The Tim Ferriss Show - Ep 30: Tracy DiNunzio, Founder of Tradesy, on High-Velocity Growth and Tactics

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Starting point is 00:00:49 the number one, drinkag1.com slash Tim. Last time, drinkag1.com slash Tim. Check it out. Hello, ladies and gentlemen, this is Tim Ferriss, and welcome to another episode of The Tim Ferriss Show. Thank you for listening. I'm going to start off with some Japanese trivia since a number of you, quite many of you, have asked for more Japanese tidbits given that I lived there in high school. It was in fact my first extended overseas experience going from Long Island to Tokyo, Japan for a year. I was the only American student in a high school of roughly 5,000 students. So I thought I would give you two recommendations. The first is a song, and you may think it's cheesy. Everyone in the country of Japan was in love with this song when I was in high school, and it's called Shima Uta. Shima Uta is by The Boom, the name of the band, and Shima Uta literally means island song. And Shima Uta is more generally

Starting point is 00:01:43 speaking a genre of songs thought to originate from the Amami Islands. And there are two versions of Shima Uta, Shima Uta by the boom. There are two different versions. The first is in Japanese, what we know as Japanese, it's actually Hyojungo. So Hyojungo is basically Edo dialect Japanese in the same way that Mandarin, what people think of as Chinese is also just a dominant dialect of Chinese. That's why it's called Hanyu. Hanyu is the language of the Han people. That's what many Chinese would describe Chinese as, or how they would identify it. So you have Hyojungo version of Shimaota, regular Japanese, and then you have an island dialect. And I always thought

Starting point is 00:02:26 it was Okinawabeng, but I could be wrong. But it sounds nothing like normal Japanese. Absolutely nothing. And you can listen to both versions. It's very, very cool. So that's the first, Shimaota. The second bit of trivia or recommendation that I'll make for those Japanophiles out there is a comic book. I learned to read and write and speak Japanese through a few different avenues. The first was bukatsu, so I was in the judo club and I could beat Tarzan while still picking up bits and pieces here and there. But primarily, during the classes that I couldn't understand, I would read comic books, manga. And specifically, I read a comic book series called Rokudenashi Blues. So Rokudenashi Blues is

Starting point is 00:03:07 Rokudenashi Blues and that literally means roughly translated good for nothing blues. Rokudenashi is good for nothing blues and it is a series basically based on high school gangs and martial arts and it has incredible artwork, in my mind, very reminiscent of some of the early Jim Lee work. And it's spectacular. I haven't read it in a very long time, but I was obsessed with this particular series. And you can go online and search

Starting point is 00:03:38 Rokudinashi Bruzu, R-O-K-U-D-E-N-A-S-H-I. Roku also means six, just like the device that you can use to watch Netflix and so on. Roku is six. Roku de na shiburu. And you can look it up and look at the images on Google Images, for instance, and I think you'll be very impressed. It was a huge hit in Shonen Jump, the weekly Shonen Jump, for a very, very long time. Now, all of that having been said, this episode is very exciting to me. Extremely exciting. I hope you guys love it as much as I did. It is with Tracy DiNunzio. And Tracy is the CEO and founder of Tradezee. Tradezee, T-R-A-D-E-S-Y.com is a startup that

Starting point is 00:04:19 I'm involved with. And I invested through a syndicate that I created on AngelList. So if you want to see other deals that I'm involved with or will be involved with in the startup world and how I select them and so on, you can go to angel.co. This is AngelList, angel.co forward slash Tim and check it out. I ended up investing in TradeZ along with a number of people you might recognize. Sir Richard Branson, John Doerr and Kleiner Perkins. He's legendary in the world of venture capital. He joined their board. Now, the reason that I think Tracy is very, very interesting to talk to right now, among other reasons, is that she is in the trenches right now. So unlike some of the people I've interviewed on

Starting point is 00:04:59 this podcast who are just mega stars, they've sold 60 million plus albums. They've sold millions of books. They've accomplished these incredible things that some of you have said it's hard to identify with. You find it inspiring, but from a tactical standpoint, it's intimidating. You're not sure if you could ever get to that point because you get the picture from A and then you get Z, but perhaps some of the steps in between are missing. And Tracy is currently building a huge company. They're growing extremely quickly. They're facing all of the challenges that a bootstrapped or venture-backed company would face. So in many instances, both sets of problems. She is not technically trained from the outset. So she does not have a computer science background

