This Week in Startups - E1082: OfferUp CEO & Co-Founder Nick Huzar on creating liquidity in a marketplace, acquiring their largest competitor in Letgo, location-based pay & more!

Episode Date: July 7, 2020

Follow Nick: https://twitter.com/nickhuzar Check out OfferUp: https://twitter.com/offerup https://offerup.com/ Follow Jason: https://twitter.com/Jason https://linktr.ee/calacanis

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when you visit pb.com slash twist and LinkedIn jobs. A business is only as strong as its people and every hire matters. Go to LinkedIn.com slash twist and get a $50 credit towards your first job post. Hey everybody. Hey, everybody. Welcome to this week in startups. I am super excited about today's guest because he failed miserably at his first social networking start. up and then today has built a startup that you all know, love and use in all likelihood, unless you're a laggard. And that means somebody who adopts technology way after the fact, the last person on the bus, basically. So you know the company, Offer Up. They do billions of dollars in GMV every month. That's the value of all the stuff going back and forth. And they're

about to hit 100 million downloads. And we've been waiting to have them on the pod. It's It's been a hugely successful company in a space that everybody thought could not be innovated on. Welcome to the program. Nick, Hu-Z-R. Hu-Z-A-R, but it's Hu-Z-A-R, but it's Hu-Zar. Just so everybody pronounces it correct, right? That's right. Thanks for having me, Jason.

It's good to be here. Yeah, and you're home in quarantine. You got the nice Offer-Up pillow on your chair over there. I like the placement. By the way, the chair is from Offer-Up. The lamp is from Offer-Up, and that ugly painting is also from Offer-Up. I was going to say, do you have a vendor you could lean me towards to get ugly paintings? And I'll just, I guess that's tagged on offer.

I was going to say, my wife hates this painting. That's why it's in there. I happen to like it. Of course. Yes. Yes, absolutely. Trolling your wife, one of the great joys in life. That's why I had a quarantine beard for about 15 days. And my wife was not pleased.

I had to shave it. But let's start with that. How are you holding up under quarantine? I'm assuming that you went into quarantine in the beginning. of March like most of us and you've been home for a hundred days or more. Yeah. And I don't know where you're based, but where are you based? And how are you doing?

Yeah, I'm doing, I'm doing fairly well. I mean, we're based in kind of Bellevue, Washington. I live kind of on a mountain so I can get out and go rum around the woods if I want to. So, um, pretty good when it comes to social distancing. I think the challenge like a lot of parents out there are how do you adapt when you've got two little kids at home? My daughter just turned nine and my son's six. So, you know, it's been challenging.

There's one neighborhood family that they play with. They were both kind of had an agreement. They were both kind of quarantining. So that's about the extent of our social interactions. I've only seen one of my friends the whole time during COVID, which is challenging. So I think that's the hard part as a social interaction. But I enjoy spending more time with the family, which is nice. That has been an upside.

and do you think you'll be changing your quarantine and over the summer, you think you'll loosen it up a little bit? I know it's a very personal question. We are loosening up a little bit, seeing a couple of different, like you said, we have like two or three families that we're now kind of in agreement

that we have a close social circle. What are your thoughts on? Didn't Seattle and Washington get hit early? And then you guys got through it super quick. Yeah, but I think, you know, I think one of the challenges, challenges, you know, I mean, it's great to be an American. Like, we don't like people telling us what to do. So, so this, there's a lot of lack of consistency, which means, you know, I had a board member tell me this this morning.

It's kind of like a pool and an earthquake. You know, it's just kind of up and down, up and down all over the place with no kind of. And I think that's kind of the challenge that we have with this. So yeah, I think personally, we'll probably loosen up a little bit, but we're being very, very cautious and we're, I think, over communicating with friends just to make sure. Everyone's clear of what's happening. But I think in other places, clearly they're not doing that. Like there's a lot of places like, I'm not going to wear a mask. I don't need to wear a mask. And I think that's a little challenging. Which is kind of crazy when you think about it. The mask costs nothing.

And it saves every, and we could totally be through this by now if everybody had comply with masks. So literally the last hundred days of people like us being in hardcore quarantine is now being extended and ruined by people just not being willing to wear a mask. You look at Korea, you look at Japan, they have under a thousand deaths each. They've totally got it beat. And they're back to life. And it seems to me like what we're going to have to do in America is we're actually going to have to go through this three or four times to get it through our thick skulls because we're so intent on freedom and not being told what to do.

We have nobody, the government is not just giving us a clear answer. I mean, you know leadership having run two companies. And I was giving you a little goof there about your first social network. because you're so successful now, I can do that. But you know, you've learned what leadership is. In your estimation, as you've grown as a leader, and obviously you're tremendously successful in this one, what do you think leadership really is at its core, especially in a crisis? Yeah, I mean, I think one of the things we did, I think, well, and it's not just me, but I think

my leadership team in this is we took it seriously early. And we laid out, I just kind of, we got alignment on, okay, through a series of circumstances, what are the actions we would take? And, you know, we had everything from, okay, maybe we just, you know, start to, ultimately, we said when school's closed, we're just closing the office. That was like phase three. Well, we quickly went from phase one to phase three. So I think one of the things I hopefully have learned over the years is I think part of your job as a leader is to build alignment. and take, you know, be able to extrapolate what's happening today and say, okay, make sure people understand kind of where things are going and overly communicating. And one of the things I've learned

from remote working so far is communication. My team has never felt more connected across the company. And we've been surveying and doing roundtables. And I thought that was shocking because you think, like, oh, you're in the office. You go in the office to be connected. And then we found that, well, it's probably because we've over-indexed on how we communicate with the team. unpack that for me. What's working in terms of Slack, Zoom, modern day communication from a company that wasn't work from home and now is, I assume, 100% work from home. Yeah, we are 100%. So, I mean, I think the things that we've learned is we just increased the velocity and the frequency in which we communicated. Example would be we used to do monthly all hands. Now we do every week all hands. And it used to be a bigger production. We were on stage. It was all polished. It was longer. Now it's much smaller. a lot more casual and more frequent.

So people have a better pulse and we do it on a Friday. So we're ending the week and they, okay, I understand kind of the rhythm of the business. I think people are being more conscious in how they spend their time, right? Our time is more optimized. Like I go from one meeting to the next meeting. And so, you know, you're a little bit more productive and focused at home. But I think when people are engaging with others, it's like a lot of people are doing happy hours. We do happy hours with my exec team every two weeks.

