The Exchanges

Q Like you would do these, these road shows where you'd go to different cities and, and, and host these fashion events and things like that. Um, but, but the thing about a community, right, is that it, it can turn on you. And, and I think pretty early on your, some of your users did turn on you in, in part because of your shipping fees. Like what exactly happened?

A Yeah, so we launched the app with five dollar shipping at that time, and our cost of shipping was turning out to be 10 dollars and 50 cents on an average. And so we were basically losing money left and right on every order. And if you remember, having come out of dot com, I didn't want to build a business where you were losing money on every order. So we were like, what do we do? And, you know, our shipping fee was nine dollars at that time. We had discounted to five dollars for the launch. So we said, you know what, we'll just, Take the discount away and go back to normal things. So we put a little note in the app in May of 2012 saying, hey, we are, the discount is going to finish, the welcome discount is gone, and we're going to move the shipping to nine dollars. Hmm. I kid you not, Guy, within 24 hours, Tracy and our mailbox and Twitter was flooded with hundreds of people saying, you are going to make us bankrupt. We won't have any clothes to wear. You guys are crazy. How can you change the shipping? And it was a revolt by our community for us to move our shipping from five to nine dollars. We had never seen this level of passion ever in my life.

AI assessment note: “it was a revolt by our community for us to move our shipping”

Q And, and from what I gather, initially when you launched, there wasn't like a buy now Button on the site, right? Like, I read that something like that, that, that employees of Poshmark would set up face-to-face meetings with the, how did, what was going on there?

A We were big believers of putting the product out into the customer's hands very early. So we got funded in February, and by May, we were starting to test the product in, of, of, of, of, of, and by August, we were starting to see transactions happening. But, We hadn't gotten our payment processing set up. We hadn't gotten shipping set up, so we were still just a content site, and so people would literally write a comment, and Leanne, who was our first employee in our, today our SVP of community, was heading up the community management, so people would just email her, and she would say, uh, you guys want to buy this thing? Please Bring your money or PayPal me the money and then meet us. And, and typically our meeting was at the district wine bar in Soma in San Francisco. And that's where the product would happen. It would be almost like a little physical product exchange. And half the time it was cash and product being exchanged there. We were not making any, we were just trying to facilitate the transaction.

AI assessment note: “We hadn't gotten our payment processing set up. We hadn't gotten shipping set up”

Q up for a moment because you're working on this thing even before you raised money. And what did it take to get you to leave your job, you know, your, your well-paying job at Versant as a, as a, an executive there to jump ship and start this thing? Cause you launched this, this website in 2005. So what happened to make you feel like, okay, I can do this.

A Yeah. You know, the discussion we had was, okay, how much money do you have in the bank? How much money do I have? How much money? Chetan, Kieran. And can we survive for six, nine months without funding? And after nine months, if the idea doesn't take off, then it'll take us maybe three, four months to find a job. So basically we said, do we have 12 months of cash in the bank? We were lucky that we were able to raise, you know, the money in the first three, four months and didn't have to burn much more than that, which was a series of interesting and wonderful circumstances that raised the money. And so we were, uh, by, by month four, we had a million and a half dollars in the bank and, you know, we had started payroll and we were able to start to pay a little bit to the company and, and start recruiting engine for the company.

AI assessment note: “basically we said, do we have 12 months of cash in the bank?”

Q All right, now you're going to start working on this thing, and it was going to be mobile only. It would enable people to take a picture of an article of clothing, upload it to their page or whatever, and then for somebody else scrolling through this app to buy the product, and then you guys would handle everything else. How was it going to work initially?

A Yeah, the idea was that Somebody would come, buy it from you. We would take care of all the transaction money movement. Once you ship it using a shipping label we emailed to you, once the person received it and said that they received it and they're satisfied with it, you get the money. You would keep 80% and you would get 20%, and that's it. I was tired of people, you know, hiding a lot of fees, like, you know, if you sold another marketplace at that time, You had one fee, then another fee came, and by the time you sort of got your money, there was nothing left. So here, our idea was, day one, we would reveal to you, if you listed your item for 50 bucks, you can get 40 bucks. And not up any more, not up any less. You can get 40 bucks. We would not charge you any hidden fees, et cetera. And then that's sort of how we launched it, uh, in, in 2011.

AI assessment note: “We would take care of all the transaction money movement. Once you ship it”

Q Can you tell me how that came about?

A Well, we were coming out of COVID, but kind of in a weird, funky way. Inflation was skyrocketing, so consumption was going down. In between, because the business is going through all this turmoil, the stock has taken a dive, we start to get inbound inquiries for acquisition. Right. And in January, we got a call from Naver, where they said, hey, we love what you guys are doing. We love this whole area of You know, consumer marketplaces, social commerce, and we'd like to make an investment in your company and learn from you guys. And so started the conversation. And suddenly one of the big things that started to shine for me is that one of the big growth areas for Poshmark could be live streaming and live shopping. And so I started to put a lot of energy into that. And, uh, you know, we're sharing obviously what our strategy is with Naver because we're in confidentiality. And suddenly they actually put an offer on the table. And by January of 2023, we had become part of Naver.

