Season 2, Episode 8

How to build a successful marketplace in a crowded space - David Oates (Curtsy)

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About this episode

Marketplaces have conquered some industries earlier and faster than others. Besides home-sharing and ride-haling, one such industry is fashion. The European second-hand clothing giant Vinted was founded in 2008. The US-based Poshmark started in 2011 and is now a listed company.

One might think there are no opportunities left for new marketplaces in these pioneer industries. One would be wrong. In this episode of Two-Sided, Sjoerd talks to David Oates, CEO and co-founder of Curtsy. Curtsy is thriving in one of the most crowded spaces for marketplaces: reselling apparel.

On the podcast, David shares the most important lessons they learned since Curtsy was founded in 2015:

  • Be efficient: Curtsy reached $25M in GMV with a team of six.
  • Start with one niche: Curtsy started as a peer-to-peer dress rental platform for sorority students in Southern universities in the United States.
  • Don’t force your business model on your market: it took Curtsy some time to find out people wanted to sell rather than rent out their pre-loved clothing.
  • Have big bets on your roadmap: David finds it important that Curtsy doesn’t only focus on incremental improvements.
  • Get the best advice available: Curtsy was part of Y Combinator, which is generally considered one of the best startup accelerators in the world.

A very entertaining episode, showing that even crowded spaces have room for new entrants with an innovative approach.

Resources mentioned in this episode


Transcript

[00:00:00] David Oates: A moderate level of success is more dangerous than having a complete flop. No matter what your level of success is, even if you're on a really great growth trajectory, you still need to every quarter, every semester, whatever your business cadence is, you need to be trying to disrupt yourself and launching innovative bets designed to maximize upside instead of more incremental changes designed at minimizing downside.

Welcome to Two-Sided the Marketplace Podcast brought to you by Sharetribe.

[00:00:38] Sjoerd Handgraaf: Hello and welcome. I'm Sjoerd CMO at Sharetribe and I am your host. I hope all of you are. Well, it seems we're in the middle of a flu season here in the north of the planet, so apologies if I sound a little bit stuffy. Regardless, I am very excited about introducing this episode. Today's conversation is with David Oats, CEO and co-founder of Curtsy, an online marketplace for reselling clothing.

I think this is a fascinating space. Reselling and renting clothing is one of the more mature categories of online marketplaces. Uh, there are several bigger players such as p Mark, Rent the Runway, the pop Thread up, and others. Also, over the past years, there have been a wave of mergers and acquisitions in this space.

For example, in Europe. The Lithuanian company, Vinted has been buying some domestic leaders, so several European countries such as the Dutch Company, United Wardrobe, and more recently the German company Rebel for 30 million Euros. And also at Sharetribe. We have several successful customers in this niche who serve some type of sub niche, such as children's clothing, for example.

So all of this is to say very mature market, and yet when I attended one Clubhouse chat, remember Clubhouse people in February, 2021, I was listening to David and William from Curtsy, which I hadn't heard of before at the time, who were saying that they were doing 25 million GMV with just a team of. So ever since then I've been very curious about Courty and I was very happy to finally talk to David.

The conversation turned out fantastic, I think with some really valuable learnings, how to always reinvent yourself. They started as a dress rental marketplace for sorority students about dealing with seasonal marketplaces. How to find the right balance between your model monetization product and your market.

Additionally, David shared their experience with Y Combinator, which I think is really cool because I haven't talked to a Y Combinator company on this podcast before. And finally, and maybe most importantly, this conversation is also a great reminder that marketplaces can take a long time to take off.

David and his team have been hammering at this since 2015. As you learn, they're a very special case in many regards. David is a great storyteller and I had a terrific time. I hope you do too, and in fact, let me know what you think. Ideally, drop a review on the platform of your choice. Just click those stars.

If you like the episode, it really, really helps us a lot. But also don't hesitate to reach out to me either by email s j oe rd share tribe.com, or on Twitter by tweeting at Share Tribe or directly to me. S J o e r d h a n d G R A a f. Basically my first name, last name. I won't hold you any longer. Please enjoy my conversation with David Oats from

Hi David. Welcome

[00:03:46] David Oates: to the show. Hello. Thank you so much for having me. I'm so excited to be.

[00:03:50] Sjoerd Handgraaf: Yeah, I'm also super excited. I think I listened to a clubhouse, like, you know, when Clubhouse was a thing? Yep. For you and your other founder were talking about the story and already at that time it was really, really super exciting.

So glad you took the time.

[00:04:03] David Oates: Wow, that's amazing. , I don't think I participated in Clubhouse that much, so you definitely caught me back in the uh, in the, in the glory days of. Yeah,

[00:04:11] Sjoerd Handgraaf: I think it was, um, or I think I know for sure it was, uh, just brainer who was talking and then I think maybe Oh, yes. Somehow forced you to join

Yes. As he had just invested money.

[00:04:21] David Oates: I do remember that, Yeah. Oh, I kind of missed clubhouse, honestly.

[00:04:25] Sjoerd Handgraaf: Same, Same. There are some, there are some good things there. Hey, before we go into Curtsy and what CURT's all about, could you tell us a little bit about yourself and, and what you were doing before you founded?

[00:04:35] David Oates: Absolutely. Yeah, so I, I would say my background is more on the design and product side. When I was a kid, I got started making websites for neighbors who were, like, it was, the very first one was a neighbor of ours. I was opening a restaurant and my mom told them that I, I would be able to help them with their, their website.