I never did a happy hours with my exec team every two weeks when we were in the office. What happens in these, I haven't been to a happy hour, but I've heard about these Zoom happy hours. This seems like completely dystopian and something I wouldn't want to do, but people love them. What happens at a Zoom happy hour? Is there a process or is there like something you do specifically? You have to have a specific beverage. You all drink the same thing. What happens?

Yeah, I think it's just, you know, I think teach their own. Not everyone's always drinking, but yeah, I everyone's having some kind of drink. And it's, you know, it's just, I think it's a way to connect with people on a different level. Like, we're never usually talking work, right? We don't. We just start to talk about hobbies or what are people doing during quarantine or how are people's families doing or a movie or something. So I think you're able to connect with people on a different level that typically when you're in the office, you're just not doing that. Right. And so initially, I thought it be a little bit awkward, but I found that to be helpful. I started doing also roundtables, which I've always tried to make time for even in the office. But, you know, I did a bunch of these as COVID happened. I said, okay, I need to do this right now. I need to make sure I'm around. What kind of questions do people have? There's a lot of change in our business. So I wanted to just be able to connect the dots and make sure people are understanding what's happening. So you're asking, like, how do leaders lead through crisis? I think the best thing you can do is be available, be around and be empathetic what people are going through.

And I tried to lead by that over the last few weeks and just make an extra time to communicate with people. Yeah, I think those are really interesting insights because we took for granted when we were in office that we had culture because the office provided a context, a setting, right? And people talk a lot about the setting and the context mattering, whether it's when people are taking mushrooms, like in that book, Change Your Mind,

like they're like, the context and the setting actually really set and setting are like really important. And the set and setting, not just in psychedelics, but in our offices, we just thought, well, that does it,

right? Like, we're done. We have free, you know, lacroix and it's not enough. Yeah. But I like this idea that shorter,

but more frequent check-ins, are better. And I always think about my younger self. Did you ever work for anybody else? A few times. I would self-admit I'm a terrible employee. Yeah, same with me. I mean, yeah.

And do you remember like feeling, do you remember the feeling of not knowing why you were doing things or looking up to the bosses and being like, what are they talking about in that room? Sure. You had that experience?

Oh, yeah, yeah. I try to carry that with me now because you get some young people working in your organization. They're just mind wanders, just like ours did in those first jobs. What are they talking about? Are things good or bad? Yeah. And when you have your mind wandering like that, it can go to weird places.

I don't know if you've ever had people tell you what they thought you were thinking as a leader. And I know what the opposite. Yeah. And I think especially when COVID really hit, people, you know, I get it. Or you freak out. And I wrote this long blog about some of the. the pain I've gone through in my career and the learning that I've had to go through because I acknowledge that there's a large part of the workforce that's never gone through an

economic cycle. All they know is up into the right. And so I wrote this blog on my own story so people could really understand that, hey, this is, you know, this two shall pass, but it doesn't mean that it's not going to be challenging as you go through it. So I think to your point, I like to be available and not, like I don't have an office when we are in the office. I just want to be out and about. So people don't worry, don't think like, hey, there's some magic happening behind the door when really we want to be as transparent as we can be. Yeah, I do the same. I like to sit out with the group, be transparent. And I actually got that from Mike Bloomberg. When I used to do Bloomberg, I would come in at six in the morning and talk

about the internet in the 90s. And he would be at his cubicle. And he had a conference room behind him with a glass door that was always open and no shades. And he just sat out with everybody else. And I said, why don't you have your own office? Like, you're the CEO of Bloomberg. And he's like, if I have my own office, everybody wonders what I'm talking about. And it just creates this, you know, chaos. And the other thing I heard that was really interesting is somebody told me, I think it was Warren Benis, who was on the podcast early on, you know, real thinker on leadership. I have to pull that episode because he passed away.

But Warren Bennett said, I never forgot it, that leaders define reality, right? They let you know, like, this is the reality. And so when we get back from this, I want to know what you think the reality is of the third and fourth quarter of 2020 as we come out of the COVID crisis. And how are you defining reality for your business, Offer Up? And then we're going to hear all about the origin story of Offer Up in the second segment. So we'll be right back. Hey, do you have a great idea? Do you want to turn it into a beautiful website?

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And we're talking about leadership in the time of Coronavirus. And we're going to get into the story of Offer Up, which if you haven't downloaded, you're really, where have you been? 100 million people have downloaded this thing. And you only operate in the U.S., right, Nick? Yep, 100%. Right. So that's a tremendous number.

If you're just in the U.S., I always see you in the top five or ten in the commerce section. So you're up there with all the major. companies Amazon, eBay, etc. And I'm curious what, before we get into the story of offer up and what you do, just looking at the second half of the year as a founder, what was March through June been like? Has the business collapsed? Has it gone up? Because in my portfolio, I've had some businesses revenue go to zero and then I had others triple their revenue. during coronavirus. And I'm thinking out loud here. So people have more time on their hand,

so they do more shopping, for sure. But you have to change, you have to exchange something in person or maybe ship something. So maybe that could be a drag on the business. And so I'm going to go ahead and say, I think there are categories that exploded. People needed certain things that aren't available like bicycles that were sold out. But I do think that the coronavirus must have been a headwind in some ways. So I'm going to think that you were net neutral during coronavirus. Am I right? No, way up. Way up. But you're right. You're right. Certain categories are just not as engaged upon, like fashion, non-essentials. But you were spot on on bikes. Try to find a bike right now. I tell anyone it's a seller's market. You're selling a bike, mark it up. I never tell people to mark things up,

but you can't get a bike right now. Amazing, right? What other, any other categories? Yeah, I mean, Puzzles up a thousand percent. It's the number one thing that's blowing up is puzzles. Interesting. I have been doing puzzles with my four-year-olds the last week or two, and they can do them so quickly now. I think that I might have like gifted kids on my hands. Either that or they've done the same ones.

Board games, I suspect. Board games. I think you can, the way I put it in various buckets. Yeah, put it in various buckets. What do people need that's hard to get right now? You can't go into a gym. So fitness equipment, like through the room. weights, kettlebells.

Kettlebells, weights, you name it. Like anything fitness is sky high. Things to keep your kids occupied, especially for parents that are struggling. And clearly there's a lot of financial stress or just stress of, you know, working. Firecrackers, knives, all those good stuff. Yeah, we don't sell those things. I can tell you, the searches are up, but we don't encourage people selling those on our marketplace. But, you know, we'd say in about three times increasing people buying video games.

