What It Takes to Build an Iconic Marketplace: The Poshmark Story
They faced an uphill climb raising venture capital. They were turned down by every single payment processor in the country. They discovered they were in violation of USPS regulations, and almost ran out of money.
Yet today, Poshmark is one of the most successful marketplaces of all time.
Poshmark is the most amazing story most Founders have never heard – but should. This is a company that has more people making money on it than on Uber, Airbnb, Lyft, and Etsy combined. A network of 50 million people who engage an average of 7-8 times each day, Poshmark is one of the best case studies for marketplace Founders everywhere.
But what does it really take to build an iconic marketplace?
In this podcast discussion, you will hear directly from Poshmark CEO Manish Chandra:
- The mindset of high-growth leaders – 3 ways Founders can choose to lead.
- User psychology in marketplaces – How to align incentives, increase sharing, and create a perpetual wheel.
- Fundraising – What Founders need to understand about VC feedback, especially the rejections.
- Growth vs. Engagement – What matters most in B2C companies.
- Navigating tough times – How to keep going when it feels the universe is not on your side.
With our new $275 Million Fund II, NFX has built a world-class team and is hiring for investment, product, engineering, and marketing positions. Read more about our team and ethos here.
Manish Chandra: So the business scaled very fast. By middle of 2013 grew 10 to 15X. It felt like everything was breaking. We had hundreds of boxes strewn around in our offices. Sometimes service would crash USPS had just arrived at our doorsteps and said that we might want to sort of take your CEO to jail because you’re violating all these USPS rules and I said, you know, I’m going to cut down our growth by 80%. I’m going to cut down my marketing spend by 80%. It’s a difficult decision.
James Currier: This is James Currier with NFX. We’re a seed stage Venture Capital firms started by a group of entrepreneurs. The NFX podcast aims to discover for the Founder community what it takes to build iconic companies.
Today we’re here at the Poshmark headquarters in RedwoodCity, California with Manish Chandra the co-founder and CEO of Poshmark. It is one of the most successful online marketplaces of all time and truly the most amazing story you’ve never heard. This is a company that has more people making money on it than Airbnb, Lyft, Uber, and Etsy combined. It’s a network of 50 million people who are constantly buying and selling fashion and going at it about 7 to 8 times a day or more.
So quick background: Manish Chandra founded Poshmark in 2011with Tracy Sun and I believe it’s the most brilliantly conceived and executed social commerce platform in the western world. It’s the social commerce company by which all others will be measured.The company has raised $160 million of venture capital so far and they’ve recently welcomed a new board member in Serena Williams who’s extremely active in fashion, technology, and now in venture capital.
Manish and I have known each other now for 15 years and we’ve been working together for eight on Poshmark. Today Manish is going to take us inside Poshmark and share for Founders what it took to get here. Fundraising, developing his marketplace dynamics, network effects, and the personal growth that goes along with it. I believe we’re going to be hearing a lot about Poshmark over the next 10 years. Why? It’s clear to me that the network effects are just beginning to kick in. So we’re really just at the beginning of the Poshmark story.
So let’s get started.
We believe that behind every iconic founder is a fascinating story about their childhood. What was childhood like for you?
Manish Chandra: Yeah, I grew up in small towns in India and my father was a judge so we would get transferred every two to three years. The theory in India was that if you transfer judges, they won’t be corrupt. And so that was sort of one of the reasons you were transferred. So I had to be very quick to sort of settle into a new school, new sort of society, and that was part of my growing up, you know in being this very flexible adaptable sort of process.
I was sent to spend my. Summers with my grandfather and my grandfather owned a large sort of wholesale pharmaceutical store in the middle of a place called Chandni Chowk, which is a hustling bustling marketplace in Delhi, and it’s time to go there when I was eight. And in those days they were just sort of a level of freedom.
So even at eight or nine, I was free to roam around the entire bazaar. And now that I think about it, I don’t think anybody would allow their kids to just walk around accompanied. Yeah, I don’t know how it affected me. But just seeing people talking, haggling, hustling. I think definitely gave me an appreciation of the power of the world of commerce.
Through all these moves sometimes people would lose a year or two. I somehow ended up gaining a year or two. I finished high school at 15, and was admitted to a school called IIT Kanpur. And I wanted to go to their computer science program.