Starting point is 00:05:45 or anything like that and had to scrap really hard and hustle and train herself as an autodidact to develop the skills to become a very competent, high velocity CEO and founder. So she's right in the middle of this right now. So I'm catching her. We are catching her at an inflection point. And I really think that Tradesy could turn into a huge company. So to have an eye on the ball, to look through that window now, I think is a very unique opportunity. So that is part of the reason that I'm so excited that you'll get to listen to this interview, which went a little long. It's going to be broken up into multiple parts. This is part one. And I did decide to have some wine. I don't think it affected my judgment and my ability to speak as much as it did with Kevin Rose, for instance. But I think you'll really enjoy it. And the last thing I'll say, as always, is this podcast is brought to you by the Tim Ferriss Book Club. And to support the

Starting point is 00:06:40 podcast, if you want to see a handful of books that have had a huge impact on my life, you can listen to at least one of them for free, typically by trying Audible. So you can go to audible.com forward slash Tim's books, go to audible.com forward slash Tim's books, and you can hear samples of all of them. You can get one for free if you try Audible, or you can just download them as audio books and enjoy. Without further ado, here's Tracy, and thank you for listening. The Tim Ferriss Show. Hello, ladies and gentlemen, this is Tim Ferriss, and welcome to another episode of The Tim Ferriss Show. I'm very excited to have Tracy DiNunzio with me. Tracy, how are you this evening?

Starting point is 00:07:40 I'm doing well, thank you. How are you? I am great, and this is an exciting occasion for me, And it's been a while since I had wine on the podcast. I'm not going to overdo it like I did with Kevin Rose, where I got to a fairly disgusting level of intoxication. But I am going to celebrate and people always want to know what type of wine. So I'm having a K Brothers, K-A-Y, Amory Vineyard Block 6 Shiraz Vintage 2010, which is delicious. And the reason that this episode is exciting to me, and I'm hoping to everyone listening, is that oftentimes on this show, I interview people who are perhaps 5, 10, even 15 years out of the trenches, meaning that they hit their apex of professional or creative careers at a point well in the past. And in hindsight, they can give a lot of tactical advice, but sometimes it's very, very high level and listeners have trouble identifying with those

Starting point is 00:08:40 folks or feel that it's so out of reach that they could never experience and replicate the successes of those people. And Tracy is the CEO and founder of TradeZ. No relation. Just kidding. I have to make that crack. It was not on purpose. T-R-A-D-E-S-Y.com. This is a company that I've invested in, a company that is doing fantastically well. And Tracy is absolutely in the trenches right now, doing a really fantastic job, in my opinion. And we'll dig into all the backstory and specifics. But I wanted to have the chance to really talk with someone who's on the front lines and to someone who, in my opinion, and of course, time will only tell, but I think that Tracy, you are at a major inflection point in your life. And it's a rare

Starting point is 00:09:33 opportunity that I would get to chat with you in this particular window in your development and growth. And it's also fun for me because in many of the interviews that I've done, these are people who have been exposed to the media and the public for a very long time, decades in some cases, and it's hard to uncover stories that people have not heard before. And I think we have a lot of fertile ground to cover. So thank you very much for taking the time. I know you are a very busy founder, and it's probably at the tail end of a very full day. But I appreciate you making the time, first of all. Of course. Of course. I'm excited. And I thought just for people who may not be familiar with you and your story, we could start

Starting point is 00:10:23 close to the beginning beginning and you could just give people a snapshot of where you're from, where you grew up, and some of the exploration or adventures that you had prior to Tradesy. Sure. A short version of that is going to miss out on a lot of the fun, but I grew up on Long Island, suburbs of New York, like deep suburbia, ran away the minute I turned 18 and went to school in Manhattan for fine arts. So I have a bachelor's degree from the School of Visual Arts in fine arts. And then after I graduated from college, I was doing some painting exhibits in Manhattan. And because I was young, I decided to run away to Mexico and get a master's degree in Mexico. So I also have an MFA in painting from a university in Mexico, which is definitely not the typical CEO and founder kind of resume. for about 10 years, like most of my 20s, I was a painter and I traveled all over South America

Starting point is 00:11:26 and Europe with a backpack on my back and a bunch of canvases rolled up in a suitcase and sold my work and lived that way. And as I got to be kind of closer to 30, I thought about doing something that had a little more stability than painting. There are very few things that have less stability than painting. So startups, even though they're kind of notoriously risky, actually felt like a really secure path for me. And at that point, when you decided to phase shift and start a startup, what type of business did you start at that point? So it was in, let's see, 2009 that I launched a peer-to-peer marketplace for everything wedding related. So primarily wedding dresses and then decorations and accessories, et cetera.