The number one thing people are searching for is the Nintendo Switch. Everyone wants one of those right now. Wow. Yeah, toys and games. Things to keep kids occupied and fitness. Those are really... I'm super worried about kids. I have kids, too.

I think you said you had a nine-year-old. I have a 10-year-old. And then I have identical twins who are four. And I think you said you had a four-year-old, too? Six. Six. So you're right in the thick of it. I mean, they need constant attention or an iPad or a movie.

And I am just... The amount of screen time I'm getting a little worried about. But are you worried about that as well with the kids? Yeah. Well, in our case, my kids are outside in the trampoline, which we bought an offer up, by the way. But they're out there. So they're out there for a few.

I mean, the weather is nice. So they're out there for four or five hours a day this time of year, which is great. Perfect. So we do give our kids a little bit of screen time, but it's usually like end of the day. Yeah. During the day, we try to really limit that to them. Get out of the house. If they're on their laptops, it's usually learning, right?

They're not really watching YouTube or anything. But, you know, we're fortunate. My wife doesn't work. And I can walk around sometimes. in the day. But if you're, if you have two parents working at home, I empathize with that. That's, that's a challenge. Yeah, that is the thing I'm seeing is really breaking people. And we need to have some compassion for people who, you know, you got either you're a single parent. And you can really appreciate what single parents go through now when you have your kids home

from school. And then two parent homes where both people work. What do you see going forward? When you're talking to your management team, you had a, you said you were on a board call earlier, I think, today? What is the board call like looking forward? And are you thinking this is an opportunity for us to hire people because so many people have been laid off? Is this an opportunity for us to invest in marketing because marketing's cheaper? Or are you thinking, my goodness, people have 20% we'll get 20% unemployment in this country. We're going to have a problem with buyers. Or is that counter for your company because people are like, you know what, I got laid off. Now I'm going to sell everything, get a little extra cash, and I have the time to clear out the garage. Tell me what

you think of your business, Offer Up going forward. Yeah, I think it's all the same. I think, unfortunately, for the macro climate, there's a lot of challenges. And so I feel for people that have lost their job or they're really having a hard time making ends meet. But Offer Up was always built on community. It was always built to help, you know, connect people to prosper locally. And so I'm not shocked by this uptick and what we're seeing in engagement because we are kind of that local marketplace. And if someone needs something, they can get it right away. They don't have to wait for something to be delivered to them. So that's the positive in terms of people looking for supply.

And if you're selling something, I think, like you said, people have more time. They're clearing out their garages more and they want to make room for, you know, maybe it's a home gym or whatever it is. people are definitely doing that. So I think this COVID experience is definitely a large tailwind for us. I expect this to continue based on the numbers I've seen and for a while all the way through the end of the year. So I think if anything, you're going to see more from us to help, you know, to unlock more supply.

We're very supply constraint, not just offer up, but just the country. Like, I don't know if you've been shopping recently, but try to buy some yeast or try to buy some flour. Ice cream machine sold out until. next year. I got my ice cream machine last year. And that is, let me tell you if you've got kids making ice cream, they are really interested because you get to eat the ice cream. Yeah. And you get to take whatever you want. And in the last phase of ice cream, throw it in there. What are you thinking about staffing and work from home? You were,

how many employees ballpark do you have? 310. 310. And I'm assuming most people were in an office somewhere or multiple offices? Yep. Yeah, most people are in office somewhere. But I think that your question is a good one. So, you know, we through, I think, roundtables and connecting with people, we've done a number of surveys, you know, we want to understand like just people's mental health. And what are the pros and cons of this environment? And I think I was always hesitant to really embrace remote work in the past because I worried that productivity won't go down. I worried that, you know, people wouldn't be communicating as well. And what I've actually seen is the opposite. productivity is up, people are communicating better.

What do you attribute that to? I think that, like I said before, in the communication, I think that people are just more conscious and trying to be very intentional in making these times for people to connect not only just on work, but also even more socially. It's easier to find an hour on Zoom than it is to coordinate everyone to go out for drinks sometimes,

depending on where you live. So that's part of it. And then in the productivity, like, you know, well, heck, just eliminate the commute. Right there, you've got some time back in your day. Yeah, somewhere between 90 minutes and three hours, depending on the commute. Yeah. And it feels like there's some, there's some contract that's occurring without anybody discussing it,

that people are working a little bit more, but they're also not having to commute and they have less pain and suffering of that commute and time. So I think what people are doing is they may be. getting to work a little bit earlier and staying a little bit later, but they still net out getting some of that benefit. That's what I think's happening. Yeah, I probably agree with that. And the other thing I think is time is your time is just more optimized in the day where, you know, if I'm in the office, well, my role's a little different. I'm far more productive at home. There's less distractions. But if I'm just, you know, working in the office, you know,

you might have a little bit of a time between meetings or you have a half hour. And so you go and talk to a friend and grab a call. You just have all these, if you add up all those other distractions, they're all kind of gone now. So I think there's pros and cons to that. I think there's healthy aspects of clearly meeting face-to-face. So you're asking, you know, where do we end up? Here's my, if you had to ask me today, here's where I think this ends up. So first of all, we communicated to our team that they have the option to work remote the rest of the year.

And that's a no-brainer because people are scared and you're giving them the option, right? Yeah. And we just, and again, back to kind of leadership and setting the expectation. We didn't want to send mixed messages. We wanted to say, look, have this in your mind. So if you need to make an investment in your house and your setup, if you need to get an office chair or something, come by the office and we'll just, we let people take any equipment they wanted out of the office, their desk, whatever, just take it.

That's great. And we said, whatever you need to be productive, go. And if we decide to open the office, we may do that before the end of the year, but I wanted to set the expectation with the team that it's not the office that you went back to. Like, we're not going to be sitting the same. It's not going to, there's a lot of things that will be very different because of COVID. So, you know, where I think this lands is, in my mind, is can you create a hybrid that, that kind of there's the best of both worlds where I don't, I don't, I think we would struggle if we didn't.

And like, I think we need to embrace remote work moving forward and just become a remote work company. And that means you can be in the office. You can't, you could if you wanted to, but I don't think you can do half. I don't think you can say half your teams in the office, half's remote. So what I do think this lands in my mind is maybe it's two four hour chunks in a week that you come into the office. And you use that time for what I think people are missing right now. You have department meetings. You do a whiteboard session.

