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Lessons of Entrepreneurship: 10 Years Powering The Resale Economy

thredUP Co-Founder and CEO, James Reinhart details the thriving marketplace and scalable infrastructure he built that has inspired millions to embrace secondhand for the first time, and now powers resale for broader fashion industry.

James Reinhart is the founder and CEO of thredUP. They started in 2010 and now have 2000 employees. They just recently they processed their 100,000,000th piece of cloth.

All right. Good morning. It’s great to be here. Thank you Sam for having me. It’s good to see all of you here in Oakland. We just moved actually thredUP to Oakland from San Francisco, so we’re 10 blocks that way. Very excited that the conference is here at this event, and then I could just walk down from the office to be here with all of you.

So I’m going to tell you a little bit about the origin story of thredUP, how we got to where we are today. And then what was most exciting about the opportunity to be here was that Sam and team said, hey, reflect a little about the lessons that you’ve learned over the last 10 years.

What are the things that the audience can learn from you about how you built the company. What are some best practices? And so I’m very excited to share those with you.

But let me start with how we got started. So about 10 years ago, I was in business school at the time and I had a closet full of clothes that I wasn’t going to wear, and I had no money at the time.

So just to give you some perspective, when I got out of college I became a teacher. Because I was looking for the highest paid job I could find when I graduated from college.

And I spent a few years doing that and then decided to go back to business school. And when I can tell you is that being a teacher does not pay the tuition to go to Harvard Business School.

And so here I was in the middle of my two years with about $200,000 in debt, no savings. But what I did have was a closet full of what I thought were nice things. J.Crew, Banana Republic, Brooks Brothers, Theory. Things that I thought other people would like that I no longer liked.

So I took them to this consignment store and I tried to sell them. And I said, I have all these things. And they said, we don’t take these things. We just do luxury. And by the way we don’t do men’s.

And I thought, well that doesn’t make any sense. This stuff I have has real value. It just doesn’t have value to me.

And so I went to school the next day and I asked everybody that I could find. I said, “What percent of the clothes in your closet do you wear?”

Not a single person said more than 50%. The average woman said, “I don’t know I wear like a third.”

And it occurred to me that if we all have closets full of clothes that we aren’t wearing, that there’s a lot of value locked up there. If you think about it, think about all that stuff you’re not wearing. Those 20 shirts, sweaters, skirts, blazers, right? That’s thousands and thousands of dollars of value to somebody else.

And so that’s how the business got started and we started peer-to-peer. And the idea was let’s build a better version of eBay. Let’s connect buyers and sellers together. Let’s build this marketplace. It’s frictionless.

What we learned in this process though is that people are super lazy. And if I had more time I could pull the audience and we could do a fun exercise around how many of you use various platforms, but typically when there’s a hundred people together and you ask them, hey, have you sold a piece of clothing online, like a piece of your clothing online in the last six months? You typically get two people raise their hands.

But if you ask this same group of people, have you given away something over the last year? Given something to friends, given something to goodwill, took it to a local consignment store, gave it to Salvation Army, right? You get nearly a hundred percent participation.

And the insight for us was that we needed to figure out how thredUP as a secondhand marketplace and secondhand platform could do all the really powerful work.

And so we decided instead of building this peer-to-peer business where we just connected buyers and sellers, what we need to do was put thredUP at the center of this ecosystem. Now this is 2011, 2012.

When you think back seven, eight years ago, this is when Airbnb was getting started. This is Uber and Lyft getting started. This is TaskRabbit getting started. DoorDash would come online. Postmates would come online. All of these companies are really managed marketplaces. They are connecting disparate parts of the ecosystem, doing a bunch of work in the middle to create a bunch of consumer value.

And that’s what we did at thredUP. So we started building facilities to process goods. All of this to delight the customer.

And so for many of you if you think about the experience of cleaning out your closet, it kind of sucks. Nobody’s like, you know what we should do this weekend, Saturday afternoon, let’s spend all day getting rid of shit, right? Nobody wants to do that.

But on thredUP this is how you feel when you clean out your closet. You lay back, this is the thredUP bag up there on the screen. We send you this prepaid bag, you fill it up, we pick it up at your house, we take it to one of our processing centers, we go through it and you make money. People really like that.

