Episode #247: David Oates, Curtsy, “Our Number One Best Selling Item To-Date Is Active Wear…Lululemon Leggings, Lululemon Shorts, Nike Shorts”

Episode #247: David Oates, Curtsy, “Our Number One Best Selling Item To-Date Is Active Wear…Lululemon Leggings, Lululemon Shorts, Nike Shorts”

 

 

 

 

 

Guest: David Oates is the CEO and Co-Founder of Curtsy, an app making it easy to buy and sell, and re-sell clothes whether you’re cleaning out your closet or looking to fund your next great outfit.

Date Recorded: 8/26/2020

 

 

Run-Time: 44:51

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Summary: In episode 247 we welcome our guest, David Oates, CEO and Co-Founder of Curtsy. In today’s episode, we’re talking about running a company completely designed around making it easy for people to buy and sell clothes.

We chat about the pivot the company took from launching as an app allowing women to rent clothing from each other to an app focused on buying and selling. We discuss some of the user-friendly features that have moved the needle for the company, like the effort put into curating and merchandising the items to the Curtsy shipping kit that keeps users from needing to leave their home to ship items.

Curtsy has found themselves in the fortunate position of increased growth during this environment, but our guest lets us in on what the team is focused on in the near future, and what they are excited about as they look ahead.

All this and more in episode 247 with David Oates.

Links from the Episode:

  • 0:40 – Sponsor: Maude
  • 1:43 – Intro
  • 2:42 – Welcome to our guest, David Oates
  • 3:45 – David’s story from post-grad to Curtsy and his time doing DoorDash
  • 8:53 – My strange, unexpected love affair with delivering food (Oates)
  • 11:44 – Y-Combinator
  • 13:18 – The pivot into selling
  • 17:23 – Building for their demographic
  • 20:13 – The challenge of relaunching an app
  • 21:31 – The moment they knew it worked
  • 24:52 – Features that moved the needle
  • 26:34 – Reducing friction in the experience
  • 29:38 – Current state of the company and how COVID impacted them
  • 33:07 – How the demographics of the Curtsy customer have changed
  • 34:18 – The ThreadUp model and how people value their belongings
  • 37:22 – The team and how they are working through the pandemic
  • 38:11 – What does the future hold for Curtsy
  • 40:43 – Fundraising plans
  • 41:37 – Most memorable part of building this company
  • 44:43 – Follow Curtsy and connect with David: Curtsy App, on twitter @deoates

 

Transcript of Episode 247:

Welcome Message: Welcome to the “Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

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Meb: Welcome podcast friends, we got a fun show for you today. Our guest is the founder and CEO of Curtsy, an app making it easy to buy and sell and resell clothes. That’s for whether you’re cleaning out your closet or looking to fund your next great outfit. In today’s episode, we’re talking about running a company completely designed around making it easy for people to buy and sell clothes. We chat about the pivot the company took from clothing rentals to focused on buying and selling and reselling.

We discuss some of the user-friendly features that have moved the needle for the company, like the effort put into curating and merchandising the items to the Curtsy shipping kit that keeps users from needing to leave their home to ship items. Curtsy has found themselves in the fortunate position of increased growth during this COVID environment but our guest lets us in on what the team is focused on in the near future and what they’re excited about as they look ahead towards the horizon. Please enjoy this episode with Curtsy’s David Oates. David, welcome to the show.

David: Thank you, it’s good to be here.

Meb: I know you’re a fellow North Carolinian originally, but where in the world are you located now?

David: We’re in San Francisco. It’s pretty smoky at the moment but normally it’s a good time of year to be here.

Meb: I was actually just up there last weekend and planned on spending some time in Santa Cruz with some friends and Santa Cruz is obviously ground zero for all the fires and we did…the whole drive home from San Francisco to LA was just super smoky. But usually, this is my favourite time of year in the Bay Area. It feels a little more like summer, September or October, get to go surfing down in Gray Whale and Linamar, all those spots in San Fran. How long have you been there?

David: I’ve been here for about five years on and off. This company, Curtsy, took me out to Mississippi for a couple of months and then we spent a year in Mountain View doing our time there and then moved back to the city in the summer of 2017. I initially came out here in 2015 summer.

Meb: All right, so I want to hear the full origin story. And we’re going to talk about Curtsy in a minute but give me the on-ramp, what was the post-undergrad sort of progression that led you through Mississippi? I’m curious to hear what that was all about to eventually San Fran.

David: Should I talk about like what Curtsy is first?

Meb: Yeah, you can go real brief and then we’ll get way deeper later.

David: So, Curtsy is an app that lets women buy and sell clothes from their phones. So, it’s like if you’ve heard of Poshmark, it’s a simpler version of that targeted towards Gen Z. And I can kind of get into like how we got there but we started with a different business and two, my co-founders, I actually went to high school with in Charlotte. My friend William was a grade above me, he and I were the two, like, tech kids at our high school, so we put on the morning announcements every morning. It was a big high school, like 3,000 kids, we had a live TV broadcast at 8:00 a.m. every morning. So, he and I would bond over, like, AV stuff and Apple products and entrepreneurship. And his sister was in my grade, her name is Claire Agnes and William.

