Poshmark: Manish Chandra

25:23And some subscription money. It was like basically I was trying to do too many things at the same time and being an entrepreneur, I was just going wherever the money was and wherever the distribution was instead of sort of saying that all distribution and all money is not good for the business. So by the time Condé Nast was happening, business was slowing down and we went from being a hot startup to suddenly sort of figuring out, you know, investor conversation started to disappear. Investors said, you know, come back when there's growth and I had to lay off a couple of people. So we came to the conclusion that we have to go back to where we started the year.

25:58We have to be a shopping company for women, focused around social shopping for fashion. And we had to somehow get ourselves out of eBay and Condé Nast at this time. And we were also starting to run out of money. When we come back in just a moment, how Caboodle turns out to be a dress rehearsal for Manisha's next business, Poshmark. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

26:33Guy Raz, how the hell are you? This is Kino Vigil from Cary, North Carolina. And if I was pressed to pick across the portfolio of amazing shows and just pick one, I would have to say the Boom Chicka Pop episode was definitely near the top. The power dynamic between the couple, their candid approach to business, their money problems. It was hilarious at times. It was sad at times. And it ended on a high note. And just overall, rollercoaster and incredibly fun and candid episode. If you want to share your favorite episode of How I Built This, record a short voice memo on your phone telling us your name, where you're from, what your favorite episode is.

27:23and why, a lot like the voice memo you just heard. And email it to us at hibt at id.wondery.com, and we'll share your favorites right here in the ad breaks in future episodes. And thanks so much. We love you guys. You're the best. And now, back to the show.

27:51Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2007, and Caboodle is running out of money. So Manish picks up the phone and starts booking meetings with his investors. So I went, drove around, most of my investors were in Silicon Valley, and collected small checks like$10 ,000,$15 ,000, enough to make one or two payrolls at that time so we could survive. Then one of the investors stood up and said, you know what? I see this pattern that this traffic is going up. I see how passionate you guys are. Let me help you get a bridge round together. So he ended up doing a bridge round,$1.7 million bridge round at that time.

28:30And that money ended up giving us runway for nine to 12 months. So we got this money done. And suddenly, our traffic was now starting to become vertical in the sense that we were starting to, at that time, the rankings were measured through Alexa. And we were climbing rapidly in the Alexa ranking for shopping sites. And so we got noticed by investors. You know, one of our early investors was a guy by the name of Ron Conway. And SoftBank, which was not the SoftBank of today, it was, you know, still a VC, still a prominent VC, ended up calling us out of the blue and saying, hey, we're very interested in talking to you.

29:07And within sort of two, three weeks, they decide to write us a term sheet. Now, I'm like, you know, feeling like I'm on top of the world. You know, we just the seed funding. Now we get a top-notch guy. So I'm like super excited. I take the term sheet for my board and the board looks at the term sheet and says, this is a terrible term sheet. I think we should look at exit options and you should think of selling the company. Wow. What was so bad about the term sheet? What do you remember about it? I think it was 2x of the last round, but it was like not 3, 4, 5x. And again, I was so tunnel vision.

29:40I was like building the company, trying to manage. I had two young kids, et cetera. I only remember that I was so happy to get the term sheet. And then it was like getting cold water poured. And I was like, how the hell do I figure out how to sell a company? I mean, I barely know how to raise money. And again, remember, we had very little money. So I had$1.7 million. Even a flight in a hotel was super expensive, you know, to use those tiny resources. That's what you had left in the bank. Yes. And so it was just, it was a tricky time. And what ended up happening was one of my co-founders came to me and said, but Manish, you're doing all of these things.

30:17What do you really want? I didn't know what I wanted. I hadn't decided whether I want to sell the company or I want to keep the company and build it. I wasn't thinking for myself. I was just doing what my board was asking me to do. And he created this question and provoked it in a way that forced me to think about what do I want? And so I sat down and cleared my head. I wrote down all the pros and cons, where I was in my life, sort of what was happening. And I wrote down a number. I said, if I get this number, I actually want to sell the company. And you also had great timing because during that period, there were a bunch of established media companies like MTV and AOL and CBS.