I, I guess just going off of like my ability to fix the TV when it broke or, or something like that. I agreed to help out and kind of figured it out, and that launched me on this journey of creating websites for lawyers and other small businesses in Charlotte all through growing up. I'm from Charlotte, North Carolina, and I was also on the school paper when I was in high school.

My job was this, it was called the Centerfold. So it was two pages in the middle of the paper that were not constrained by the, the normal layout of the paper. It was more of a magazine. Type, you know, design so I could kind of do something different every month. And I was able to do reporting for IT design and interviews and photography.

And so that was a great like foray into the visual design side of it and through coding websites and doing that. And I really kind of went to college like with this, this skill of like, you know, Laying out a website, getting it live, and, and that was, that was a really great experience growing up. Can I

[00:05:53] Sjoerd Handgraaf: just quickly ask, what did you, what did you use to build your own website?

Because I'm also from like early, like early website build that, like, do you remember what you used at the time? Yeah. Cause I'm super fascinated by those like, early, early tools

[00:06:04] David Oates: always. Yeah. And my, my evolution definitely reflects the prevailing like technologies of the time, but the. like technology stack that I used was Action script and Macromedia Flash.

Flash, Yeah. back, back when all the websites had sounds and loading indicators and, and, and fancy like rollover effects on the buttons. And then a couple years later transitioned to doing like WordPress, Buildouts. Okay. Yeah. And then, you know, for simple stuff would just do like, you know, html, css, and yeah.

Lot of j qu.

[00:06:39] Sjoerd Handgraaf: Yeah. Yeah, because it's so, like, I think it's so fascinating to see those, like, because now people talk a lot about like how like, oh no code tools and it's all like the thing. And I was like, well, you know, like there was like dream weaver before and the like macromedia flash, like you didn't actually need to do coding and still at work.

So I'm always, uh, Sorry I interrupted your, your story. So are you saying you went to college with this.

[00:07:00] David Oates: Yeah, and I, I pretty quickly got into entrepreneurship. So Northeastern has this really amazing club called E Club Entrepreneurs Club, and every Tuesday they have a speaker from the area. My year we had, like Wayne from Crashlytics, I think Darmesh from HubSpot came to speak, and it was this really amazing exposure into the like startup ecosystem.

So I got really involved in that. The summer after my freshman year, I ended up interning at HubSpot with a friend that was interning with me. We worked on this startup in our spare time, and then when it came time to go back to school, I decided instead of doing the second year, I was gonna drop out and work on this, this project that we were working on, working at HubSpot part-time to pay the bills.

That project within a couple months fizzled out. It, it really, really didn't have that much legs and I wasn't that interested in making it work. So I ended up joining HubSpot full time and I stayed there for the next year. And my job there was to lead the design of their CRM that they were launching, cuz HubSpot is, has this really, really great like marketing automation tool.

But at the time they had nothing for sales people and they really wanted to be your. Business Cloud. So when was this? This was 2014. Yeah. All right. Yeah. That's when they launched their, their free sales CRM that I worked on. Yeah. Cool. Yeah. And that was a great experience. And then I, I ended up leaving HubSpot to go back to school, but I only lasted for like a month before I dropped out again.

I was feeling like I wanted to, I didn't necessarily wanna work at, at a job, at a job like HubSpot. An experience that would be available to me, I felt, you know, in a couple years when I graduated. So I really wanted to go be a student again and like, you know, read textbooks and like do just do stuff that, you know, wasn't as focused on, on like making a paycheck, but I got bored.

I got really bored really quickly. And the amount of money for college, it's a lot of money if you're not absolutely gung ho. Being there. Yeah. So for me it was like, even if I don't really know what I'm leaving school to do, and even if I don't know like why I'm doing that, I, I definitely don't really have a good answer for why I'm at school.

Yeah,

[00:09:11] Sjoerd Handgraaf: yeah, yeah. So these are not racking up depth.

[00:09:13] David Oates: Yeah, yeah, yeah, Yeah. And so, uh, the, the year after I dropped out, it was a lot of random going down random paths, a lot of traveling, a lot of reading books, doing different projects, doing a lot of freelancing, and, and at the end of that, A friend of mine that I went to high school with gave me a call and he was, he told me about the project that they were working on at the University of Mississippi that ultimately became Curtsy, and I agreed to, after a couple phone calls, I agreed to help out with the first version of the app as a designer and that version that we launched, that early app that we launched on campus.

Did so well that I actually moved from San Francisco where I was living at the time, to Mississippi to help them work on it. And we took that idea and got into Y Combinator, which brought us all back out to California and eventually led to what is now curtsy. Yeah.

[00:10:03] Sjoerd Handgraaf: Wow. So you came when they were already sort of work on the idea.

So you happen to know, like how did the idea come about? I mean like, let's put a little bit of context. So Curtsy is a marketplace for selling secondhand clothing, correct? In, in sort of the most broadest nutshell. Yep. You can think of, Do you remember like, you know, even at the time probably it was already like a niche that was getting crowded perhaps, or there was alternatives available.

Like do you remember like how did they get the idea?

[00:10:30] David Oates: Yeah, so it actually started as a more of like rent the runway, but on college campuses specifically, like within the sorority system. So my friend from high school, William had a girlfriend at the time and she was in a sorority and he was in a fraternity and he was a computer science major, and she was saying that, you know, Especially the culture of in the South at these big s sec schools, uh, which is like, you know, the schools that have football and Greek life.

