Insights From Leading Growth At OfferUp With Ian Fliflet | EM Group Chat #218

Welcome back to Everything Marketplaces, where we talk with founders and leaders from some of today's top marketplaces. So this is episode 218, which is a group chat that we just had with Ian Fleifitt. Ian was previously the Chief Growth Officer at OfferUp, which is one of the largest marketplaces for buying and selling items locally. Ian was at OfferUp for over 10 years, where he built a marketing function from the ground up and went on to lead growth as they scaled to over 20 million monthly active users. So it was a great chat with Ian, where he backed his experience leading growth at OfferUp. He shared some of his key learnings. We discussed growth for marketplaces in the age of AI. Ian shared lots of tips for founders, and we also had a great group Q&A. We did unfortunately run into some Zoom issues and had to make a few edits, but I know you'll enjoy this conversation and find it a great watch to the end. So Ian, it's actually been a few years since your past group chat, and of course so much has changed in the world of marketplaces since then. So I'm excited to have you join us here today and want to start off by saying huge thanks for taking the time to do so. We have a lot that we're going to dive into with your marketplace experience and topics related to growth. I thought it'd be great if you could start off with a quick refresher on your background for those that have just joined the community.

Yeah, sure. So I spent 12 years at OfferUp, just wrapped up at the end of the spring. But back when I joined, it was 2012 and we were just really trying to get started to prove liquidity in a mobile-first local marketplace. And back then it was the world of Craigslist and there was a belief that nobody had any chance to take down Craigslist as a horizontal marketplace. Everything was vertical. So it was one of those, hey, let's go see if we can do something that nobody believes that we can do. And it was a blast. So joined a few other guys and gals and really dove in. And it was an opportunity, career opportunity to kind of go do and contribute in a bunch of different ways. So I started off as a VP of marketing, I think was my first title. And then a month in, I was running finance. And then after that, I was building a biz ops org. And so the first 5 years or so, it was kind of a funny combination of running marketing, finance, and biz ops. But from an opportunity standpoint, what it allowed me to do is really test and learn and be responsible for, you know, the full stack of how to grow the business early on. So lucky enough along the way, we found our way into some some pretty amazing growth, some exponential growth that catapulted OfferUp into kind of what it became and what it is today. So lots of phases to my entire experience from the beginning, which was a rocket ship to kind of the middle, really competing with Facebook Marketplace and trying to find our way, life or death. And then kind of the latter part of it was really trying to build a scalable business model on top of all that. all that liquidity that we had created over time. So looking forward to talking about it. Lots of learnings, lots of fun things to look back on, lots of pain to look back on. As everybody knows, building a marketplace is fun, but incredibly painful a lot of the time. So looking forward to chatting about it.

Definitely got some head nods with that. And that's some really great experience. So I know we covered it somewhat in your past group chat, but kind of going back, can you walk us through your experience at OfferUp? Kind of starting with building that initial marketing function in the early days?

The context of when we started was we had a product, a mobile app back then when mobile apps were just getting off the ground and there was an opportunity to market locally, which kind of hadn't existed before. And that opportunity was because of Facebook. If you remember back then, or maybe you don't, advertising on Facebook was relatively nascent and it wasn't the the place that you go to, like you go to now. Instagram didn't exist, but what it offered was the ability to really target users down to the zip code actually level if you wanted to. There were no Apple restrictions on tracking users. There was, the targeting was available anywhere and everywhere. There was no automation of, hey, automated against this conversion metric. It was, hey, here's all the available metrics. You can target anybody on our platform that you want. So We had this great, great combination of a, of a marketing opportunity on Facebook, a little bit of Google as well, combined with kind of this, this opportunity to build a mobile marketplace in the face of nobody doing what we were doing. So we were first mover and then we had basically first mover advantage on the marketing side of things to meld the product experience and the marketing together. to create a growth engine. And that was what we had. That's the opportunity we had and that's what we did. So started off and remember diving into the metrics, we had about 1,000 users a month in kind of the local Seattle area. But even those 1,000 users that we had, they were using the product a ton, they were buying and selling, and then every day it was growing by hundreds of users. So what we did was we said, okay, what's going, what's working really well? How can we amplify this? How can we add really smart marketing to this to put fuel on the fire and start creating our playbook? And the philosophy was always, hey, let's build the playbook and let's meld the product experience and the marketing together to create liquidity. Because that was really at that point the magic, the magic sauce, the aha was getting to liquidity, which was just a successful transaction for a buyer or seller. And right off the bat, we started to see inklings of that working. And then what we would do is we would launch a new market, iterate on the product experience, iterate on the marketing, refine the combination of those 2, and then go to the next market, the next market, so on and so forth. And along the way, because of the success that we were having and the metrics that were so strong, we had every way you could measure it. It was really exciting. We were able to raise a lot of money from some of the best investors in the world who got really excited about it naturally because they hadn't seen something like this. So over time, we were able to kind of build on that engine, invest more on the, on the marketing side, invest more on the product side to grow the, grow the user base and kind of build these, you know, we call them like liquidity beachheads market by market around the country.