I think it was definitely a meme all of us were applying to United States and colleges and for me, I was very much influenced by an author called Ayn Rand which was you know, all about objectivism and freedom. So my whole sort of thing was, I wanted to be in that place where people are highly objective, very free, not driven by norms.
James Currier: And what part is Silicon Valley?
Manish Chandra: So my first 15 years were spent in Enterprise software. I worked for, I would say progressively smaller companies, so when I was at Intel they were 10,000 folks, and then slowly realize that the database was not their core business. So I wanted to look for a real database company. So I chose Sybase which was a very small company at that time. If I joined them there were 80, 90 people by the time I left five years later, we’d gone through a public offering and they were 6,000.
James Currier: And then you went on to join Versa. Why?
Manish Chandra: I felt like I wanted to do be part of a startup again. You know, Sybase had become big. So I ended up joining an eight person company. I was the head of product at that time. So, that company started to scale and we took that company public in 2000, and the peak when I left them we were over 600 people.
James Currier: Was this when you started to think about starting your own company?
Manish Chandra: So, ’03/’04 we were remodeling our home, and as we’re remodeling our home, the shopping was really really hard. And it’s sort of very hard to imagine today with, you know, with mobile shopping and all kinds of sophisticated things that exist what the world was like, but it was really really hard.
And so I started to see the need for this product which was collaborative shopping kind of a product, getting everyone on the same page and I kept rejecting it saying, you know, who am I to do this? I’m an enterprise software guy. I have no idea of consumers no idea of advertising no idea of what the experience should be like so for almost like six, nine months I kept saying no, no, no and then the desire or sort of the idea wouldn’t go away. Everything felt like a nail.
James Currier: So your first consumer startup was called Kaboodle, and it was a social bookmarking app for commerce. But how did you make that jump into consumer?
Manish Chandra: Around that time is when I started to set up together with a group which was how could I connect to the best minds and sort of consumer. And that’s when we first started to meet and connect. And you know Reid Hoffman was there in that group David Hornik, some of the really interesting people who are coming together and I got to viscerally start to learn from some of the best thinkers.And one of the things I remember from those times is how to rethink and rewire my brain. Enterprise software is a lot about productivity, shortening the cycles, you know, messaging versus consumer software is lot more about how you feel and how it makes you feel and how you sort of engage with them. It’s also about productivity. It’s also about other things,. But ultimately the emotion part. And that took some time for me to transform through that journey.
James Currier: I’ll tell you the number of people who from enterprise software who have tried to do consumers. Tens of thousands of people in the number of succeeded is so low. It’s so hard to make that transition. You really have to have a flexible mind, and even a flexible heart if you will. You have to have such levels of empathy in order to make that switch over because you’ve been successful in your other markets. You’ve been successful at your other jobs by doing things a certain way.
And so your synaptic patterns get built around that and to adopt whole new synaptic patterns, which are alien, is so hard to do. I mean that’s that’s an amazing accomplishment to make that transition. But there’s got to be something you’re doing behind the scenes that enables all this. What should Founders understand about what you were doing that made all these great moves work?
Manish Chandra: Kaboodle in many ways was the predecessor to Pinterest, in terms of we coined the term social shopping, but they were many sort of things around simplification that we missed in that journey.
So it was successful. But it could have been way bigger had my thinking there… We were trying to do a lot of biz dev. and partnership and distributions, which don’t work when you’re trying to perfect the consumer experience. There was stuff that we could tap into from a network effect perspective that we didn’t enhance in Kaboodle days.
James Currier: When you’re running at startup, It’s so easy to follow every opportunity, especially when things are growing and there’s just so many things you could chase. But we do a lot of work with our Founders, right, pushing them to simplify and simplify to just focus on the one or the two things where they get the most leverage.
Manish Chandra: But the things that I loved and learn from Kaboodle was the power of community.
We built a very passionate community of a few million users who were very connected. Very passionate users. The second was just understanding people’s connection to their products, and how sort of they think about it including fashion and lifestyle. And third was the power of simplicity, how simplifying and progressively simplifying leads to scale, and seeing where we had gaps and see where we could imagine.