Meb: This is Myers Park, by the way?

David: Wow. Yes, it is. You are North Carolinian.

Meb: Yeah, keep going. Okay.

David: Yeah, Myers Park is one of the biggest schools in North Carolina. Easy to get away with stuff but pretty good education too, I guess, not that I was particularly interested in that part of it. Anyway, William and his sister went to the University of Mississippi, I went up to Boston for school. Clara Agnes in the senior year, William had just graduated. They and their friends linked up together to make an app that lets sorority women rent dresses from each other on campus. So, the idea was…this world was foreign to me but at the big SEC schools, big football schools in the south like Alabama, Georgia, South Carolina, Ole Miss, women in sororities tend to get really dressed up for all the football games, even baseball games, all the social events in the fraternity sorority life. So, this insight was like, “Wow, we need like 20 unique dresses a semester, let’s build a platform where they can more easily swap them on campus.”

And my background is in design and engineering, whatever engineering, more like development. I got started making websites when I was really young. I would help out, like, my neighbour who’s starting a restaurant. I, like, figured out how to make websites for him and continue to make websites for small businesses in Charlotte all through high school, got into the morning announcements at Myers Park, did the newspaper, which kind of helped me hone my, like, graphic design skills. And then, just continue to get more into engineering and then ended up dropping out of Northeastern after a year to work at HubSpot full time along with my friend. I started as an engineer but after a couple of months, I got moved to a new team that was building HubSpot CRM or…it wasn’t even a CRM yet, it was actually just this email tool that let you see who opened your emails.

And then over the course of my year there, I went on to be the lead designer on their new CRM project. We got that shift that launched and then I left to go back to school briefly before leaving again permanently, finally. So, around the time, there were was like a year that passed after I dropped out of school and before William and Clara Agnes started this app at Ole Miss, University of Mississippi. But William and I had stayed in touch all through college, his sister had posted this article to her Facebook about, “Congrats, William,” on this thing and I remember reading about the app that they were working on and I just commented on Facebook and said, “Hey, this looks really interesting, like, let’s catch up soon.” And William called me over Thanksgiving 2015 and he wasn’t at all, like, fishing for or trying to recruit me whatsoever, he was just saying, “We really need a designer.”

I thought it was interesting. When I was in Boston, I was on this group called Rough Draft Ventures, which was similar to the Dorm Room Fund but funded by General Catalyst. Part of that was we would see, like, student-backed startups come through every Monday and pitch for investment, so I kind of had like a pretty high bar, like kind of bullshit filter for these students started things. So, when William was talking about it, I was like, “This is interesting, whatever.” But actually, I actually agreed to do the first version of the app just as a freelance project for him, I was kind of in between projects. Truthfully, I was only a few months into living in San Francisco and got randomly addicted to, like, delivering food on DoorDash. My friend kind of talked me into coming to the orientation with him and I just got, like, super into it. I actually became, like, the world’s number one DoorDasher in October 2015. I’m not even joking, that’s actually something that happened.

Meb: What do you get? Do you get like a special award? Does DoorDash give you any special perks for being numero uno?

David: They called me, this guy named Michael called me and he told me that they kind of wanted to know how I had done it because I had gone from zero deliveries in September to being number one in October. And, yeah, he said he was gonna send me a gift card but they never followed up, which, that’s pretty lame. I did write an article about it on Medium and then Fox paid me to put it on this blog there, so that was pretty cool. It’s actually still on the internet, that’s kind of unfortunate.

Meb: We’ll put it in the show notes. Don’t worry.

David: Great, awesome. No, it’s kind of a random little side thing. And the year after I left school, I really didn’t know what I wanted to do longer term. I had these skills of design and copywriting and web development, app development, but I was just kind of all over the place, I didn’t really have a direction or, like, anything pulling me that strongly. So, DoorDash was just one thing in a string of like these, like, random projects. I spent a month in Japan, I was really just trying to figure out what I wanted to do with my life and then right around that time, I started getting involved in the project that William was working on at Ole Miss. But funny enough, if you fast forward, I did the first version of the app, it took off at the University of Mississippi to such an extent that I actually gave up my apartment in San Francisco and moved to Oxford, Mississippi to help them work on it there.

And then we applied to Y Combinator with the idea and then we got in, which all brought us back out to Mountain View. The last, like, funny thing about the food delivery. In our YC interview, Sam Altman was one of the partners, and he was interviewing us and he said, “What do you guys know about two-sided marketplaces?” And I was like, “Well, funny enough, Sam, I actually delivered…I was the number one DoorDash delivery driver in October 2015 and I actually delivered to you once.” And he was like, “No kidding,” and I was like, “Yeah, like, your loft is, like, over there in that neighbourhood, you ordered this Indian food,” and he was like, “What, that’s crazy.” So, it was like it was this funny moment.