Lots of different considerations there, like as you mentioned, being hyperlocal marketplace and mobile and so forth.

Yeah.

Kind of dive into it more, you know, at the earlier stages, you know, what are some of the specific channels, maybe tactics and kind of strategies that worked well?

You know, it's easier to look back and kind of figure out why you were successful as opposed to, you know, in the moment understanding why you were being successful. But, you know, I touched on right place, right time, right opportunity, very little competition. So that was the environment that enabled us to even have the chance to grow. But some of the really smart things we did was we knew that the we needed to bring on users who would tell their friends about OfferUp. So we looked for markets or networks of people who were highly social and apt to tell their friends about the product itself. So sorry, I'm getting something on my screen. So we targeted moms because moms are naturally, you know, in a moment in time where, A, they need to buy a lot of things, And there's these mom groups where they're, they're getting together for that kind of the social aspect of, of, of, of getting together with other, other moms who are in the same situation and they talk a lot. So what we found was that we could create an experience that created opportunities for them to buy. But, but conversely, when people would see it have opportunities to buy, they'd also start selling. So then we create buyers and sellers. But what was awesome about it was they told all their friends about it. And then once they told all their friends about it, then we started to get these viral mechanics, these viral coefficients of you go find a user, find a mom on Facebook that we can pay for and target a certain area, a certain zip code, a certain neighborhood, a broader part of a city, and we could kind of fire those up. And then the product, combine that with the product itself where people would tell everybody about it and, you know, the thing would kind of take off like wildfire and we could pull back a little bit on the marketing side of things. But the takeaway there is for when you're starting a marketplace that's still relevant is go after a very specific segment that can drive natural growth for you. You know, single player versus multiplayer. If we were just focusing on generic buying and selling anybody and everybody, for example, used cars, that probably wouldn't have been something that someone would, would go, you know, go tell their friends about. So the targeting was really smart early on. And which was, which was, which was one of the enablers of the early success to drive the viral aspect of the growth.

Certainly, it's going to be helpful tips as well, you know, but how did growth change, you know, some of the strategies that, you know, as you scaled and, you know, say, for instance, kind of going from like, you know, 1 million users to 10 to 20 million users?

There's different dynamics that start to take hold when you, when you get bigger. So, you know, one of the biggest things for OfferUp was that, that focus on the moms and the That narrow focus on the viral growth, that only went so far because on all these platforms, and it took longer to get to this point than it does today, but on all these platforms, you get to some point of saturation where, you know, you're targeting a segment of users and early on it looks amazing and it's really exciting because, you know, your cost of acquisition is really low. The quality of the users that you're bringing in is really high. They're telling their friends about it, but then that starts to dissipate. Because what happens is you start spending against that same audience. And this dynamic holds for, you know, any channel and of course cross-channel at this point because a lot of the platforms, the TikToks and the Instagrams and the Facebook and YouTube, you're all hitting the same customer. So when you start hitting the same customer over and over, naturally the cost of finding an incremental customer in that segment starts to, get higher and higher. And the crazy thing is it can happen really fast. It can happen overnight. So when you're growing and investing and you start to see slowing growth in your segment, you then have to figure out how do you expand. So after the first couple years of really riding that initial wave of opportunity and going doing the same thing in new markets, finding all the moms in LA, San Diego, Phoenix, you know, the Midwest, the East Coast, Then we had to start figuring out how do we broaden this thing? Like, how do we bring people who are not necessarily moms or a little further into their lives, or are they interested in other types of categories? And some of that was natural, but some of it we had to proactively attack. So we started attacking different segments and figuring out how to scale that growth. You know, I don't remember the exact numbers in terms of the scale over time, but You know, the 2 levers you have are, now, can you bring in more new users? And then can you continue to make sure that those users stick around at the rate of your prior users? So one of our struggles was dealing with the scale that we had, because as a marketplace founder, early metrics are always the strongest. You know, you have your earliest on the adoption curve, and those are the most intense users. And then you can have these cohorts that look amazing. And then you start to do your— you start to extrapolate that and say, well, we're going to take over the world, the market's going to be, you know, yay big. But the reality is that as you brought in an offering like OfferUp, you start to get people who are just incrementally less intense and intense and intense. And when you're still trying to drive scale at the time, because you're measured by the top line, you're measured by your users, It starts to become a dance because you can, you can start driving in a bunch of those new users that are a little bit out there to start to be further away from your target segment, but then the metrics behind them, their usage starts to wane. And then all of a sudden, you're having to ramp the number of new users up even more to be able to keep those year-on-year growth rates at the rates that they were before that attracted all the you know, all the investment. So it's a dance. And that, I guess that kind of lesson was, that kind of lesson held for the kind of the whole time I was at OfferUp. Scale becomes harder and harder as you become more of everything for everybody, particularly in a marketplace.