Okay, Yeah. Yeah. It's, it's a very centered around dresses. Pretty much every, every single social thing like football, weekends, baseball games, all of the. Formal events connected to the fraternity and sorority parties, like you need a different dress for all of those. And so she calculated that you need something like 20 unique dresses per semester.

And some of those are gonna come from, you know, gifted from your parents. Some of those are gonna come from a local boutique, some of those are gonna come from your roommate's closet. But her idea was to create an app where you could list your dresses on it and. Other people could rent them from you and you would go, Yeah, you would go meet in the sorority house.

They could try it on and if it fit they could take it for the weekend and then bring it back on Monday. And so that was the, that was the idea. It was just at Ole Miss when we launched, all of the rentals were paid for via Venmo and we just kind of manually Yeah. Ran that process. We tried to have it be very simple and like take care of a lot of the stuff, you know?

Yeah. Manually in the beginning, but, . Yeah. I think at our first, our first month there we did like 300 of, or something like that. Rentals. Really? Yeah. So it was like a really big, really big spike and people really seemed to love it, even though it was very. Janky and as far as user experience goes. Yeah.

[00:12:13] Sjoerd Handgraaf: That's so cool because like people who actually often listen to this podcast are getting sick and tired of me asking this question about like, how did you constrain the marketplace? Like how small did you start? But this is like such a great answer. It's like we started in this like, like within this one particular university, then only within the sororities.

Yeah. But to make that point apparently, because you don't need to use market to make 300 transactions in the first month. Like that. Perfectly liquidity. Holy Molly.

[00:12:36] David Oates: Yeah, it, it might have been 300 in the first semester, but we can round up. Yeah. , the spoiler on that idea is that it was a great beachhead, exactly what we were talking about, like launching in the college market.

We were really able to zoom in on one school, even one sorority, to bootstrap the supply side and the demand side. But as we grew out over the next couple of years, we would launch at other schools that were similar to Mississippi, like Alabama and Georgia. And it would do extremely well, just like Alabama.

Then we would try launching at a school that is slightly culturally different like UCLA or even like Michigan. And there it's less of a dress culture. There's, there's less. Need for these unique dresses throughout the semester. And the idea just didn't fly there. It was never able to get liquidity, you know, as fast as Alabama.

The, the experience of of the demand side wasn't as good. Experience of the few suppliers that were on there wasn't good. And it was tricky because it's hard when, one, there's a ton of seasonality in the college market, especially with formal dresses, cuz you have these two windows a year. And say that you have a semester and it doesn't go according to plan at UCLA and Michigan.

Well, you come up with all these ideas to, to fix things or to make it easier to change your app, to fit the culture of those schools more. But you, you don't know if that's gonna work until the next, you know, until four months later. Yeah. The feedback loop's super long. Yeah. Feedback's loops super long.

Yeah, so we probably worked on that idea. We probably worked on the rental idea for longer. We should have. But that's really, I think, the reason why, and you know, it, it, it never, especially in the, the last year there, we really didn't know if it wasn't clicking because we hadn't yet hit on the right formula or because it really just wasn't something people wanted outside these core schools.

And so it sounds obvious when I'm explaining with the benefit of hindsight, but back in the day, it really was difficult. I was talking about this with a friend the other day. You would almost rather have your startup completely flopped than do moderately. Well, that's what people say. Yeah. Yeah. You really, you really would.

But the last year of rental, so this was, this is getting into like 2018. 2019, we tried three major experiments to try to shake up the business. Okay. One was, we opened a physical retail store in Tuscaloosa, Alabama, because a big constraint was, you know, this is a pain. I have to meet up twice. It's very synchronous.

And so the idea was to have a store where it could be a drop off point. We could actually have your dresses on display so people could do the entire rental process without you as the supplier having to do anything, we'll take a larger cut. So we opened that. That did really well. It was responsible for like over half the volume at at that school.

By the end of the semester, we also launched shipping. So you could. Between campuses because we noticed that people were working that out in the messages, like ing that on on their own. That also by the end of the semester was driving a significant chunk of the rentals, and then we tried to launch a subscription business at Georgia and that was a complete flop.

Okay. To this day, people were like, Oh my gosh, like Curt. The resale app is amazing. Like I I, I didn't get on forever cuz I thought there was a, a subscription fee and we're like, Did you go to Georgia ? Yeah, yeah, yeah, yeah. . But yeah, so after that semester, the fourth big thing we tried was we added the ability to toggle between selling your dress and renting your dress.

[00:16:08] Sjoerd Handgraaf: All right. Because before there was absolutely no selling.

[00:16:11] David Oates: Exactly. That was really the experiment that led us. That and the shipping experiment were really what led us to pivot entirely to resale because the people that were previously our biggest renters all of a sudden were like, Okay, sure. I'll get rid of this dress for a little bit more money.

And that side of the market, that side of the app really started to grow a lot faster than the, the rental. And it was cross campus growth, which was really cool.

[00:16:36] Sjoerd Handgraaf: Yeah, because you get rid of that return requirement, Right? Exactly. Which makes it a lot more straightforward and just, I mean, not to put you on the spot, but did that take you like three years to figure it out, sort of out, Like does it like, Oh, actually people wanna sell it, not rent.