And then the last piece was my insight and sort of looking at Kaboodle and looking at where we could take it is the analogy I sort of give is the power of coffee cup and power of Starbucks, which is how big something can become is as much in your imagination. So if you think of a coffee cup. And you look at a coffee cup somebody can just look at a coffee cup and drink it so you can imagine a coffee cup into a coffee card in create a small coffee card.
Somebody takes it into a coffee shop somebody takes into a string of coffee shops, but there was someone who looked at a coffee cup and imagine a whole Starbucks. So I think the power of reimagining what something can become was also clear to me as I stepped out of Kaboodle and looked at all the things which were taking.
Recently Pinterest went public congrats to Ben, and sort of an idea where Ben was able to reimagine, where my imagination ended at Kaboodle he was able to reimagine to make something very different. And so when I committed to a Poshmark journey it was to serve hundreds of millions of people, give them the power to be an entrepreneur, but do it through a very social platform which had very fair playing field and ultimately create the largest fashion and lifestyle platform that would be bigger than any other fashion lifestyle platform, that’s sort of the journey we are on.
James Currier: When did the light turn on for you? Did it happen in a moment when you came up with the idea for Poshmark? Because I got to say, you know in 2011 you and I and Tracy Sun are sitting on the floor of my office, my home office in Palo Alto, and we’re editing your deck, and you haven’t raised any money yet, and we’re talking through it kind of… and you described a product to me and a business plan to me that it’s the most invariant business plan I’ve seen in my career.It must have come to you at a moment. It must have come to you over several weeks. Well, how did you and Tracy talk about? How did it come to you?
Manish Chandra: I remember seeing iPhone 4 in August in a vacation, my friend was using it. And that phone was so powerful at that point in time, both in its ability to capture pictures and transmit pictures and view them simultaneously at felt like it would be transformative.
And then right around August or September I saw this little app, I think it was called Instagram. The combination of all of these things really clicked and and sort of the idea of Poshmark was reborn in my mind very, very clearly at that point in time. Tracy that night happened to be at Mayfield, so I waited for her in SF and then the three of us met and I kind of described the idea to her and she was like, okay this finally makes sense.
And so that sort of how we started the journey in that whole process. The difference I think was, between my previous journeys was, I was much shorter about my thought process I was much more willing to bet all on a single direction and the simplicity didn’t scare me. It actually delighted me.So it was very simple process and we said we’re going to only do it on an iPhone only in model which was very contrarian.
James Currier: Yes.It was.
Manish Chandra: Yeah and we were going to keep everything very simple. We’re going to charge a flat commission. You’re going to have a flat shipping system. We’re going to take care of all of the daily things and the Discovery Model would be entirely social now. These are a bunch of bets – mobile, social, simplicity, etc they were very contrarian each of them were somewhat contrarian to what the norm was at that point in time…
James Currier: But you felt very certain about it. And you know, Navin Chaddha who’s been with you through this whole journey of Poshmark, once you wrote the business plan, he’s just been stalwart in his belief.
Manish Chandra: Navin, you, Kanwal, and Jeff Clavier were all there. I remember many of them just trusted me and then you were helping me in terms of thinking about the network piece. So in fact, if I remember the first name we came up with of how to position the product was fashion shopping network. And in fact in some ways that the whole sort of power of this social commerce as we think of ourselves today was really this world of network commerce and and I remember brainstorming and coming up with those vocabularies and words with you and Stan and those have largely still been there.
James Currier: It’s sometimes counterintuitive as product people right? But we found with the most successful companies that when you really think about the language, the descriptors of what you’re building, and you articulate this to the whole team was building the product, it’s very powerful because it can literally change the way your team builds, which is what you’re saying has happened.
Manish Chandra: Three months we had a basic prototype out that we were starting to test in the market and through that first year, we had a hundred, hundred and fifty users total, right. The goal was to get most of them active, and our marketplace even though it’s a two-sided marketplace there’s a high rate of participation both sides because it’s fashion…
James Currier: That was very unique, that was a very unique discovery
Manish Chandra: And ended up causing a lot of problems later on in terms of just understanding what we were doing from a data perspective, but that time is exciting because we could activate a person.
James Currier: The buyers were the sellers, the sellers were the buyers.
