did you um get around the um empty marketplace problem? Uh, because you need to have some critical mass, right? Um, before people start really transacting. So, did you, for example, did you publish your own uh used cards to kind of create a sense of a marketplace? So, you know, what are some of the tricks that you used in the early days?
SPEAKER_01:Yeah, we did it all. So I I would go buy stuff. So imagine the early days and you see like five items being posted. I get so excited. Like somebody actually posted it on our marketplace. So I would go buy it, but I never told you I worked at Offra. So I would walk up and say, Hey, hey, hey Sharish, I've just thanks for selling me your chair. All my friends are using this thing, it's the best thing ever. Complete BS. Like, no, but nobody was using this, right? I just kind of like faked it to admit it. So then I'd buy the chair and I come back to our office. At the time, our office was like 400 square feet, pretty small, and I had all this stuff in there. So imagine like five guys coding into stuff everywhere. That's what it was like. And then I'd repost the chair back on off-road, right? Because I'm like, it wasn't. So I'm like, I didn't have so we did a lot of the little hacky things. Those don't really move the flywheel, but they teach you a lot, right? You're like, oh, that sucked, and so I gotta make that better. And that makes, you know, there's a lot of tweaks like that you do in the early days, and eventually you get a lot of those kinks out, and even today we're always thinking about how we can make it better. But um, you do a lot of that in the early days. Ultimately, again, it's about concentrating. It's like think of it like um a magnifying glass, right? You take a magnifying glass out on a hot summer day and you want to set something on fire. Not like I've done this, uh, but I have. Uh, and uh you really want to focus that that you know, harness the power of that sun to really get something to light on fire. That's what we did in markets all around the country. And so, yeah, like say the first time you get an install in LA, not that great. But if you hit it hard enough and concentrated enough, you're gonna you're gonna get enough. Like you'll get enough items coming, enough engagement. And then eventually that thing is just it just think of it as like lighting the field on fire, right? So we got very, very good at doing that. And you know, again, it's all about liquidity though, and so we didn't have to do all those marketplace hacky things that we did in Seattle and all the other markets. We didn't have to do that because we already understood how fast we could get people in and start to make the product experience work for them.
SPEAKER_02:Got it. So you uh uh started this in Seattle, and uh let's talk about raising money in the early days for right, because now you know you have the flywheels starting to move, so you got to reach achieve scale, so you needed money. Uh in my mind, you were in Seattle, not known for major marketplaces at that point. We had Amazon, but they were not in local commerce, right? Amazon was still early days, they're evolving from books to other things. Um, and then uh Craigslist, eBay, all those guys were I mean, Silicon Valley was much more location-wise, better suited to start an offer up, right, than CAP. Um, and uh you also had uh theoretically, in the minds of the investors of incumbent so big called Craigslist, even though none of them had used it, I'm sure. None of them bothered to ever go on Craigslist after you said, Hey, have you ever used Craigslist? No, then they're quickly going and checking what's on Craigslist now.
SPEAKER_01:It's not the it's not the core demo, no.
SPEAKER_02:Yeah. So how did you raise money in the early days? What metric you showed the investor that you you you talked about two things, right? You talked about the circle, I want to win the circle, and you uh all these hacks. What metric uh in the early days you showed the investor saying, hey, this is gonna work? That's when the investor said, Yeah, we'll take a bet on you. Because you the odds of you making from the money-raising standpoint was harder in my mind than your business working. Your business had a good chance of working, but raising money in this town in those days was a tough, tough, tough proposition. So, what'd you do there? What was your Yeah, yeah.