And then for buyers, we process all of those goods. We inspect them. We authenticate them if they need to be authenticated. We ensure they’re only of the highest quality standard and we send it to you as a buyer. And it feels like you would be shopping on Nordstrom or Amazon or any one of these other online commerce experiences.

To do all of that We’ve built this incredible infrastructure. So as Sam mentioned, we will process our 100,000,000th piece of clothing this year. 100,000,000 pieces of unique clothing.

We now have four distribution centers all over the country. Chicago, Phoenix, Atlanta, Mechanicsburg.

That’s just a picture of what it looks like inside one of these. To give you a perspective on the scale of what we’re doing today. Imagine a football field full of conveyors and hangers and carousels, put another football field on top and another football field on top, and that gives you a sense of what our small facility looks like.

The facility that we’re now building in Atlanta will be two and a half football fields, plus two and a half football fields, plus two and a half football fields. It’ll hold more than 3,000,000 unique items at any one time. These are the three largest Garment-on-Hanger facilities in the world.

And so from a guy who was just trying to make a few dollars in selling my old clothes, this is the journey that we’ve been on today.

And our mission remains the same. Inspiring a new generation of consumers to think secondhand first. It’s about creating incredible value for the customer. It’s giving them a fun and delightful shopping experience. We have massive selection. We carry 35,000 brands across a hundred categories.

And then also making people feel really good about their shopping. So everything that you’re reading about the circular economy and resale, thredUP was really a pioneer of this category.

So typically I can go on and on all about this stuff. But that’s not why I got invited here to talk to all of you. But if you really care and you want to know all the interesting things that thredUP is doing, you can Google us.

Onto the stuff that I think is most interesting. So in this journey we’ve made tons of mistakes. There’s been lots of learnings and I’m excited to share with you a few of the things that I feel really passionate about. And since this is a day for a conference all about peers and learning and collaboration, I think there’s a few things that I might be able to be helpful on.

Sometimes when I tell people this, they think I’m an idiot. They’re like, who gets rejected 27 times? The definition of insanity is doing the same thing over and over again expecting a different result.

And I think what I’ve learned in this process, I share with people all the time is people get obsessed with being right. You might have even experienced this over your Thanksgiving dinner table when the arguments came out.

We want to be right. And so when people tell us no, or people tell us maybe, we try and convince them that we’re right. That the thing they think is not true. The thing we know is true. But I can tell you that when it comes to raising money, you can never convince investors of anything.

A no is a no. A maybe is a no. A maybe later is a no. I need more data is a no. Let me get back to you is a no. See me when you’ve raised more money is a no. See me when you’ve got more scales, and it’s all no. Stop trying to convince investors when there are nos and maybes into being yeses.

So for those of you who are founders and CEOs out here, sometimes I think we don’t want to believe this so I’m just going to tell you, having been doing this for 10 years, this is unequivocally true.

This is a picture of my team. I love them to death. A bunch of them are here. Your time as a CEO and a founder or as an early startup employee is more valuable than everyone else’s.

You’re the only one who can do the fundraising. Work with the board. Go on CNN. Do all the really hard things, build the culture, share your story and your vision over and over and over again. Writing product specs, buying coffee, making sure the office is open and closed, all those things should be delegated to other people.

And somebody gave me this a great advice and I will share it with you, which is do only the things that for which you are uniquely qualified to do.

And if you think about the things that you’re doing today, day to day, if there are other people who should be doing them, get those people who are doing them now to free up your time.

Third is I think young founders… I would consider myself in one of them, we get so wrapped up in building our business and the hustle, the hustle that we are on, we forget to take care of ourselves.

And so I will tell all of you, go for a run. Go for a bike ride. Do some yoga. Do something that connects your mind and your body in a way that allows you to be your best self when you come to work.

I think people don’t give this enough credit. I don’t think people create enough space in their life. And I think it ultimately kills lots of people, both emotionally and psychologically because they’re not ready for the next phase.

These are my lovely children. I like them most of the time except when there are flight delays at SFO, I like them less. But make time for the people in your life. And people will give you this advice all the time. People gave me this advice.

It took about five years of running thredUP before I truly internalized this. Which is why I feel like if I tell you, and then you go to four or five other conferences and they tell you, at some point it will sink in.