Manish Chandra: That’s where through the process of discovery, we came upon this notion of Posh Party, which is our virtual live parties, which have been a whole engine of growth for us. That was for the phase of, I would say, market discovery, market fit, and just seeing if people will actually use these things and a lot of things we did was actually through physical events.
We would get together with users teach them how to take photographs and it was early so we would actually hand out iPod videos, which is people may not even know what it is today, but it was like an iPhone but without the phone . iTouch. I think that’s the word. And they used it and they started to post photos because nobody, many people didn’t have a phone at that time.
James Currier: And Instagram hadn’t taught everybody to take amazing photos yet. They were trying to…
Manish Chandra: Yeah, it was it was very early. Then the second phase was really we felt like we were starting to see something really interesting, and one of the things to me in the early stages of consumer product, and we remember talking about it in ’06,’07, on this topic is really that the best way to understand a consumer product is engagement, and return rate of your users. Not growth. That was incredible when we launched. We only had a thousand or so users. But the average engagement time is 20, 22 minutes a day, which is 7-8 engagements a day. Today it’s like 23 to 27 minutes a day.
And so that was to me very, very powerful. People were still buying a little bit, selling a little bit. We didn’t have search, it was all social, and the parties were working, people would hang out for the whole party.
But there was no distribution engines. There was nothing really… The cost of distribution was insanely expensive. There were really crude ad networks that were available.Word of mouth was hard. We didn’t have an Android product. We didn’t have a men’s product. Just women, iPhone, no web either.
So we decided to just start to throw some physical events.So we took this virtual Posh party that we have into physical events, and that turned out to be a surprisingly interesting growth engine for us. So we threw probably in the first half of 2012… I would call it a form of growth hacking. Also helped us continue scale the community because we have this high touchpoint with different folks…
James Currier: And then they were right there in the room and you could ask them questions. What do you like about this? What do like about that? And it also encourages the whole team to come to the Posh parties and see the enthusiasm of the consumers, and realize that this is a wonderful company to be with is wonderful product to work on this wonderful community to be part of and get everybody energized and excited. Kills about 18 birds with one stone, right?
Manish Chandra: It did, it did. Then the third phase was in 2013. And that was what I call scaling and understanding the power of scaling and managing it. And I remember… Still have this vivid memory of a conversation, it was like January 16th of 2013 I was lying on a Saturday morning in my bed and talking to you on the phone. It was I think in between some soccer games of the you found time to talk to me, and we were talking about how fast should the business scale?
And you were saying “Manish make sure that it’s not super fast”. And at that time I was like”gung ho let’s go”.
And so the business scaled very fast from 2012-13. We grew from 10-15X… A really interesting distribution engine that had come around etc. to the point that by middle of 2013 it felt like everything was breaking. We had hundreds of boxes strewn around in our offices. Parties were not scaling they were crashing, sometimes servers would crash. USPS had just arrived at our doorstep and said that we might want to sort of take your CEO into jail because you’re violating all these USPS rules.
All of our payment providers had said that you need to find other payment provider. We can’t really support your payment method even though it was so secure. And in the middle of all of these things we were trying to figure out what should we do around financing and everything.
And the unit economics of the business were deteriorating not that… The engagement of the users was really high, and the community was very fast, but just the whole sort of system was not yet there.
So I took a step back, and went back to Naveen overhead Mayfield and said you know guys, I’m going to cut down our growth by 80%. I’m going to cut down my marketing spend by 80%. And part of it is I don’t want to just basically get into a place where we are effectively continue to spend money like crazy, and not grow, and effectively go into a bad situation. It was a difficult decision.
James Currier: It was a very difficult decision, in particular because there was about 8 other VC-backed companies in the online fashion space at the time and the competition in TechCrunch and every place else was everywhere.
There was so much pressure. At the board level and from everything else for you to just take the market and win and grow at that moment. And you looked at those metrics and you realized that it wasn’t going to work.
Manish Chandra: It was not going to work. The system was… It was not the right thing to do for our community either, because we were not servicing them correctly.
So we cut down our marketing spend by 90%.
James Currier: So at a time when you’re growing. I asked you have competition biting at your heels. Everyone around you is pushing you to hit the accelerator more. You push the brakes and this moment right here, this is critical because you’re betting everything on a few key strategic moves. What were they?
