Whatnot's co-founder started with Funko Pops, raised just $300K after Y Combinator, and hit $1 million monthly revenue with a tiny team. By proving the model worked, he expanded into Pokémon and sports cards, each quickly outselling the original category and attracting serious investor interest.
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So I find it super interesting that starting in such what might be perceived as such a niche category, right? In the collectible space, how did you think through what the TAM was and then expansion when it comes to categories?
So there's how we thought through it and then there's how investors thought through it, is what I would say. So in the early days, almost all of the money we raised for Whatnot was last year. And when we first started out, we did not have an easy time fundraising. We went through Y Combinator right before COVID hit, and at the end of Y Combinator, we were only able to raise $300,000. And to just give you some sense, we are by a good margin the most valuable company from our Y Combinator class today. And, you know, there's, there's investors will look at that and they'll go, oh, you're just selling Funko Pops. I don't know if this can be a really large market. And that's what they said to us. And, you know, as a function of that, they didn't invest largely. We had enough, but, you know, I think particularly if you're a software business, and like you're running almost 100% on software, you don't need a lot of money. We, with a team of 4.5 people, we got to $1 million a month in sales. And so like you don't need a tremendous number of people to go and achieve pretty material results with software. Now, there's what we believed about the business. We believed we had a clear path for market expansion. We can go to Funkos, we can go to comic books, and if we can figure out how to launch Funkos and grow that, we can apply a similar— like, a lot of these categories are very similar. You can apply a similar playbook and continue to scale outwards. The thing with investors is, even venture investors, is they're like relatively risk-averse. And so they'll want to see like proof. They're not going to— I would say there's probably like 2 buckets you can fall in. I mean, broadly speaking, it comes from the same thing, which is like they want to have with high confidence that you have a clear expansion path of TAM. And then the problem with us was there hasn't been a competitor or player in recent memory that's achieved scale that had a similar playbook to us. And so that's why we needed to basically prove to VCs by actually doing it to unlock the capital. What's the more typical marketplace models that I've seen recently in terms of market expansion, like the Uber, DoorDashes of the world, where it's like you take a city or 2 cities, And then if the economics, et cetera, look really good there, the VCs can extrapolate outwards and run their models and be confident in the returns of the business. For us, there wasn't good comps to do that. The last person who's done that at meaningful scale was eBay, which was— eBay IPO'd in '97 or '98 or something like that. And so yeah, we just didn't raise that much money. And then what happened was we went from Funko Pops and we went into Pokémon cards, and those, you know, within a few months became bigger than the Funko Pop business. And then we went into sports cards, and then every major Series A, or, you know, every major venture capital firm that you've heard of came knocking at that point.