Meb: Sam, a good tip or a bad tipper? But more importantly, was he cheap bastard or was he generous? You don’t have to disclose.

David: When DoorDash first launched in San Francisco, the economics for the drivers were unbelievable. They were doing $12 flat rate per delivery made plus a guaranteed 20% tip. So, it didn’t matter how stingy their customers were, I was making like $36 to $45 an hour.

Meb: Wow, awesome. Okay.

David: Hence me getting, like, really into it for a second.

Meb: Sam is like, “We got to approve this application, they may have some dirt on me.” And the interviews are pretty short, aren’t they?

David: Yeah. When I talked to companies that are doing interviews, like, I kind of bring up that story as an example of it really is monotonous for these interviewers. They’re doing 20 to 50 of these in a day and so it’s hard to, like, try to be funny but if there’s any way to make it lighter or to loosen up a bit, that actually could help you be remembered at the end of the day.

Meb: And it’s a pretty quick turnaround on acceptance, right? Don’t they tell you pretty quickly?

David: Yeah, ours was like midday and we were kind of. like, really nervous and really just kind of anxious about it. We were walking along the shoreline by Google and then Justin Kan called us and told us, he was like, “You guys got in,” and we were like, “Ah,” and he was like, “Yeah, it’s cool. Okay, bye-bye.”

Meb: It’s been a few minutes, I’d love to hear about what that whole process was like, for the listeners, I’m sure, would love a little behind the scenes in the Y Combinator. How long did it last? What you guys’ take-aways for the whole time there?

David: We actually didn’t necessarily get as much value out of YC as we could have and part of the reason for that is the business that we were in was highly seasonal. Everybody after the semester and all the spring formals and all the events, they go on spring break and then they go home for the summer. So, if you have a local rental marketplace for college kids operating in one zip code, it’s going to be dead in the summer. So, YC is best when you can use that pressure cooker environment to grow your company really quickly but we had to decide between do we like try to change our business in order to show growth or do we sit here and prep for the fall?

I think if we did it again, we would have just deferred. I mean, obviously, we didn’t know that it was going to be like that, I think we would have done it later. But it didn’t matter. I mean, if it was for the purposes of helping us raise money, we didn’t pitch a demo day because we didn’t have any growth to show but we had an amazing fall semester and then we raised around at the end of that year, so 2016. And we actually…because we defer demo day, after we pivoted the business, which we can get into, we ended up showing up to demo day like three years later last summer and pitch with that batch. So, I think literally, that’s the record for the longest demo day deferment in YC’s history.

Meb: Tell me a little bit about the pre-pivot. You guys went into fall time, did go back to Ole Miss? Were you expanding to other campuses? What was sort of the progression?

David: Rental stop and a lot of people don’t necessarily realize this, but Rent the Runway, at least before COVID, was doing well mostly due to their unlimited subscription business, which is really different. When you’re paying a subscription, your mindset shifts to like, “How can I get the most value out of the money that I’m paying every month?” So, you’re like, “I have this event coming up, I have these workouts that I can just try to get as much value out as possible.” When it’s a special occasion rental business, which is essentially what Curtsy was too, it was just peer-to-peer, it really only works for dresses, it’s very event-based. So, if I gave somebody…and we did this all the time, we gave somebody a $25 or $50 coupon and we said, “Go rent something,” they wouldn’t even…most the time, wouldn’t even be able to use it and they didn’t.

It’s very logistically complicated. Because it’s event-based, there’s a huge element of timing that has to work out. You got to get it ahead of time to make sure it fits, wear it, bring it back to make sure it’s clean in between the rentals. So, that’s a nightmare even when the company is handling the cleaning and the shipping. If you’re relying on college kids to do that, it’s even harder. We built a ton of tooling around just, like, eliminating some of the common breaking points or friction points in a rental. And special occasions, like, by definition, people don’t mind splurging. If you have two sorority formals every year, most people’s parents are happy to help them buy a new dress. So, it was just tough. Even with our best customers, maybe they were using it five times a semester. With our margin and economics, it just doesn’t work. It would have been a great lifestyle business. We’d launched it at 10 schools the fall after YC and then we’d launched it at 30 schools the next semester.

It would have been a great lifestyle business in the southeast, the problem is that every other school like Pennsylvania or even like UCLA that doesn’t have that big SEC football Greek culture, they never were as big. We tried everything to really make it work. We opened a physical retail store in Tuscaloosa, Alabama, that we had open for six months. By the time we closed it, like, half of our business was coming from Alabama and most of that was coming from the Curtsy store. It was like a managed rental store where we would, like, hold the inventory and do all the logistics so people could come try it on there. We tried a subscription business at Georgia. We tried to launch shipping to do rentals across campuses. And then summer of 2018, we’ve had enough and we decided to pivot into our number one most requested feature, which was the ability to, like, sell stuff too.