31:00They were trying to shore up their businesses by buying digital assets like yours. And so I guess in 2007, you got the number you were looking for, right? You were acquired by Hearst. I read they paid something like$30 million for Caboodle. But I wonder, like, and forgive me, I hope this doesn't sound rude, but what exactly were they buying? I mean, you had the technology and you had built this platform. But I mean, did they ask you, like, hey, what's the plan here? What's the business plan? I mean, or do you think they thought, oh, you know, hey, they have this platform. Now we can take this and figure out a way to sell things to people?

31:40Yeah, I think their strategy was digitizing the magazines at that time. They had a new CEO, and he was focused on taking all of the magazines and creating engaging digital properties. And also, they wanted to have a presence in Silicon Valley. The last thing is, Hearst as a company was basically made up of a series of acquisitions that they acquired at small stages and then grew and made them meaningful properties. So that was sort of their business model as well. So a bunch of things aligned, unknown to me at that time. I had no idea of the media business. I didn't even know that Hearst was on the East Coast.

32:15So I was, again, to some degree, being naive has helped me in being able to just go talk to these people without knowing that who I'm talking to or what sort of is on the other side. I mean, in some ways, I mean, who knows what would have happened to Caboodle if you kept it if you kept it private. But in some ways, you got really lucky because a year later, the financial crisis would come about. And once again, you would have had, it would have been impossible to raise money. It was a very, very lucky thing, you know, that happened from a timing perspective, because we were not monetized, we were growing, but we were not a massive property.

32:52So had we hit 08 without an acquisition, no matter how much cash I had, it would have been a very tough time. You know, we would have to be forced to be a profitable company. And so being acquired in 07 was serendipitously one of the luckiest things that could happen. The ability to sort of get that liquidity turned out to be a fantastic thing because so much, particularly non-monetized companies, went down under in 08 and 09 overall. Whereas we kept growing through that and ended up monetizing and becoming sort of an interesting property within that 08, 09 timeframe. All right. So now you sell it to Hearst and this big media company, and you stayed on as the head of Caboodle.

33:33And what was the monetization strategy once Hearst took it over? It was largely advertising. So they were selling advertising to big companies, whether it's a brand or a retailer, and they would advertise in the print. And they would also have a significant digital presence through Caboodle. But the advertising we were doing was not directly tied to the engagement. Some pages were over monetized. So there were pages we were running where there were three banner ads running on a single page, which made it very, very hard to sort of load up and work with. And so that led to sort of one of the principles by which I looked at anything I create where wherever you have love, the money is sort of synergistic.

34:08So engagement and monetization had to be 100 % synergistic in any business I created. So the more you focus on engagement, the more monetization you get. That was not the case with Caboodle. You know, we were sort of pulling in different directions based on, you know, how the advertising was there. But otherwise, I would say they were very, very healthy partners as an owner of Caboodle. They were never overly focused on it. But on the monetization side, we didn't have a choice. We had to put those ad units. And that was something that none of us really liked in terms of how they manifested in the site.

34:41But I'm assuming it was probably never profitable. It was probably still very hard. It was never profitable. And it needed like a three or five X growth before it would be a scale to be, you know, to have enough monetization and add engines at that time. So really the focus of the property should have been less monetization and still much more growth for another year before you got to monetize it. So you had started a business and obviously there was a lot of anxiety as you described, right? Like there was just a lot, I mean, even the short sort of period of time that it was an independent company, you know, raising money and worrying about payroll and, you know, kind of retooling the approach and slowing down growth and trying to do a bunch of different things.

35:29So when Hearst bought this business and you became an employee of Hearst, did you think to yourself, I'm done with this? I'm not going to be an entrepreneur again? Or did you think, you know, I like this. I'm going to try this again one day. At the time Kaboodle was acquired, I felt like Kaboodle was still a baby. So my attention and my focus was still growing Kaboodle. I was not thinking beyond it. But as time went on, it started to become clear that even if we create a tremendous amount of value, the journey has become completely different. And I was getting very frustrated because I felt like I was working with some constraints.

36:03I was working with something where I didn't feel like I had the full ownership. But financially, we were doing very well. And life was, you know, in a groove. But I was just unhappy personally. And so I was talking to my wife. She goes, you know, I haven't seen you this unhappy in years. Even when you were struggling with Caboodle, you were so much happier than the thing. And I said, I really need to do something. And so, but I don't want to jeopardize, you know, the security that the family has. And she said, we'll be all supportive. Why didn't you just leave? And that's when I started to think of leaving.