Manish Chandra: So the big thing we had to do at that time was rebuild our partnership for the USPS, which led to the creation of Posh post, which is country’s first sort of fashion and lifestyle shipping label, which has been a fantastic sort of partnership… label P. It’s basically you can put as much stuff in any kind of box and ship it across the country goes priority post up to 5 pounds and it’s a flat rate
James Currier: And you worked with the US Postal Service to develop that, define it, get it passed it approved and launch it into the system all the way to the Postmaster particularly to support the shipping for Poshmark. And that’s why you did it.
Manish Chandra: Shipping for Poshmark and our vision was that anybody who sort of has to ship something shouldn’t have to worry about how to ship it how much it’ll cost them to ship it.
The thing about fashion is that people may spend a week or two deciding… once they decide they want to wear it tomorrow. So we wanted fast shipping. We have 5 plus million nodes across the country shipping. So it’s a highly distributed network to each other.
James Currier: Today we have five million people who are selling and shipping their fashion on Poshmark using the Poshmark label. So I as a user decide to sell something you’ll let me print out a label which I can then stick on any box with this with this partial label for the USPS and just ship it.
Manish Chandra: It just goes. It’s super simple. So anybody can get started, you know on that process.
James Currier: You know, I want to point this out because as Founders think about what they’re doing is hard. Come on, man. You got the U.S. Postal generals change the whole rules to support your business. So for the Founders who are listening like think about how deep you need to go to build the kind of company you want to build and you might need to do something like that or beyond. Okay, so big bet number one was on shipping. What was the second bet you made?
Manish Chandra: We also want to take away every non-essential pain from our seller community.
So the second thing was payments, so we were end of ’13, and every single payment processor in the country every single one of them – and they are all today chasing us for our business – had rejected us.
Then something happened at the beginning of ’14, which was I would say lucky for us is, Braintree, which was an independent company got acquired by Paypal. And while PayPal or Braintree individually couldn’t support our business model, combined magically they could. And so we got this lucky break of this thing and we had actually signed with signed up with a payment processor who agreed to support us and at the last minute asked us for a three-month escrow, which we… our balance sheet couldn’t handle that so we had to walk away from them and that led to creation of Posh Pay which is our unique payment processing thing.
The third thing we try to fight and be only just recently succeeded is we wanted to create automatic collection of sales tax and remittance for our sellers. We went to the government and asked them that we want to collect sales tax for you and give it to you. They wouldn’t allow us todo that.
So for a year, we kind of kept collecting sales tax with the hope that one day they’ll allow it and will remit to them. They didn’t. In fact, they forced us to remit it back to our sellers and to the buyers.
I’m happy to say that just about two months back, we finally launched Posh Remit which collect sales tax on behalf of every single state government, city and local government in the country that wants actually to be collected on behalf of our sellers and remits it back to them. Posh Remit, it just recently launched. It took seven years to get there. And so now at this point if you think about it, your shipping is simple, your payment is simple, all of the government integration is simple, so you can focus on two things that sellers love to do, which is how to merchandise their product and make it easy to have the conversations with their customers.
And that’s the magic sort of what we’ve created but it takes long time so going back to your advice from from a Founder’s perspective is really you have to stick to the customer experience. If you’re not focused on the customer experience, in this case both the seller and the shopper experience, and simplifying the world and simplifying the world and simplifying the world for them, I think somebody else is going to come and take it over at any area that we have lapsed there is probably somebody else who’s doing it for them and that is sort of something which is our core pursuit is to make it easy on both sides.
James Currier: And getting the government to change, getting the postal service to change, getting the payment provider… These are some of the hardest people to get to change.And you’ve had to go through it all in order to make Poshmark what it is and that’s that’s sometimes what It takes. That’s incredible.
So talk to me about the social aspects that you built into the system at first, right? This is a very unique platform because it’s social commerce and in many ways, it’s unique place because fashion is such a large sector of the economy maybe as big as real estate,.
You know… Airbnb and Poshmark, for me, appear to be sort of the leading companies for building these marketplaces. It’s also unique because of the level of passion and that the people have for it the frequency and the passion that the buyers and sellers have is very unique.