You mentioned lots of challenges before I get into here, you know, during the group Q&A, 'cause they're, you know, typical with marketplaces. But, you know, one that comes up quite a bit is, you know, about balancing liquidity kind of versus growth. And, you know, of course being in a hyperlocal marketplace, So how did you think about that?

Yeah, I mean, like, so from early on, we talked about, okay, in an optimal world where we didn't have to meet goals that we were bringing upon ourselves from raising at these really high valuations that were accelerating every time we raised money, I think that at one point, you know, we were, there was a, we had raised it with over $1 billion at a valuation. And then that, what that means is that, you need to achieve performance metrics that support that so you can, you know, move beyond that. And when you're motivated by top-line growth, which is kind of grow or die, which is generally kind of what a startup's ethos has to be, if you do it too fast, we kind of did it too fast, you start to get to the point where it's hard to get past kind of like your goals. If you get to— so if we get— we're at 1 million users and get into 5 million users, that was easy. But then the 10 million users was a little harder. And then you start to see kind of cracks in the strategies that got you from 1 to 5 to 10. And then you have to kind of reset and figure out, okay, like, what's different? What are we going to do? How do we adjust the product? What do we need to do in the marketing? How do we justify the spend? So yeah, it's, I could get into a lot of the specifics here, but there was the challenges as we grew was the scalability of the cohort performance over time.

Quite the experience that you've had at OfferUp. What are some of your key learnings that you find yourself telling founders today?

You know, the key learning, especially a lot of the founders that I'm helping are really early, sometimes pre-product market fit or just after launch. So, you know, From a— it's, you have to nail the product growth side of things before you get too fast into the paid aspect. A lot of the time, a lot of the times you can, in this day and age, you can create a product that can be so much better than V1 of what a product looked like 10 years ago, you can start spending against it. And you can fool yourself into thinking that you have the potential for scalable growth. But if your product itself isn't nailing like that initial kind of aha moment where a consumer— I'm a consumer guy. So a consumer has seen, oh, this is what makes this thing amazing. This is different than everything else in the market. This is what I'm going to tell all my friends about. If you don't nail that aha moment before you've even attempted to scale, you have a limit to how big you can be. So really define that aha moment for your product itself. For marketplaces, this is generally some form of liquidity, but it's got to be just a little bit more than the— in these days, it's got to be just a little bit more than a transaction. You got to nail that aha moment and find the users who are going to find the customers who are going to enjoy that aha moment at the highest rate and then nail it and then keep iterating on it and then make sure that you've created an environment where they have a motivation to tell their friends about it.

That's going to be really helpful. You know, that's a great transition to talking about, you know, growth for marketplaces today. And, you know, you mentioned that you're working with some, you know, early-stage founders. So how do you advise them, you know, just from like a high level, we can start there. How do you advise them to think about growth?