36:34Yeah, you know, Hearst, I mean, I think even at that time, but I know that today, you know, it's got Cosmopolitan and Elle and Harper's Bazaar and, you know, Red Book and Seventeen, a bunch of magazines that feature fashion, right? And so I imagine just working and having kind of pivoted towards fashion with Caboodle that you kind of just became more aware of how the industry works. I did. I did. So I would say, as Malcolm Gladwell calls it, those spending time in Caboodle and then spending two and a half plus years in Hearst was my 10 ,000 proverbial hours in fashion. And so as I left Caboodle, I knew I wanted to do something in fashion.

37:15I don't want to touch inventory. I realized that Silicon Valley, we are good at a lot of things, but managing inventory is not our forte. You know, we think of things as very fluid and consumer and bits and bytes. So I said, that's not that inventory is not a great thing to do, but just we are not good at it. And the third thing I wanted to do was build something where monetization and engagement were just one, right? So I didn't want it to be disconnected. Yeah. I felt like the caboodle journey had given me enough experience and appetite. And, you know, we'd got a few million users, and I wanted to create a community of at least 100 million users.

37:50So that was sort of like my thing is I want to hit something with 100 million people. Right. And I think when you came up with the idea for Poshmark, it was inspired by a lot of different things. But it kind of started with the iPhone, right? Yeah. I remember I was on a trip with a bunch of my friends. and this guy had this little iPhone. It was iPhone 4. And he takes a picture of these birds and shows us. It looks amazing, you know. And we are all here with our SLRs trying to take a picture of these birds. And then he quickly uploads it on, at that time, a hot platform called Facebook. And we suddenly see his picture on Facebook.

38:27And I'm like, I have to now take my SD card, shove it in the laptop and all of that. And so I suddenly said, you know, this mobile is coming of age, like something massive is happening. I had iPhone 3 at that time, which was grainy and photo quality was mediocre, et cetera. And this was high quality stuff. And so I said, I need to do something with mobile. And then I was at my son's high school game and the high school homecoming queen was wearing a yellow dress. And we knew her parents, we were talking to her parents and they said, you know, she's just thrifted this dress. This is, she's bought it used from a thrift store.

39:02And then I came back home and I was in our closet and they were like bags and bags of clothing, just unopened, lying, you know, not returned, you know. And so suddenly like all of these things just clicked in my head. And I said, the right idea is to empower everyone to have this phone. A girl can literally take her clothing from this phone, list them very quickly, put a little filter, make them beautiful and sell them. And all of these things kind of came together. and I wrote a two-page paper on what Poshmark should be. And I called it Gosh Posh at that time. Gosh Posh. The idea was basically to make it easy for people to sell their used clothing.

39:42Yeah. The idea was buying and selling clothing should be fun and simple. The use case we wrote up was you've gone to a wedding, you come out, you know, that dress is now seen by everyone. You quickly take a couple of pictures, you list it, somebody buys it. You don't have to worry about shipping because we've taken care of all of the things. You just ship it and you collect the money. And I met my co-founder, Tracy, through Mayfield, who's one of our early investors. And her background was all fashion. She grew up in the New York fashion scene. She had worked on a small brand there. She had an MBA.

40:15She had a fashion background. And she had moved from New York to Silicon Valley to do something which marked fashion and tech. And talked to her, talked to another person. Everyone sort of immediately started to like the idea. Tracy went and mocked up something. Another guy started to prototype something. And soon, this idea caught a momentum of its own. And the thing I was very regimented in my mind was, we're not going to do anything on the web or laptop. This is going to be a pure mobile iPhone thing, which was very hard to pitch to the investors because nobody thought people could actually shop on the phone.

40:49Yeah. And this, I mean, and did you, when you described it quickly, I mean, would you say this is just, it's basically going to be like a thrift store online? Is that how you describe it or? Sort of. But the idea was that over time you could fail used fashion, new fashion, everything. It becomes sort of this social hub for fashion. And we actually had a lot of people using Kaboodle and hacking it to create a marketplace where people would post and say, I have these Jimmy Choo's, you know, do you buy it? Can you PayPal me the money? So they were using Kaboodle for transactions. And this was sort of transaction built into it.

