LA Tech Week 2022: Building Community Marketplaces

To celebrate the LA community and the city’s growth, CFI recently hosted Time to Build Los Angeles, an event where we invited LA-based investors, founders, and operators from across a diverse range of industries to talk about company building in LA. In this episode, Grant LaFontaine, the co-founder and CEO of the livestream-shopping platform Whatnot, talks with CFI General Partner Connie Chan about building the company, his experience as the site’s first person to go live, and why he prefers Los Angeles over San Francisco. 

Transcript

Connie Chan: Great to have such a packed house today. For those of you who haven’t used Whatnot, Grant, can you tell us and describe what Whatnot is?

Grant LaFontaine: Sure. Whatnot’s a live stream shopping platform, an online marketplace. You can kind of think about us as Twitch meets eBay.

Connie: Twitch meets eBay. Is it different than the Home Shopping Network and QVC, or…?

Grant: So, you know, it’s a helpful analog to think about it. Like anyone can come on Whatnot, they can be a QVC-style host or Sotheby’s, a live auctioneer. I think the people who are coming are not coming because they want QVC, they’re coming because they hate QVC, and this is something different where they can engage in what they’re passionate about or with the communities that they’re passionate in. A lot of the things that are sold on Whatnot are collectibles and things in enthusiast categories. Things like sports cards, vintage fashion, sneakers, and so on.

Connie: What made you decide to start Whatnot?

Grant: The honest answer is, I was at Facebook before this, and my co-founder was at another big company. And we’d both started companies before, and we just liked to build. And that’s the most fun and engaging and satisfying thing that we did. And we just decided we were going to start a company. And we initially didn’t know what we were going to do, and we just set parameters, we’re going to do an online marketplace because that’s where we spent all of our time, and then we’re just going to build stuff really fast. We’re going to take big swings and build a really great consumer-focused, not vision-focused company. We want to build stuff people want.

We started off with something really bad, decided we couldn’t make any money. And then we came back into Whatnot by… A little bit of background. You know, I started selling Pokémon cards online when I was seven. My co-founder had done a lot of the same, selling sneakers, Pokémon cards. And we could see that people like us were just getting back into collecting, back into the market, and we thought there was a product to be built there both in the social commerce space that would appeal to that audience. We thought eBay had kind of fallen behind the times a bit.

Connie: So, eBay for the next generation?

Grant: Yes.

Connie: Cool. How did you know that you were onto something? What did that moment feel like? Because the company’s really young, right?

Grant: Yeah. So, I guess for context, we started the business in December 2019. Just under three years ago. Two years, nine months-ish, I guess. Fun fact, when we first got started, we just built a social commerce Funko Pop marketplace. And I bet you there’s people in this room who we talked to about that, who said that’s a really bad idea and didn’t invest in us. It took us probably 10 months before we thought we were onto something. The first 9 or 10 months, we grew really fast.

Connie: And that’s typical of marketplaces, to take a while before you feel like you’ve hit something.

Grant: One, it’s definitely a typical marketplace. I think marketplaces are harder to build. You have a classic chicken-and-egg problem. How do you get sellers if you don’t have buyers? How do you get buyers if you don’t have sellers? We were able to solve that problem pretty well early on, and it’s like January, February, March, we were growing 30% month over month. Still, it didn’t feel like something that was transformational, it felt like something that was a little so-so. As the world was locking up and COVID was taking over, we wanted to double down on something big in social commerce. And that’s when we came to this idea to layer in live shopping into Whatnot, and pitching my co-founder, like, “I think it’s going to be really cool. It’s going to be amazing.” Because we were opening up cards live on Instagram and things like that, and it was super fun.

I was like, “Can you build it?” He had never built anything with live video before, and he was like, “I don’t know. I’ll try and figure it out.” Locked himself in his room for six weeks, came out with the product. That was in July of 2020. And I was the first person to go live. We were just selling Funko Pops at that point in time. And my co-founder wouldn’t use it because he was so afraid it wouldn’t work because he’d never built anything with live video in real-time. And so I went live. And I’m not an entertaining person, as you’ll probably surmise by the end of this panel, but I sold out $5,000 worth of Funko Pops in two-and-a-half hours, which was more than I sold on eBay in the prior year.

Connie: You knew you had hit something magical.

Grant: You know, we still at this point weren’t sure exactly what we had, but we go, “This thing is special. Team meeting tomorrow morning. Everyone all in on this.” Even then, I wouldn’t have said we had product-market fit. I would have said we have something special that could fade away. And then we kind of systematically worked through the things that we would have to prove to build a really good business. Those were like, “Okay, we’re just in Funko Pops, we have to prove that we can expand into other markets.” We went to Pokémon cards, we went to sports cards. “Okay, in all of those markets, we have to prove that we can sustainably grow and that we have really good buyer retention, seller retention.”