My philosophy here is that if you don't have the core product-led growth engine, the paid side of things, the inorganic side of things isn't going to work. So you have to have a vision to build those 2 in a way where they work together. So really it's the frameworks that I like to use are kind of the setup aha habit moments. The great— the Reforge has got so much good content, but, and they've really done a good job of these types of frameworks, but forcing a little bit of thinking around the entire user experience from the first time that they see anything about your product to when they download it, if it's an app for the first time, the first run user experience, what they're doing once they've achieved the aha, and then how do you make a habit out of that? Getting really into the details and mapping out that customer journey, particularly pre-product launch, it's all hypothesis driven. You got to make sure that you have a belief in terms of what a customer's experience needs to be. You need to be able to measure it down to the— and this is what's amazing with all these AI platforms and things like PostHog, all these services that didn't exist when I was getting going. You can instrument the thing in every different way optimized against getting as many people to that critical moment in your experience where, where they have this, this aha moment. And I, and I like to add to the aha moment, the aha moment needs to be so good that they are, they want to tell all their friends about it next time they go out, go out to dinner or drinks or whatever they go do with their best friends.

Yeah. So kind of moving beyond that product, you know, having that like aha moment, you know, how would you advise founders to think about like that initial kind of channel selection?

Yeah. Well, for, you know, what you're trying to do is you're trying to understand where your ICP is, where your target customer is. And the great thing nowadays is that these platforms make those users relatively easy to find. But one of the challenges here is when we do our ideal customer research, we're thinking about demographics and, you know, lifestyle and And such. But then the platforms themselves, they're so targeted on actions that you try to meld those together is kind of the challenge. So you have to be thoughtful about, hey, I'm going to go on Meta and then I'm going to wire my app up so that it's optimizing against, you know, the initial transaction. That's going to work and they're going to find users who are going to transact. At a high rate. But if you're not careful, they're just going to bring anybody and everybody who's going to transact. And you then you've accelerated that problem that OfferUp had over years to like weeks or months when you start bringing in random hodgepodge of people who the platforms, whether it's Meta or Google or TikTok, have found that are highly likely to transact. But you don't know that those people are highly likely to transact And transact again and tell other friends about it. So if you're not careful in terms of understanding like who's coming in, you can kind of, you can grow too fast in the wrong way. So, you know, when you're identifying channels, I think it's, you take, you leverage the amazingness of these channels that can optimize for the right event that you're looking for, but then also try to figure out a way to understand more about who these customers are as they're coming on. Particularly with if you're at lower volumes, speak to your customers, figure out ways in the app or the product itself to get a little bit more information about them. So you're, so you're learning along the way. So you kind of have to match the qualitative learning to the quantitative learning as you go. And don't forget about, you know, the, the narrow type of audience that you need to kind of build off of to create an amazing experience before you, before you scale broadly.

Yeah. And also to, you know, retention kind of fits within that as well, right? Yeah. So, you know, maybe we can expand on, on that note as far as, you know, retention.

What I try to impress upon people from if you're going to run a marketplace is you have to understand how retention works. And you have to understand how cohorts work. Like this is, this is unit economics, cohort analytics, which is at the highest level is you group users by the time period in which they come in, you can segment a bunch, a bunch on top of that, but then segmenting based on when, when someone came in, say week, you know, week 1 of September, How do they behave over time? Because it's the long-term behavior and the long-term retention of these users as measured by the percentage of people that are still using the product at whatever cadence that your product is natural. That's, that's how you build scalable growth. You can, if, if you're not, if you're not focusing on that, you can start to jam a bunch of users or customers into the top of the funnel who have that initial transaction. But if they don't repeat, you're not going to scale your business. So my recommendation is always to, you know, be, be kind of conservative on the new user side early on while managing your understanding of how customers are retaining as measured on a cohort analytics basis before you start to put the pedal to the metal, because you're going to learn things and you're going to have to, you're going to have to pivot and you're gonna have to change something in the product, you're gonna have to move towards, you have to improve your CRM in an organic way. There's just so many things that you need to do before you start to get into channels and start to start to spend aggressively if you want to build a business that can scale for the long term.

Definitely. We could get into the weeds of things that we'll wait until the group Q&A so we can get more specific. You know, we kind of zoom out and just think like right now, you know, as you're working with like early-stage founders, you know, what are some of the biggest mistakes that you see them make when it comes to growth?

With the ability to build as fast as you can today, which is amazing, which, which all in all is a is an asset, but you can build something that looks really polished early on and then can be, but can be undifferentiated. So if you're not applying taste to your product, intention to everything that you're doing, it's really easy to build product really fast and kind of fool yourself into thinking that you're way farther ahead than you actually are. So You know, just making sure that you're being intentional and creating something, even though you're leveraging AI to build, that's differentiated and doesn't look like everything else out in the market.