41:23So it was a very simple model. And you had already had a successful exit. So was it easier this time around pitching investors? It was. So Naveen Chadha, who was the Mayfield general partner, who was the one who his team had connected me to Tracy, was very keen on at least putting some money into my next company. And then we went and pitched to the partners. And after that, he said, you know, we're ready to invest. And so that first investment from him came very quickly. How much did you raise in that first round? We raised$3.5 million in that first round, quite a bit of money at that time. And we raised to have been from Mayfield, but I also gave room to my investors who had supported me in Caboodle and carved out room for all of them.

42:11So all of them joined the round. All right. Now you're going to start working on this thing. And it was going to be mobile only. It would enable people to take a picture of an article of clothing, upload it to their page or whatever, and then for somebody else scrolling through this app to buy the product and then you guys would handle everything else. How was it going to work initially? Yeah. The idea was that somebody would come, buy it from you. We would take care of all the transaction money movement. once you ship it using a shipping label we emailed to you, once the person received it and said that they received it and they're satisfied with it, you get the money.

42:55You would keep 80 % and you would get 20%. And that's it. I was tired of people, you know, hiding a lot of fees. Like, you know, if you sold another marketplace at that time, you had one fee, then another fee came. And by the time you sort of got your money, there was nothing left. So here, our idea was day one, we would reveal to you If you listed your item for$50, you can get$40. And not a penny more, not a penny less. You can get$40. We would not charge you any hidden fees, et cetera. And then that's sort of how we launched it in 2011. And from what I gather, initially when you launched, there wasn't like a buy now button on the site, right?

43:34I read that something like that employees of Poshmark would set up face-to-face meetings. What was going on there? We were big believers of putting the product out into the customer's hands very early. So we got funded in February. And by May, we were starting to test the product. Of 2011. Of 2011. And by August, we were starting to see transactions happening. But we hadn't gotten our payment processing set up. We hadn't gotten shipping set up. So we were still just a content site. And so people would literally write a comment. And Leanne, who was our first employee in our, today, our SVP of community was heading up the community management.

44:14So people would just email her and she would say, you guys want to buy this thing, please bring your money or PayPal me the money and then meet us. And typically our meeting was at the district wine bar in Soma in San Francisco. And that's where the product would happen. It would be almost like a little physical product exchange. And half the time it was cash and product being exchanged there. We were not making any. We were just trying to facilitate the transaction. You would facilitate the seller and buyer physical in-person meetup initially. Initially. That was sort of how our community formed.

44:49So a lot of our initial alpha testing was we would host a weekly get-together at the District Wine Bar and another get-together at our office in Menlo Park. And that's how sort of the product got started. Presumably, you know, people were already doing this on eBay, right, for years before anybody were selling secondhand clothing. So how did you sort of persuade people to try this platform? I mean, was the selling point in the sense that this is just about fashion and that's why you should come here? A couple of things. I think the fashion part was very critical. I think the part that was very exciting for people was it was very empowering and very stylish.

45:29So our product has something, still does, has something called a cover shot. So you don't just create a listing. You start the listing with a cover shot. So the first shot is you posing with your clothes on or you're sort of making it very beautiful. And then you add other photos to kind of describe the product. So it felt like you're creating your little magazine article. And so it was just fun to browse, you know, as you were looking at it, fun to connect. There was a community forming. And, you know, sometimes you build a product and just, you know, the four or five things you build end up all being magical and supplement each other.

46:02So the way the product was designed, the fact that it was all happening on the phone, 2011, very few stuff was on the phone. Even the applications that were there were predominantly web applications, and we didn't have a web page. So we also leveraged the fact that mobile was very novel, and we finally launched the app in the App Store in December of 2011. Before that, it was still being distributed through hands, sort of through private distribution. And at that time, in December of 2011, when you launched an app on the App Store, it wasn't like today. There weren't millions of apps, right? I mean, the competition was just, there were just fewer apps available.

