How Whatnot Built a Global Marketplace

0:00If you look at e-commerce today, you have to know exactly what you're looking for. Live commerce is over a third of all commerce in Asia. Is that right? 30 to 40 percent of all commerce is live commerce in China. What is it in the U.S. today? Single digits, really. The experience was really broken. Transactions weren't integrated well. Shipping wasn't. Payments, discovery, CX. And we just thought we could build a better one of those.

0:24David George:I want to start all the way back when you were a kid. Your first online sale was a holographic Pokemon card. At that point in time was when eBay was getting started. And I was like, wait, you can make money from Pokemon cards? Like, I love Pokemon cards and I can make money from doing it. The first one sold for$10. That's probably the true origin stories of whatnot. Users spend 95 minutes a day on the platform. Is that right? Yeah, about 95 minutes. It's incredible. Users don't give a shit about the market. They care about whether they're going to enjoy the thing. It provides value. you. And that's the experience that makes it fun and keeps you coming back.

0:59David George:What are the most exciting things that you're building towards that you want to grow into over the coming 12 months? Yeah, I mean, online shopping has become incredibly efficient. Whatnot is betting it can also be fun. In this episode, A16Z general partner David George sits down with Whatnot co-founder Grant LaFontaine to unpack how live shopping combines commerce, entertainment, discovery, and community in a way traditional e-commerce doesn't. Grant shares how selling a Pokemon card online in elementary school eventually came full circle with Whatnot, why the company stumbled into live commerce by watching what its users were already doing, and how the platform has expanded from collectibles into more than 100 categories.

1:42David George:They also discuss the small businesses being built on the platform, why trust and safety accounts for a significant part of the company's investment, and how Whatnot is using AI to help sellers scale without taking the humans out of the experience. Okay, I want to start all the way back when you were a kid. So I understand that your first online sale was a holographic Pokemon card and that the buyer mailed you a money order and you cashed it at the post office and then you shipped the card. So what age was this? This is like a formative young age? I must have been third or fourth grade, I want to say.

2:23So I don't know. How old are you there? Like seven, eight, nine, something like that.

2:26David George:Yeah. Okay. So there's all these stories of a founder kind of finding their market this early. Tell me about you kind of having that experience and making it a formative piece of starting whatnot eventually. Well, I think all kids back then, there was just a Pokemon craze. Pokemon cards became big. Get my dad to go bring me to the shop. Open my Pokemon cards. I had my binder, had all my Charizards in it, had everything. and down sort of the street from where I was living was like a little lake and hangout area. And me and my friend used to go there and we'd trade Pokemon cards and I'd try and hustle people on getting the better cards.

3:00And then at that point in time was when eBay was getting started and their biggest competitor was Yahoo Auctions. And I don't know how I found out about it, but I found out about it and was like, wait, you can make money from Pokemon cards? I love Pokemon cards and I can make money from doing it. And so I got my dad to help me set up an account and I posted a bunch of my holographic cards online. and the first one sold for 10 bucks. And it was the holographic chancy card. Chancy is the chancy card, yeah. And the thing that always feels funny about that is that at that point in time, the internet was so nascent, you weren't doing payments online, which is just crazy.

3:34David George:Yeah. Yeah, this is clunky. I mean, yeah, early days, there was no trust to do it. The infrastructure didn't exist, but there was no trust either, obviously, so. Yeah, but it's also pretty wild that there was enough trust that someone would send you the money order in the mail and sort of hope you would then send the card back. So I remember I got the money or like, okay, I can send the card now, dad, can you bring me to the post office? I'm going to wrap it up and send it off. And that's probably the true origin stories of whatnot. Whatnot's pretty funny in that almost all of my experience in life, like the big bits, all of my core jobs have come full circle and whatnot.

4:08David George:Yeah. It was like Pokemon cards and I worked at YouTube for a long time and so I did video and then I was working at Facebook and I was working on marketplace stuff. And so I did some of that and then whatnot, sort of the amalgamation of all those things. Yeah, the perfect combination of all those trends. Yeah, it's awesome. So there's different stories about how you and Logan decided to start the company. How did you guys settle on doing this? Yeah, so there's Logan's story and there's my story. Yeah, okay. And look, both of them are like actually correct. I think Logan's just more nostalgic about, Logan's story is actually, I don't know, maybe it's slightly better.