That's actually a great segue into AI because that was the next topic that I wanted to discuss. And, you know, as you mentioned, it's, you know, easier than ever to build. But, you know, how do you think AI is changing the growth equation for marketplaces?

A couple of my clients that I've been working with, you know, they are in this stage and one of them I'm really excited about and I'm going to work for full-time here fairly soon and they're going to come out of stealth in a little bit. So I've been living it and the fun part is that you can do so much with such fewer people. And early on when you're early stage, you don't have the ability to hire a 10-person growth team across analytics, product, marketing, PR, all that kind of stuff. So you can do so much more with so much less at this point. So from leveraging an AI standpoint, really, I've had a lot of fun in terms of kind of building out all the functions that I had that took me years to build over time at OfferUp as we grew and you kind of grow into it. You can build things right off the bat. I mentioned kind of before on the analytics side, you know, that was really one of our secret sauces at OfferUp in terms of combining the product, the marketing, and the analytics. Like out of the box, you can create the analytics and understanding and instrumentation to the degree that was limited historically based on having analysts running SQL queries for you and data scientists. So it's really fun. So, you know, the core foundations of a growth team, I guess, that you need to have the product-led aspect of things, you need to have the analytics side instrumented, you need to have the marketing and the different skill sets within marketing. You know, you need to have the paid side of things, need to have the CRM and the retention-oriented aspect of things. And then kind of a lot of the general other aspects of marketing. You can use Claude, you can use Codex or whatever you're using to create frameworks, to create ideas, to create ideation. So if you've been in the market for a long time, you can use those to be able to make decisions, make sure they're all working together at a rate that just didn't exist even a year ago. So it's pretty amazing if you're thoughtful about how you approach things.

Definitely. It sounds like you're in stealth, so we won't get into too much detail with it right now. But I guess related to that, if you were to launch, say for instance, like OfferUp or a similar marketplace today, what would you do different from day one with AI?

Because OfferUp launched 14 years ago, everything's different. So the advantage that you would have now as a marketplace, there's advantages and disadvantages. The advantage that you have as a marketplace in terms of building is really building the kind of the real-time optimization of the product experience itself. So we always dreamed at OfferUp early on about tailoring the experience to what the customer's indicating they're interested in. Second by second. And that just wasn't physically possible. But with AI these days, when you build something like OfferUp that's feed-based, that's content-based, it's UGC. As customers are using the product, they're clicking on things, they're engaging on things, they're starting conversations on things that are indicating what they're interested in in that actual moment in time. And so I would build a marketplace with a foundation of real-time response to the customer intent at that moment in time. OfferUp, early on, what we had to do was there was no personalization of the experience in the beginning. And then over time, as we built these kind of basic personalization systems that would take into account the last couple of things you're looking at, and it would be based on your last session or the last time you were here, which could have been a month ago when you were looking for a kid's bike, but actually today you're looking or golf clubs, but we'd be showing you kids' bikes. So, you know, the foundation of any type of marketplace these days has to be highly responsive to the intent of a— on the buyer side, what they're actually interested in at this moment in time. So lots more to— I could go in a lot of different directions, but that's really the key, one of the key product experience differentiators that I see is available to us that wasn't available back then.

Yeah. What about on the growth side?

You know, on the growth side of things, You know, because you can accelerate a lot of the product-led side of things, I think you need to create, for OfferUp, what I would've created is kind of something that we always had trouble creating was really a true community around the product experience. There were just parallel transactions where it was a one-to-one, but really there was no awareness of everybody else who's transacting at the same time. So just because of what AI offers us in terms of capabilities of product features, I would have really focused on creating some type of community aspect around awareness of all the other activity that's going on, real-time transaction volume. There's so many things that can be solved for a buyer and seller in a marketplace by having awareness of what other buyers and sellers are doing. And then that has compounding effects in a really positive way for the growth because you're trying to create network effects where people can get more value from more other people transacting on the platform just beyond, you know, just growing the absolute number of buyers or sellers. So really, so product-led community features combined with kind of what I referenced before in terms of real-time intent is that you could create a marketplace that's completely different than what OfferUp was built on.

Definitely. It's really cool to see what's possible now. So, you know, you and I could probably go on for quite some time and actually see some raised hands. So I want to make sure we can get to the group Q&A. You know, right before we do, what would be your top tips for founders starting marketplaces today?