AI assessment note: “we got a call from Naver, where they said, hey, we love what you guys are doing”

Q Right. And I think when you came up with the idea for Poshmark, it was inspired by a lot of different things, but it kind of started with the iPhone, right?

A Yeah. I remember I was on a trip with A bunch of my friends, and this guy had this little iPhone, uh, it was iPhone four, and he takes a picture of these birds and, and shows us. It looks amazing, you know, and we are all here with our SLRs trying to take picture of these birds, and then he quickly uploads it on, at that time, a hot platform called Facebook, and we suddenly see his picture on Facebook, and, and I'm like, I have to now take my SD card, shove it in the laptop, and all of that, and so I suddenly said, you know, This mobile is coming of age, like something massive is happening. I would, I had iPhone three at that time, which was grainy and, you know, photo quality was mediocre, et cetera. And this was high quality stuff. And so I said, you know, I need to do something with mobile. And then I was at my son's high school game and the high school homecoming queen was wearing a yellow dress. And we know her parents, we're talking to her parents and they said, you know, she's just thrifted this dress. This is, she's bought it used from a thrift store. And then I came back home, and I was in our closet, and they were, like, bags and bags of clothing just unopened, lying, you know, not returned, you know. And so suddenly, like, all of these things just clicked in my head, and I said, The right idea is to empower everyone to have this phone. A girl can literally take her c…

AI assessment note: “I suddenly said, you know, This mobile is coming of age”

Q And at that time, in December of 2011, when, when you launched an app on the App Store, it wasn't like today. There weren't, there's millions of apps, right? I mean, The, the, the competition was just, there were just fewer apps available, so was it easier to gain traction at that time?

A It was, and it wasn't, you know, in the sense that the expectations were very moderate. I think we had like a hundred users in the first day. It was all through PR, and, you know, we got an article in a pub at that time, which was very popular, called Refinery 29. We had a couple of articles in San Francisco Chronicle, print, and, and we started to see some users come in. But there wasn't any cost efficient acquisition engines, you know, it was really, really expensive. So we started to experiment some online advertising, but app installs were not there. So you still had to sort of click through, discover something, then go to the app store on your own, and try to download the app. And so that whole funnel was extremely expensive, complicated, etc. So we couldn't figure out how to scale it.

AI assessment note: “It was, and it wasn't, you know, in the sense that the expectations were”

Q And what did you want to see happen? I mean, 2004, 2003, like, what were you saying? Hey, this should be better. We should be able to just, like, go online and buy these things, and they should just be delivered to our house. Is that what you were saying?

A Well, it wasn't even about the purchase. What I wanted to do was to make sure that there's one page. So if, if let's say there's a project, let's say we were putting together a room for my daughter and my wife, me, my mother-in-law, our designer were collaborating. There should be just one page where we could put what we want, discuss it, and then throw out the things and just collaborate and have a single page, like even a small project, like our kitchen stove, which has so many different decisions to be made. And everyone has different opinions, and people are arguing, and you're really passionate when you get into this project. You're focused on that doorknob, and whatever, like, and that little knob, and, and, and, you know, at the end, these all sort of dissolve, but at that point, they're the most important things, and you're passionately discussing it. So any kind of collaborating decision-making was painful, and that's where I started to see the potential of this idea in multiple places.

AI assessment note: “Well, it wasn't even about the purchase. What I wanted to do was”

Q but what exactly were they buying? I mean, they, you, you had the technology and you had built this platform, but I mean, did they ask you, like, hey, what's the plan here? What's the business plan? I mean, or do you think they thought, oh, you know, hey, they have this platform. Now we can take this and figure out a way to, uh, to sell things to people.

A Yeah, I think their strategy was digitizing the magazines at that time. Uh, they had a new CEO and he was focused on taking all of the magazines and creating engaging digital properties. And also they wanted to have a presence in, um, in Silicon Valley. The last thing is Hearst as a, as a company was basically made up of a series of acquisitions that they acquired at small stages and then grew and made them meaningful properties. So that was sort of their business model as well. So a bunch of things aligned, unknown to me at that time. Um, you know, I had no, no idea of the media business. I didn't even know that Hearst was on the East Coast. So I was, again, to some degree, being naive has helped me in being able to just go talk to these people without knowing that who I'm talking to or what sort of, uh, is on the other side.

AI assessment note: “their strategy was digitizing the magazines at that time.”

Q So people start to discover it, and how did people use it initially after, after it was publicly launched?