But I think the more that you make time for these relationships, I think the better you are at your job. And I have found that being a father of three little rug rats there has made me a better CEO. It has allowed me to keep greater perspective on the decisions I’m making. Things are never as bad as they seem. They’re never as worse as they seem. And having this experience in your life will make you better at your job. I guarantee it.

Raise as much money as possible. People have told you that before. I’m telling you, to you again.

I’ll tell you just a funny story. I had a conversation with an investor in 2009, and they said, “Well, how much money are you going to raise?”

And I said, “Well, I think I’m going to raise about 250 to 300,000 in this seed round. And the model that we’ve built is so good, I don’t think we’re going to need to raise anymore, just 300,000 and then we’ll just grow on our own cash flows.”

We’ve now raised 300,000,000.

Raise as much money as possible. The next thing is, this is my professor from college, Jeff Johnson. He was super happy when I sent him this screenshot via text message, but he was my Philosophy and Theology professor. And he told me two things. This is the second part.

The first part was the questions are more important than the answers. If you’re asking the right questions of your team, of the opportunity in front of you, of the people that you’re interviewing to bring on, if you really get the right questions right, you can get at the root of the issue of so much more quickly than if you’re a guy who’s obsessed with what, “Tell me the answer. Tell me the answer. Tell me the answer.”

The second part of this was he said, look, strong convictions loosely held. You’ve probably heard this advice before but in any startup journey, certainly in mine, the hustle over the last 10 years, the grind over the last 10 years, things have changed. Markets have changed. Competitors have come and gone. The financial markets have been good and they’ve been terrible. You have new teammates that come on board. You have new technologies. There’s new regulation. All of these things change.

And it takes great leadership to say, “You know what? I thought we were going to do this. I have new data. We’re now going to do this.”

But your ability to do that is ultimately what inspires the people and the team around you, and so you need to have those strong convictions but be willing to entertain and change.

The other thing I’ve learned is that anytime you’re trying to meet with somebody who at least appears on paper to have had a lot more success than you out of the gate, or somebody who’s older and wiser, if you do not bring something to that conversation, you will never meet that person again. Ever.

If you get a chance to meet with Lloyd Tabb who is the co-founder and Chief Technology Officer at Looker, and Lloyd doesn’t want to engage with you and you’re not willing to share things that you’ve learned with Lloyd or things you know about the universe, you’re not going to get that next meeting.

And I can’t and emphasize enough. If you were to email me for example and say, “Hey, I would love to ask your advice about something for 30 minutes.”

My first response is, well, I could go hang out with my kids. I could go for a run. I could run the company. Why am I going to dedicate 30 minutes of my life to you other than just being a nice guy. At some point you can only be a nice guy for so long. And so think about when you’re asking for help, how do you make those relationships really powerful?

This is the resume of a guy that I had no business hiring. His name is John Voris. He was at SpaceX working for Elon Musk, replicating the rocket program. Before that he was five years at Netflix building their DVD system. This guy, John, had no business leaving SpaceX to come work at thredUP.

Now this guy, Anthony Marino, who prior to coming to thredUP in 2012, was working for Richard Branson.

But both of those guys came to work at thredUP, work on the problem that I was trying to solve, work on the opportunity because I convinced them that there was a great opportunity to make change in the world.

I sold them on the idea that we could dent the universe, that they could work with incredible teammates, that we could inspire a new generation to think differently and maybe make a little bit of money.

But my point is that you have to have aspirations to hire people way better than you deserve. Because if you think about where your companies are early in the stage, or where thredUP up was, it was a company doing a few million dollars with 40 employees. These guys were leaving six figure, seven figure, eight figure paying opportunities to bite off something new. But I encourage all of you aim really, really high.

Turns out there is a vomit emoji on the internet. We’re in that. So in case you ever need a vomit emoji, it’s out there. Google it.

I put this on here because I think that generally as companies get bigger and as founders get busier and CEOs have more things on their plate, they stop communicating. And so I want to just emphasize for you all, communicating your vision until you want to vomit.

When the company is just 10 people in a room, you can stand up and tell everybody what’s up. As it gets bigger, you need to develop new methods to communicate because when the company has five offices worldwide and 2,000 employees, it doesn’t cut it to just post some stuff in Slack.

Last couple of things. This is Eric Paley. If you don’t follow him on Twitter, you should. He says smart things. He’s a founding partner and founder collective. He gave me incredible advice about five years ago. He said, “Don’t rationalize.”