46:42So was it easier to gain traction at that time? It was and it wasn't, you know, in the sense that the expectations were very moderate. I think we had like 100 users in the first day. It was all through PR. And, you know, we got an article in a pub at that time, which was very popular, called Refinery29. We had a couple of articles in San Francisco Chronicle, print, and we started to see some users come in. But there wasn't any cost-efficient acquisition engines. It was really, really expensive. So we started to experiment some online advertising, but app installs were not there. So you still had to sort of click through, discover something, then go to the app store on your own and try to download the app.

47:24And so that whole funnel was extremely expensive, complicated, etc. So we couldn't figure out how to scale it. Why don't we come back in just a moment? Manish learns that shipping clothes from point A to point B is a serious business. So serious that if you don't do it right, you could wind up in jail. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

48:06Hey, welcome back to How I Built This. I'm Guy Raz. So it's early 2012 and Poshmark is out in the world as an app. And now Manish and his partners are asking, how do we get people to discover this thing? But two things happened. When we first launched the app, we saw amazing engagement. You know, the 100 people who downloaded the app, most of them were actually creating listings and many of them were buying. 80, 90 % of the people were coming back week after week. So there was amazing engagement. But the biggest thing was through our data and our data systems were still early. We saw that average user spending 15 to 20 minutes a day in our app.

48:4615 to 20 minutes a day. You know, my belief, having worked in five, six years in consumer, I was not a guru, but I was sort of in the early days, is that you can buy growth, you can buy anything, but you can't buy love. You can't buy engagement. Engagement is very natural to whether your product works for the consumer. And then I knew that this business is going to work. Yeah. And one thing you seem to really lean into early on was developing a strong sense of community among users, right? Like you would do these road shows where you'd go to different cities and host these fashion events and things like that.

49:19But the thing about a community, right, is that it can turn on you. And I think pretty early on, some of your users did turn on you in part because of your shipping fees. Like what exactly happened? Yeah. So we launched the app with$5 shipping at that time. And our cost of shipping was turning out to be$10.50 on an average. And so we were basically losing money left and right on every order. And if you remember, having come out of.com, I didn't want to build a business where you were losing money on every order. So we were like, what do we do? And our shipping fee was$9 at that time. We had discounted to$5 for the launch.

49:59So we said, you know what? We'll just take the discount away and go back to normal things. So we put a little note in the app in May of 2012 saying, hey, the discount is going to finish. The welcome discount is gone. And we're going to move the shipping to$9. I kid you not, Guy, within 24 hours, Tracy and our mailbox and Twitter was flooded with hundreds of people saying, you are going to make us bankrupt. We won't have any clothes to wear. You guys are crazy. How can you change the shipping? And it was a revolt by our community for us to move our shipping from$5 to$9. We had never seen this level of passion ever in my life.

50:45So what did you do? So finally, after a lot of thought, we said, okay, we'll change the shipping fee to$7, right? And even as we changed to$7, we got so much negative feedback from the community. But we were still losing money on every order, but we said we can afford$7. So we started with$7 shipping in 2012 and 20 % day rate. Just to give you a sense, today it's 2024. Our day rate is still 20 % and our shipping is$7.97. Huh. But you guys actually ran into a lot of issues with shipping at the beginning. I mean, I read that the post office came down on you after you basically prepaid for a bunch of shipping labels.

51:30but basically they were all the same weight, like I guess two pounds. So it didn't matter, right? If the seller was sending heavy boots, the shipping label that you paid for would still be for two pounds, but that wasn't enough, right? Yeah, so at that time in 2012, we wanted to make sure that the seller didn't have to worry about, you know, how much the item weighed, what they had to do, like keep it very simple. We didn't want them to think of them as a seller. They should just be two people exchanging products and everything, just shipping. They don't have to worry about anything, Just list the item and price it and ship it.

51:59So what we would do is we would ship them the right label for there. So if you were shipping from Minnesota to Texas and you were shipping, say, a pair of shoes or whatever we knew, we would generate the right label, priority mail label from USPS. We would pay for that label and only charge you$7 for that label. So some labels, we were losing a lot of money. Some labels were making a lot of money. But we were simplifying the job for the seller. So they didn't have to think of weighing the item. And then in middle of 2013, we get a knock on our door in the morning and two men walk in and say, we need to speak to Manish Chandra.