You do a one-on-one. You know, you do those things to connect face to face. And maybe if you're, you know, you don't have the right setup at home. I talked to an engineer, by the way. He has two other roommates in a 500-square-foot condo. And he's coding on his dresser. Like, he needs to get out of it. Yeah, not going to work.

So maybe the desk now becomes satellite desks, right? Anyone can sit anywhere that they want. And so that's where I'd like to try to land and experiment and see that, hey, Can we create a system where the office is just a shell? We can reimagine how we use it. And maybe not everyone ever comes in exactly all at the same time. Your landlord just had a heart attack. I'm sure a lot of commercial people are having heart attacks.

I mean, it's got to be just brutal to talk to your operations and facility team because any office has one or two people per 100, 200 people managing the facility. And now the facility is going to be smaller. So those jobs are at risk. those people have to get redeployed somewhere. And then if you just think about what you're spending on those leases, you know, it's probably $500 a person per month, maybe $1,000 per person per month, all in with the space. So a company of your scale, if I were to guess, would be spending $3 million a year

on facilities. And now you're like, okay, well, there's 30 more employees or people get raises. When we get back for this quick break, I want to ask you a very difficult question, which is two difficult questions. Number one, should people get paid different amounts based on where they live, which is Zuckerberg's promise to employees, if you leave the Bay Area, we paid your premium to be here. But if you want to go live in the woods, we're going to take 20, 30 grand off your salary based on where you live. So should that be the, how do you manage that? And then the second one is, can a company be built to scale like Facebook, Uber, or your own offer up without everybody being in a central local?

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Up is with us. Nick, Huzar, emphasis on the Z, not Hazar, but you can follow him on Twitter, N-I-C-K-H-U-Z-A-R. If you haven't downloaded offer-up, pause. If you're listening to us on Spotify or podcast on iTunes and go download the app and you will be amazed at how quickly your garage gets cleared. The liquidity on Offer-Up is unbelievable because my team uses it to get rid of our old stuff and it's just like same day. It's pretty amazing. So I gave you two hard questions and you've been at this for a while. You started working in Web 1.0 and through Web 2.0 and here we are in the mobile era.

What do you think about Zuckerberg's announcement? Should people get paid differently or is that just a transitional thing? Yeah, I mean, we've thought about this too and we're definitely embracing more, I think, remote work, just given how we're all working remote. I mean, I think that makes sense. The cost of living is very different depending on where you live. So I do think that makes sense. Part of your compensation is directly correlated in my mind to where you're living,

and you need to account for that. So I think if we were to embrace more remote work, we clearly have to look at our comp structure and be adaptable based on where we're hiring. Yeah, see that, I think... giving people like a year's notice or whatever it is, six months notice, hey, if you choose to leave, which I think, you know, listen, it's really easy to criticize Zuck and because he does a lot of things that are so cutthroat and elbow swinging. But in this case, it is actually unfair to the person who was in Nashville, who got a 70K offer to then have somebody leave San Francisco at 100K and make 100K

and live next door to them in Nashville and drive up housing prices. You have to think about the system holistically. Yeah. And what do you think about the ability to build a high-growth startup? There is something that happens when everybody's in that office and they're part of that SWAT team mentality, high-growth startup mentality. Certainly some of that is lost. If people are working from home, do you think?

And then does that create two classes of citizens where if you're in the office with the boss doing the whiteboard session or you happen to get to? bump into them and have an espresso in the coffee bar, you got FaceTime. And then the person who chose to go to Nashville didn't get FaceTime. And therefore, they're less important. Yeah. I mean, I do think that's, I think if we were just starting off for up in COVID, it would be very hard. I think to your point, especially in the early days of your first 20, 50 people, you've got to really spend a lot of time together and work together and a lot of whiteboard sessions. Like, things are less figured out in the early days. I think where we are now,

Now there's still a lot of innovation and things we want to do, but we also have a lot of baseline and areas that we want to iterate on. And so it's a little different. I think we can continue to scale and innovate and bring new ideas, even if we were embracing remote work. But I think it would be challenging, to your point, if we were just starting. I think that would be a little bit harder in this kind of setup. Explain to people what your central thesis was when you look. launched offer up because people were letting go of stuff and flipping stuff, you know, pretty efficiently on eBay and Craigslist.

And it was either free on Craigslist or, you know, most people would consider low cost on eBay. It didn't seem like we needed to have another app to do this. Was it that they were just had bad apps or what was your thesis of why you could go into a place where there were just giants waiting for you. Yeah, well, okay, so I'll try to be succinct that it's kind of a longer story. So I'll go for the long story. Okay, long story. Okay. So here I am, as you acknowledge, I had another startup that I moved on from and didn't really, didn't really pan out. So I was not in- You went through $5 million in venture and returned $0.

Yeah, it was actually from Angels. So I like to say I spent most of my time raising money, not building a company. It was- Oh, really? 50-K checks at a time. Oh, yeah, it was like 56. That $5 million came from like 56 angels. And you had to email and call them and let them know you lost their money. Brutal. Well, not me, my co-founder, but yeah. Co-founder did that one.

Yeah, he had to take that arrow in the face. Yeah, yeah. So it's literally like an arrow to the face. Yeah, that's right. Yeah. So that's never fun. Did any of those angels like lose their cool and were jerks about it? Or were they all just like that I'm aware of?

Not that I'm aware of. I think they knew what they were signing up for. I have to train new people on this, especially syndicate investors, because I've seen syndicate investors get all bent, you know, people on an angelist syndicate or, you know, seed invest or mine, the syndicate like dot com, they will get freaked out.

And I'm like, okay, how much did you invest? They're like, 4K. I'm like, yeah, yeah,

I think your rage in this failure needs to be proportional to the amount you lost. You lost a business class ticket to Maui. Yeah, maybe you're in the wrong, wrong business if you're freaking out of that. But okay, keep going.

Yeah, so my plan was not to go do another startup at all. but my wife and I had moved into a decent size house and you know most people have like a drunk drawer in my house everyone's got one of those I have junk drawer I got a drunk dresser I had a junk room okay so I just threw all this stuff in this room and then you know my wife and I wanted to have kids and so you know at one point she's like hey I'm pregnant I'm like so excited I'm like oh I'm going into dad mode and I go open the door door one day and that was the spark I'm standing there in the door I'm looking at thousands of dollars worth of stuff not junk

just stuff I wasn't using. And I'm like, kill me. Just to post this online is going to take me all week and just to post it. Right. And now you think about the opportunity cost. I'm going to make a thousand and I'm going to lose 2,000 not going to work that week. That's right. So I go, just to make these things discoverable, this is going to be hard.