It gives you an opportunity to build a social commerce product unlike any other so it’s good fertile soil for sure. You didn’t make that up, you dove into that fertile soil. How did you till and then and then plant that fertile soil?What were the features that you feel like really starting to get the social part of the commerce?
Manish Chandra: So social was very core to what we built and it is to me when we think of community and social you can’t make it a feature. It has to be embedded in the very soul of your product and I think every product in every platform is at the end of the day our community whether you consciously inculcate it or you unconsciously inculcate it. We’re part of a community. That’s how we connected as a venture community.
But I would say for us the first insight was how do people connect around fashion – in particular how women connect around fashion. And one of the things for example in Poshmark we don’t have is public ratings of sellers, which is very contrarian to almost any of the marketplace in the world.
The reason we didn’t do it is because when you leave a rating on an item that’s in a closet it’s almost like you’re personally rating the style of that person and so a three star rating isn’t three stars on the transaction., it’s three stars that reflects my personal style. Imagine how you feel if that happened. So it was built with that empathy.
Second thing was, there was no private communication between the buyer and seller so everything was social. Everything is social, which was a big risk for both the seller and buyer. The openness of the conversation actually inculcated good behavior, and transparent behavior, and a level of sort of transparency on the dispute and the conversation and in fact many people have told us that reason they like it our platform is because they don’t get strange direct messages, you know in the system.
And then the third thing which is there on the platform is that there are so many ways to connect people and everything happens to the people. Discovery and connection of the people.
So when you think about sort of social communications, no public rating, and a lot of sort of social discovery, and initially you connect and you follow people, those were sort of the foundations of it. But the magical glue was the following notion, which is as you are listing the products, as you’re shopping the products you can also curate them.
So there is this button called the share button and what happens with that is you can share your own items to your followers, but you can also share somebody else’s items to the followers. Now, if you think about that that was one of the most controversial features that you know, we built and I was sort of very much “pro” it and at various points I had to defend that feature even today people tune into it but is such a powerful thing because it’s this one button which really allows products to be propagated indifferent things into parties into styling into your followers.
And now for a seller curating the allows them to show their style right?
James Currier: I don’t own this, but I like this.
Manish Chandra: Exactly.
James Currier: So their followers get a greater sense…
Manish Chandra: Exactly.And it allows the followers to discover new sellers. And so beyond sort of curation of items. It also is a way for sellers to connect their followers to other sellers.
So we’re probably the only marketplace where sellers actively spend anywhere from a fourth to half their time promoting other sellers, which is very strange right…
James Currier: It is very strange and it’s very unique to you guys and it’s another rule that you’ve broken that fits all the other rules you’ve broken. And this balance between following people but then looking for things to buy is a very delicate one, right?
Because it’s generally about people but if you don’t focus on the items, then the conversion rate goes down and you want the growth of the company to go up. So maybe you need to focus more on the products and less on the people but maintaining that balance that flying that plane as I said between the commerce part of it and the social part of it, I think has been one of the more remarkable things you guys have done and I don’t know that many other people who even tried it, let alone anybody who’s accomplished it.
This idea that you could get them to share other people’s closets, other peoples items to sell where it doesn’t benefit them at all, other than socially. But it does benefit them socially because it’s such a amount of value placed in the community on your reputation, right and who you’re connected to but without the ratings and that’s the critical thing.
Manish Chandra: Yeah.So ultimately for us the the balance between what I call love and money is so critical. So one of our core values is “lead with love and money follows”. When you lead with money, nothing happens. In my personal sort of belief is that when you look at a decision you have to make when you look at an experience you want to create there’s three places from which you can come and make that decision.
One is a place of fear. I’m afraid of competition. And I’m afraid somebody’s going to kill me.The other is a place of greed. Let me have more of it more of it . And third is sort of this place of love a lot of times when you sort of intentionally feeling afraid, or feeling scared, or feeling depressed, If you can center yourself in make that decision or place of love you always win.
And I find that to be very true about product decisions that we make around that evolution because there are times you feel “oh my god, the sky is falling”, you know, the business is not growing. This is not happening. That’s not happening. It’s a place of fear. Then there’s times where things are going really good and the idea is “how do we raise the price, how do we maximize that?”