A So a lot of people ended up using it for either food, so they were using it for recipes in restaurants, or fashion. But as we started to talk to our users, because we picked up the phone and reached out to these users, what we found that Almost all of them were women, and, uh, there was no women in our investor team, no women in our company, and yet every single person we talked to ended up being a woman, which was kind of surprising to us, you know. This is how naive we were about the world of internet at that time, and we were having furious debates as we sort of started to think about it, and ended up sort of saying that shopping and fashion will be our focus. We're going to walk away from recipes and all of that, and that was, um, Turned out to be a very good decision because social shopping was something in the early days that had a lot of following that didn't have a solved problem and sort of closely resembled actually the pain point which triggered the product creation. So it all came together by early 2006.

AI assessment note: “a lot of people ended up using it for either food... or fashion.”

Q So now you sell it to Hearst and this big media company, and you stayed on as the head of Caboodle. And what, what was the monetization strategy once, once Hearst took it over?

A It was, it was largely advertising. So they were selling advertising to big companies, you know, whether it's a brand or a retailer, and they would advertise in the print, and they would also have a significant digital presence through Caboodle. But the advertising we were doing was not directly tolerated. Tight to the engagement. Some pages were over monetized. So there were pages we were running where there were three banner ads running on a single page, which made it very, very hard to sort of load up and, and work with. And so that led to sort of one of the principles by which I looked at anything I create where, wherever you have love, the money is sort of synergistic. So engagement and monetization had to be a hundred percent synergistic in any business I created. So the more you focus on engagement, the more monetization you get. That was not the case with Caboodle. You know, we were sort of pulling in different directions based on, you know, how the advertising was there. But otherwise, I would say they were very, very healthy partners as an owner of Caboodle. They were never overly focused on it. But on the monetization side, we didn't have a choice. We had to put those ad units, and that was something that none of us really liked in terms of how they manifested in the site.

AI assessment note: “It was, it was largely advertising. So they were selling advertising to big companies”

Q And had you not done it, what do you think could have happened?

A I think, I think I, I fear that, you know, we would have lots of failed transactions. Our customers would have churned and gone away, and ultimately, you know, we would, we could have crashed. We could have completely crashed. Instead, through this whole process of cutting our marketing, I hired some of the key executives. Our head of growth joined us in spring of 20 14. I shared with him, I said, you know, for six months I can't give you any money. He said, no, let me help join. Our head of data joined at that time, and so I felt like we built the management team as well, besides sort of building the infrastructure, but we built the management team, not fair weather friends, but we actually found foul weather friends who would actually stick around, and luckily none of my co-founders left. They're still all here, and so we actually ended up forming a lot of, um, grit and character through that sort of year, um, and, and, and I think form a lot of bonds where we all sort of Almost kind of had a second startup from 20 14 onwards. We did to restart growth, rebuild the infrastructure, and grow the business in a much, much more, you know, gritty way, if you may.

AI assessment note: “we would have lots of failed transactions. Our customers would have churned and gone away”

Q Wow. What was so bad about the term sheet? What do you remember about it?

A I mean, it was just, it was, I think it was two X of the last round, but it was like not three, four, five X. And I, You know, again, I was so tunnel vision. I was like building the company, trying to manage. I had two young kids, et cetera. I only remember that I was so happy to get the term sheet. And then it was like getting cold water poured. And I was like, how the hell do I figure out how to sell a company? I mean, I barely know how to raise money. Uh, and again, remember we had very little money. So I had 1.7 million dollars. Even a flight in a hotel was super expensive. You know, uh, to, to use those tiny resources.

AI assessment note: “I think it was two X of the last round, but it was like not”

Q And so, how was it? Like, what, what did it look like?

A So, we could go to different websites, get the information summarized. If it was a single page, you could look at all the information, unless you're trying to make a decision on, you know, uh, sofas or lamps, you could put them all together, you could have a comment on them. So, the basic prototype of the product was working. I said, now, Is the time to really make a decision? I want to find out who wants to jump in and quit their jobs and put their lives on the risk. Who wants to sort of be an advisor kind of a thing? Who's going to contribute and only join us when we have funding? And I had to sit down because I had two young kids, you know, I'm, I was in a secure job. I had everything. I had a mortgage and I had to sort of think it through. So I went back and it just so happened that my mom that winter was visiting from India because there was a cousin's wedding. And so I got a chance to talk to her, and my mom said, you know, I think you should do it. I can see that there's no way you're not going to do it. You have to do it. So I came back, and I was energized, and then, um, you know, I wanted to have one technical co-founder and one person from the consumer space. Unfortunately, all the consumer guys backed off, and two technical guys came forward and said, you know, we want to do this with you, and I like both of them, and they had slightly different skills, and Shetan a…

AI assessment note: “we could go to different websites, get the information summarized.”