Meb: I was smiling because I was, like, wondering what the per cent destruction rate on these dresses were because if you’ve ever been to SEC tailgate or any of these…imagine some of these, you get vodka cranberries or Bud Light spilt all over them. I was like, “You should be making money on the insurance or just the 30% that come back totally trashed, people end up buying them.” Okay, so you decided to pivot, what was the insight that you mentioned?

David: About that point, it’s funny that there are things that investors tend to fixate on that we really don’t think about as much. In the rental business, that was everybody’s first question is like, “What happens when the dress is destroyed?” or like, “How do you maintain that quality?” And then in the rental business, it’s like how do you ensure that it’s more like a fraud or like a satisfaction question by some business. Really, the interesting thing about starting this company is, like, the vast majority of people are good actors, they do see it as like, on the rental side, they are somebody’s thing and there was a personal connection.

So, the times when a dress would be returned and it was like utter trash were, like, so rare, shockingly rare, way more rare than you’d expect. And to a large extent, that’s true with the buy and sell business too. Most of the time that an item has to be sent back, it’s due to a total accident, didn’t realize that it was actually a small but they listed as an extra small. That’s, like, the most common scenario for why items have to be returned.

Meb: All right, so you decided sorority girls weren’t the best business model, then you decided to move to a little bit different focus. What was the…this was summer of 2018?

David: Yeah.

Meb: What was the progression there?

David: We knew that this business, this rental business was never going to be as big as our kind of ambitions for it. It had a lot of like slow growth dynamics, very similar to Uber and Lyft. You really have to get density in every town, it’s very, like, manual process. We wanted to pivot into shipping, we knew that people wanted to try buying and selling on our platform. Most of our customers were in college, 18 to 22, interestingly, were not using Poshmark was surprising to us. They’re definitely, like, the industry leader here in terms of letting people sell clothes from their phones. But the average customer on there tends to be a lot older, like the moms of our customers.

So, our customers, if they were selling clothes online, it was way more likely to be on social account, they would have a separate Instagram called like Macy’s Closet and they’d be selling to their friends or they’d be selling within their sorority on Facebook groups or GroupMe, something like that. Some of them had to use Poshmark but due to, like, older focus and the brands on there, they tended to, like, not be current users of it.

Meb: Why do you think Poshmark skews older? You mentioned the brands, is it the user experience? Is it the design of the app website? I wonder why that’s the case.

David: Curtsy has a strong focus on Gen Z because we’ve built for that customer. There could be a similar feedback loop that was in place from Poshmark from the early days where they were going after this market and it evolved over time, but I will say if you look at Curtsy app, hopefully, you will find that it’s very clean and well organized. It doesn’t look thrift, there’s nothing really thrift about it. It doesn’t require wading through a lot of low quality listings. We do a very, like, manual process of curating and manually cropping and rotating and improving every listing so that it’s a very clean, consistent shopping experience for people.

It’s very casual seller-driven. So, the dynamics of Curtsy are such that you can be brand new to the app, have zero clout or followers on the platform. If you list a good brand, a good item, a good price, that will go to the top of our price feed and that will sell. We call it like an item meritocracy but really, it’s similar to like TikTok. Instagram, you have to build up followers, you have to grow your audience. That’s the dynamic of apps like Poshmark. Those are way more conducive to people who are trying to make a business out of selling. They’re willing to kind of spend their time learning the platform and growing their network as a way to grow their sales and grow their business. Curtsy is way more like set it and forget it.

Meb: As you decided to pivot, how big of a challenge was redesigning and launching the app? Was that like a one week? Was that like a six-month experience? And then when did you guys kind of flip the switch and turn that on?

David: Good cue, and I was gonna mention that. We actually originally started as a toggle, so you could rent or you could buy/sell. And we didn’t necessarily foresee it but the buy/sell side, because it’s not constrained to just dresses, people wanted to sell and still our number one best-selling item to date is activewear, Lululemon leggings, Lululemon shorts, Nike shorts. It’s not necessarily intuitive that people would want to sell those things. So, there was demand for activewear, there was demand for selling casual things. Nobody ever wanted to rent anything casual, denim skirts, denim cut-off shorts, denim jackets, mom jeans, that’s a lot of denim examples. But Ray-Ban sunglasses, you never want to rent those. So, pretty much overnight…and the other thing about the other comparison between rental and buy/sell and what we noticed when we had both of them in the app is there’s no such thing as an impulse rental, it has to be around an event.

What we saw is if we do a discount, we could say, “Here’s a 20% off coupon,” like, that will grow sales because people buy regardless of their calendar. They can buy this pair of leggings knowing that they’ll get some use out of them over the next six months or buy a bikini in December knowing that they’re going on spring break in four months. Like, that’s something that’s incredibly common. So, a lot of those constraints that were on the rental business, as soon as we switched, they just went away. It was like you took the weights off and it just kind of…it started growing way more organically. way more naturally. Every time we added a category, we saw it continue to grow. Within a couple of months, it was clear that that was the future of the company and we took out the rental side of the app altogether.