Starting point is 00:12:16 And so it had the same exact business model that TradeZ now has. TradeZ is a peer-to-peer marketplace for fashion, kind of like eBay, but easier, safer, simpler, faster to use. And so TradeZ was really an outgrowth of that first company, which was called Recycled Bride, and kind of lived at my dining room table for a few years. And how did you make, just even mentally, the leap from the traveling artist to entrepreneurs. So peer-to-peer is a term that even now many people wouldn't be able to define if they're not immersed in business or tech. So what type of education or self-education did you embark on before deciding to start such a company? Well, it's interesting because peer-to-peer isn't really a layman's term. And I don't even know if I knew that term in 2009, but I had been living this kind of like barter

Starting point is 00:13:10 lifestyle as an artist for such a long time. You know, I always sold the stuff that I wasn't using or wearing to make money to continue on and get new stuff and have new experiences. So I think in that way, the transition was very natural because I was just kind of thinking about my own lifestyle, imagining that some other folks might be interested in living similarly and built a web platform around that concept. So it's really at that time, maybe in the mind's eye being viewed as a marketplace. Yes. And how did you bootstrap that or how did you finance that? Painfully.

Starting point is 00:13:48 So nobody, investors, traditional investors aren't really lining up to give painters with no track record a whole bunch of money. So I started with some credit cards and a couple thousand dollars of my own money that I made from selling off the last of my paintings and some of my nicer clothes. And it was a true bootstrapping situation. Like I hired backend developers, but I taught myself how to do everything else from design and marketing and customer acquisition to even a little bit of front end code and writing some kind of crude scripts for functionality of the site. So I was really in a learning process and I was bartering the whole way through. At one point, I had a web developer living in my underground storage unit in exchange for work. So that's

Starting point is 00:14:36 how kind of scrappy it got. How did you find that particular developer? Do you remember? Believe it or not, he was a roommate who couldn't pay his rent. And so I said, well, I have to get a roommate who can pay rent, but you're welcome to move down to the storage unit if you can continue working on the project. And that was for about a year or so. And then in early 2010, I heard about this new website called Airbnb. And at the time, the concept of renting out your home to strangers was kind of foreign to a lot of people. But I thought like, great, that's right up my alley. And I did have another roommate at the time, but I decided I was going to sleep on my couch and rent out my bedroom in order to continue funding the company. And I got really lucky because the very first

Starting point is 00:15:21 guest that I had back in September of 2010 is now my husband. Wow. Yeah. I didn't know that part of the story. Oh, yeah. We were Airbnb's first marriage and we're probably Airbnb's first funded company too, I would imagine. That's incredible.

Starting point is 00:15:37 You bring up a really fascinating point and I should, I suppose, ask you before I get to what I think is a very fascinating point, but of course, I suppose, ask you before I get to what I think is a very fascinating point. But of course, I suppose I have an elevated opinion of my own opinions, especially when I'm drinking wine. But could you define for the audience what you mean by front end and back end? Oh, yeah, of course. A lot of techies are listening, but I want to make this understandable to people who are looking at your journey and realizing you went from having no familiarity with these terms to now obviously being very comfortable with them. What does that refer to? So really simply put, the backend technology is like deeper technology. And in

Starting point is 00:16:17 the case of the platform that I was building, we were using a number of different languages to create different functions. And it would have taken me a long time to catch up and learn how to handle backend coding. It's just more nuts and bolts, I guess you could say. Frontend coding has more to do with like the UI functionality and is often layered into the design that gets handed off to backend developers. And frontend development is mostly just HTML and CSS, two pretty basic languages. Not that they're easy to learn and I never mastered them, but I was able to play with the code enough and watch it make changes by switching from browser tab to browser tab to learn where I could plug in different color codes and different basic tags to change and update what was there.