And then I closed the door and I was just like, I'm not going to deal with it. Right. So then I kept thinking about this problem. And I'm looking at my first smartphone, which was the second gen iPhone. There's no Android at this point in time when I'm coming up with this idea. And I, like you had just said, I'm like, oh, everyone uses the classic desktop solutions. Like, you know, I think this is kind of crazy. How many people have tried to compete in this space is just foolish?

And so I'm out interviewing because here I am. My wife is working. I have no income. I just quit my last job. So I have no income. And I have a daughter on the way. So I'm like, I don't want to be a deadbeat dad. I have to go get a job.

So I'm out there interviewing. And so months is going by and I keep going, you know, and I keep just unpacking this problem that I started to have a feeling that I had a feeling like I wasn't alone. I had a feeling that there was a lot of people out there that weren't using desktop solutions because it wasn't worth their time. And what I started to uncover was that I kept going back to this idea that value is locked up. And, you know, it's in our homes. It's in businesses. It's in storage units.

It's in retail. And I kept thinking like, well, why is it all locked up? And my conclusion was we all make time value decisions. And that's a reason that certain things go in the trash, certain things go to Goodwill, and maybe some things like a golf club, you know, they just go into your garage and they just sit there. And so I started unpacking all these stats that I thought were fascinating. A good example would be 25% of U.S. households with the two-car garage cannot park in their garage. Oh, God, do I know it?

25%. So that's thousands of dollars sitting there. going anywhere, right? And then you look at our homes. Our homes are actually 30% larger than the 1950s, but we're actually having less children. We're putting more things just in our houses and they're just sitting there. You know, if you look at storage, like the fastest growing area in real estate is actually storage. It's not residential. It's not commercial. And, you know, 10% of the U.S. population rent storage units. In fact, you can wrap a seven by seven square around every man, woman, and child in this country with storage space.

And so that's just, think of that as just consumers. But what about small merchants? And so, you know, when I was out here, you know, kind of collecting information, it was during the whole, the tail end of the housing crisis. And I would walk in and I'd talk to store owners and I'd say, what do you do to promote these things in your store? What do you do to promote that jacket right here, right? And the response I would get.

The window. Yeah, I just put on the window or I'm on Google or I'm on Yelp. And I go, no, no, not your store. store, the things in your store, right? And so, you know, so after my bottom line, after about four or five months of doing all of this, my conclusion was, while there are large players out there, I believe that the, the, the, the, the tam is so much bigger. I believe that value is just stuck. And I believe that the smartphone enabled us to reimagine the entire buying and selling process. So for me, my spark was simply, I just wanted to take a picture and make something

discoverable in 30 seconds. And the alternative was 15 minutes just to post something. Right. So, but if you continue to unpack that, it's, it's the discovery part. It's the communication part. It's, you know, you add all that up and it creates a lot of friction. And so I just felt like, hey, if we could focus on simplicity, if we can focus on bringing trust to local transactions, maybe we could actually, you know, create something that was really innovative. And that was that was kind of the spark for offer up, you know, years and years ago. Okay. So the biggest challenge is obviously liquidity.

The hardest thing, Bill Gurley talks about it a lot with Uber and, you know, he's been in tons of different marketplace businesses. You did a social network. So you understood a little bit about liquidity, I would suppose, certainly virality. liquidity is hard and it's probably the I mean the hardest place I can think of trying to get liquidity would be in a garage sale like an online eBay. So when we come back from break, I want to know your hacks for getting the flywheel going and adding liquidity to a marketplace of buyers and sellers when we come back on this week and starters.

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is safe during this incredibly trying time. I myself am losing my goddamn mind in quarantine. I am not built for this. It's 100 days. and gosh, I can't wait to take all you out for some dim sum and get some ramen and get back to Tokyo and New York and my friends in Sweden. God, I can't take this for much longer. My guest today, Nick Hoosar is the co-founder and CEO of Offer Up. It's been doing that since 2011.

Candidly, a great time to start a business, not dissimilar to this exact moment. Or if you're a founder out there and you're wondering, oh my God, the market has crashed. And actually, the market rebounded. But, you know, this is a troubled market. You shouldn't start a company. Wrong. Best time is when everybody else is not vying for the same employees, advertising space and dollars. Start a company now.

And if you do make a great company and you get the product lunch, email your boy, Jason at calicanus.com. And, yeah, if you get to like 5, 10K a month in revenue or 5,000, users a day, I might just ship you 100K be part of our launch accelerator. You've raised over 300 million. About to hit that 100 million downloads. Congratulations. 20 million monthly users, which is extraordinary since you're in the U.S. and the U.S. population is 330 million.

The adult populations, yeah, 70, 80 million kids. So you've got 10% of adults using this every goddamn month. Is that right, Nick? I'm a mac of the math, right? Maybe overall, what's more exciting is we have huge markets like LA where we're almost at 20% of the adult population

using that's up every month. Yeah, and it seems to me that there are definitely markets that work better for peer to peer. And I would think those are ones, let me think about that. Would density be better than not density? Certainly density is important, right?

L.A. is dense. And then weather has to be a factor if it's really cold and it's Minnesota and there's snow, I'm not getting out. to go get a pair of you sneakers. So is it the weather and the density? Those are probably some of the biggest parts. So, yeah, weather definitely matters.

And, you know, we spent a year in Seattle before we went in any other markets. And I could tell you, and as we thought about testing and scaling, there's a reason we didn't launch in Chicago in the middle of winter. Like, you don't want to move a couch. Forget it.

But density, and actually, I would also say, the ability to move, you know, density to a certain degree. Like New York is its own anomaly. Like, you do not want to move to, two dense. You do not want to, and no one has the ability. One, two things. One is people don't have a lot of space in New York. And then the other one is try to move a couch in Manhattan.