[00:16:49] David Oates: Really It did. Yeah. It, it really did. And I would say two, two of those years were really trying to force our model onto people that didn't really want it. And then the last year was an acknowledgement that what we had really wasn't working. There was a lack of product market fit outside of these big schools in the south.

And so that was when we were actively trying to disrupt ourselves and really hoping that one of these ideas was gonna lead us somewhere. That is

[00:17:14] Sjoerd Handgraaf: fascinating. So you've, you've been working on this a long time Cause I didn't actually know it started already such a, such a while ago. Yeah. So did you say like 2015 or when did you,

[00:17:23] David Oates: when, when was it sort of Yeah.

William first called me to talk to me about the idea in over Thanksgiving of 2015. And we worked on the designs over Christmas break. Yeah.

[00:17:33] Sjoerd Handgraaf: Because like in, in our business, like, so we make the software, and I'm not gonna, I'm not gonna pitch the software, all that, but we make the software and we're like subscription business.

And of course like we tried to tell people that like, Hey, you know, it takes longer, Like marketplace are notoriously difficult. Like it takes longer, three months. But of course, like we have, like since we are a subscription business, we have an. Reason for saying that, but like it's nice to sort of hear this confirmation that actually, you know, marketplaces are super hard.

It takes a long time to

[00:17:59] David Oates: figure things out. I think looking back over the last seven years, there's so many things I can point to and say, Well that was stupid. And I think that's everybody's experience. But one thing about us is, I think, especially Y Combinator, a lot of people imagine that Y Combinator is a bunch of 20 somethings, but.

you know, going in there as a 22 year old, I might have even been 21. I think I was 22. But yeah, cuz it would've been my senior year of college. I was 22. My co-founders had never had a real job. I was the only one that had worked at HubSpot. There was only probably, you know, maybe Alex Wang and Lucy from scale.

Like there, there was only a handful of people in that room that were younger than us. Almost everybody was this average age of like, you know, probably. 30, early thirties. And so I think a lot of this is just for a lot of us is our first swing at a startup. And then also we were just really young and we hadn't had other experiences and so maybe another team that had done this before would've only taken them a year of that rental business to, to successfully pivot.

It has taken us longer to figure it out, you know?

[00:19:04] Sjoerd Handgraaf: Well, but at least you know, like you didn't die. Like that's not like, you know what I mean? Like there's like, there's lots of other things you've learned during that process. So it's like, it's just more like, like I said, like I didn't mean to put you on a spot and it did like hindsight.

2020 everything. Oh my God. Yeah, no

[00:19:19] David Oates: worries. But like.

[00:19:20] Sjoerd Handgraaf: It's a good reminder that for everybody who's running a startup, that Brian Baller who talks about this like model market fit thing that, cause people always like product market fit, whatever, but like, but hey, model market fit is actually, the whole premise is not even there then.

Like it's difficult to sort of reconcile it with what you're seeing like day to day.

[00:19:37] David Oates: Yeah. So what, what he's talking about is channel market fit or, or like a channel market. And I think, and I think what he's talking about is like, a way to simplify that is like, you know, your, your growth engine. Combined with the market.

Combined with the product. And so that is definitely the, like a more recent kind of issue with Curtsy is like figuring out how to scale it from the, you know, from where we are to where we wanna go. Because the predominant growth, and we can get into this, but the predominant like growth channel that we were using during Covid, you know, in the last couple years.

Like digital product ads or dynamic product ads on Facebook. That mechanism, like one Covid, all of the impressions were artificially cheap for the year of Covid. But then also that was before Apple stripped away advertiser's ability to like track people from ads to install. So yeah, that really broke that channel for us.

And I think you, you're seeing this with a lot of other direct to consumer companies that grew on Instagram and. All of us are now needing to refine that channel. Yeah, Yeah.

[00:20:40] Sjoerd Handgraaf: We can get into it a little bit later because I would like to unpack that a little bit, but how did Y Combinator happen? Because I don't think I've had actually a Y Combinator company on here yet, so could you tell a little bit about how a set process.

[00:20:51] David Oates: Yeah, it was amazing. It was very early on, so we applied, you know, when the, the app had only been live for a month. The cool thing about why Combinator is the longer your company survives, the more they earn the equity. So even like this year, in the last six months, we've had a office hours with Michael sk.

So just being the longer you survive, you know, you can continually check the internal forum knowledge base. Get other founders recommendations for various software tools. Investors, you can request office hours with your group partners, so the longer you survive, the more they're gonna earn that equity.

Maybe right. When I got out of yc, I didn't necessarily appreciate that aspect of it, but we also went through in the summer and our business was highly seasonal to the college semester. In retrospect, I think it would've been a good idea had we deferred our admission to the next batch because everybody around us was hustling, getting installs, getting sales.

We were kind of, we spent half the semester like trying to do that by like changing our model to work for older customers and cities and, and then we kind of, you know, threw our hands and said, You know what? We're just gonna prep for having an amazing fall semester. And we, we did. So we actually deferred demo day.

We did not pitch at the end of the program. We ended up raising outside of Demo Day from CRV in December based on our, our growth at like 10 schools that fall. The cool thing is that you know, when you deferred demo day, you can go to any future demo day. So we actually use demo day three years later. In 2019 summer to raise for our second seed round for our new business, the resale business.

Cool. So I didn't even know that was possible. I, I think we really were the, I think we actually were the record holders for like the longest affirmative demo day. Longest .