Starting point is 00:17:05 I appreciate that. I should just say, and UI, user interface for people wondering, and front and back end, another way to potentially think about it. And I've spent some time with, for instance, Derek Sivers, who's just a brilliant, awesome guy. He was the founder of CD Baby and became very well known as a PHP developer, then also got into many discussions about Ruby on Rails. But he sat down to describe databases and SQL to me at one point and did it in one page. I mean, he's a brilliant guy and an even better teacher. So another way for folks to think of front-end and back-end is almost if you were in construction of a house and the piping, the electricity, the structural engineering involved in the architecture could be thought

Starting point is 00:17:50 of as the back end, all the stuff that makes the house work. And then the front end, this is not entirely a fair comparison, but would be then all of the interior, exterior, interior design that is the look and feel of the site. And there's definitely a functional component, and there's a lot of science and art, but that's another way to think of sort of... That's a great analogy, yes. Yeah, the division of labor.

Starting point is 00:18:18 There's the form versus function. It would be another way to look at it, although, again, I don't want to shortchange the front-end developers who have to think about how a user or a customer interacts with every element. Now, at that point, you have this company, Recycled Bride, and where does that company go? What is your goal with that company when you started? Gosh, you know, I didn't know when I started that company about this whole sort of startup world. I didn't know what a VC was. I didn't know how to use Excel and create a forecast for our financials. So my goal at that time was to have a business. And shockingly enough, in the startup world, I just thought that a business made more money than it spent. And so that was my shocking, shocking observation. Yeah. So I was really focused on driving revenue, which was something that wasn't possible in the first year or so as we were growing.

Starting point is 00:19:11 And then I was building in features to allow us to monetize. And the site got to profitability after about a year and a half and profitability, just meaning that I was earning more money per month than I was spending on maintenance and improvements. And my goals were really shifted as I went. So it feels like along this whole journey, every horizon that we finally cross, suddenly you realize once you've crossed it that there's another bigger, much more exciting horizon ahead. So I never dreamed of an IPO. I never even dreamed of a company the size of Tradesy today. But those dreams just started shifting with every new milestone we hit. And while you were keeping this company afloat for a year and a half, just to clarify, when you say

Starting point is 00:19:57 that you didn't have much in terms of revenue because you were focusing on growing, what were you growing in lieu of revenue at that time? Traffic and members. So in the first year, you know, I kind of, the day that the site launched, I kind of sat down and went, what the heck have I done? How am I going to get anyone to visit this thing? And at the time in 2009, I, I literally Googled how to get free traffic to your website and started to understand that there was organic search and there was social media and that those could be two very promising channels for getting people to come to the site. And I started blogging on the site and promoting it via social media. I became a Twitter ninja. And I also wrote a very crude script for search engine optimization. And it took about a year for

Starting point is 00:20:42 all of those things to really start bearing fruit and for the numbers to get big enough where I thought, okay, if we put some paid features into this experience, people might just be willing to give us their credit card number. Got it. Right. And at that point you can hit a critical mass where the revenue is a meaningful number and the profit, hopefully also a meaningful number. When you were starting from scratch, I guess two things. Number one, how did you keep the company afloat financially during that period when you were not generating profit? And then secondly, how on earth did you go about learning how to develop scripts and these technical skills that you had no background in? What books or resources did you find most useful?

Starting point is 00:21:27 So I kept the company afloat just barely. That's how. Meaning, I mean, I was scrambling to pay rent every month. I borrowed the same $8,000 from my parents like four times over that year. And it was a true bootstrap effort. And in a way, that whole kind of marketplace or peer-to-peer economy really came into play for me in my life. I lived in a large building. I had a lot of really interesting neighbors and friends and I would solicit their support or their help,

Starting point is 00:21:57 whether it was, can you bring me food for a week and I'll help you figure out your social media because I didn't have money for food sometimes. Or just asking people to teach me things and trying to do favors or give them big smiles in return. And you continued to use Airbnb as well as a source of revenue during that time? I started using Airbnb about a year into it. So right around when we started turning a profit. But of course, the moment you start turning a profit, you see that there's so much more room to turn more of a profit and that you need to invest probably more than you're making. So that was where Airbnb came in. I was able to fund some of the features that let us monetize with Airbnb. But after my first guest, who I'm