Meb: Wow. To me, it’s funny because it seems like a pretty audacious goal. The pivot, you said, “Look, this wasn’t working so much, we’re gonna try something new.” But it’s so funny to think about it because in so many ways, I feel like most listeners would have just been like, “Hey, there’s Poshmark and these like 50 other apps that are kind of doing something similar but for whatever reason, the user design or focus on a certain demographic, the way that it’s presented, it found a certain niche and just be able to really resonate.” Talk to us a little bit about when did you get a good understanding or be able to look around to your coworkers and say, “Wow, this is actually starting to work, this might just happen.” Was that a couple of months in? Was that a year in?

David: We were really hungry for something to collect. I was joking this year that I finally understood what it was like to have a startup feel like a roller coaster because it never felt like a roller coaster during the rental days because there was just never any absolute peaks. Those semesters that we would have that would be good, immediately the business would go down in the summer and, like, that was the nature of things. So, it wasn’t a hard decision for us. That little traction that we had in the first couple of months of buy/sell was so exciting. I remember…we’re great friends, the whole team of Curtsy, I mean, me and my high school friends and then Eli is our other co-founder.

I think we’re in Sea Ranch for the weekend and we had a day where we got like 25…I forget what the absolute number was, but it was something like a ridiculously low number of sales and we were just so excited that we got that and we all, like, cheer or something like that. But it was just us kind of responding to the numbers that we were looking at and the excitement from people and it made sense that there was an opportunity in the market for an app that is designed with the simplicity and have the service of Nordstrom. I use Nordstrom as an example because if you ask our customers their favourite app to shop on, a lot of them or most of them, I would say Nordstrom comes up.

Nordstrom is a great e-commerce business with a failing brick and mortar business weighing them down. There really was an opportunity and space for, like, somebody to bring Amazon level of simplicity to resale. If you think about it, everybody that ever buys clothes at some point is going to have to get rid of them, so whether that’s throwing them away, donating them, upcycling them, reselling them. This was a category that didn’t exist 10 years ago and we think even the options that are out there, eBay, Poshmark, apps like thredUP, like, they haven’t yet cracked this for most people. The market is still pretty small due to the UX issues around it, it’s complicated to price, it’s complicated to ship. A lot of these things, Curtsy has basically reduced it to be one tap flows, incredibly simple. That’s really our strength as a team is the product.

Meb: Well, tell me a little bit about that. What were some of the major additions you added post-pivot, post-launch that really move the needle, you think, on how this app enabled people to buy and sell easier or just more comfortably over the past 12 months? Was it any particular insights onto the user experience or any parts of the app that really stand out where you look back and say, “Oh, man, that little tweak we did ended up being pretty significant,” or, “This was something we had expected to really work but didn’t?” Any ideas?

David: I would say, definitely what I mentioned earlier about, like, the work that we do to merchandise all the items posted and present them in the best light. How to photograph your items and display them so that they can be successful in a marketplace isn’t necessarily intuitive to people that are doing this casually, so doing that legwork for them. We actually have what we call a Curtsy Shipping Kit, so we send people in the mail everything they need to ship their order without leaving their house, which is the status quo in this space is to print out your label, drive to a post office location, and wait in line and figure out what box to use and I hope you brought tape and scissors because they don’t give you any.

So, it’s a very poor customer experience. It wasn’t like we necessarily had a big breakthrough here, it’s like, “No, Gen Z doesn’t know what the post office is.” They have absolutely no idea, we literally have to do it. That was the way that we made shipping work back in the renting days because we sent people the bags to do it. And they’re really cute, they have Curtsy branding, they have a little sleeve for the label that’s adhesive that goes on like a sticker and the mailer self-seals and then you tap one button and USPS will come pick it up at your house.

Meb: It’s so seemingly meaningless but I think massively significant. I mean, I’m trying to think back over the last few years, how miserable the experience of buying and selling anything on so many sites is, whether it’s eBay, whether it’s, God forbid, Craigslist, dealing with 400 emails and then, like you mentioned, the whole shipping part. I just bought…probably with everyone else in the United States, I tried to buy some dumbbells earlier this year, which is like impossible to find anywhere. I bought some and it was like two months later, I get an email and they were like, “Sorry, your order was cancelled.” I’m sure it’s somebody who just dropshipping them from China or something.

But the user experience…and I’ve been debating this and one of the reasons I’d invested in you all’s company with Peter Livingston and others was some of the mentions, which is reducing the amount of friction involved and just headache of selling and recycling sort of things that people own, that they would totally securitize and sell much easier and buy if all the headaches were removed. I mean, you’re seeing that with cars now a bit in Carvana and others but this is one of my favourite themes across all of investing right now is this concept.