4:39So it was, Logan's origin story start in like January 2019, I want to say. We did a trip to Tokyo over like New Year's. And we were drinking in a bar and we, both of us had started businesses before. And so a couple of drinks, we just started talking, oh, what should we do one day? And then we started talking about building some marketplace business. We bought 30 or 40 domains. And then like the trip ended. we got back to the real world and sort of nothing happened for six, seven, eight, nine months, basically. And so that's all true. Like we talked about it and like we said, we're going to do it, but then there was like this.

5:19That wasn't the launch moment. Yeah. There's this like huge intervening period. And so mine really was sometime around October of 2019. Yeah. And, you know, I was like, Logan, remember we talked about doing those businesses and we brought those hundred domains when we were drinking in a bar in Tokyo that we never used. Maybe now's the time Logan was like wrapping up his job and I still had mine, but I was like, I need to go back to building some stuff. And we could see a bunch of our friends getting back into collecting. So it was like Funko Pops and comic books and sports cards. And I was like, know a little bit about that industry.

5:56And I'd always dabbled even after Pokemon cards and the sneakers for a while. And And then I was doing some of the Funko stuff for a while. And so I sort of knew that market. And it just hasn't changed in a really long time. And everyone like us now is older. They're starting to have some disposable income. They grew up on a mobile phone. I think there's something around collectibles and social commerce. If someone's going to figure it out, maybe why not us? Let's see what we can do. Yeah. And so then December 2019, we both quit our jobs. And then we went full time and launched our authenticated Funko Pop marketplace.

6:32David George:So I got to ask, was Whatnot one of the domains that you had bought? No, that would have been, can you imagine? Pretty good. That would have been amazing. Yeah, it would have been amazing. Actually, so the origins of Whatnot name, which everyone always asks, because Whatnot's a very memorable, good name. We've had it for a very long time. So actually, one of the domains we bought, again, think we were drunk in a bar in Tokyo, so it wasn't as if our judgment was immensely good, was like always legit. And I'm not joking because that was the first domain for whatnot. And the reason it was the first domain for whatnot is we're always obsessed with, let's just make progress.

7:07Yes. Let's just do a thing. Yeah. I was like, we don't even have a product. We don't have anything. I don't want to sit here and talk about a branding exercise for days. Just go. Let's just go.

7:17David George:Yeah. And so it was always legit. And then the first designer on whatnot, this guy, John, who I worked with on my prior startup, But before we were about to launch, he's like, I cannot be associated with a company called Always Legit. That is a horrific name. And it was. I named it and it was a horrific name. But I was like, it doesn't matter. We don't have a product. Who cares what it's called if you got nothing? And so he made us get into a room, do a brainstorming exercise for like an hour. We got a list of 10 names. We're like, all right, we'd be comfortable if we got any of these. Let's go see if we can buy the domain.

7:51And so I got three. John got three and Logan got three or four. And Logan got whatnot. And of all those domains, all of them would have cost like$100 ,000 plus. And we had raised no money. Logan got ahold of the guy who had whatnot. And he, the guy goes, I'll sell it to you for a Bitcoin. So I was an early Bitcoin investor. So I had Bitcoin. This is amazing. And Bitcoin back then was worth$10 ,000. So not like what it's worth now. And Logan haggled them down to half a Bitcoin. No way. Yeah. For five grand? Yeah, for five grand. And so... I hope the guy held on to it. I hope so too. I mean, a great price for that domain.

8:34And so then that's gross service we were using. It was kind of funky because they hadn't really used Bitcoin before. So anyways, we sort of like sent the Bitcoin off and then he sent the domain to us and he sent us the wrong domain. He sent us why not instead of whatnot. But we're like, not a bad... Also a pretty good option. Pretty good name. But we're like, let's try and see if we can get WhatNot because we do like, we always had this idea that we're going to sell lots of different categories of items and collectibles. And so WhatNot always felt a little better. And luckily, I think it took us 36 hours to get a hold of the guy.

9:04But, you know, 36 hours later, we were able to get WhatNot. And we were almost, why not, for a period of time, which also would have been okay. That's great.

9:11David George:That's an awesome story. I haven't heard that piece of it before. Okay. So at the time that you guys were getting started in the U.S., Facebook marketplace was working. right? In the sense that there was a lot of activity, right? And you could sort of see the network effect behavior at that time. Is that right? And then in China, this had actually started to happen, right? The live shopping trend had become a category was early. And then in the US and the Western world, you had QVC. So talk about just the state of the market when you guys were actually starting and what you saw that made you have conviction that this was going to be a really good idea.