SPEAKER_01:I mean, I think kind of multiple things. So, for one, I feel fortunate we have some really amazing angels that supported offer up early on in Seattle. And and a bunch of them, I think, believed in me and my team, even without any metrics. Like, you don't have any metrics year one. You're just launching a product. And so, you know, we were able to raise a few hundred thousand dollars from some local angels, and that was enough for us to kind of cobble our way to kind of get a basic product out there, but not a lot of growth, not a lot of scale. Um and you're right, I think from you know, we are definitely more of a Silicon Valley style company. Um, I think Seattle is a wonderful place to raise capital for, say, more enterprise or SaaS type products, but you don't see a lot of consumer uh companies in in Seattle. And so I think the challenge, of course, with consumer is often uh real revenue scale is deferred, right? You have to get an audience growing versus monetizing early. And I had feedback by the way, and I won't name names, but from a local investor that said, well, you should just charge a dollar a post. I'm sitting there in the media and I'm like, I'm never gonna do that. Why would I put a kink in the hose? Like, that makes no sense to me whatsoever. And then, of course, the response was to show to demonstrate revenue traction. I'm like, well, that sounds great. Uh as a VC, you would say that, but uh for to grow a marketplace, that makes no sense, right? And so uh you name it. I pitched every institution in this town multiple times. I got rejected by the we got rejected from tech stars twice, by the way. Um, you know, we've been pretty much projected. Every major kind of institutional investor uh rejected off-rup. So again, we were fortunate they had enough angels that were we were able to somewhat survive, you know, on that. I also think, you know, I knew fundraising was hard. I've been in this town for a while, but you know, going through it again um even back then was was extremely challenging. And so, you know, we went for two years before we raised our Series A. I think most people would have tapped out. Um I had at least a product out there, but here I am now. I don't have an income. Even the first money we raised, I the baby was already on. Yep, I was a father now. And my and my wife was working. So I uh I told her, I said, there's either two ways this is gonna go. Either this is gonna fail miserably and you're gonna resent me, or it's gonna work and you're gonna be super proud. But there's no middle ground in this. And so luckily, luckily, my wife's pretty happy now, like that when that's worked out. Uh, but then uh so that's kind of how it was in the early days, was you know, very starvation-esque. Uh, and especially, you know, any anyone that's a dad that's starting a company, you realize that. Like you have a child here, you want to take care of your family. Like, you don't, you know, you you worry about that in the you know in the early days. But so I just was very open with my wife and we'd have a lot of conversations, but um, you know, I just kind of took her on the journey with me all the time. I said, Do you want me to stop? Do you want me to quit? And she's like, I think you should keep going. And so, you know, with her blessing, I started getting on airplanes and going down to the Bay Area. And I just said, Look, I have no other rocks to turn on uh look at here. I I can't gotta get out of this town. And so uh I did 15 trips to the Bay Area in 12 months. And what I did was I had a guy on our team that was helping us to do growth hacky stuff, and I kind of made him my pre-seed sales guy. And I said, Look, I want you to find early mobile local marketplace investors in the Bay Area um on LinkedIn, and then I want to fill out this spreadsheet, and then I want you to take this message and I want you to log in as me and tell them I'm down there having coffee or whatever and set up these meetings for me. And so he did that, and it was all kind of BS, by the way. I didn't have any trips down there. So you get this message like, I'm in town next week. I'd love to meet with you. And uh, so I would do that. I would go down, I'd have three meetings. I didn't want to spend any money, I'd stay in my buddy's guest room. So one of my college buddies, I stayed in his guest room. Then I'd do have a few more meetings, I fly home. And so I did that, like I said, about 15 times in a year. And it's such a joke as one of my good friends, uh, I still see him every year and we laugh. I'm like, remember when I wanted to stay in your guest room that one time, ended up being 15 times. Uh, but through that, uh, I was able to network and ultimately um connect with an investor that lit our series A. And so I think that was just about my learning lesson from that was just sheer persistence. Like I was just not gonna stop. And uh luckily that that had panned out. And once we raised our Series A, um, you know, that gave us a lot more scale. And then ultimately, you know, Andrew Easton Horace led our our B, and that really kicked things up because we had a lot more capital and they're a very reputable firm. And so then that really started to put things in high gear. But yeah, by the time our Series A was funded, we had about$350 left in our bank account.