David: To your point, people say like, “What’s the differentiation?” I basically, in summary, say like, “It’s our design and it’s our customer experience,” but there’s a lot of contradictions definitely. One of them is that small things make a huge difference and then the flip side of that would be like, “You’re not going to iterate your way to a big company.” I argue with the difference between MySpace and Facebook or Yahoo and Google, the devil was in the details there. MySpace and Yahoo, they have the elements in place. It was just missing the PageRank on Google side and for Facebook and MySpace, it was missing the trust element. So, that’s kind of how I think about Curtsy too and we’re definitely not big enough to be able to say that we follow that pattern entirely. I think about that a lot, what’s the small shift that will unlock or get rid of some, like, remaining friction and help more people sell their clothes easily online.

Meb: That’s funny. I had moved to San Francisco in the early 2000s, worst possible timing ever, but had firsthand view of a lot of friends that had been involved in the original internet boom and bust. And it’s so interesting in retrospect to see how many companies with a very similar approach, mandate, etc., just with a little bit different execution ends up being the difference between billions of dollars of market cap and others totally failing and going to zero. Friends that had started social networks in the 90s, they were even too early that just, for various reasons…you mentioned MySpace, I probably still see myself on MySpace page somewhere and Friendster and Orkut and all these others. Anyway. Okay, so you guys found a little product-market fit, started selling some Lululemon pants, which is astonishing to me, by the way, that that’s one of the most highly transacted. And this is all-female, by the way, right?

David: Yes, sir.

Meb: Okay, so you have a little product-market fit. Where are we now? Have you decided to go raise some more money? Where in the progression of rollout are we in the timeline?

David: We had a great year this year. We grew a lot last year too but this year, COVID, instead of slowing us down, it just kind of accelerated things, which I’ve actually heard is pretty unique to us. I’ve heard from a couple of other companies in the space that they didn’t necessarily see a similar curve. I think part of it was spring is always really big for cleaning out for apps like Curtsy. People are bloated from the consumption right up to December and Christmas, they have a lot of stuff. They want to clear out, they want to stop buying new stuff, they’re looking for a deal again and then they’re looking ahead to, like, spring events. All that stuff is really conducive to us having great couple of first months of every year.

I know this wasn’t really your question but when COVID hit, we were like, “Oh, shit,” because all of our customers’ events got cancelled. They all got sent home, they were looking ahead to just sitting at home for several months and we were really worried because a lot of our sales in the spring were still on dresses and stuff to wear to events, swimsuits to wear on spring break, all that stuff. What happened was the increase in supply posted to the app and, like, surge in demand for casual things like sweat pants and hoodies completely not only carried our business and sustain the growth rate but accelerated it. Our growth rate went from like mid-30 percentage to like mid-50s percentage within, like, two months. Our current volume at a high level, we’re now at around like 15 to 18 million annual recurring GMV. We are doing about, like, 80,000 transactions a month.

Meb: Wow. Is that a bunch of the…podcast audio listeners can’t see this in the video, there’s a rack of clothes in the background, I’m gonna make a joke that, “Are you the top seller on Curtsy? Are you fulfilling some orders in the background?”

David: Well, this is a good question. One of the coolest things from our rental days is like one of the things we got really good at was tracking an item as it went between colleges. We would see, like, during game day for red romper or what somebody wears to football games, it would literally go from like Alabama to Georgia to LSU, like, every weekend and we knew that young people were less interested in…the behaviour was less like accumulate, accumulate, accumulate, and then purge after five years. Like, young people were way more into like rotating their outfit and selling as a way to fund new stuff.

So, it led us to this idea of like Curtsy is built for that rotation. Everything that is ever posted to Curtsy stays on Curtsy as it moves between people’s closets and people that have bought something can resell what they bought with one tap and everybody that had initially loved the item gets re-notified. Yeah, and it creates this loop where the more things that have sold, the more things will be ultimately resold.

Meb: That’s smart.

David: That connects me to the rack back here. Whenever we have to buy something…like, whenever we have a return on Curtsy, say…it could be a number of things but say somebody got something and it had a stain but they missed the window where they could do a return to the seller, 9 times out of 10, we’ll just buy that item from the person using our own one-tap re-list account and then we just sell it from, like, a Curtsy account. That’s how we do returns.

Meb: What are some of the insights that you could give as far as demographic? Has it remained that similar age group as they age? I mean, it’s only been a few years but do you see the people continuing on as they get a little older? Is it any particular parts of the country? Is it still heavy in the southeast?

David: It’s still really focused on 18 to 22. There is like a good amount of customers in high school and in recent grads but still very, very concentrated in the college market. And that’s something we’re actually working on now is adding more segmentation in the app to deliver a more personalized experience to like college but then also high school and recent grad because the use case and category mix changes depending on age.