I said, “What do you mean Eric, don’t rationalize?”

He said, shit’s going to go wrong for you all the time, and your inclination could be to just hand wave at it. And I was like, what do you mean? He’s like, well for example, you missed the November financial numbers. There was weather and this competitor was spending a bunch of money and the site was down for like three hours. Rationalization.

This great employee left, you know he wasn’t a great culture fit. I think we could do better. Your marketing expenditures were not as efficient as they’ve been a year ago. You know what Facebook and Google, they’re making changes to their methods. We are catching up.

If you don’t get to the root cause of why these things are happening to you, you are likely going to hit a wall and you’re going to fail. Don’t rationalize them away.

Ask yourself whether you truly have gotten to the root of why this thing is the way it is. At thredUP we call this first principles thinking. Get to the root cause of the thing. Ask yourself why it is the way it is.

Finally, I was fortunate to be a guest at an incredible event a few months ago for a day, and the last slide of the whole day of which there were hundreds was this. So I’m stealing it to share with you because I can’t stop thinking about it. And the question is, what will be obvious in retrospect? And I would encourage all of you if you sat down with a cup of coffee or a cup of tea and a fresh piece of paper and asked yourself, what will be obvious in retrospect about my business, about my life?

You will find some really compelling things on that list that you should take and then do something about as soon as possible. Because these are the things that you know but you’re not willing to put down in paper to fix.

And so I can’t emphasize enough how doing an exercise like this can help you be better founders, be better CEOs, be better employees. And just to give you a sense of, and I won’t walk you through all of them, but if you look through the list that I’ve given you.

If you can’t turn a no into a yes. And if you don’t truly internalize this, you’ll look back five years and you’ll be like, “God I wasted so much time fundraising.”

If you don’t think your time is more valuable than everyone else’s, you end up doing stuff that other people should be doing.

If you’re not going for a run your mind and body, they actually aren’t recharged for when it gets really hard. Because at some point you think you’re working as hard as you can and then it gets a lot harder.

And if you’re not ready for that next hustle, you’re going to let other people down and you’re going to let yourself down. If you don’t make time for other people in your life… this was on my list when I wrote, what will be obvious in retrospect, you’ll wake up rich and lonely. Or you’ll wake up poor and lonely. And that’s worse.

You raise as much money as possible. You don’t do that, you run on money. If you don’t have strong convictions loosely held, let me tell you how many companies fail from stubbornness. They think that they’ve got the right strategy. They’re getting all this data in, that they’re rationalizing away and then they fall apart and they’re like, “I don’t know where it went wrong.”

I love reading the postmortems of people when they write about their companies failing. Some of them are truly heartfelt. Some of them have view me realizing that they got all these signals and they just rationalized and ignored them.

Two way conversations. If you don’t have them, you’ll never meet those people again. If you don’t hire a pair of people than you deserve, you don’t get the leadership you need. And if you don’t communicate until you want to vomit, the team never aligns on the strategy. And when you rationalize, you rationalize and rationalize and rationalize to your colleagues, to your fellow leaders, to your board, eventually you get fired or you do things even worse and you go to jail. Don’t do that.

So hopefully these eight lessons, 10 lessons help you appreciate some of the things that I’ve learned over the last 10 years, building thredUP into the resale company it is today.

I think this is a great event and I’m really thankful that Sam and the team invited me and I’m happy to answer any of your questions in my final few minutes. Thanks.

Q&A

Speaker 1:  So we had a bunch of questions asked. We went through a few of them and these were the top ranked ones you want to kick us off in the top one.

James Reinhart: How did you build customer attraction or acquired customers when your service first starte  any money, that’s how you grow the business.

James Reinhart: So everything was about referrals. Then we started to build into our flows, small amounts of acquisition and then media. And if you’re not hitting the media circuit, convincing people to write about you, then you are missing out on that free opportunity.

Sam Parr: And James, when you guys first started in your first year, how many users did you have?

James Reinhart: We had about 10,000.

Sam Parr: And you said those came from paid media, so advertising?

James Reinhart: No, it was mostly referrals. Mostly word of mouth and then a lot of PR. And today we’ve registered over 20 million.

Sam Parr: Wow. How about the second one? Why should you raise as much money as possible? Aren’t you giving away more than your share?