Starting point is 00:22:40 now married to, he stayed, my roommate moved out, and we ended up renting our spare bedroom out then to over 100 guests over the following year. Wow. The point I was going to mention earlier is that I am so encouraged and excited by the fact that within the sharing economy, and I was the first advisor to TaskRabbit, I think that was in some ways, you know, ahead of the curve, and they've done some really amazing things. And then in terms of what people refer to as collaborative consumption, picking up the sort of excess capacity of cars, in the case of Uber, for instance, excess capacity in the case of housing, Airbnb, that to start a startup or to found a company, right, because I don't want to imply that everyone should get venture capital, which we'll talk about. But if you're starting a company, you can use other

Starting point is 00:23:29 startups to get the money to start your company. And I think that's just so incredible. And there are many, many instances where I've been, say, taking an Uber home late at night, and I always talk to the drivers. And in some cases, they're students who are earning their entire tuition by driving at night for Uber, for instance. And it really opens so many possibilities for people who don't or can't take on new full-time employment because it won't leave them any space for starting a company that with the flexibility of turning your rentals on and off via Airbnb or working any hours that you want via a ride sharing company like Uber, that you can fund, ostensibly fund, at least the prototyping and testing of a company

Starting point is 00:24:19 just through a few avenues like that. In any case. One of the core values at Tradesy is that you already have everything you need. So if you, if you think of, do you remember that guy who turned a paperclip into a house by constantly trading up? I do the red paperclip. Absolutely. The red paperclip, one red paperclip. That's one of my favorite stories because I think in a way that idea that you already have everything you need becomes more and more true, no matter what you actually do have. As a philosophy, as all of these platforms proliferate, and we get these new and exciting ways to connect with people. And I mean, share, I think is a misnomer, because it's not sharing, it's really, you know, buying and selling in a kind of non-corporate paradigm. So I see people now even using TradeZ in that same way that I used Airbnb. And it's like the most heartwarming thing in the world. We have two women who are launching an alternative modeling agency in Chicago. So

Starting point is 00:25:18 models who don't look like your typical idea of a model, but who are rather interesting or unique or especially athletic. And they're selling a lot of their closets and I think some stuff that they're picking up at estate sales and all of that on TradeSuite to help finance their dream. So I really like the idea of spreading the idea that you don't need all these things to start what you want to do. You just kind of start and piece it together from what you have. And there are all these great platforms around now that let us do that. Definitely could not agree more. I just think it's never been easier to start a company. It's also on the flip side, never been harder in a way to develop a critical mass of customers. And some people would dispute this, but the reason I

Starting point is 00:26:00 say that is that because of the low barrier to entry, whether it's through people acquiring startup funds through Airbnb, Uber, et cetera, or just the ubiquitous access to infrastructure on demand, like Amazon Web Services, Heroku, et cetera, you have more players, you have more participants in promising markets, right? So you have to develop an unfair competitive advantage with say SEO or messaging or branding or whatever your secret sauce might be. And I'm curious to know with that business, what were some of the key lessons you learned? And you don't have to give away the secret toolkit, obviously, but what were some of the aha moments or lessons you learned that you then carried into Tradesy? Well, first of all, I couldn't agree more. It is noisy and crowded out there on the internet. That low barrier to entry is a beautiful thing, but it means that there's more competition, more smart people throwing their hats in the ring. So here's an interesting

Starting point is 00:27:00 lesson that I learned from starting then. So I was able to leverage social media back in 2009, 2010 to build a really nice following and drive a decent amount of traffic to recycled bread. In the years since then, I've seen this sort of, I'm now bearish on social media as an acquisition channel for e-commerce companies, because I've seen that in 2009 or 2010, if you were a brand talking to customers on Facebook, that was revolutionary. That was surprising. It was shockingly warm to receive a message in your Facebook newsfeed from a company or an organization, whereas now it's very commonplace and more often than not monetized. So between the kind of noisiness and the crowdedness of all consumer facing spaces and most B2B spaces paired with the monetization of most of our social platforms, it's become more expensive, more time consuming, and ultimately not always a great return on investment to put time and energy and money into social media channels as acquisition channels. So I think if I were starting over today and I knew what I know

Starting point is 00:28:11 now, I would skip right over social media, which sounds like a little radical and counterintuitive, but that's what the numbers say, at least in our sector and for the companies that I advise. In terms of kind of secret sauce that was really impactful, social media was for us in the beginning, as well as the SEO. And without revealing kind of the secret sauce, although I think we're at a stage now where it probably doesn't matter, I saw a huge opportunity in search engine optimization because we have user-generated content, meaning that all of the products that are for sale on our site, they're not products that we have there. And this was true of Recycled Bride and of Tradesy.