52:38We are from USPS. We are postal inspectors. And so our team says, you know, I'm Olivia. I'm the head of marketplace operations. No, no, we can only speak to Manish Chandra. And so I sit down with these two postal inspectors. They said, sir, we are here to inform you that you have millions of dollars of fine because you've been underpaying or overcharging for some labels for these things. And, you know, you have to pay the fines. Otherwise, we can actually legally put you in jail. Wow. So I explained to them. I said, yes, you're right that there's a bunch of labels that we are underpaying. But there's a bunch of labels that we're extremely overpaying for because of the thing they're saying.

53:13Well, we don't care about overpaying. We only care about underpayment, et cetera. So a lot of back and forth finally made me sign some things. And, you know, we are now growing very fast. So we are consuming a lot of USPS priority labels. And from there, a series of conversations start that ultimately led to creation of PoshPost, which is a simple fashion shipping service that we created, where basically we have a partnership with USPS where we have the ability to send you a simple shipping label. We charge you a flat fee. We pay a price to USPS, but every single item goes to the single label, whether it's underweight or whatever it is.

53:50And so that was one thing that was going on. And meanwhile, another thing that was happening, I guess, kind of more generally was that mobile was really starting to take off. Right. I mean, you guys launched in 2011 as an app. And then with each passing year, more people were discovering and downloading apps right from the app store. So that had to be good for awareness. Right. Yeah. So by Q4 of 2012, Facebook had retooled their app to be a mobile app. And they had done a partnership with Apple to create an ad format where you could click and get an automatic mobile install of the app, right? And we somehow, you know, were good at getting ourselves into beta testing.

54:32So we got into the beta testing of that app. And it turned out that in the first two months, it was an extremely successful product. And we just grew three to five acts in two months. That sounds like a good problem to have. It was an amazingly good problem to have, but the speed of growth was so crazy. On a system where a lot of things were still very weak in terms of the payment systems, the shipping system, it all sort of untested. So suddenly our volume exploded. Think of if you're doing half a million dollars a transaction, we're now doing five or six million dollars of transactions, which is not much, but the speed was very high.

55:12So we started to hit alarms in every single one of our partners. And we started to hit alarms with our payment provider, with our shipping provider, infrastructure. We hadn't built some of the distribution scaling. We were starting to hit the problems. And meanwhile, in 2013, the app is growing like wheats and rockets. And people are loving it. Everything is sort of working. But our systems are just blowing apart. The payment processor calls us and says, you know, we can't, the way you're structured, we can't handle your payment processor. You've got to move to another payment processor. We went to every payment processor.

55:43We went to PayPal. We went to Braintree. We went to Stripe. We went to Wells Fargo. We went to First USA. We went to like literally every payment processor. And even when they would agree to take our business, their compliance chief would just throw them out. And it was kind of very, very bad because we had actually the safest model because, you know, the money was never at risk in this whole sort of transaction. The money would go to the rightful owner. But they didn't understand it. Now we were like a few months from shutting down because all the payment processors had rejected us. But around that time, PayPal ended up acquiring Braintree.

56:16And somehow, through a miraculous set of licensing, and this whole area is quite complicated, they were able to onboard us. So the combination of PayPal and Braintree at that time saved our life, and then we became their partners and still are huge partners of PayPal and Braintree. I want to dive into a decision that you took around this time around growth because you were growing so fast and it was unsustainable that you decided that you wanted to slow it down. And I guess you did that in part by cutting back on marketing, on how much you spent on marketing. Tell me what you did and why. Yeah, this was middle of 13.

56:59We were growing like a rocket ship. But in those six months from January through July, competition had massively increased. And there were many companies in the fashion space that were spending a lot of money in marketing and actually were starting to declare bankruptcy. And we had a very sustainable model to begin with, but we were obviously caught up in this frenzy of, you know, of marketing. And so I went to my board members and I said, and these were both VCs and VCs are ultimately focused on growth. I said, I'm going to cut down growth massively for a year by saving money and using that money to rebuild the infrastructure.