And so, I don’t think we properly knocked down those things until December. And once we had done that, and then I started to get wind of what was happening with live shopping in China, which for those who don’t know: live shopping in China this year will do about $250 billion worth of sales, 20% of all e-commerce, and it’s still growing something like 100% year over year. I had the proof points for how to scale and grow the business, and new people loved it, and I had this point down the line that said, “Wow, this thing can be massive.” I think we did it pretty fast, but it took us about a year before we had real conviction in the business.

Connie: Give us a sense for how has it grown. Whatnot is the fastest growing marketplace in the U.S. now two years in a row, based off all the Second Measure credit card panel data. Give us a sense of how fast it’s grown.

Grant: Two years ago, we were the fastest growing marketplace. Last year, we were the fastest growing marketplace. 

Connie: At this scale. Okay. So, because we’re here in LA Tech Week, give me a sense of, what role has LA played in the company’s growth? 

Grant: One of the ways I look at what’s happening with tech, is it used to be really centralized in San Francisco. And for you to build a successful company, you had to be there. I’m not a huge fan of San Francisco. For any number of reasons, culturally, it’s become a little bit homogenous. The city is a little shaky right now. I guess what that means to me is, what can happen now is you can build really great technology companies with relative ease and just about anywhere, and I think LA is one of the best places to do that. It’s an amazing city with great culture.

Connie: Describe the Whatnot culture.

Grant: We officially have 10 principles that define our culture. And as we bring people into the company, that’s the single most important thing that we assess people on. So, everyone goes through an interview, where we assess you on those principles. I won’t go into all of them, but I would say, the most important things are, we move at lightning speed. We deeply understand and listen to our customers with incredible intent. We take really big swings and risks, we’re playing in a multi-hundred billion, potentially trillion-dollar market. You can’t be risk averse. And we’re all nice people. There are two kind of shortcuts I have on this. One is, I like to hire nice sharks. So people who are going to get after it, but be good people. The other kind of shortcut in hiring when I’m talking to my team is smart, humble, hungry. And so, I want to build a company full of those people.

Connie: Smart, humble, and hungry. That’s the personality that succeeds there?

Grant: That is the ideal architect.

Connie: You’ve also seen lots of success hiring former founders.

Grant: Yeah, a lot of former founders. Other than that, the background of people who have been successful at Whatnot is very diverse. I would say we have a lot of very non-cookie-cutter hires, and that is actually one of the things I’m most proud of. One of the most impactful people on our team, it’s a good story, he’s a partnerships person on our sports cards team. Before working at Whatnot, he was a marketing manager at a local lumber store. I hired our head of partnerships and marketing, he’s someone I’d worked with before, and I was like, “You have to talk to this guy. I think he fits that smart, humble, hungry mode.” He interviewed him, and he pings me, and he’s like, “What are you doing? You’re crazy. Who is this person?” Anyways, I end up convincing him to bring him on his contract. Fast-forward to today: sports cards is our biggest category by a large margin. Without him, the category would not be where it is today with that certainty. And so, he’s probably one of the top 10 value adds to the entire company. And he’s someone who, if you look at most startup or Silicon Valley companies, you probably would not.

Connie: Yeah. I think you’d agree if I say we’re still on early innings of what live shopping can look like in the U.S. Would you say that’s true?

Grant: Absolutely.

Connie: Can you share some of the live shopping stories that you have? Some of the best ones, for those in the audience who haven’t experienced it before.

Grant: As I said at the beginning, we’re kind of like QVC, but at the same time, I never ever want to be QVC. It’s soulless and not interesting.

Connie: No community. You don’t know the other buyers.

Grant: Yeah. There’s no community around it. And what ends up happening is we give everyone those tools that injects a lot more personality and soul into it. One of our first-ever lives, I think it was our first ever external live seller, they’re called Funko Whisper. It’s now a husband-and-wife duo. They were not a husband-and-wife duo when we brought them on, but they’ve built a pretty large business selling Funko Pops on Whatnot. And because it’s been such a big part of their life, they streamed their wedding live and sold gifts from the wedding registry, and the community bought out all of the gifts on the wedding registry. They streamed it live and sold all of their gifts. And so, there’s just a lot of interesting use cases as you start to hand over these tools to a broad base of people.

Connie: Like they’re real friendships that are formed with sellers, with other buyers. I see people buying things and giving it to other viewers in the same show. They’ll even tell the seller, “Don’t ship it to me, ship it to this other person.”