SPEAKER_02:That's that's incredible that you really brought it down to the wire. You know, but you know, the you uh uh one of the things that's overlooked, and uh Sherish and I talked to a lot of young entrepreneurs even now, um, is uh your family unit, whatever that may be, right? In your case it was your wife and kid, in other cases, maybe other your family unit is as important in this journey as as uh your developers and your co-founders. And people just kind of think of separation, right? Yeah, I gotta work and then I get I got family. No. The the pressure of uh a startup is clearly unknown uh for first time entrepreneurs and certainly for younger entrepreneurs, they just think, hey, I'm just gonna work twenty four seven. Well, you got a baby.
SPEAKER_03:That's gotta be every
SPEAKER_02:couple hours uh you know and your wife in your case in your case your wife was working so you were wow that's a incredible uh incredible journey that you that you went on that was uh that's amazing that for you somehow felt in you that you were going to make this thing work and till you ran it to zero you're gonna do it so and I I like that story I like that story a lot and and to the point by the way of family I encourage anyone listening like you take them on the journey you don't have to tell them every intimate detail and how terrible your day went or whatever but don't you you need to bring them along because they they are supporting you.
SPEAKER_01:Without that significant other um that's supportive I think it's gonna be a real hard row for anybody to be an entrepreneur. And so I think it's important to share that so when you do have a bad day they can be empathetic. But if you're if you're not sharing anything um it's hard for them to understand what you're going through. Would you have started Airbnb then if this guest room thing didn't work out I don't know I mean that that that I mean good for Brian Chesky and that company and that's just a phenomenal story on that one.
SPEAKER_02:I know I know they they beat regulation and made a marketplace that's um unbelievable and but anyway go ahead Sharice sorry yeah um so um you started off in in Seattle and then I'm send you expanded into a few other markets uh but once you raise money from A16Z um did you go still market by market because there's lots and lots of markets in the US or did you then go nationwide?
SPEAKER_03:How did you think about that strategy?
SPEAKER_01:Yeah so we were always very paranoid that somebody was going to kill us. Like we always thought Amazon would try to kill us. And so this is very anti could be anti-startup is I thought they would buy you. I thought they would buy you I don't know if Amazon buys I I think they would just try to get information and then try to take us down. Yeah but but so that was always a paranoia of mine and so I love the book Art of War it's a phenomenal book and when it's you know when you're small you evade and you you you you go you flank and you build build out territories before you you come out and really pound your chest and so what we did we were very strategic in the US because I said look we gotta win the biggest NFL cities. We have to get size and scale because if we if we if we get big enough somebody's gonna try to take us out for sure. And so even when Andreessen invested you won't see a press release and so we stayed under the wire for a long time and right they're like hey well Mark's going to tweet about you here's our PR team we're like actually can you not even put us on your website and so what we were doing was buying time because we wanted to get into these markets and really build beachheads. And so like another example is we intentionally didn't launch in San Francisco and New York for many for a long time. And so you know eventually we started you know making noise because let go entered the US and they were our first kind of major competitor. And then we had to switch it and we said now we're now we're changing the game.
SPEAKER_02:Now we're pounding our chest because I think at the time let go had their first um I think the first app in the app store and they were Toronto based right they started in Toronto where did let go they were based um actually they had an office in New York.