Meb: And you can correct me but I assume the answer will be to continue to focus female-only, right?

David: Yeah. Men and women, in terms of like the fashion world, are completely different. I think I have probably more than the average person, I have, like, 15 shirts that I rotate between on a regular basis. The number of SKUs in, like, any of my girlfriend’s closets will be like in the hundreds. So, it’s just a little different.

Meb: I’ll tell you a feature that I think is brilliant but is a little bit different and I’m curious if it’s something you guys have ever considered or would do and I actually posted it to Twitter and got a goose egg response back from my followers which was I love the concept of what you mentioned, this purge where people go through a certain time in their life or just can’t moving, Coronavirus, nothing else to do. Which, by the way, is probably another reason you got so many influx of users is people just at home looking for some distractions, but one being the concept of, “Look, I’m not just going to sell one shirt but I want to sell all of my shirts, like, I’m so done with X, Y, Z.”

I think thredUP, if is it thredUP? There’s one company, there’s not that many that have this whole clean out your closet sort of concept. Is that something you guys have ever considered? Because you guys don’t do it but I would 100% do that tonight with not only all my clothes but half the electronics in the house too. Anyway, is that something you all ever brainstormed, considered, toss that idea in the trash can?

David: So, thredUP, for those who are not as familiar, they send people a bag and then you put whatever you want to give over into that bag and send it off to thredUP and they will a couple of weeks later give you an offer on those items. The way to think about it is like an online version of Plato’s Closet or Buffalo Exchange. The problem with thredUP is a similar complaint that you might have doing it locally, which is like you’re just not going to make that much from your stuff. I was listening to an interview with James who’s the founder and CEO at thredUP. They essentially said, “How do you make money?” and he just said, “Carefully,” and everybody laughed but it’s really tough.

They end up having this problem where because people don’t tend to put their nicer stuff in a thredUP. If it’s even a little bit nicer or they spend a little more money with it, they’ll be more likely to try to sell it on their own or hang on to it for fear that they won’t make any money if they put it in that thredUP bag. So, thredUP is having to make money off of the stuff that has low liquidity on Curtsy, fast fashion, J.Crew, there’s like less popular brands that don’t hold their value as much and winning on volume essentially. So, I don’t envy them and the complexity of that business.

Meb: Yeah, that makes sense because there’s the very real behavioural bias of people who, once you own something, prescribing a much larger value to it than before or after you own it. There’s probably a big spread between what they think all their junks worth and what it’s really worth.

David: Curtsy is really…and I think we will always be, to some extent, demand constrained. Not only were there always be more people that want to get rid of their clothes than there are that necessarily want to buy those but people, in general, have really high expectations for what their used clothes are worth. Part of that is just due to the general, like, lack of liquidity in the resale market because it’s like a little bit nascent and growing. But that’s actually a big lever that we have for liquidity is how do we adjust expectations down and help the shopper and the seller arrive at the market price quickly?

Meb: How big is the team size now and how are you guys kind of dealing with everything during the pandemic, as far as working together as a company?

David: We’ve got five people full time and we’re hiring a couple more people. We’ve got two full-time engineers, one of those is a co-founder. We’ve got myself, I do all the design and I also do engineering for, like, internal tools and our website and stuff. And then William is our head of growth and he also does, like, the financial part of the business, our P&L and books and stuff. And then Clara Agnes is our…I saw this tweet once, it was like, “Every company needs a chief community officer.” That’s like a great description of what she does, she leads our customer service, she handles all of our, like, customer re-engagement on social media, emails, customer development. She, like, leads the logistics of our returns and our shipping program as well.

Meb: So, let’s talk about the future. 2020 has been a long decade already. It’s only been, what, eight months and the summer starting to wind down, people are getting back to business, back to school or not. When you look to the horizon, not just the rest of the year, what’s on your brain for Curtsy? First, we can tackle the actual app and business. What are you excited about? What are you looking to roll out? Maybe then we can talk about fundraising, all that good stuff, what’s the future hold?

David: We definitely have product-market fit in the market that we operate in. Our focus now is on growing within that market because there’s still a lot of people that haven’t heard of Curtsy. Also, like, expanding into younger customers, high school, and then recent grads. Part of that is to just get more sophisticated when it comes to growth. Really, the lever that has been relevant over the past year is really paid acquisition. There is a big aspect of virality, not incentivized in an app like ours because there’s a strong incentive for sellers that posts to promote themselves and there’s also a lot of sharing that’s happening when you’re doing any online shopping, sending it to your sister or your mom to get their feedback, stuff like that.

So, our current focus in, like, next couple of months is really doubling down on that sharing, so making it really easy for the buyer to share things and then also, like, get incentivize for that referral. For sellers, we’re doing a program where you can sell to your friends for free for life, so you pay zero seller fee for anybody that you refer to Curtsy that buys from you. With the thinking that, like, we would always get cut out of that transaction anyway, so, like, maybe we can put that value prop in front of somebody, get them to share with their followers, and then give them like an extra incentive to do that. Longer term, we see a lot of opportunity with video, we’re launching a video selling platform within Curtsy.