[00:22:43] Sjoerd Handgraaf: Yeah. But that's cool. I think this also just nice to get a little bit sort of to the Y Combinator story because you usually, you know, you just get the stripes and whatnot.

Lawyer, it's just like, You know, like rocket chip from the get go. Kinda like, uh, so this is really, Well, of course not, not all actually, I'm, I'm generalizing. I think like Airbnb is similar, not on similar story, like you were, it also took like several years to actually find the, find the business idea of the model and everything.

[00:23:06] David Oates: Yeah. And I, I think for me, like when, when I started at college, we had, we had that, that club that had a different speaker from the Boston area, like tech ecosystem coming in to speak with us. So the actual dinners of YC were really less valuable for me cuz there was a lot of, it was a lot of battle stories and you know, advice that I actually, I had already heard from that experience, which I now see like it's pretty rare to have a really well built out entrepreneurs club in a major tech ecosystem that has like, The ability to get those speakers in.

So that was a really cool experience like my freshman year. But for my co-founders, that was, that was the talks were really cool. And then the other half of the dinner, of course is like your group office hours and just getting to network with other founders and that's an amazing formula that they have and it definitely works.

[00:23:51] Sjoerd Handgraaf: Yeah, I mean, there's no doubt, like crazy amount of telling people there and people with like super hardworking attitude. So I've always liked to know about like chicken problem. How did you get the first board? So, so maybe you can tell a little bit like how did that go with the sorority? Like was it just worth of mouth?

And then also like how, actually what worked for you when you added the resale layer? Because I'm, I'm imagining you once you go outside of the campuses, like that's a whole different ball game.

[00:24:16] David Oates: Yeah. So we had these very robust. Campus ambassador programs and at each school they would try to recreate what our original co-founder Sarah did at Ole Miss.

She started off, like right when the app was available, she got up in her sorority, uh, during chapter meeting on Monday and she said, Okay, everybody take out your phone and down this app right now, you're gonna help your sister by doing that. So everybody downloaded it and then she would then go try to get invited to the other chapter meetings of other sororities, do that.

Then she. Put the feelers out to all of her friends. She would get a rack of their dresses and then she would take that rack of dresses around from sorority house to sorority house and do these little trunk shows where people could just rent right off the rack. But they had to download Curtsy and get do it through the app.

And so that. Was our strategy. I mean, we, we tried to recreate that exact process at every campus that we went to. And there were some challenges. Clemson doesn't actually have houses, for instance, so we had to get creative there. How are we gonna actually have trunk shows? But the schools that were set up like Mississippi, that strategy did extremely well and we, The only difficulty there is it's just like this manual process of recruiting.

You have to manage the team members. and the, the trick with any kind of on campus marketing for any, any companies that are thinking about doing that or any founders, what you get out is relative to what you put in. So you have these, these people, if you pay them nothing, but they feel like it's a good experience for their resume and they feel like they're learning and that you're.

You're spending a lot of time with them and giving them a lot of mentorship, you know, they'll do it for free and they'll work really hard. If you can't spend as much time on the phone with them and you can't give them as much guidance as more passive, then you're gonna have to pay them way more. That's kind of the spectrum.

And so we, we we're always trying to find the right balance there of like, We can't really talk at 50 schools. We can't really talk to every team for an hour every week.

[00:26:15] Sjoerd Handgraaf: All right. And then when you, once you added the sales layer, like did you like, because at what point did you move beyond campuses?

[00:26:22] David Oates: So as soon as we pivoted to resale, like fully, which was really the fall of 2018, we basically said goodbye to all of our campus ambassadors and went entirely to shipping.

So we cut out the local pickup aspect of our business entirely. And for the first time that enabled, that enabled us to do things like Facebook ads, which we really never tried before. And Facebook ads, we got them to work, but we, we didn't yet have the unit economics to support that. Like we, we weren't, we weren't pulling enough revenue out of each transaction.

I think back in those days we were giving a discount on your first purchase. We probably were making around. between one and $2 per transaction, and now we make, you know, nearly like three to four times that. So once we, like it was around summer of 2019 that we were able to like improve our revenue quite a bit, which then combined with starting to use Facebook's DPA product.

So uploading our catalog of items to Facebook and letting. Advertise specific items to specific people. Yeah. That really was the the first big growth spurt we've had. We've always tended to grow in big spurts, so that was our first unlock.

[00:27:38] Sjoerd Handgraaf: That's cool. And then did you, because then I can still throw in my constrainted question because like you didn't immediately go US wide, I'd imagine?

Or was it straight up? We did all across the country. Yeah, we did. All

[00:27:49] David Oates: right. Because with shipping, like the whole country is one market. Yeah. It's through us P. So you can ship anywhere in the country for effectively the same cost. And so somebody in Alaska could. Purchase from somebody in Mississippi for the first time,

[00:28:02] Sjoerd Handgraaf: but then, okay, well I can understand like the demand side, like getting the product in, but how did you get supply on board, like countrywide?

Like how did you do

[00:28:10] David Oates: that? It's very interesting. So for the rental business and the resale business, We've really never had separate supply acquisition. It has always been that like enough percentage of the people coming the app, which really, like, we only really do like shopping focused, you know, advertising.

Some percentage of those people are going to post an item. It's actually a higher percentage than, than actually going to purchase. But enough of those people are going to post items that then you. There's enough supply for the people that come on to shop. There's extreme crossover I think relative to, and part of that is our focus on the casual seller.