SPEAKER_01:But they came in very aggressively with a lot of capital and and and you know good for them. They I think they deployed the right strategy to try to get a lot of scale um and uh um but um you know we had to finally switch the game because at the point I think at that point in time they had they had a press release before we did that was like$10 million in transactions and I walk in that morning with my this guy running marketing and I said I think we need to start to say who we are because we've had a billion in transactions. All right and so let's get out there and really you know make a lot of noise. So we started doing that and then now I'm spending more time in the Bay Area. Now we're launching to the Bay Area and I used to get a kick down there because you know I'd go to these networking events and people like yeah you must not be that big a deal no one uses you down here. And I'm just laughing because I'm like wow you should see the metrics in LA like like LA is a monster. LA by the way a third of the adults in LA use offer up every month today. Wow and so and LA's a huge market. So like I'm glad these strategies all kind of played out because we are still you know Facebook came and they we didn't see them coming um and Facebook's a very sizable competitor but we still have a lot of user growth and and engagement all around the country especially markets uh that we were very strategic and focusing on so that was you know I think back to the kind of the the question is we definitely still went market by market but at some point we had enough word of mouth and such scale that it kind of didn't matter. Right. So sometimes we would focus on driving more supply or more engagement in LA sometimes we'd say no we just want more installs across the US so you know now we've been installed 130 million times. So half the US population is installed off rev at least uh at least at one point and so you know but it's very market by market until you know you get enough scale where you know the economics are such that there's different strategies you can deploy but I'd say in the early years it was definitely market by market.
SPEAKER_02:So so you launched and uh you decided to go after NFL cities. Uh so you're from Seattle so you're a Seahawks fan I take it.
SPEAKER_01:Um my wife is way more of a fan than I am I'm a fair weather fan. It's entertainment so if they're if they're not performing I I'll do laundry and stuff.
SPEAKER_02:I'm a I'm a serious NFL fan because I live in Kansas City so finally having our moment for five years. But the interesting part is again you drew circles right now I'm using the NFL analogy you drew circles you know there are only X number of NFL cities right there. Once you get through all and then you eliminated San Francisco New York in your own mind.
SPEAKER_01:We just delayed it we just delayed them.
SPEAKER_02:So ultimately we entered them but it was very delayed yeah yeah no I at the moment when you entered and then LA did not have two teams then when you launched I think I think LA was still an open market uh when you guys were out so the the the interesting thing is you were paranoid about your competitors but they were going to still face the same issues that you face right because you had the issue of uh security and safety um you you as you said earlier on the podcast women didn't like using traces and because of security and safety. Any big competitor will also have the same thing and your other startup let go was trying to uh scale now along the way you you probably thought okay hey we've overcome the uh security issue meaning you have trust in the process which is a which is a big part of marketplaces you need liquidity and you need trust right in your case I need to know if I if I clicked on something and bought it then I know the guy isn't A gonna mug me or B gonna show up to actually give me the stuff even if it's not real. So you had two both issues come together at the same time. Did any city teach you more uh about these two than other uh I mean I'm thinking Bellevue is a fairly safe place. I don't know anything about LA or or Chicago or any other place you might have launched you know did did something say hey this is what we're gonna really build into a product and make sure that our competitors can what was the mode you try to build?
SPEAKER_01:Yeah so one of the first things we built even before we raised our Series A was this program we built called True. And at the time uh you know we wanted to make a statement that we cared about trust but we didn't have a huge team but like how are we going to build all this trust stuff in the system? And keep in mind we didn't even have any users yet but we kind of geeked out on this cool technology where you could scan a government ID and we used a third party called Jumeo to do this. And step two in the process was uh it actually you took a selfie and would actually behind the scenes marry those two and if it was a match you could say yes this person is who they say they are so we reach out to this company called Jumeo at the time we said hey has anyone ever done this from a mobile phone and they were like the leader in kind of ID verification at the time they were doing um like they were doing this for casinos and like real estate companies on on the desktop. So you would like hold it up to your desktop camera and it would verify. But nobody had done it on a mobile phone. And we said well we want to do this on a mobile phone and if you go through this true you program you get a badge that says you're a true you member. Well of course in the early days wait who's gonna do this like it's early days in smartphones uh what does this app offer of and you want me to put my government ID in like you're crazy. We did it though because we said look we care about this and we want people to know. So that was kind of early did not get a lot of adoption early on but that was kind of step one. Then we started building out basic things in the app which Craigslist still doesn't have like how about a profile like duh uh or like ratings. Do you show