Starting point is 00:28:50 They're products that individual people have in their homes and are posting online for sale. So we have zero cost of inventory. We don't pay to have listings. describe the product in a way that's very accurate and also mirrors the way that people who are searching would describe that product, then you have this incredible volume of content that people can find when they're searching on the internet. So simplest way to explain that is, you know, if you're searching for a Kate Spade black alligator bag and Tradesy has one or 10, chances are we have it at the best price. We have a really interesting description that's unique. And when you accumulate all of that content, it becomes

Starting point is 00:29:31 easier and easier for Google to recognize your site as a valuable result for searches. Definitely. And I should also point out just to folks who are listening that just because you chose that avenue does not mean that someone else should choose that avenue. And I think that there are a few observations or assumptions that at least I keep in mind when working with companies or working on my own projects. And the first is that you have, in effect, goals, strategies, tactics, and then tools in that particular order work together very well. And if you try it in the reverse, i.e. you choose the tools, you say, oh my God, everyone is using Pinterest. I need to use Pinterest. And then determine your tactics for improving Pinterest subscribers. Then try to figure out your business strategy. And then sort of reverse engineer what your goals are

Starting point is 00:30:26 based on what you've now selected ad hoc, the outcome usually is not very good. And that's in direct proportion to the persistence or the likelihood of those things changing, right? So your goals can remain very, very constant if you choose them well. Let's say week-on-week growth or any number of things. The toolkit, however, whether it's crayons or markers or oil paints or whatever it might be, just using sort of an artistic metaphor, will constantly change and evolve. But the underlying skill set and the goals will not change as much. The reason that I raise that is I think that positioning is often under-emphasized in terms of importance. And people use the term branding, which can get very confusing and it's overused to the point of almost

Starting point is 00:31:12 being meaningless. And there are a lot of agencies that will take advantage of startups to charge an arm and a leg for branding. But really what we're talking about is differentiation and positioning. So how did you make the jump and why from a recycled bride to tradesy, if that was a straight jump, maybe there were things in between. And why don't we just start with that? And then we can, we can revisit the, the positioning if, if that seems relevant, but what, what was the evolution or jump from one company to the next? And why did it happen? So like everything, it was actually a slow and painful jump. So that's kind of like the first rule. More of a hobble and a drag. It was a crawl. It was not a jump. It was a crawl. I would say that when I was a little over a year

Starting point is 00:31:55 into Recycled Bride and the system, the kind of model, business model foundation of the peer-to-peer economy that I had been iterating on really started to work, I thought, well, goodness, why am I just doing this for weddings when there are two and a half million weddings a year in the US and every year you lose your customers and you have to go out and get new ones because people usually don't get married twice or at least they don't get two big white wedding dresses. And so I had my eye on the fashion space for probably two years before moving into actually launching TradeZ. And in those two years, I spent a lot of time improving myself, really improving my own skills. So I

Starting point is 00:32:37 thought, well, gosh, I want to move into this much bigger market. You know, we've got instead of two and a half million weddings, there are 50 million women in the U.S. alone in our target market for a fashion marketplace. And that's a much bigger and more exciting opportunity for this kind of peer-to-peer marketplace system that's already showing that it works. And I started asking some people I knew, like, what do you think? How would I make this leap? And met with some investors early on who probably were just horrified at how green I was. And eventually I applied to Launchpad LA, which is an incubator accelerator here in Los Angeles. And it was a blind application. I didn't know anybody involved

Starting point is 00:33:18 with the program. They gave me kind of like a mercy interview and took me as what they would now call like their biggest risk ever, because I was a single founder. I didn't have a tech team and TradeZ wasn't launched yet. And that was the opportunity that they were really interested in. So as part of getting into that program and moving towards making the value proposition more attractive to investors, I thought, well, I'm going to put it all back on the table and include Recycled Bride in the overall entity that also includes the future website, TradeZ.com, so that we have the ability to either run both or merge them together. And the investors that