So that's kind of Curtsy. What Curtsy identified as the gap in the market is you have these apps like Posh Mark who, who definitely you can, you can use it as a, as a casual seller. You have eBay that is predominantly pro sellers. And then at the time that we launched, there really wasn't Depop in the US but for Poshmark.

the app was set up in a way that was pretty hard to figure out for like everyday people like my mom and my sister. It's set up so that the more sales you get, the easier it is to get sales. So existing sellers have a leg up over, over new sellers, and what you see as a user is kind of determined by who you follow.

It's, it's built on a social graph, and so it's kind of like the difference between TikTok and Instagram. On Instagram, you have to spend years building up a following to become an influencer on. If you produce a piece of great content, you could go viral with zero followers. I mean, that's exactly how Courty is too.

Yeah,

[00:29:42] Sjoerd Handgraaf: because I actually read something, maybe one of your investors tweeted about this, but what I really liked about your approach, If I'm like, sort of paraphrasing, I think the point of the tweet was that there is this weird thing with, with like app building that people focus a lot, like also for marketplace apps on like time spend in app.

Like, you know, like, oh, how do we get people engaged with the app? And actually for your seller side, they want to spend as little time in the app as possible. Right? Like, like you don't, like you just wanna make a picture and like put the price and that's roughly, Yeah, roughly what you're doing. And I figure that's such a great.

Like, in hindsight, it's so obvious, but like people are so, you know, Dow, ma, whatever, like so focused on these like Yeah. Retention numbers for both sides, Like there's absolutely no point for this

[00:30:28] David Oates: market. Yeah. A absolutely, like it was one of our competitors was, was bragging that, you know, their, their seller spent 30 minutes in the app per day.

And really that, that is because you, in order to sell on there, you have to do this process. That's essentially like manually growing an Instagram. You have to go comment on things. You have to go follow people and like their stuff to get, to get impressions on your profile. You have to share other sellers listings and so if Curtsy made people play that game, I'm sure that that metric would go way up.

But I would love to see a metric of sales per minute spin in the app. You know, that is really where Curtsy would exceed, I'm sure. Yeah.

[00:31:06] Sjoerd Handgraaf: Yeah. And then so tried to put the timeline together in my head. So you came outta Y Combinator, you got first seed round, then second seed round at what? Like what was sort of like the achievements in between which you unlocked the, like at what point were you like, I remember like referring back to clubhouse talk that, I think that was after your, you got a funding.

In January, 2021, I think, or, or something around that time, like you, you can feel in that. But, and then you were mentioning, or your co-founder was mentioning like some crazy gmv and you were only like seven people or something. Yeah. So how many people were you prior to that? It was like really just a handful, right?

Or like

[00:31:44] David Oates: how many? Yeah. We, we really got to, to that gmv, we were, I think it was around 25 million g We really got there with just the four co-founders and, you know, additional like two or three people. It's really a learning that we still kind of think about. It's just, you know, how oftentimes if there's, if there's like a lack of progress or there's a lack of like, efficiency, you know, it's like, is there a very few people working on this?

You know, it's like, because we, we've seen what one person is able to do. Like we, we had Eli, our, our technical co-founder, he built the entirety of the iOS app for Curtsy, which had all. Functionality of these other companies that had been around for a decade. So it really just goes to show like if you have somebody that is really well aligned and really scrappy and, and startup oriented in the sense that they love like a, a good rough draft version of a feature, you know, they optimize for getting it out the door over making sure it's perfect.

There definitely gets a point where you, you know, if you. 300,000 daily active users. You really don't want something that's very buggy if, if you're launching it, but at every stage there's a way to cut corners. And he has, you know, Eli's greatest gift as a founder is he loves cutting corners. He really, he really is very aligned in that sense.

[00:33:03] Sjoerd Handgraaf: Yeah. Yeah. And at least he's apparently cutting the right corners, like Exactly. Yeah. That's a

[00:33:07] David Oates: gift. That's a gift. Yeah, we, we always joke about, you know, minimum viable, functional, beautiful. Like, we keep adding like qualifiers there, product .

[00:33:17] Sjoerd Handgraaf: Yeah. So where are you now? Like what, how is, because you're mentioning now, actually you refer to a little bit earlier that like, okay, now we, so much that like Facebook ads was the biggest sort, the biggest growth, right?

In terms of like getting, getting to scale now that's somewhat broken after the, the iOS update. Where is Courty now? Like in terms of like where are you working on.

[00:33:39] David Oates: Yeah, so it's a very interesting time in our history. We have, we, we have like two of these kind of new directions that we're, we're working on.

One is actually to power resale experiences for other brands. So a lot of brands like Lule, Patagonia have launched resale platforms on their. Or not on their own, but in partnership with companies like Thread Up and Trove

[00:34:04] Sjoerd Handgraaf: Who Yeah, I've seen Thread up. Yeah. They have this whole like Ross layer now, right?

Or resale as a service.

[00:34:10] David Oates: Yes. Re sells a service. Yeah. Yeah. So Thread Up and Trove are helping brands with build out trade in programs where you as a, as somebody has Lululemon, can bring that product into the store and get credit in. To buy something new. And so the problem with Tradein, and really the value of Curtsy for brands is that Tradein is very expensive because they have to handle the, the fulfillment, the storing of the merchandise, the processing, the photography, the listing that's expensive and it's gonna eat in, you know, resell already has very low margins on, say, say you buy a product for around a hundred dollars, there's already very little if, if that thing.