up when you say you're gonna show up was the item as described were you you know how were you like so we do a lot of those kind of normal things you would see. Uh we started doing a lot around item curation. And so you know it's not that big a deal when you're small but then you scale real quick then it becomes an issue. And so you know you name it. I've seen every body part every drug like you've seen it every weapon. So eventually you have to crack down on those and initially you do things very manually and then you find ways to automate those. And today we're extremely sophisticated here. You know we do a lot of things uh you know kind of leveraging kind of machine learning and image recognition uh keywords uh we're also very proactive like with law enforcement so you know a few years ago we trained 5,000 police officers on how to use and engage with Offer up like we were renting out auditoriums and we met we know like the the head of the LAPD right so we started getting very proactive on these things. The thing I would say overall for people that are skeptical on using local commerce is um it pretty much rounds to zero. The amount of incidents you will find it's not to say they don't happen but given the amount of the number of transactions we have um it's super super super super low. And so it rarely happens. And the unfortunate thing is you know you want to equip users and give them a safe experience but you hope they leverage those tools. Sometimes they don't so a good example I would say is like would any would either one of you meet up uh at 3 a.m at a bad part of town with a thousand dollars in cash on you probably not somebody did that and they got robbed. I said why why did you do this? Right so what are things you can learn from that and because offer up is commerce wrapped around chat you know we can do things like machine learning we could see people talking saying hey we're gonna meet here um at this time and we can give warnings you know in the app that say you know we recommend that you might reconsider this you might not want to go through this transaction. So there are things like that that we constantly have focused on and to the end of time. Like I said we've been working on you know trust and safety and really I think innovating a lot in this space. We don't talk about it uh unfortunately that much of how much time and effort we put into it um but it's like you know think about it if you're the mayor of LA uh it's it's a lot of pressure like there's no way you're gonna eradicate crime right given the scale of LA but when you look at the size of off rep like we're larger than any major city in the in the country and we have to manage that as best we can too. So I think we do the majority of it we try to do with machines and learn from that and be very smart and reactionary. Sometimes report that's another thing that we look to is hey um you know our users will report other users quickly they'll say hey this is project or something and so people care about the community which I really appreciate. And so you know we we react to those things you know a lot too but I've learned I've definitely learned a lot about uh uh some of the rougher neighborhoods in the US that I had no idea about until starting off for up right there's been neighborhoods I'm like oh it's a rough area there and uh you know it's kind of unfortunate because what you see sometimes may you know more incidents may occur in those areas on offer up than they would say Bellevue like Bellevue is a very safe area to live. So it's just you know we try to do as much as we can and try to be as proactive as we can here. And again I think in the early days I think that was an area that I just felt was a it was kind of sad that I just felt like Craig's just never innovated in this space. They could have they had all the tools to do it. I don't know why they didn't spend time to make it a better experience.
SPEAKER_02:So let me ask you one quick follow-up question. So you saw a lot of stuff on Offra what made you think huh I can't like the more bizarre weird thing that you saw like no way you know I I can see weapons that's not you know unimaginable I suppose right uh or and early on you might not have had cars and now you have a lot of cars etc but what was one thing you said no way no way somebody is putting this up well I'd say it's stuff that you wouldn't want to like underwear or like used mattresses like nobody's gonna buy this stuff and people do.
SPEAKER_01:Yeah like I'm sorry like when when you're done with your underwear just get rid of that like nobody you don't no one else needs to buy that yeah I can't believe people sell underwear that's crazy I've I saw I saw like my k my son's um his crib with and and the mattress was still on there and I was gonna just dispose of it and like the you know but again some people really need it like that's it goes back to the value of offer up they really need something and so I I was gonna get rid of the mattress like no no we'll take that I'm like oh god that's it's my son's been drooling over that thing for you know three years now yeah yeah yeah yeah that's that you don't think about it right because you're not only enabling commerce but you're also satisfying a need and um I mean what was their other choice go to 20 Goodwills they may not have the time they may have two jobs I mean hey yeah isn't Bellevue this guy got a good crib I may never be able to buy a new one let me get this one I I you know put a sheet over it and then call it good you know yeah I I've actually I had a number of stories I've done hundreds and hundreds of transactions and and and I really enjoy the stories because you run into people that you realize such a you know I'm getting rid of something and that's that's great but then you get it get to hear from people how it's impacting them and like man I could have never bought this brand new and thank you so much for you know for giving this to me and just they just a lot of gratitude because they're able to get a really good deal and yeah and that's that I always love seeing that.