I have a hypothesis built on a unique insight that you have to a market, hopefully, hopefully data-driven. But, you know, you can— ideas are so easy to come by these days. But But if you're going to dive in and build a marketplace, build something that's near and dear to your heart where you have a particular reason and a particular passion to go after it. So, you know, whether it's, you know, it's, if you're interested in just marketplace liquidity, go build an OfferUp killer. But you know, that's hard. I would say focus on keeping something going down a path that's unique to what your true passions are. Because those are the— those are the— because you're going to— like I mentioned before, there's going to be a lot of pain. But if it's something you're truly passionate about and you love, it won't feel like work. And you're going to— the odds of success are going to be greatly increased.

I'm glad you mentioned that. I know the passion is definitely, definitely needed.

Yeah.

Yeah. Cool.

So we have a few questions here. Hey, Blake, saw you raise your hand. You want to help us kick things off with the group Q&A?

Great to meet you, Ian. I have 2 questions for you. One about the early days and then one offer up going forward. So early days, you talked about your cohort retention curves. I imagine the very first set of users were amazing. You probably got a flat retention curve engaging. And then as you poured more marketing dollars into lower-intent channels, like you mentioned, it kind of maybe didn't flatten out or retain at a lower level. I'm curious, were there any, rather than just making up for that by pumping more dollars top of funnel, were there any experiments or Levers that you pulled to significantly improve retention or engagement for those lower intent, for those newer users? And then the second question is kind of going forward for OfferUp, you know, obviously you're a billion-dollar company. I imagine internally you're like, how do we get to $100 billion? You know, what would have— if you had a magic wand in your hand, you know, how would you get to $100 billion? I imagine maybe delivery is part of that plan to kind of open up the TAM a little bit more. People like me who don't have a car can't really use OfferUp as well as others because I can't drive anywhere. So I'm just curious, like, is it— is how much did you experiment with delivery or what other levers would you pull to kind of 100x the business from here?

Back to your original point in terms of, yeah, that was kind of the growth challenge over time is a little bit of a decay in the retention curves. We actually had a smile curve, you know, where after a market would grow, people, the retention on the outer weeks and months would actually start increasing. And that was what actually enabled us to grow or raise a lot of money early on and pour more on that. Nick, who was the CEO, and his co-founder, a guy named Arjen van Velen, we were all new and it was the first time any of us had built anything at this level of scale. So we were a little bit naive in terms of the impacts of taking more money and Putting them into the top of the funnel and the long-term negative impact on the retention curves and how that kind of makes it harder and harder, particularly that you get further out. So since we didn't have a lot of the traditional retention mechanics like push notifications or any type of retention marketing, every time we launched one of those, it would start to kind of bend the retention curve back up. You know, it was different. There was no silver bullet from a retention standpoint. Everything for us always led back to if you can increase the odds of someone having a successful transaction, their retention curves are going to look better. If someone comes in and those new users come in, they don't have a good experience from having a successful sale or a purchase, they don't come in. So no silver bullet on the retention side of things. I'll answer your question on the delivery side. Because OfferUp got— we, we shut off delivery a couple years ago. And in my opinion, I don't work there anymore, it was actually many years too late, we should have shut it off earlier. And people are surprised by that. So you articulated the exact hypothesis behind why we added delivery to OfferUp in the first place. I think it was in like 2017 or 2018. Yeah, the delivery, because you look at different markets across the country and some are, some are really big that don't need the incremental liquidity, but some, some don't. So you would, you would, you would, you would look at a small market and say, okay, well, what we, how do we get more supply? It's really hard to get supply on a, on a peer-to-peer marketplace or have any control over the supply. But you say, okay, well, let's bring in shipping inventory. From people broadly across the country and also make that available to buyers who happen to search for in Evanston, Illinois for golf clubs because there aren't enough golf clubs there. But if you bring them in and have them available for shipping, they're going to buy them. Okay. That hypothesis at the high level holds. But then when you get into the reality of that, what you're creating in terms of an experience for a buyer is that They've come into OfferUp and they're looking in Evanston, Illinois, and all the marketing, all the expectation, all they've heard about is I can get a great deal, pay cash and meet someone down the street or across the, you know, across the way, and I can get it immediately. Then they start to see interspersed with those items, which are, which is their expectation. Then there's an interspersion of these items that are in LA, where they're going to have to pay with a credit card, they're going to have to pay $20 in shipping. And oh, by the way, the seller is doing that whose intent is to sell to someone locally where they're going to get cash. Oh, OfferUp is going to take a transaction fee so it can, it can break even on that. That's where the thing starts to break down. Because it doesn't match customers' expectations. I spoke a little bit before about building something for a target audience. The other, the other part of that is build the product that the customers are expecting. If you start to, if you create an experience for someone that, that is not what they expect, and what all the marketing, what all the word of mouth that you've spent all this time trying to create, it doesn't match with that, you're going to get very low uptake. So the shipping on OfferUp never was more than a single percentage point of all the transactions. On top of that, there was all types of pain because a seller could add an item and say, oh yes, I'll ship this if someone's interested. But they didn't really want to do that. So they really wanted to sell it to someone who would give them cash where they didn't have to pay taxes, where they didn't have to pay a fee. They didn't have to take it to the UPS store. So shipping really never took off, even though at the highest level you would think that it would work. So. Thanks for actually that question. I've never really been able to publicly put that out there, but OfferUp's a local marketplace where people have an expectation of buying something and getting a great deal locally.