Like, forget about it, right? It's just kind of ridiculous. Ridiculous. So you need to have, ideally, a place where people can get on and off freeways quickly. People have cars, like L.A. And they have enough room to have accumulated stuff. That's right. So, yeah, so we definitely, you know, we, we, we, we're, you can use offer up anywhere in the

US now, but definitely there's, there's areas that have a lot more, uh, vibrant activity, just giving kind of some of the attributes you'd see those markets. You took an Uber like approach. And if I, if I understand correctly, you went city to city, correct? Yep. City by city. So why is that important for, you know, somebody who wants to create a marketplace right now? And then what were the tricks to get the.

flywheel going. Yeah. So you're asking probably one of the most painful questions. So, you know, in the first year, it was just billing the product. My specialty. Yes. Year one was building a product that, quite frankly, most people wouldn't use. And so, you know, I think from starting from, you know, a lot of people say marketplaces are really hard to build and they're also really hard to break down. You know, I felt like we spent a year and a half trying to get the flywheel to go. And it was living hell. It really was because we could not get the flywheel to move. And so I convinced my friends I'd say how I'll buy it for you like go buy something on my product or hey mom post something on this app and the hard part in the beginning was we didn't have a vibrant buyer

community so it was crickets right you just post things and nothing would really happen every now and then we would have just random people posting things but it wasn't you know wasn't anything to write home about and so you know you kind of have to fake it till you make it so i used to get in the car and i would just go buy things from people and i would never say i would I would never say I worked at Offer Up. I would just say, look, I'm just a buyer, and I would clearly tout how great Offer Up was. But in reality, we didn't have a lot of buyers. And so I would bring it back to our first office, which is maybe 400 square feet, and there was five guys in their coding.

And so imagine a few desks, and it looked like a Goodwill. There was just junk everywhere because I'd show up to work the next day with a chair. Right. And so, and then I would also post it again on Offer Up. because we needed more items. Right. So you're basically creating velocity. Well, yeah.

Yeah. Velocity of transactions. And then that person who actually sold something, if somebody sells something, what is the, of people who have a successful sale, what is the percentage of those people who then sell a second item? Is that like one of your key metrics? Yeah. That's, well, it's very high.

Once you either buy something or you sell something to an offer up, you're hooked. Like, you're there. You just keep going. And so I think that's, we've definitely optimized the product for that first time experience. And so we definitely want to make sure that when people post something, we make sure they get a lot of exposure and able to sell that thing, you know, very quickly. So first time, there's a new account. You really want them to have that first. So that is a great way to ensure that people don't go one and done.

I posted it. I didn't get it sales. Well, yeah. Yeah. And I was just going to say like liquidity was what we built the whole company on because it was. was we believe that, hey, someone is going to come along and try to kill us, maybe one of the big players. And so one of the things we did, I think, luckily, it's paid off so far was we were very quiet for a number of years. Like we didn't even, even after Andreessen Horwitz invested, we didn't even do a press release.

Like we said, don't even put us on your website. And what we were doing was we were growing around the country in big, big markets without anyone knowing. And some of the last markets we launched was actually New York and the Bay Area. So I used to love coming down to the Bay Area and people like, well, no one uses you down here. And I'd laugh because I'm like, oh, man, like you should see what LA looks like. And so I think that was a learning that I would share for anyone else starting a company is you don't always have to pound your test in the beginning. In fact, in our case, it was an advantage not to. I think, you know, Travis from Uber has added that to his process because he's yet to do an interview about Cloud Kitchens.

And if you were to do one, it would be on this program for sure, would be the first. first one he would do. And I told him when you're ready, you know, come on the pod, but no pressure, you know, and, you know, you would, you will not see anything about Cloud Kitchens, until the IPO is my prediction. And they'll just stay out of the press and put all that energy, which, you know, press is usually, uh, in people's, uh, you know, top of what they want to do for their ego. If you're going to do it, you really should be doing it because there's some outcome, like it helps with fundraising or yet the New York Times. logo, it helps convert people on your landing page. I wouldn't do it for ego, right?

Yeah, I always tell people, if you're doing press, you need to ask why, right? Is it to attract capital? Is it to attract consumers? But for us, we never thought that press was a needle mover for consumers. So, yeah, I mean, the other issue is the press is so distinctly anti-capitalism and so distinctly anti-tech these days, for whatever reasons, you know, whether we've earned it or It's just the nature of where we're at as a country in terms of embracing, you know, socialism or, you know, just not being able to understand wealth disparity and resolve that problem. It's just, I tell founders now don't talk to the press. There's no good that's going to, the chances of something good coming out of it are so low that take that energy and put it into acquiring customers or writing your own content and developing your own content strategy. Do you guys do anything in terms of content marketing or what marketing does?

do you do? What works for you guys at this point? For the most part, I mean, a lot of our growth is just word of mouth. So we've really put a lot into the product to make it work because if people are finding value, then they tell their friends. And most of the time when I run into people, like, how did you hear about offer up? It was usually, oh, my friend told me or my mom uses it. And so, you know, I think that if you build an amazing product and people like, you know, that's definitely going to yield better results versus just, you know,

continuing to spend large, large dollars. So that said, it's not like we haven't spent dollars in marketing. You name it. We've definitely invested in a number of marketing channels over the years. But, you know, I think today a lot of the work we do is, yeah, we just do more, I think, internal marketing. But we don't spend a lot, you know, if you look at overall P&L, marketing is a pretty small line at them these days. We actually spend more, we spend more at AWS than we do in marketing. And speaking of AWS and Amazon, I would think Amazon's ascension and their ability to get me stuff so easily becomes the reason a driver of why offer-up exists because people can buy stuff so quickly and cheaply that it actually provides the supply for you.

How do you look at Amazon as a company? Are they doing anything in reselling yet? Did they buy any companies? not in their wheelhouse, right? Yeah, I don't think so. I mean, Amazon, amazing company. I have so much respect for them, especially being in Seattle and learning about their DNA and their ability to innovate at scale. Like, it's really mind-blowing.