SPEAKER_02:Yeah yeah yeah I I I I started noticing during the COVID people started side hustles on offer up either they got rid of their stuff or they like your early days they would buy from because I moved uh right uh somewhere during COVID and then we would put stuff up because I don't want to take it with me I uh it's like on offer up people would come and buy it I'm looking at them thinking there's no way you you need a use for this thing right that they live in an apartment and they're buying a full bedroom set.
SPEAKER_01:I'm like really it clicked for me they were doing a whole side hustle buying because I didn't have the time or the inclination to you know curate it stage it sell it at the highest price you know there was an arbitrage to be made I said oh more power to you that is that is a big uh growing segment uh on the marketplace for sure people can find it and they arbitrage and they make money on that and like you said good good for them.
SPEAKER_03:Yeah exactly exactly so um you talked a little bit about competition from letgo and Facebook and so forth uh and then you merged later on with letgo uh was that because you're concerned about competition from from Facebook um in in I'm just curious how you view Facebook as a competitor.
SPEAKER_01:Yeah when you look when you look at the US I mean the way I look at the kind of the battlefield now is you definitely have Facebook um and Facebook's got plenty of smart people there a lot of size and scale and you know people have definitely used uh marketplace um Craigslist is around but I often I used to say on the older folks use Craigslist but not anymore like a lot of older folks use uh offer up now but it's kind of a declining marketplace you know and so um you know we looked at the US and we said well we have let go this definitely has some size and scale in other markets that we're not in and we felt man this could be great to come together with them let's raise some additional capital and let's really own let's be the kind of the leader in local commerce as a standalone entity and so that's kind of was the the major thinking behind that is if we could come together and raise capital, we could really own this long term. And I I believe you know I've been in tech long enough I believe the player that has a singular focus long term always wins. You know one time I think Zilla was scared that Google was going to kill him because they were doing all this real estate stuff. I think it's the same thing with Facebook. Facebook is definitely a competitor when it comes to buying and selling but is this going to be a strategic focus of theirs long term and are they going to go as deep as we're gonna go into this experience because like I said we still have a lot a lot of work to do as a company and we think there's still a lot of um friction and things that we could could do to make it a better local experience. And so I think that was a lot of the thinking when it came time to kind of merge with let go is hey can is this an opportunity for one plus one equals three and really distance ourselves from anyone else. There was also by the way plenty of other smaller competitors that have always been lurking um but we really wanted to make sure that we were kind of the the main standalone leader in the space.
SPEAKER_02:But the categorizations that you started doing right now I see um you have automobile you didn't start with automobiles right you you you have other categories that you launched and also you have now built uh clearly in the household goods a lot of a lot of categories right is there one that that is uh uh driving liquidity at the moment I mean there there's the price of these items because there's 50 cent items and half a million dollar item I'm I'm meant to show the vastness of your marketplace yeah is there any any one category that drives liquidity now?
SPEAKER_01:I think you know overall people come to offer up I always say people come there to shop they might be coming there for a car and they end up buying a couch. That's just kind of the nature of the experience is um it is definitely has you know we you can use it for anything you think of the things that do extremely well though probably not surprising they're things that definitely skew local so furniture is a monstrous category for us uh cars I mean we sold probably five five plus million cars last year like we're probably one of the top places to sell cars in the country um you know uh household goods is is pretty common electronics food or sorry not food but uh clothing uh things like that are are are pretty popular so um I don't think there's any one category that's oh this is where why everyone comes here um but I definitely think probably not like I said not surprising you know things like furniture definitely skew more local like you're not gonna put your couch up on eBay yeah yeah yeah but uh but there are certain players who have come along just for certain categories like motor a car eBay motors and there's definitely good categories for clothing because you could ship it across right yeah uh across the country put it in a box and ship it you know etc.