Those are great questions. So, hey, actually, Ian, I actually wanted to ask a related question that was added in advance, and it was around the buyer and seller overlap. You know, so how much overlap did you see between buyers and sellers, and were there specific levers you used to turn buyers into sellers or vice versa?

Like most marketplaces, there's way more buyers than sellers. I don't remember what the exact ratio was, but, and then as you can imagine, our best users were users who both, who bought and sold. And for us, what it was, the product itself was so naturally set up to make it easy to sell that we really focused on the buying side of the marketing because if We found that if we created liquidity for the sellers, they would stick around longer. And then those buyers just naturally became sellers. It wasn't something that we had to proactively say, hey, did you know you can sell on OfferUp too? Because it, you know, it's just super obvious.

Hey, David, saw you raise your hand. Do you want to jump on here?

Ian, thanks so much for making the time to meet with the community. You talked a little bit about using AI to do more with less things that you'd usually be hiring human beings to do. You know, that's an outcome of obviously AI's capabilities. The flip side of that is VCs are super focused on these like companies that are just hyperbolic growth kind of places. I don't know if the stealth company you're going to is a marketplace or some other sort of services company, but if you're in our shoes, how do you think about external capital? What to use it, like how to get it, What to target, what to use it on and why? Not just compared to the old world, but compared to like saying, screw it, I'm just going to do a bootstrapped approach to all this. Like what's your rationale for going and raising money and how to spend it smartly? Like in ways that guys like Mike and Marketplace Capital would be like, yeah, that's the right use of our capital.

First of all, it's not easy to build a marketplace and go raise capital. It was never easy, but it's really hard right now because of what the outcomes that the investors have in terms of where they can put their dollars. They're looking for, they're looking to put a, first of all, they're looking to put a lot more capital to work in a dollar amount that they were looking for before. Whereas as a marketplace founder, you actually don't need as much capital as you needed before. So those 2 things are not congruent. So if you're looking to raise $5 million and they're trying to write checks for, you know, $10 million, It's rough. And then on top of that, the, this, I'm, this is going to sound doom and gloom, but there's, I think it just requires a pivot. But then there's the seed capital. They're also looking for, they're looking for quick accelerated returns and they're looking for their home runs and they're, you know, they still have the decent size funds and the size of those funds have grown. So capital's Capital where if you're a bootstrapped marketplace, particularly on the consumer side, it's brutal to raise right now, but it's not brutal in terms of what the opportunity is in terms of the bootstrap opportunity relative to what it was before. There was, you know, I've explored building some things on my own and, you know, there that you can get, you can get some capital out there if you have early success or, you know, a strong story or some type of insight. That was kind of what I mentioned Or if it's something unique to you, you know, why are you the person to attack this? You can get some, you can raise capital to get off the ground. And then of course you're, then you're playing by the same rules of you have to, you know, show the growth rates and show the traction that you're going to have to in the past. But, you know, I would at this point always lean towards trying to bootstrap just because we're, you know, well, passion is a requirement to build a startup or a marketplace, you're also trying to maintain as much control over it as possible from an economic outcome standpoint. And if you raise too aggressively too early, you're just kind of limiting kind of those outcomes. So long-winded way of saying, I'd, you know, try to bootstrap as far as you can go while raising the minimal amount of capital and take advantage of the AI opportunity that it gives you in terms of being able to get farther quicker than you were able to in the past. But yeah, it's hard out there.