57:36And we cut down growth by taking our marketing and bringing it down pretty close to zero for almost a year before we restarted it while we rebuild the infrastructure. The hard part was that this year of no growth ultimately meant that to get a real funding round was delayed by a couple of years. We had to bridge the company for more than a year, year and a half, because when people look at our metrics, they saw this time of no growth and they could not grab their heads. Even though we kept saying it was because we cut down marketing, investors just had a hard time. They needed a long runway of growth before they would fund the company.

58:09So it kind of delayed my funding by almost a year and a half before I could raise a real proper round. But in hindsight, I felt like it was probably one of the most bold, painful, but probably correct decision that I made in this journey of Poshmark. And had you not done it, what do you think could have happened? I think I fear that, you know, we would have lots of failed transactions. Our customers would have churned and gone away. And ultimately, you know, we could have crashed. We could have completely crashed. Instead, through this whole process of getting our marketing, I hired some of the key executives.

58:45Our head of growth joined us in spring of 2014. I shared with him, I said, you know, for six months, I can't give you any money. He said, no, let me help join. Our head of data joined at that time. And so I felt like we built a management team as well, besides sort of building the infrastructure. But we built a management team, not fair weather friends, but we actually found foul weather friends who would actually stick around. And luckily, none of my co-founders left. They're still all here. And so we actually ended up forming a lot of grit and character through that sort of year. and I think form a lot of bonds where we all sort of almost kind of had a second startup from 2014 onwards.

59:23We did to restart growth, rebuild the infrastructure and grow the business in a much, much more, you know, gritty way, if you may. You also started to kind of not pivot, but introduce other users, right? Because initially it started out as a place for women to sell women's fashion. but then you got into men's and kids' fashion. Today, of course, electronics has many more products. But tell me, I mean, was that just kind of the natural outgrowth of where the business was heading? No, it wasn't. So actually in 2015, we were growing very well. In 2016, there was still a lot of hesitation within the leadership team as we talked to the community to go beyond women.

1:00:08But we ended up launching men and kids. And I remember when we announced that we're going to launch these things, We got hundreds of emails in our inbox saying, why are you letting men in our community? It's not the right thing to do. It's terrible. You know, it's going to be. And anyway, it ended up that men became, after women, the fastest growing category. And the way men shop was great for our women sellers because they are faster shoppers. They had sort of different characteristics. And of course, they could diversify their inventory. They could sell more stuff that was in the closet. And then I started to get hundreds of letters of thanks.

1:00:44Thanks for launching men. So it ended up being a very good decision to support all the different folks in your household and not just, you know, for women. And so women are still a biggest dominant thing, but all those categories are a meaningful part of our business. Yeah. So you guys continued to grow a lot. And around 2019, you were actually poised to go public. But then I guess the business takes a few hits that kind of stall the process. What exactly happened? What was going on? Yes. So we were going to initially be class of 2019 public company. But at that time, the United States government decided that marketplaces should collect sales tax on behalf of their sellers and remit it to them.

1:01:32So we implemented sales tax on our platform. And we thought it'd be a minor, and there'd be some friction, but it won't be very big. It turned out it was a major friction. Just adding that sales tax caused the transaction volume to drop, the business growth to slow down, and everything sort of moved out. Derailed our IPO. We could no longer be a public company because we didn't know what was happening at that time. Literally, we had to stop the IPO process, take a step back. And so that whole 2019 timeframe, we were growing, but we started to burn a lot of money because suddenly we were doing new category expansion, new countries, new things.

1:02:11And suddenly we went to our investors and we said, you know, what do we do? We have this much money in the bank, et cetera. We were not out of money. We had like money in the bank, but it was a very small amount of money. This was February of 2020. And the feedback was become profitable, right? And we knew how to do that because our single biggest expense was marketing. If we cut down marketing, we'd become profitable. So we were going to present a new business plan to the board in March. We are having our board meeting on March 12th or 13th. And it's exactly the day the government is declaring COVID-19 to be a pandemic.

1:02:45And every day, the sales started to go down. We didn't know if anybody would buy used clothing, right? Because it's touch and go. We didn't know if anybody would buy clothing, nothing. So things are going down. We're cutting down marketing, marketing, marketing. Yet at the same time, every day the revenue is going down. So I was like, every night I'd go to bed, I said, how do I change my mindset? And when I went to bed and I woke up, I'd visualize ringing the opening bell of New York Stock Exchange. So I literally, that was sort of the way I would psych myself up. I said, you know, there'll be a day, we'll go through all this trouble.