Used, if it's been purchased once, the, the value of that product overnight jumps from a hundred dollars to $40. So then you can kind of do the math. If you have two way shipping, if you have the, the need to warehouse, if you have to pay for labor to process, there's very little like revenue earning potential on that transaction for these brands.

So Curtsy, what we say is like, Listen, we can actually help you build out a peer-to-peer marketplace. We handle the logistics, we handle the technology. Because the item is going directly from one of your customers to another one of your customers. We have a much higher margin and you actually can make significant revenue from this channel while also helping your customers lower their footprint and be more sustainable.

Yeah.

[00:35:34] Sjoerd Handgraaf: Plus like no infrastructure investments whatsoever. Yeah. That's a great value

[00:35:38] David Oates: problem. Yeah. And there's other companies that have launched that are helping brands launch peer tope marketplace. , but they, because they're not building on the back of an existing marketplace, they don't have liquidity on day one.

So Curtsy can launch our first customer. Princess Poly is live on the web right now. It hasn't yet launched, but it's, it's launching with like 7,000 items available for purchase. That means that Princess Poly doesn't have to put any marketing dollars behind growing the marketplace. It's already ready to go, and when one of their customers post an item on their platform, it'll cross list to Curt.

So that. Those sellers get way better liquidity than if it was constrained to just the people using it online. Yeah.

[00:36:21] Sjoerd Handgraaf: That's brilliant. Yeah. That's brilliant. Yeah, because actually one question that I still haven't asked was like that, that at least like here in Europe, like I've seen a lot of consolidation.

Like, uh, internet is buying multiple, like national, what do you call it? Like, uh, leaders in the. And there seems to be like a lot of consolidation going on. I think also the pop and someone other merged, so, so you know, it's crowded space. I was wondering like, how are you gonna defend the business? How are you gonna differentiate

[00:36:47] David Oates: in that market?

There's a lot of competition in resale. There's also this issue of brands competing now in this space. And then there's also social media platforms like TikTok and Instagram. People can just go on and sell. And Venmo has made it really easy to pay people. And so the resale app of the future has to provide value that doesn't exist on either of those options.

And so that's the idea behind our new Tryon feature. So that is built for the consumer Curtsy app? It is. You essentially, instead of just, and it's kind of based on, it's in response to what we observed our customers doing. They would, they would list their items on Courty, but then they would go promote.

Their items on Instagram and TikTok by creating a video of them trying on the item and talking about it. So we launched the ability to sell products in Curtze with a video and people that actually make a, make a try on video. Like we can see that those items are two and a half times as likely, two and a half times more than static listings to sell within one week, which is insane.

We never, we never. So now, now we're really like trying to redesign the consumer experience to put video front and center and to really prioritize that. Yeah.

[00:38:00] Sjoerd Handgraaf: All right. Awesome. So we talked about the past, we talked about the future somewhat. Yeah. I have actually just one more question, like, because usually I talk things about quality, but it's, it's quite clear to me, like, because you basically, you do the quality check when it comes in, right?

Or before, before you even accept it. Like how, how, how does that work on your, on your.

[00:38:18] David Oates: Yeah, so we use a combination of machine learning and then human review to look at and help improve every listing before it goes live. So we actually are the only, If you look at Kurtz's feed of items compared to any other marketplace like eBay or Depop or Posh Mark, you'll notice the photos are a lot clearer and more consistent.

And that's because we actually. , our cropping, we're brightening, we're taking down, we're rotating work. We're really, really curating what is going live to a greater extent than any other, any other marketplace. And the reason for that is cuz you have all these independent suppliers, these sellers, Who are posting images in different styles, and so we're trying to make them as consistent as possible for the, to create a great shopping experience.

[00:38:59] Sjoerd Handgraaf: Okay. That makes sense. Yeah. We covered everything. I was just wondering, like, would you have any, like, okay, we, because we, you've been really open about learnings from the past, is there anything you know, you would've done differently? Like one thing where you're like, Oh, or like something that you, you know, I don't know if you ever talk to other marketplace founders, but you're like, Okay, this is the one thing people should

[00:39:18] David Oates: take.

That's a really good question. I think it's a little bit cringed to even talk about because it's, it's like, you know, the fact that we didn't know this before is, and we had to realize it the hard way is kind of, kind of frustrating. But the first thing that comes to mind is, and there's a couple things.

The first thing that comes to mind is being more rigorous about AB testing changes to the app, because, at least in CURT's experience, we're product people. You know, my, my background is in engineering and design, and so, When we're faced with any kind of challenge, whether it's growth or it's retention, the way that people are using the product, our solution is to, is to solve that with additional features.

And so, and I think that's a very common thing for all early stage founders, and what happens is you don't really, at the outside of your feature, you're not really sitting there and going, Okay, if this doesn't drive 30% an increased retention or if this. Result in 46% of our active users clicking this button, then we are going to take it out in one month.

That never happens. And so over time you end up with this app that was really simple, now just like full of bloated features that are not doing anything, and they're actually detracting from your retention and your growth. So that's the first thing that's just being more rigorous about AV testing and actually setting clear product goals that if you don't hit them, it's getting ripped out to keep it very simple.