9:46So I guess the state of the market when we started it, so keep in mind, this is sort of December 2019 going in just before COVID. So one, I'll preface it with saying, we probably weren't very sophisticated on the state of the market. We had no idea, like live shopping in Asia. We had heard of QVC. And my impressions of QVC was like, no one wants to shop on QVC. Like it's like grannies shopping on QVC. So no one my age wants to shop on QVC. And look, there was a bunch of other big marketplaces around. But we sort of, you know, there was a bunch for our market initially, which was collectibles. You know, there were a bunch of players who were doing it, but I sort of felt like it was a little bit stagnant, like the space hadn't changed in a while.

10:32So that was sort of like the state of the market.

10:34David George:And by the way, I would just say, I think it's probably an asset, not a liability, that you guys didn't know much about the market. Because if you knew a lot about the market, you'd probably try to build what existed in the market, but like iterate on it? Yeah. As opposed to a new, an entirely new thing? Yeah, but I was 1000 % in advantage. Yes. Because look, I think the punchline, and I can get into it is, users don't give a shit about the market. Yeah. They don't care about the market at all. They care about whether they're going to enjoy the thing. It provides value. Yeah. And so there's this counterintuitive thing, which is if you try and build a market, it oftentimes distracts from like, are you building a really great user experience?

11:17Yeah, because again, like no one's, the consumer is not making a, going like, oh, this is a live shopping market and, you know, I can transact all of these things in this market. And they're going like, well, no, what are you going to provide for me? What's the value? And so there were a bunch of players who were trying to do that because they sort of saw what was happening in Asia. And it's a monster market. It's like a trillion dollar plus market today. And we were like, we don't know. We were building our Funko Pop marketplace and we were talking to our customers every single day. and then we saw our customers hacking social media in interesting ways and the way they were trying to hack it was selling items in live video but the experience was really broken.

11:54Transactions weren't integrated well. Shipping wasn't. Payments, discovery, CX. And we just thought we could build a better one of those and it would solve the problems of the customers we had in the platform. Logan locked himself in his room for a few weeks, came out with the first version of the product and I went live, sold a lot of items and the rest is sort of, you know, history from there.

12:19David George:That's incredible. Yeah. Awesome. So it's interesting to think about what you all provide. So I think it's a super insightful way to say like customers don't give a shit about a market. Like they want a product that's compelling to them. Like what do you, what value do you provide to them? Shopping often starts with intent. So how much of the idea of this is like entertainment versus intent? And like, how do you think about the distribution of the behavior of the buyers and what they're getting out of you? Yeah, I think, um, whatnot sort of like analogous to visiting a store. Yeah. Um, which is, I don't know if I go to the mall or I go to a set of retail shops, I'm sort of like, I kind of know I want a thing, but I don't know exactly what that thing is.

13:06I'm going to go walk in that shop. I'm going to go and browse around. And so I don't, what have I bought? I bought some new shoes. And so I went on to go get some new sneakers. I was like, oh, I need some sneakers. I'm going to type in the website and I'm going to go like, I spent 30 minutes browsing, didn't know what I wanted. I came away on the other side and that's sort of the whatnot journey. Whereas if you look at a lot of the e-commerce companies that have been built in the past, you know, prior to us, you sort of know exactly what you want. It's not really great for discovery. It's not really great for an experiential or having fun or being entertained.

13:41So I think that's, that's sort of the analog with whatnot. Maybe, you know, you want a thing, but you don't know what that exact thing is. You're going to come on whatnot. You're going to look for it. You're going to have some fun along the way. Yeah, that's awesome.

13:51David George:So there's all of those elements embedded in the product. So watching, chatting bidding buying returning are there pieces that i'm missing um you mean just generally discovery yeah i think yeah i think you've covered a lot i mean the the the one of one of the reasons why whatnot has worked so well to today is that there's a lot of value because it's such you can do so many different things sometimes you're going to look for a great deal um a lot of times you're going to just have an experience and be entertained. So on any given day, most people on whatnot don't purchase anything. The vast majority of people don't purchase anything on whatnot.

14:31They're just going and they're watching and they're talking with people. Entertainment, yeah. And so that's why I can do, like, it's not a perfect analog, but I like the sort of analog of like going to the shopping mall. Like you'd go to the shopping mall, hang out with your friend. At least, you know, when I was growing up, hang out with my friends, walk around the mall, have some fun. You know, many times I wouldn't purchase something. You just go there for an experience.