1:03:18This is March of 2020. Things are going down. And just wake up the next day. And then by March 31st, we actually had our first net EBITDA profitable month. So we hit profitability a year ahead. In April, government started to release stimulus and turned out people really did want to buy and sell clothes in the pandemic. In fact, they cleaned out a lot of closets and used our platform to buy and sell a lot of stuff. And things just started to move. And by June of 2020, all the bankers were at the door and we were starting to think of filing for a public offering. And you finally did wind up going public in 2021.

1:03:55And I think briefly at the peak of that process, you were valued at like$7 billion. But the company also ran into some turbulence afterwards. And I know that you were kind of feeling some of the effects of COVID and the after effects. It was kind of tough to retain workers and you had a few high-level resignations. But in early 2023, this is just like two years after going public, you guys get acquired and taken private again by a company called Naver, which I guess is a Korean company. Yes. Can you tell me how that came about? Well, we were coming out of COVID, but kind of in a weird, funky way.

1:04:38Inflation was skyrocketing, so consumption was going down. In between, because the business is going through all this turmoil, the stock has taken a dive, we start to get inbound inquiries for acquisition. And in January, we got a call from Naver where they said, hey, we love what you guys are doing. We love this whole area of consumer marketplaces, social commerce, and we'd like to make an investment in your company and learn from you guys. And so we started the conversation. and suddenly one of the big things that started to shine for me is that one of the big growth areas for Poshmark could be live streaming and live shopping.

1:05:20And so I started to put a lot of energy into that. And we're sharing, obviously, what our strategy is with Naver because we're in confidentiality. And suddenly, they actually put an offer on the table. And by January of 2023, we had become part of Naver. Wow. And today you are still the CEO of the company. Yeah. So Naver has acquired the company and they are, think of them as Google and Shopify of Korea, but sort of they're into many other businesses. They're into AI, they're into robotics, et cetera. And their vision is that they believe the space can be an independent company in the future. They want me to grow this company and at some point in the future, make it an independent public company owned by neighbor, but also public.

1:06:13So the journey we are working on is to grow this business over the next few years and make it into, you know, Poshmark 2.0 as a public company. So that's sort of the journey we are on. We launched live streaming in April of last year, and it's really growing very fast. The core business is starting to grow as well, and we continue to gain market share. So we are sort of feeling a lot of momentum. But the best part of this journey, guys, is that literally all of my team is here with me, still energized and wanting to go to, let's call it Poshmark 3.0. If Poshmark 1.0 was a private company, Poshmark 2.0 was a couple of years as a public company.

1:06:52This is sort of the third phase of Poshmark growth. And they're still all very excited about building and growing it. When you think about the incredible journey you took and all of the twists and turns of it and where you are now, how much do you think has to do with your work and your commitment and your focus and intelligence? And how much do you think happened because of luck? I think it's definitely luck is a big piece of your journey. But luck is something that has to be married with hard work. but also values, you know, in the sense that there are a lot of temptations along the road and sometimes you do succumb to the temptations.

1:07:36The key is to wean yourself off and continue with your core values and a lot of times, you know, not give in to your fear, not give in to your greed, but proceed with love. And ultimately, I think the key to all of this is surrounding yourself with amazing people. I think if you do that, luck, hard work, tenacity, love all comes through that And I am just blessed to be surrounded by amazing people at Poshmark. That's Manish Chandra, co-founder and CEO of Poshmark. By the way, in 2021, in addition to men, women, and kids, Poshmark added pets to its list of categories. You can now buy a turtleneck sweater for your dog, an anti-anxiety vest for your cat, even a previously loved air pump for your home aquarium.

1:08:20Hey, thanks so much for listening to the show this week. please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. This episode was produced by Sam Paulson with music composed by Ramtin Ereblui. It was edited by Neva Grant with research help from Catherine Seifer. Our production staff also includes J.C. Howard, Casey Herman, Kerry Thompson, Alex Chung, John Isabella, Chris Messini, Carla Estevez, and Malia Agudelo. Our engineers were Robert Rodriguez and Josh Newell. I'm Guy Raz and you've been listening to How I Built This

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