Right now, the process of selling does involve, like, some typing. So, video is, like, a little higher fidelity and you can kind of show the item without having to type as much, so we’re pretty bullish on that and we’re launching experiments around that. Other than that, like, it’s a little bit of a land grab and let’s just introduce ourselves to as many customers as possible. We are starting to work with an agency on the paid side, we are working a lot on demand aggregation and matching. The more items that are posted to Curtsy, the harder it is to keep things highly relevant and reduce the amount of impressions it takes to find something that you like, so investing in that. That’s a lot of stuff.

Meb: I was gonna say. And on top of that, being a bootstrap company, are you guys planning on doing any more fundraising? I know it’s been a bit of a rocket ship this year. What are the plans there? Are you just gonna keep cruising? Are you gonna raise some more money? Any thoughts?

David: I wouldn’t be surprised if we hit the road in the next six or seven months. It seems like Series As have kind of become a little nebulous but, certainly, my understanding of it is the right time to raise an A is when you have your ducks in a row to some extent, you know what needs to be done, and it’s really just like that capital and those hires that you need to make and those channels that you need to pour money on. And I think we really are on the verge of having that apply, so I wouldn’t be surprised if we hit the trail here shortly.

Meb: Cool. Investors, hit David up, tell him that Meb sent you, maybe he’ll give you free shipping on the carry. What’s been the most memorable part of this whole journey over the past handful of years? When I asked Peter for any questions to ask you, he joked about you living and working with all of your coworkers together in the early days, the challenges of getting it bootstrapped off the ground. But with you, what’s the most memorable moment? Anything come to mind? It can be good, it can be bad, it can be in between.

David: When we live together Mountain View, it was our first year, right? We were in Y Combinator. There was the four of us and then, like, William and Clara Agnes’s cousin at one point was living with us and there was six people living in, like, three-bedroom house, two in the garage. And it was in the South Bay and we were there together working on our startup, so we literally had nothing to do. We would work out twice a day, we’d all bike to 24 Hour Fitness in Mountain View at lunch and do a synchronized work out where we would all…there was an app called “I Want Six Pack Abs.” It was these workout videos that we would just all do at the same time and then after dinner in the afternoon, we would run to the shoreline and do a bike ride.

I mean it was like summer camp. I mean, it was literally ridiculous, great conducive environment for focusing on your startup. After that year, we moved to this mansion. It was such a big house in the Marina. When we signed the lease, the plan was like nine people were going to work out of there and by the time we left that house a year later, we had only four people because we did the pivot. We lost some interns, went back to school, we had some people quit or we had some people fired. There was, like, six bedrooms, two kitchens. It was actually the mansion that was used in season one of “Top Chef,” so it had like this gigantic kitchen and we all worked out of there.

And then in the third year of our company, the year that we pivoted, there might be some correlation here but that’s the year that we finally got an office and the boys on the team kept bonding together until two months ago and then we finally all have gone our separate ways but we’re all still great friends. I think YC does say like living together is the best because…Paul Graham especially, like, in the YC onboarding notes, it’s like, co-working is not good for startups because startups are like cults and they have their own unique way of doing things and they need that, like, isolation to thrive as a cult and that definitely happened with us.

Everybody on the outside looking in was like, “Who the hell are these people living like this?” But I think now that we’re not doing that anymore and it’s more traditional arrangement where we have like a separate office and a house and it doesn’t seem like any efficiency…or all the conversations that we used to have late at night, we just have it, like, in a meeting during the day and it’s totally fine.

Meb: That certainly brings back fond memories when I lived in San Francisco, I was in North Beach. Four guys, at least, minimum, living in a two-bedroom that we turned the dining room into a bedroom and then just took over the basement. There was a basement that I think was shared with the rest of the building, we just turned it into a bedroom. That’s funny.

David: Fun times.

Meb: I love San Francisco despite all the challenges that the city goes through, it’s such a world-class city. David, where do people go? They want to follow on what you guys are doing, download the app, where’s all the best places to find you guys?

David: We have an app on the App Store called Curtsy, you can go check it out, share with all the women in your life, your daughters, whatever. There is some men stuff too you can find on there. Anything that’s ever accidentally posted that’s in our sizes, Eli, William, and I will typically scoop it up. But you can find me personally on Twitter, D-E-O-A-T-E-S, my first initial, E, and then Oates, my last name. That’s basically about it.

Meb: Awesome. David, best of luck to you in your continued expansion of this great company. Thanks so much for joining us today.

David: Thanks. I really appreciate it, I appreciate all the questions.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback@themebfabershow.com, we love to read the reviews. Please review us on iTunes and subscribe the show anywhere good podcasts are found. My current favourite is Breaker. Thanks for listening, friends, and good investing.