Grant: Yeah. People will just go in there to have a good time and connect. You know, I think back in the day, you might go to a mall, you hang out with your friends, have social interactions. People are coming on Whatnot, they’re building real friendships, they’re buying their friends things. And even just the action of buying is really interesting. So, I’m pretty into sneakers. I was into sneakers before Whatnot started, and now, sneakers is a pretty large category on Whatnot. There’s this pair of Travis Scott shoes, pretty popular shoes that came up the other day. They’re quite expensive, but I was like, “All right. I’m going to splurge, I’m going to buy them.” And I bought them, and then everyone went nuts. The whole chat went…was, “Oh my God,” and the seller went crazy, and they were so happy they got sold, they started taking shots for me. And so, the community, the real-time interaction, as soon as something is on a mobile phone and anyone can be their own QVC-style host, you just create a much richer and deeper experience that you’d be surprised about.

Connie: What’s another story?

Grant: So, one of the other more memorable things is…I said this earlier. So, sports cards is pretty big. And what’s pretty wild in sports cards today is the best cards are pretty big assets and investments. So I think last week a card sold for $10 million. If you have a…

Connie: Wait, can you say that again? Last week, a card sold for what?

Grant: So, for like $10 million. Not on Whatnot, but broadly. All the time, there’s multimillion-dollar cards getting sold. And if you were ever a collector at some point, one of the best things you can do is buy packs and open them live to see what cool cards you get. And so, a lot of that happens on live video. It’s one of the more popular use cases. About a month, two months ago, a bunch of our sellers were opening up this product that had…they called it LeBron James Triple Logoman, which is one of the most highly sought after modern-day cards. And people thought it’d already been pulled and just someone was hiding it somewhere, but they pulled it live on Whatnot. That card ended up selling for, I think, $3 million. So, there’s all of these kinds of extremes, like seeing wildly priced items all the way to people’s weddings and really personal interactions. It’s a very rich environment.

Connie: So, it sounds like it’s far more than commerce. It’s really commerce and entertainment and community and social all rolled into one?

Grant: Yeah. You know, I think one of the popular things is content, community, and commerce. And that is a succinct way to describe what Whatnot is, and all three of those are pretty big components of it.

Connie: What’s the last thing you bought on Whatnot?

Grant: So one of my favorite new categories is called estate sales. And the reason why is it’s…

Connie: Describe what an estate sale looks like.

Grant: Honestly, it’s kind of like a garage sale if I’m being honest… it’s just a random hunt. I was watching this show the other day, and… people were letting them into their houses and opening up boxes, and then they were just seeing what people want to buy and buying it on the spot. And I wanted to purchase something because I…

Connie: It’s kind of reality TV-esque?

Grant: Yeah. There’s all these shows where you go around and see how much something’s worth. And so I just bought a little jar. I didn’t care. I just wanted to support the seller. And I just thought it was really interesting, I shared it with the team.

Connie: And that dynamic happens a lot. You just want to support the seller. You end up buying stuff oftentimes that you didn’t think to go in to buy, necessarily.

Grant: Yeah.

Connie: Last thing you sold on Whatnot.

Grant: Last thing I sold on Whatnot was a pack of Pokémon cards.

Connie: Final question. What is either a favorite quote or a life philosophy you want to share?

Grant: You know, I’m not hugely into quotes, but… When I think about how I’m building Whatnot and what I think about every day is, move fast, take risks, build something people want, and those are kind of a couple of guiding principles.

Connie: How fast is fast?

Grant: Faster than you think you can move. If you think you’re moving fast, you’re probably not, and you should look for all. One of the greatest benefits of software is the cost of a mistake is really low, it’s, like, exceptionally low. You can almost always fix that mistake. And so, as a function of that, you can move at an incredible, incredible pace. One of the biggest mistakes that I personally see with startups is they just don’t move fast enough because you can move at lightning speed. We built the first version of our apps in two weeks. Our live commerce product we built in six weeks, but that was only because, Logan, who’s my co-founder, he made a mistake and used some really crappy live video provider initially. Probably could build it in three weeks. We are in the process of launching internationally. We decided to do that in one day. For Canada, the engineering team came to me and said, “We can launch in Canada in three days. What do you want to do?” I said, “Launch in Canada in three days.” That’s not a question.

Connie: And product decisions, you limit the timeframe for decisioning to?

Grant: As short as humanly… we’re like 220 people now. So, my recommendation to the team is, if you haven’t made a decision within four business days, it needs to come to me because I’m going to make the decision for you if you haven’t made it. Those couple of things, like speed, user-centricity, and building something people want, we inject everywhere. Until you do it, you think you can’t, but then when you start doing it, you’ll never want to work any other way, particularly at a software company. We’re not building hardware… I did work in hardware before this, we wouldn’t do that there. But in a pure software business, you can do that.

Connie: Thank you so much. Grant, CEO of Whatnot.

Grant: Thank you.