That's a great question. Hey, I want to ask a question for Molly. She sent it. She said unfortunately she can't come on, but she was asking, are there any companies or operators you think that are, you know, doing outstanding things to drive retention, you know, above and beyond just the core product itself being the driver?

I'm mainly focused on understanding kind of the product-led Growth loops that create kind of the inherent opportunities for people to create a product that grows because of network effects or reasons for people to tell their friends about it. Just from a pure— the implication in that question is, okay, outside of the product side of things, are we looking at the paid side of things? Paid rates paid, relying on paid for retention is actually really hard because I've never seen a version of where increasing the dollars spent on a marketing side has a net long-term positive on your retention metrics. So really, the product itself has to retain the users. And if you're— if you even do come across something like on a retargeting basis that works, it generally works for a period of time, but it is tough to scale.

That's going to be helpful. And then I'll ask another question. We'll try to wrap it up after this, but it was on competition. you know, offer up, operate in an increasingly competitive market. So how did you think about competition and, you know, how much did the competitive dynamics, you know, influence your growth strategy?

Well, early on, the competition were other startups, and that was different because we could analyze what they were doing, try to understand where our advantages were, compare ourselves to them. We would have, you know, we'd have investors scraping the, you know, the the inventory growth rates and posting rates. So we knew where we stood everywhere. But then once Facebook Marketplace came out, at first it was, we were monitoring them as well. We were cautiously optimistic that we were able to kind of defend our positions in different markets. But then over time it was like, wow, this is really a thing for Facebook and Meta. And it became, okay, well, we They're going to be really big. So how do we survive and thrive in a market where they're going to be large no matter what? So our thinking and kind of the market's thinking was that this— we were thinking it was winner take all. And that was what really was driving a lot of the early OfferUp valuations, you know, over $1 billion because there was a thinking that we had a chance to win. And that became clear that That wasn't the opportunity for us after the ubiquity of Facebook kind of started to be leveraged. So then we started to say, okay, well, what can we build and how can we create a still a large business that creates value for our users? So we really had to change our whole perspective there because, you know, if you're competing against someone like Facebook that is so big, you just have to face the reality of what the opportunity has become for you.

Yeah. And I'm sure lots of founders here, you know, are thinking like, how should they think about competition today kind of versus growth, especially when building in these like highly competitive markets? How would you advise founders to think about that?

Yeah. So I would say for competition, be aware but not obsessed because you need to be obsessed about your product and every, all the nuances of how, what you're doing to create an experience where people come back and use it and tell their friends about it. Pay attention to what your customers are doing. But what I've seen is if you get too focused on what competitors are doing, you start to over-rotate and become reactive and lose your insight and lose the, really the vision for what was made, what drove you to get into the product in the first place. So be aware but not obsessed about your competition and focus on what you can control. And recognize that competitors are going to be out there. There's going to be more competitors. There's going to be ones that don't exist today. But you got to focus on that aha moment for you to create the product experience for your consumer.

Well, that's a great way to wrap things up. And I know we're almost out of time, but, you know, huge thanks for taking the time to join us today for the follow-up group chat, you know, sharing all of your awesome experience and helping answer some of the questions that we had during the group Q&A. So this is definitely a fun one. And I want to ask my usual closing question, which I don't think I asked last time. Which is, you know, if you could go right back before you joined OfferUp, what would you tell yourself about marketplaces?

I'd tell, I'd tell myself that this is going to be the most, the most fun ride that you're ever going to be on from a, from an opportunity standpoint in your career. I didn't know that was what I was getting into, but I'd say, you know, continue to focus on the customer and talk to the customer more. I probably early on didn't talk to the customers enough to have the kind of the deep insights that you can, that you can glean from, from conversations. So Talk to the customers. Don't lose sight of the customers, and particularly the ones who love it more than life itself, because, you know, you create products like this that are life-changing for people. Those are the people that you want to really understand the why behind what you've created has changed their lives.

Yeah, that's going to be great parting advice. So, and then last but not least, time for a quick plug. Where can we all keep up on and follow along with you?

LinkedIn. I'm not highly, not highly active on social, usually just heads down on on working and building.

We appreciate taking the time to join us today. So, and yeah, thanks again for joining us for the, for the group chat. This is definitely a good one. And thanks everyone for the great questions.