James Reinhart: So you should raise as much money as possible because owning 80% of something worth zero is worth zero. And you’re always going to need more money. And so the greater risk actually is that you don’t raise enough and you fail.

James Reinhart: If somebody wants to give you money, please, it’s like a buffet. When they’re passing the hors d’oeuvres, you should eat as much as possible.

James Reinhart: You never know if the dinner is not going to be, it’s going to be shitty. I mean I’m going to stay for dinner. When they are passing the hors d’oeuvres, eat the hors d’oeuvres. They’re the best part.

Sam Parr: This is actually something I wonder a lot as well, and I know that people ask me about it is, so you guys have been at it for 10 years now.

James Reinhart: Yeah.

Sam Parr: Why keep going versus hire another CEO and build more baskets versus make one basket bigger?

James Reinhart: Yeah. Look, I think every founder who’s been at something for 10 years has their ebbs and flows. I think what excites me right now is there’s a lot of momentum in the business. And I think today I feel we can make a bigger dent in the universe.

James Reinhart: So I think we’ve had incredibly hard years, but right now, I wake up every day and there’s news about thredUP. There’s momentum. We are hiring incredible people. And so I think there’s enough positive feedback right now that I get really excited that the opportunity in front of us is bigger.

Sam Parr: So could you actually talk about the, let’s look at the Poshmark one. So for thredUP you guys have way more competitors than just Poshmark. There’s a lot, there’s a new one. What’s it called? V-

James Reinhart: Vinted. Yeah. So all these guys, the Poshmarks, so the between Poshmark and Vinted is you have to sell your own stuff. And it requires a bit of work. So it’s a lot like eBay. And so our thesis is that there’s a whole bunch of people that will be willing to do that.

James Reinhart: But when you compare people giving away stuff, either in donation or charity or to their friends or their family, and you compare people selling online, the market for people giving away is about 50 times larger. And so our thesis is, not that those aren’t great businesses, but that the ultimate market size is bigger for a company like ours.

Sam Parr: So how many different investors do you guys have?

James Reinhart: I don’t know. Too many. So many that I don’t know how many I have.

Sam Parr: Dozens?

James Reinhart: Probably a dozen or more. Yeah.

Sam Parr: And how many people did you pitch before you get your first check?

James Reinhart: Well, the first check was probably less than, probably around 30 and then but each time-

Sam Parr: 30 what?

James Reinhart: 30. Yeah.

Sam Parr: 30,000,000, 30,000.

James Reinhart: 30 investors.

Sam Parr: 30 investors. And how many people did you pitch? You pitched 30?

James Reinhart: Yeah, probably more. Those are the ones that I can still remember. Most of them went badly.

Sam Parr: Why did they say no?

James Reinhart: They said no because I think that a lot of them were white men, and I’m a white man. And I was selling a product predominantly for like 40 year old moms. So this derivative of the strategy of not being able to turn nos into yeses is find investors who are naturally inclined.

James Reinhart: So it wasn’t until I found Patricia Nakache at Trinity Ventures who’s been amazing. When I walked into her office and said, “I have this idea.” She said, “Oh, I totally get this. How will you make money?”

James Reinhart: And so she already wanted to give me $1 million. I just needed to not mess it up, versus everybody else I had to convince to give me a million.

Sam Parr: Well, and let’s do this last question here, which was a bottleneck while scaling. Everyone always thinks that it’s seamless from the outside. Of course everyone in the insides knows that it’s not true. I have a rule of thumb that every, you assume every company is just a total shit hole on the inside. And so what were some of these bottlenecks that you guys faced when you were scaling?

James Reinhart: I think the biggest challenge for scaling for us was, we touch all the inventory, so we have physical infrastructure. And so unlike a virtual marketplace that just, you can add stuff on both sides, if we want to expand the business we need to build more infrastructure. So the facility, for example, that we’re building in Atlanta.

James Reinhart: And so one of the biggest challenges is to build a new building and fit it the way you want to fit it takes a year. And so we ended up in this bottleneck of step function growth, which can be very frustrating because you want to grow faster. You know you can grow faster, but you don’t have the capacity to do that.

James Reinhart: It’s not like we just add servers. So I think when you touch physical goods, it both creates a barrier to entry by having infrastructure. But it takes time.

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