SPEAKER_02:Has that um been a thought process in your thinking saying hey maybe we pick this and you know really get focused around um these and drop those or you still stick to the local domain. Now you I mean now I see you can go trade I mean I I see tolls from outside of my area if I let it be open I could I could get theoretically shipped from New York something high. But there are clearly players now who have built marketplaces on used goods but for one category. Right? Yeah and and they are big companies. No they have uh massive market I was that ever a consideration during your journey saying hey we're gonna drive this because this does the volume?
SPEAKER_01:No I think overall like I said I I think if you're especially if you're doing a a shipping type business you got to go deep into a vertical and that makes sense and so you see vertical players in fashion and you know like you said um for us it was more about local right so it was about local liquidity percentages of population using offer up like that's all I cared about. In terms of like product mix it was more of yes we want to go deeper into categories and make it easier but it was really holistic like we never said oh we're gonna overindex and become the furniture only marketplace like instead it was more of we have to be the marketplace in LA right it was more about geography that we thought mattered because our thinking was over time if we could get enough people using it then we could keep building other businesses on top of this business. So I've always thought about this as a platform and uh and at the end of the time I still believe if you keep removing friction more people use it. I mean there's still great you know a third of LA uses offer up every month that means there's 70% that don't well why don't they use it every month? And there's various reasons you know it could be friction maybe they don't find an item that they want there's there's all these other reasons so how do we get after that right how do we move remove friction how do we make it easier for people because you know I always I always think it's kind of a it's it's it's crazy if you think about how much commerce has occurred in the last 30 years, especially in this this world of Amazon. It's kind of a sad state that we're in where it's easier to get an item to Delivered to you from China than it is down the street. That's just where we are. Yeah, yeah. So I I want to unlock all this value that I keep it continues to grow around us. Yeah, yeah, yeah.
SPEAKER_03:Yeah, but um, Nick, uh the challenge with local commerce is that uh it's very difficult to get in the middle of that transaction and take a cut. So, how did you think about monetization from that perspective?
SPEAKER_01:Yeah, it's a good point. So, you know, we always focused, um we said, well, let's build an audience and we'll scale and we'll monetize that audience via advertising. That was a a lot of early revenue for us. Um the challenge with local and being in the middle of the transaction, it is a big one. And I believe in the US, you know, I vent a lot about this to people because I think it's kind of a sad state we're in when it comes to like local payments. Like if you go to China or even India, you realize how easy it is to pay for things. Now, here in the US, you like it, you just feel like you feel like an idiot when you go to the point of sale systems. Yeah. Like, oh no, you got to put the card in for that one. No, you got to do this one. Like it is ridiculous that how much time we spent just dealing with the with the archaic payment systems we have. Or how many times do you go out to have dinner and uh you know you want to pay for your bill and you're sitting there waiting 15 minutes? We don't do that in China. Right. And and I felt like we need ways to do this. And I, you know, and so I think that's just the state of where we are right now, unfortunately, in the US, is our payment infrastructure is antiquated, it's held up by the credit card companies. Um, it's so fragmented the PO POS systems. Like at the end of the day, we just need a QR code. That's it. Like just have a QR code scan it, pay, done. And it's all this other stuff kind of gets in the way. And so I think the challenge with local payments, and this is just an offer-up challenge, but in the US, is you have to build it has to, you know, in China, they got the the economics at such that it's so, you know, it's so cheap to do the transactions now. Um, and the government's really supportive this that you know, companies like uh, you know, Alipay, they just kind of eat that because they make up it for it, you know, in other ways. Here in the US, it's like cost prohibitive. It's so hard to do. And if you want to do a local transaction, the government now says, well, I'm gonna, well, I'm gonna tax that again. So you're double taxing. Like you've already paid for this item. Well, now they're gonna say, no, you've got to pay for it again, right? Even though it's a used good. And so that's the biggest challenge, I think, for payments in the US. It's like, I would love to do local payments. I think it's the I think it should be our future. And if you look at cash, like we hit peak ATM, I think, uh, last year. Like cash is continuing to go down. And so the what we're gonna we gotta get to a point somehow that it makes economic sense to make payments way more ubiquitous. But today, just fee we just I just I look around the world, I'm like, we are so far behind when it comes to payments, and it's a big inconvenience. Like even standing there in the grocery store, like why are we all standing in line, you know, waiting to pay anymore? Like it makes no sense. So I again I think we're solving, we're talking about this under the umbrella of offer up, which I definitely would love to get after this more, but I I'm just sharing my macro view of I think the bigger challenge that's out there.