And I think, you know, they're world-class at logistics. And really, you know, I think this hub and smoke model and continuing to refine that process and make it faster, and I think they're really, really good at doing that. So I think that's their advantage. manage as offer up we touch nothing and we don't want to touch inventory so I think there's there's there's a different way to help move supply around and you know the thing I still like to remind people of is like 85% of commerce is still not online

today like it's crazy like yeah and people in tech like oh it's you know there's always online players and that's true but I think the world is changing over the next few years and I think there's a huge opportunity to unlock local supply and that's where, you know, that's where we come in. And, you know, my vision to start was just to be clear, not we never set out to build a classified business. We set out to unlock value locally. And the way we could do that, though, is we had a very kind of systematic approach was, well, how do we get into people's pockets? And so that's where we said, well, what if we focused on C to C first? Everyone has a need to get things and get rid of things. Maybe if we can get that, you know, if we can get that

flywheel moving, then over time, we could layer in other businesses on. top of it. I notice you have ads in the feed. So you can click and go to Bing for a product or Foot Locker. What's the theory there? And I know you like small local business, but I notice you're having basically ads in there as well. Is it just an additional revenue stream for you? Yeah. I mean, I think when we put that in, I think it served two purposes. One is it's high margin business and, you know, it generates revenue. Ultimately, by click or transaction or it's just a straight up ad by CPM. Yeah, it depends on the provider, but yeah, it's, it's, but I, what I would say is ultimately, we want to have all those experiences be far more native in the product, but it was easy

to throw in and it, and it, and it kicked off cash so we did it. But I wouldn't say it's super strategic long term. I think long term, there's other ways you could do that. into the experience. And I was super hesitant of doing it. Like I'm like, oh, I don't want to throw ads and it's going to ruin the experience. And surprisingly, what we saw was really no degradation in the numbers. And what we heard from people was actually the opposite. We heard people saying, it's great because now I see what retail for that bike is and I see the same bike on offer up. I realize the deal I'm getting. Or I couldn't find that item on offer up. And so I just clicked through and I ended up buying it from an online retailer. So it actually became a net

positive in the end when we introduced those. I mean, if you just do a search for espresso, which I just did while we're talking, espresso machine, it's kind of nice to see how much Best Buy and Bedbath and Beyond are charging next to the same units available used. So it's kind of more of a, if you thought of it as a feature, you would be saying, here's what it cost that. next to it. Yeah. Which would be an interesting thing to do on top of it. How do you deal with fraud in a marketplace and that kind of stuff? I mean, I know you guys charge, what, like 8% or something? For sure, yeah. To the seller. Yep. Is that about right? For shipping is now 12.9% but definitely, yeah, fraud is an ongoing, never-ending thing for sure. Yeah.

And so, you know, we've invested a lot in trust and safety over the years and really tried to build reputation into the product that we're building. So that's been an area where we, you know, we do ask people, you know, to give us a little bit more information, you know, if they want to engage in transactions, especially where money is exchanging hands. So that's something we definitely put a lot more. That's super dangerous. Yeah. Yeah. How do you mitigate against that? So we're going to meet and I'm going to sell my laptop for 500 bucks in cash.

that's ripe with danger. What's the best practice there? Yeah, I mean, the thing I would remind people of is, you know, the vast, vast, vast majority of transactions are all really positive and great. Like, it pretty much rounds to zero. When you look at all the millions of monthly transactions and the ones that actually will have some kind of incident, it's very, very rare. So people are good overall.

Yeah, I mean, I've done. Of course, get blamed for this if it does happen. So you have to really think it through. So how do you think about it? Yeah. And this was something that we cared about, even before we raised our venture round, we actually built a trust and safety feature called True You. And I think we were probably the first app company to do actually ID scanning from a smartphone.

And, you know, I think a lot of other companies now do it. But we did this really early on. And we knew, by the way, at the time that no one's really going to do that. Like, who is offer up? Why am I going to put my ID in this company I don't know about? But we said, look, we want to stand behind trust. So let's build a program where if you are a true you member, you get like the special badge. And it was a two-step process where you scan a government ID.

Part two is you take a selfie. And we actually did some image recognition to see if it's a match. So brilliant. Yeah. So we built that. We have over 3,000 community meetup spots now in the product. These are in retail locations, police station parking lots. And we just started proactively creating these signs and giving them out to people.

And now if you're chatting back and forth between a buyer and seller, we recommend these meetup locations for people to meet. And the requirement is it has to be well lit. It has to have a camera. And so now we can recommend those. You know, people have profiles on offer up. Like not really an amazing innovation, but compared to the alternative on the desktop, there was no profile. And so just, you know, now I can understand who I'm dealing with. Are they showing up on time?

Do they have ratings? So our goal is to really equip our users with as many different ways they can to make an informed decision. And so we've spent a lot of time. And we're very proactive with law enforcement too. We actually will go out and train different. We sat down with the head of the LAPD and said, okay, here's how you work with Offerup. If there are incidences or things you use, like here's how we can best kind of solve some of these things. Yeah.

And the great thing about it being an app is that, you know, an app is more traceable, let's say, because you have to install it and you have to log in and IP addresses, location. Like, these things can be forced to be turned on. I actually had one of the major, I think I could tell this story because it's well over 10 years. Anyway, back in the old days, I knew one of the CEOs of one of the major marketplaces. And there was an issue because people were selling, putting laptops for sale. And it was like, wow, I can get this for $800.

a brand new laptop that would normally be $1,500. They show with $800. A person would mug them and take their money. And the person who was the CEO knew I know cops in New York, and I was from New York at the time. And I put them in touch with the detectives, and they caught them same day, or next day. Basically, they explained the situation.

It was so easy to catch them because they're so traceable that the cops just came with $800. Guys, give me your $800, and they just booked them. Book them instantly done. Yeah. So we've spent a lot on this over the years again. Like, like I said, I built a company on simplicity and trust. And so that, that really matters. And I mean, the other great part of being an app-based company, you know, before the smartphone, when you would do a local transaction, you were either giving out your phone number or your email to people. Oh. And so the great thing I'd offer up is you never have to give out anything. Just communicate within the app. You're chatting all the way to the transaction. And you don't have to give out those personal bits of information. All right. So you have billions of dollars going through every month. You make 8% or so. You get the 3% credit cards. Suffice it to say, you're making hundreds of millions of dollars a year. The IPO market is back in a major way. How do you think about the company in terms of long term? Is this something you're thinking you're going to IPO or do a SPAC or something, direct listing? Yeah. So I think, you know, when we think about, I think the opportunities ahead, you know, I think we're still very early days. of where we can go with this marketplace we're building.

So, you know, I would love to go to, go, love to go to the distance as a, is a public company and do that. I mean, it's the best thing as an entrepreneur, right, to go to the distance and be a standalone company. Yeah, I just feel like, I don't think every, and you've probably, you've definitely seen this far more than me, but I think some companies can continue to layer new businesses on top of something and continue to build. And for me, I like the Legos, like I love the building.