Right, but neither of those are good places to be because when you create a virtuous cycle you serve your customers and you come from a place of love, then you create a perpetual wheel and a perpetual relationship that is beautiful in winning. So if you look at one of the core principles for us is, there is nothing that we do which is really making money orthogonally from sellers. We all make money together. We make money when we serve a customer and our goal is to empower our seller community, serve their customers better.When they serve their customers better ,customers come back and build a deeper relationship to the sellers and ultimately as they sort of scale their businesses, we scale our business in our platform and it becomes a very symbiotic sort of partnership.
James Currier: Yeah, but Manish how do you come from a place of love when most people are operating from fear and greed? You’re surrounded by good people they’ve grown up with fear.They’ve grown up with greed, or they’ve learned greed. How you do that personally and as a leader?
Manish Chandra: I think one of the things that you know, if you think about it, we all have tremendous what I call existential angst, right, and it comes at different points in time…
James Currier: Meaning?
Manish Chandra: Am I my valuable? Am I good? Am I loved? Am I worthy enough? You know, how do I compare myself to other people? So..
James Currier: What’s my existence mean?
Manish Chandra: What does my existence mean? So there’s many principles we’ve tried to do at different points in time, and that’s been very magical to our culture and you know, you continue to have to work at it. So it’s not that you can get rid of existential angst. It’s part of our life. But what can we do to help alleviate it? How can we make the playing field simpler? How can we make it sort of it’s more transparent?
It starts from how we compensate people, it starts from how we inculcate growth. So if you think about.. Everyone who joined us in ’11,’12, in the early years is still here. Still all … And we’ve certainly added,I think we were like 20, 30, 40 people and we are 400 people now so we certainly added more people.
But continuing to grow every person through that journey…So we have folks who joined us who may be doing something completely different, maybe they were working in the front offices of a retail outlet who are running a team of maybe 60 people today in the company. Or someone who may have never been in a company of more than 10, 20 people, who is now in a senior leadership position.
So inculcating growth internally, and the same time for a seller community providing them with ways of growth. We’ve had people who came in and maybe sold a few items from their closet and now run two different fashion brandlines on Poshmark where thousands of other sellers carry their brand on Poshmark, and they’re scaling to seven-figure businesses.
Since both continue to grow internally because growth in my mind leads to happiness, and then the second thing is how do you sort of remove some of the common pains that happen? As much as you can right…
James Currier: What I hear you saying is, you’ve got to identify and then demonstrate abundance to the people…
Manish Chandra: Very beautifully said as always you have the better way of expressing what I’m saying, James [laughter]
James Currier: But you’re actually doing it, Manish. That’s the thing you’re doing it with with how you’re running Poshmark and what you’re doing for your team the fact that everyone from the beginning is still here after eight years. Think about that.That’s amazing. Well done.
When you think of some of the harder times… I mean, you know, look you guys are just getting going, you’ve got another 10, 20 years of growth as a company and you as the CEO, you can go forever with this. You can go into home and fashion, you know home products you can go into men’s and babies and you’ve done all that, and you’re now becoming this this platform for buying all sorts of things from people, you know, that’s social platform that we all hoped we would see 10 years ago is now coming true.
We’re just getting going, but what are some of the things you had to get over to get here? What are some of those moments when it was sort of the worst and you’re going to have to get through some of those moments maybe in the future right? When you want to go from you know, four hundred people to four thousand and from four thousand to 40,000, you know, you’re gonna have to get through some hard times again.
How did you get through some of the hard times… What were some of the hard times and how did you get through them?
Manish Chandra: Well,I’ll give you one timeframe which was I think… I mean, 2014 was an interesting year because we didn’t have much money in the bank at that time. We were operating this company trying to grow because this was the time where we had just all growth and we’re growing again and we recruited some amazing leaders who are still here.
You know, John McDonald joined us in late ’13 early ’14.He’s our chief operating officer today. Barkha who’s our chief data officer joined us. They joined us because the strength of conviction. I was very transparent for them. You know, where we were, and they all, you know, are still here and helped us grow and you know work through those things and there were amazing times in ’14 to learn the level of learnings we had.