Starting point is 00:33:59 I'm approaching are going to already get a valuable asset included in this deal. So after two and a half years of bootstrapping to a point where I could finally pay my rent, I said, okay, well, why not throw it all back in and take another big risk? And so during the four months I was in Launchpad, I met a slew of early stage investors, raised our first financing of $1.5 million. That was in the summer of 2012 and started hiring a team and building Tradesy. And the jump to Launchpad, I want to visit that for a second. Launchpad implies, of course, that you're going to be taking on investment, probably choosing the

Starting point is 00:34:39 venture-backed startup game as your game. Why did you choose that as opposed to trying to bootstrap your way into this larger market? I had developed an appetite for something bigger at that point. And there was already competition in the market. But even if there hadn't been competition at that point, that the market was just so big, that the bootstrapping efforts would have taken so long that if the opportunity was as big and as timely as I believed it to be, someone else was going to raise a bunch of money and beat me to it. So I really believe that the scrappy bootstrapper can beat the bloated with funding big startup in some cases. But when you're looking at a market that's huge and an opportunity that feels like,

Starting point is 00:35:25 you know, it's up for grabs at any moment, having fuel in the tank is kind of necessary. And I think a VC once told me something that's just so true. It's crazy true. The only reason that a business ever fails is because it runs out of money. And so I had kind of integrated that idea and realized that this kind of month to month, paycheck to paycheck thing wasn't going to give me the kind of breadth of opportunity that we needed to move quickly. Got it. No, that makes sense. What were the influences, people, books, articles, anything that inspired you to make that leap into the venture-backed world and to apply to Launchpad? Oh, gosh. I wish I had a really impressive sounding list of mentors and influences,

Starting point is 00:36:15 but I was really kind of flying blind. The time and effort and concentration that it took to learn all the things I needed to know in that couple of years of bootstrapping and to get the business off the ground and run it and play every role within the company, I probably didn't do enough exploring of, you know, what it really meant to take venture capital. So in a way I backed into it. I just thought I need funding. Who has funding? Looks like it's people called VCs. So I'll go talk to them. Yeah, I didn't know. And I didn't understand all the trade-offs that come with venture capital at the time. What are some of those trade-offs? I'd love you to elaborate. Well, the obvious— be within tight knit sort of inside baseball community, very well known, but for a lot of people who might end up in your position where they're considering different avenues, they might not realize. So it'd just be helpful for you to, to elucidate that. Sure. I mean, the biggest

Starting point is 00:37:14 trade-off is the dilution. So, you know, you start off owning 100% of your entity. And then as you take on investment capital, people own pieces of the company and you own smaller pieces of the company. So that's a trade-off, although it's not something that I ever really saw as a negative trade-off. I saw it as a really positive trade-off because the amounts of money, like I think in the VC world and in that sector, people get a little bit cynical about the actual amounts of capital we're talking about. But the first time that I saw, you know, $1.5 million hit our bank account, it was so overwhelming and shocking. And it's a tremendous amount of money for someone to trust you with and put in your hands to make something out of nothing. So, you know, when I say trade-off, I want to kind of

Starting point is 00:38:01 couch that in, it's a decision you make. Every decision you make in life is a trade-off, I want to kind of couch that in, it's a decision you make. Every decision you make in life is a trade-off. I'm really happy with the trade-offs that we've made so far in terms of both dilution and partnership. And then the other trade-off is, you know, some people would call it control or at least influence over the direction of your company. But again, in our case, I feel like the investors we've worked with have brought us nothing but good input and really impactful help. So both of those tradeoffs have been very, very good ones for us. It's not always that way. And that's why everyone tells you to be really careful about choosing your VC partner, which I always found funny because for many years I wasn't in a position to choose.

Starting point is 00:38:42 It wasn't like they were lining up. But I think, you know think like people find like people. And I've been really lucky to find investors who share the same values and vision that myself and my team do for the company. So I don't even actually know the exact percentage of the company that I still own today because I don't care about the percentage. If it's a billion dollar company and I own 5%, right on. Right. And you've assembled an incredible handful of investors. And I think we will get into that. But before we do, what were some of the mistakes that you made at Recycled Bride that you vowed not to make again with Tradesy? Oh, too many to count. But one that stands out is that once upon a time, there was also a website called Recycled Tyke, and it was a disaster. So six months into Recycled Bride, I decided that

Starting point is 00:39:41 I needed two websites, not one. And so, you know, kind of first rule or lesson there is like, if you don't own the market in the area that you initially focused on and set out to build within, then expanding into another market and spreading your resources even thinner doesn't usually work out in your favor. So I launched this, you know, Recycle Tyke, which was the same concept of a peer-to-peer marketplace, but for baby and kid stuff. And I think, one, the loss of focus was a huge mistake. But even more importantly, I didn't listen to the customer. So I had probably 10 or 15 girlfriends who were moms, and I talked to them about the idea.