That's a great one. Yeah. The second thing is, I think it's very, it's very easy to just extend. It was really easy for us to just extend the LTV to payback period. Window or cocktail ltv, you, you got what I'm trying to say? Basically it's,

[00:40:55] Sjoerd Handgraaf: I'm not sure like a, Do you mean the payback period or the lifetime value?

The payback

[00:40:59] David Oates: period. Yeah, it's very, it was very easy for us to say like, Okay, well, you know, we're not really paying back these ads in 90 days, but we, they eventually do kind of get there. So like, let's just, you know, let's just spend at this level of c our, this budget for an impression on our ads and hope that it all works out.

The reason that was not a, not great for us is because our first full year of resale was Covid, and so the, the price of advertising was artificially. It was about half. And we didn't really know that that wasn't normal. And so a lot of the foundation that we built that year ultimately had to be scrapped and start started from scratch.

And so the advice there would just be to, it's okay to have long payback periods when you're an established company with multiple years of track record. Uber Eats or DoorDash knows that, you know, if they have a mom that comes on and does like three or six orders she's going to retain for three years, well, they can say that because they've been around.

You know, almost a decade, I think when you're in your first year of, of first two or three years of your product, like being very strict about trying to pay people back on more like a one to six months, some, somewhere in that range is, is probably way better. At least for us and every business is different.

[00:42:17] Sjoerd Handgraaf: Yeah, of course. But like, that is super challenging, especially like if you launch, especially like if you do a new model, right? Like it's really because you have so little data to say, like you can't really say what's the lifetime until those months have actually passed. Right. It's really challenging, especially with with, with the product like yours, where it's not.

Subscription or something where you can say, Okay, probably they're gonna say it's more like, okay, on average they purchase this much average order value. So, So I can see what you're saying. But that is like super tricky, but great advice. It needs to be more, let's say, rigorous on that or like more More frugal

[00:42:46] David Oates: on that.

Yeah, just more strict about that. Yeah. Yeah. Cause I think it would, I think it will force you to make some harder decisions and. And then the, the next thing is just, and I, I, I could keep going all day, but the next thing is basically it, it's kind of getting back to that idea that we had earlier, like moderate, a moderate level of success is more dangerous than having a complete flop.

No matter what your level of success is, even if you're on a really great growth trajectory, you still need to every quarter,, every semester, whatever your business cadence is, you need to be trying to disrupt yourself launching innovative bets designed to maximize upside instead of more incremental changes designed at minimizing downside.

So there was a tendency in our history to kind of jump too quickly into the refinement stage, and I don't think that should ever stop, but you wanna make sure that your roadmap at, at any given time, it contains some crazy stuff. The press would love to write about that your customers are going to genuinely be surprised about that is going to result in you having something that's fundamentally different than what's currently out there.

So that, that's another thing that comes to mind. And then I could, I could share one more and we could be, we could be done, but on the hiring front, I think that we've definitely made some, some bad hires over the years and really the. The takeaway there is just to really pay attention to red flags, even if you, even if you desperately want somebody.

In almost all cases where we made a bad hire, we had like those concerns about that person early on. And so the, the thing is, like before you've. Learn this the hard way just, and you, and it's built into your intuition. Really trust that if you, if something comes up, if you have like a, a quick thought or a concern in, in the meeting where you're talking about a candidate, if anybody on the team has any concerns, move on to the next person because there's going to be a person that you have zero red flags about that's going to be a great, great person for your team.

We found that the, in the same category of, of hiring advice like we found. Hiring for knowledge was never as good as hiring for basically just hunger and like ambition. So young people potentially. Yeah. Young people recently out of school that really wanted to get into startups or really wanted to work at an earlier stage startup, like that was a really great.

Candidate for us compared to people that were more senior and, you know, we were hiring them for, for what

[00:45:09] Sjoerd Handgraaf: they knew. Yeah. Thanks man. Those are great, great advice. Can you just this finally, like, so how many people is coaching now?

[00:45:16] David Oates: Right now we have about 50 people. Wow.

[00:45:19] Sjoerd Handgraaf: All right. So

[00:45:20] David Oates: that was, went pretty well.

Most of those are, most of those are, are like, you know, support staff, moderation team. So the, the actual number of full-time people is really about, So nice.

[00:45:31] Sjoerd Handgraaf: I love these like, like not scrappy, but you know, efficient, like an efficient machine. Yes sir. Thanks David, for your time. Where can people check out you and or

[00:45:40] David Oates: curtsy?

Absolutely. So I actually have my own podcast. Uh, it's called something like that. There's only been four episodes, but look out for more in in the near term that you can find me on Twitter at D E O A T E S. And yeah, if there's any women in your life that love. Finding cheap access to fashion. They love the, the treasure hunt.

Definitely send them to to Curtsy in the App store or at our website, Curtsy app dot. And you can, yeah, reach me on email if you'd like it. David curtsy app.com. All

[00:46:12] Sjoerd Handgraaf: right. Thanks a lot. We'll, we'll link to all of those in the in the episode page. Thanks very much, David, for your time, and have

[00:46:18] David Oates: a great day.

Absolutely. Thank you so much. This was so fun. Thank you for listening to Two-Sided the Marketplace podcast. If you enjoyed today's show, don't forget to subscribe. If you listen on iTunes, we'd also love for you to rate and give us a review. If you got inspired to build your own marketplace, go visit. Uww dot Share tribe.com.

It's the fastest way to build a successful online marketplace business. Until next time.

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