SPEAKER_02:Yeah, I I thought, you know, during COVID, you guys would get into the restaurant business because you're already local. I went go there for local commerce. Restaurant as in the restaurants post their thing, and they you know they have POSs and stuff like that because people went there during COVID there was a behavioral shift. People didn't go far to buy stuff. I I wouldn't even go to Auburn if I had to buy something. I would just go to like Bellevue, stick to Bellevue, right? Because I didn't know who I was meeting and I mean the the COVID drove behavioral change. Uh and I thought, man, why why you know if I if I'm picking it up, I could order food and pick up like stuff at the restaurant. And because you know, restaurateurs uh have a love-hate relationship with their delivery partners, whoever they may be, doesn't matter. They they have and they they just don't have scale to deliver on their own, but mostly they don't have infrastructure to sell on their own.
SPEAKER_01:That's more like if you look at the price we were paying too during COVID, it was absurd. Like I'd order a sandwich, I'd sometimes sneak an offer up because I had the whole office to myself because no one was in there. So I'd be in there working by myself and I'd like I'm starving, I need to order a sandwich. So I ordered like a$12 sandwich. By the time it got to me, it was like$27 or something.
SPEAKER_02:It's an interesting uh opportunity. Uh but i it's uh uh you know, as much as uh Uber might have solved payments for cabs, payments in general is still a pain, you know. It's a huge pain. Uh and uh I was stunned because I I traveled to India after three years during the whole COVID and go went this year. There was nothing I needed uh that I needed to ever pull off my car. Yeah. No, no transaction. No matter what the size was, right? No transaction. And the these uh these what I call microtransactions, like you buy this, you know, 10 bucks, five bucks, twenty bucks. Nobody and every vendor, no matter what the size of under a buck, they're willing to accept accept a QR code. Just blows me away. Blows me away. I I don't know if their taxation is any poorer. I mean, you know, they figure now they actually have many taxations.
SPEAKER_03:Transact, slack everything.
SPEAKER_01:Yeah. I I bought I bought ice cream from a vendor on a bullet train in Shanghai. And and I and and I'm like, how do I pay you? And she just she didn't speak English, she just tapped, she just pointed on her tray. There was a QR code, and I luckily had enough money on my uh I had uh the Alipay app and I just went boom, paid it, she was here you go. I'm like, that was it. And that was like six, seven years ago, and I was like, this is what we need to go do. And like I said, it's it's the problem is there's too much taxation in that process to make it economically viable right now. And so until that changes, my worry is we're just gonna be stuck in this state for a while. Yeah, yeah, yeah.
SPEAKER_03:All right, Nick. Uh that's a this was a fascinating conversation. A lot more to talk about, but we limit it in terms of time. So really appreciate you taking the time to join us today.
SPEAKER_01:Thanks for having me. Enjoyed the discussion. Thank you. Thank you, Dick.
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