Starting point is 00:40:20 And at first blush, they were all like, oh, that would be great. That's something I would use. But as the conversations went deeper, they all told me what a lot of the potential issues would be. And I didn't listen because I was so excited about the idea of having two websites, like two is better than one. And so I launched it. I put a lot of time and effort into it. It definitely slowed down the growth of Recycled Bride to some degree. It didn't take off the way that Recycled Bride did. And so, you know, in the two-ish years since we launched TradeZ, my co-founder, I have two co-founders now who came on when we were starting TradeZ, my co-founder, Sashka Tanzerad, who's our chief product officer, was always the great sort of focus police. And anytime I would come in and say,

Starting point is 00:41:06 hey, you guys, I have this idea. We should be producing a line of handbags. He just shuts it down and says, remember, we haven't accomplished our first goal yet. So I think that's a really important mistake that I made in Big Lesson that lets me listen to Sash now and realize that he's right.

Starting point is 00:41:21 That's a valuable sounding board to have. I like a few things that you said, I think that are important to underscore. The first is no matter what you do, there are trade-offs. You're making compromise. So just because you choose to bootstrap doesn't mean you haven't made sacrifices

Starting point is 00:41:36 in certain areas, like you pointed out. And that's always been just a fascinating fork in the road to help different people navigate or to watch different people navigate, right? Because if you are, let's say for many, many businesses, I just spoke to a journalist at the wall street journal about this and I fear that this person will omit some of my caveats related to venture capital. That never happens. Yeah. Never. Yeah. Pro tip for people. If you can ever,

Starting point is 00:42:01 if it's going to be a print interview, try to answer questions via email. So you have proof of what you actually said. I second that. Also advice from Mike Shinoda in one of his songs with Fort Minor, but that's a separate point. The point is that many companies, especially if they're not in a winner take all market could go to Kickstarter. And if they're really good at what they do and the product actually has demand to raise a few million dollars and be in great shape. If the goal is to create, in effect, a lifestyle business, all that means, or a very profitable business. It doesn't have to be maligned as a lifestyle business. Something

Starting point is 00:42:33 that generates a lot of free cash flow, that puts money in a bank account that you can use without the objective of being acquired or having an IPO, an exit event. But if you're in a market, like you said, where there's competition, it's going to be very tightly vied for with resources coming to bear on the situation from outside investors, then you kind of have to go big or go home. So that's an observation. And a recommendation I'd like to make to folks is a very short book I've recommended before called The 22 Immutable Laws of Marketing. And of course, all rules are made to be broken, but these are pretty good rules for most people to at least start with. And one of them is choose a market where you can be number one

Starting point is 00:43:15 or number two, and ideally number one. And if you can't be number one, you need to thinly slice it a bit further. And in the case of PayPal, for instance, they didn't start off trying to boil the ocean. They started off trying to dominate the Beanie Baby eBay power seller space. And you have to define your market finely enough so that you can dominate it and just as importantly, acquire customers in a very targeted and affordable way. Whereas saying, I want every mother in the US, even if you were to attempt

Starting point is 00:43:51 that, which I wouldn't recommend, would require doing massive advertising spends that a startup can't afford, nor should they even try to afford. If you want more of The Tim Ferriss Show, you can subscribe to the podcast on iTunes or go to 4hourblog.com, where you'll find an award-winning blog, tons of audio and video interview stories with people like Warren Buffett and Mike Shinoda from Linkin Park, the books, plus much, much more. Follow Tim on Twitter. It's twitter.com slash tferris. That's T-F-E-R-R-I-S-S.

Starting point is 00:44:28 Or on Facebook at facebook.com slash timferris. Until next time, thanks for listening.

The Tim Ferriss Show - Ep 30: Tracy DiNunzio, Founder of Tradesy, on High-Velocity Growth and Tactics

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