But I don't think every company's like that. I think certain companies just kind of have a shelf life. And it's like, okay, where do you keep going on this XYZ product? And that's kind of it. So I'll be happy. You don't have that problem. I mean, offer up. You haven't even gone internationally yet.

And if you went public on our markets here, you could buy all the people have copied you. And just do what Groupon and, you know, other folks did and Uber did and just buying up all the people who copied you and creating the mega. Yeah. I tend to look at it as layers, right? And I think we're still in a, and we're still in like one of the first few layers. But I think there's many more ahead. And so I'd be happy as a clam. I can do this the rest of my life as long as we continue to have fun and layer,

layer new things onto the marketplace. And you did make one big acquisition or merger. I don't know how you would qualify the let go deal. Is that a merger acquisition? I guess, yeah, it could be one and the same, I guess. But yeah, so that actually is still in process. We haven't even fully realized that. Like, we have not even tried to really bring our marketplaces together yet.

We've mostly been in the middle of all the paperwork to get the deal done. And so now I think that you're asking about kind of growth and, you know, other companies, too. I think that right there will be the biggest accelerator for growth for the company, given the size of our marketplace and, you know, their marketplace as well. So that is, the paint is still wet on that transaction. And that was OLX did the investment in this last round. You closed in March. So you closed around right before you closed around right before Corona hit and the shelter in place.

Well, it was actually I was in place when we announced that we were closing. So it happened right in the middle of the chaos, yes. Was that shaggy? You think the deal almost came apart or everybody was pretty sad? I think we were pretty, had our mindset, but still you never know. And then on top of that, I got really sick. In fact, I thought I had coronavirus. I had lost 12 pounds in the middle of all this.

So my head wasn't there. I was sleeping in the guest room. Did you get tested? Do you think you had it? I went and got the antibody test three weeks ago. Nothing. My wife swore that I had it. And I had, I just had a really bad flu.

Yeah. If you, did you feel like you were in complete pain and like you had no energy? Because that is like the exhaustion and inability. to walk short distances seems to be the big tail. I just felt like a really bad cold, very stuffy. I just slept with a humidifier, just blasting my face. But I had it for at least probably five weeks. I was sick for probably five weeks.

Yeah, you know, that's the thing. If you have that, the antibodies, because I did two antipidase, but negative both times, unfortunately, because I think you want to be positive and have survived it, that might actually be the better situation. maybe it's so weird to know. But yeah, it's a, I think it's 30 days.

You might not even see them anymore. So it's kind of these tests are highly imperfect. Well, listen, I know you got a lot going on right now. Congratulations on the success. I didn't bring up the fact that people don't even know this, but a lot of your success is car sales too, right? Yeah, we estimate close to 10% of the used car market is now happening on offer up every year.

It's amazing. Wow. And so the revenue per employees. You, I mean, you might be one of the highest revenue per employee companies going right now. I always think about that. 310 people. And if you're getting 8% of a couple billion dollars a month, could be at. We don't charge every transaction just to clarify. Not everybody does. Okay. All right. So, but even still, you have hundreds of thousands, maybe even a million in revenue per employee. That's just incredible efficiency. That's why you don't want to touch the product, right? Once you start touching the product, you need many more employees. Well, there's still more coming. We're a lot more to do. So I don't mind messing with it if it makes the experience better for everyone.

All right. From working at T-Mobile, Microsoft WebEx, doing two startups that, let's face it, they didn't work out. Third time was a charm. It's a third startup, right, Nick? Yep. Third startup so far, knock on wood, this one's going extremely well. and I'm enjoying it.

Just to wrap up, when you look at your career, and a lot of young people listen to this podcast for inspiration and lessons, what do you think the leak in your game was early on? And what do you think the strength that you've now developed, you know, 25 years into a career is? You know, I think a lot of people say this, but I've always believed that there is no quitting and no stopping.

So I believe in the, like, I call it the rhino principle. He can look at this up on how rhinos, when they want something, rhinos are very good at running the straight line. They'll just take anything out. I've also been chased by a rhino before, by the way. Really, what's that like? Scary.

You need a zigzag. Run in a zigzag pattern because they're not very agile creatures. But if you stand straight in front of it, you know, good luck. So I don't know. I think the thing I've learned is hopefully as I make mistakes, which everyone will, that you learn from those. and you just never stop and never quit. And I think there's been plenty of times for anyone that starts a company that you're looking at death's door.

I mean, that was the first two years of offer up. We were lucky if we had three or four months of operating capital. But we didn't stop. And I think a lot of people tap out and they say, oh, it's not going to work. I think I've always thought long term. I think very, very, very long in the rest of my life. And I think I say, okay. And when you think long, then you look at the next hurdle in front of you.

And it just, it doesn't seem that significant when you, when you put it in perspective. So took, took three or four years really to click in? Uh, I'd say it for offer up, it took about two. Yeah. But we didn't raise a venture ramp. We didn't raise a venture round for two years. That's amazing. And so, you know, these, I see a lot of young kids starting companies and like, they get to like,

they're, you know, they're into year two. And they're just like, oh, it's not working. I'm like, yeah, but what have you learned, right? And yeah. You got those 10 customers. and they really love it now, can we get to 10 more of those and then make a decision if you're going to quit?

People just quit too early. And you look at something like Reddit. I mean, they were considered like a goof compared to dig in the early days for people who don't know what dig is. They can look it up. And then they just didn't stop. Yeah. And then eventually the world caught up with them.

And it just something about compounding growth is just really powerful. Yeah. It's a series of mountaintops. You just go from one to the next to the next to the next. to the next and you have to welcome the punishment along the way the hurdles you just need to look at those as they're not going to kill you they might be painful but you know if you persist you'll overcome and you'll you keep driving forward all right man thanks for doing the pot i know you're super busy and you're not really into doing a bunch of press so i know that you've made an exception

for us and i do appreciate that everybody out there if you haven't used offer up before it's amazing and simple and elegant and better than anything else that's out there. And I'm sure you're hiring at offer up now that you raised all this money. So if you're looking for a gig, you want to, you know, I always tell people like you want to get on that rocket ship before it gets to space. Like, this could be the last moment. I would say 2020 is the last chance to get on this rocket ship. Next year is going to be maybe hitting the, maybe you hit escape velocity. Continued success. And I really appreciate you come on the pod. Thank you. Thanks for having me.

we'll see you all next time on this week's service. Bye-bye.