14:52David George:I am struck by, obviously we're long-time investors with you. And so, you know, this is, this is not new news to us, but it is striking when I describe it to other people, how big the market for this is and how big whatnot actually is. So, you know, you talked about Asia live commerce. I think the latest is it's over a third of all commerce in Asia. Is that right? Yeah. I've heard anywhere about 30 to 40 % of all commerce is, is live commerce in China. Yeah. And then what is it in the U.S. today? Oh, I mean, single digits, really. Single digits. And do you think there's any, is there any reason why you don't think that that gap could close over time?

15:31David George:No, I think it's clearly going to close. It's just a richer way in which to sell and build a business. And it's just more efficient. So, you know, if you're a fashion brand or store, you could go and set up a brick and mortar shop on, I don't know, pick a famous street. Fifth Avenue, you know, that costs you millions of dollars in rent. And you're restricted to a set of people who come to your shop at a, you know, nine to five on whoever's in New York City. And that's a great experience. You can feel it. You can talk to people. You can discover things. One, whatnot. You can set up for zero dollars.

16:11and you can have an entirely global audience that is, you know, unbounded. And so I think that that value prop means if you're a business, you know, selling consumer goods, I think you're eventually going to get into live commerce. I don't think you're going to be able to ignore it. I think you're going to be able to bring in lots of audience and that's why you see that 30 or 40 % number in China.

16:33David George:Yeah, so it's like the, if you think about just sort of marketplace dynamics and the network effect, the supply side is so compelling because it's effectively zero cost. And with a very compelling supply dynamic, lots of sellers, that drives demand, right? Yeah, it makes total sense. I mean, the numbers are just staggering. You said it's about a trillion dollars in Asia. That's a huge number. I looked it up before this. So I think U.S. e-commerce is about a trillion two, if I have that roughly right. And one of the historical knocks I've heard people say about whatnot is, well, you know, Etsy is only so big or eBay is only so big.

17:18David George:And I always find it funny when people mention that, you know, eBay was actually, if you go back something like 10 years, it was like 15 % of the overall market. And it's 80 billion of volume still, by the way. It was like 15 % of the overall market. Now it's less than 1 % of the market. So the big change that's happened is the market has actually just grown beyond it. And so I always say it's way too limiting to think about what your market is or what you can go get to think about that. eBay is sort of a proof point to me that there's at least an$80 billion market of long tail commerce to go get online.

17:54David George:But the real thing is like how much of the gap between 80 billion and 1.2 trillion do you go capture because the experience is so much better? Would you agree or disagree with all that? Yeah, look, I think, you know, to tear it apart a little bit, people will peg us to eBay because we sort of got started in collectibles and that's where eBay got started. But actually the live format is just very, very different. Yes. It means that a whole swath of different types of sellers can use the product. Yes. anywhere from, you know, when eBay got started, a lot of it was like smaller resellers. If you look at whatnot today, it's fundamentally like small business and then we're getting into brands.

18:41And a lot of those brands and small businesses would typically not be on eBay. Yeah, they would never. Yeah, it wouldn't make sense. Yeah, maybe they have a brick and mortar shop or they have a Shopify store or, you know, a bunch of things like that. So I think the seller base is inherently much more diverse. And then the thing with live is it's demand expansionary because you go in and discover new things you didn't know that you would be interested in. And so if you look at e-commerce today, you have to know exactly what you're looking for. So all it's really done is take a bunch of offline sales and bring them online in a more efficient way.

19:27You still got to know exactly what you want. And as like live commerce proliferates, it's just going to expand that market. So not only could it be 30 or 40 percent of that market, that market's going to get a lot bigger.

19:39David George:Yeah, it's sort of like it would be more akin to not so much like e-commerce, but more like the inception of department stores or shopping malls. Yes. Right, which is like actually expanded the demand characteristics of the market. Yeah, exactly. Yeah, that makes total sense. So the other thing that is so striking about the demand side, and then I want to talk about the supply side in great detail because I think that's one of the most exciting things about the platform, is on the demand side, I understand users spend 95 minutes a day on the platform. Is that right? Yeah, about 95 minutes. It's incredible.

20:12David George:That's like a shocking number and puts you on par with social platforms, like entertainment platforms. Yeah. And it's because it's fun. Yeah. You know, if you were to, if you were to sort of simplify whatnot down on like the buyer value prop is a fun experience to shop. And there's not a whole lot of fun experiences shopping online. Um, and you know, historically you'd go to a shopping mall and you know, the dynamics there are all changing. So it's said earlier, most people aren't even purchasing. They're actually just going to have a good time and experience it. Most people don't, like, you know, greater than 80 % of people don't purchase on a given day.

20:50They're just there watching, having fun. It's amazing.