What we discovered is how much love our community had even when we’d cut down all of marketing the business was still growing because of the intense engagement our community has in around the platform. But all of ’15where we’d grown very very fast and we had at that point been rejected by 200different investors.
If you name an investor, we probably pitched to them and got rejected by them. It was a crazy time. We were I remember sitting with Tracy at this coffee house in San Francisco as one other investor who felt compelled, because they really loved us but they didn’t want to give us money, to call us and tell us that you know, sorry can’t give you the money.
And I was like, I don’t even want to take this call. I know what he’s gonna… And it was it was a really difficult time. But you know, one of the things that happened in that time frame was you know for me, our mindset is, you know, continuously learning. So everything that’s bad, we learn from it. One of the investor’s had asked us to provide them with data in a very specific form.
And so as I was looking at that data as we were giving them… I was like frustrated, you know, it’s another kind of data that these guys want and grumpy, cuz you know, I was like getting painfully… end of our investment rounds and that data was being cut and put together.
I looked at those numbers, and what was funny was this entire spreadsheet of maybe a thousand cells had the same number or close to the same number. What it told me was how robust the cohorts of the platform were because he never looked at that from a different perspective, which allowed us to make judicious business decisions in the future and turn sort of the exact economics of the business around and so…
James Currier: So there was an investor who was gonna say no to you…
Manish Chandra: Who did say no.
James Currier: Who did say no to you, but in the process showed you a way of looking at your data which gave you an insight. And you learned from that, you didn’t just take the rejection and say “Well, they’re idiots.” You said, there’s something to learn here, wait a minute, and that has helped you in the years afterward.
Manish Chandra: And so what I, what I find is that in general when people are giving you feedback it’s very hard to accept it at the moment, but there’s wisdom in it. Even in the worst critic there is wisdom.
So even when my community today is up in arms when investors are criticizing you, your team is criticizing you about something, if you can and it’s very hard at that moment to take that feedback, but over time if you can absorb that feedback, there is some wisdom in it. There’s some ways to process and evolve. And if you evolve, you grow and I believe a business, if the leaders are not growing that the business can’t grow.
So a business doesn’t not grow because of competition, doesn’t not grow because of investment it doesn’t… it stops growing when the leader stop growing. And so part of it was that there were beliefs, there were sort of axioms in the business that had to be challenged, and that data challenged that axiom and broke something, broke the assumption that oh my God, the system is sensitive to this data point and it wasn’t and that allows you to fine-tune the system.
Once you do it unlocks a whole new sort of engine of growth.And many times you need a leader who believes in it on either on a distribution side on a particular area.
James Currier: Right? So I mean this is such a great example of where these decisions are unclear. You’ve got a very complicated business.You don’t have the team necessarily in place or they’re just getting in place.
The capital is only a certain amount of capital, you know, you guys had the decision to move more toward new products, right? Because it had all been used up until that. And now it’s a lot more to used… A lot more new than it was back then. The integrations with the fashion providers and the partnerships with them was all still to be done on the women’s side and that could be a very viable way to go and I’ll be honest that’s kind of what I wanted you to do.
I want to… to get more into new and more into… and lockdown the women’, and then maybe a year, two years from now, let’s go after other categories then. But you’re like no, let’s do it now, and Hans want to do it now and there’s all these different disagreements, and in the end once you did it, it was hard.
After you made the decision to go broad, the broadness was kind of hard, things weren’t really taking off, and so it kind of looked for a year like well, maybe that wasn’t the best decision.
Manish Chandra: It took 2 years to actually fully make it work.
James Currier: Right, and so I think this is just such a great lesson for all founders that there’s all these decisions that we make that, we don’t know at the time. There’s lots of good arguments on both sides.
And in the end you have to have a guiding light, and you had that guiding light, which is I want to be the platform and I want to do it with love, and that end up being right for you because you and your team, Tracy and… have been navigating this thing from that perspective, and therefore it worked for you. And it had been another team, t might not have worked.
Manish Chandra: I think there’s another dimension James which you know, you were sort of very very important in that mentorship process, is what are the decisions you make around your team during these phases of mass upheaval?
You remember that conversation, I think it was in ’16 or’17, when we were talking about senior leadership in the company and how to evolve it. I think one of the pieces that I feel very proud of is that we’ve been able to add tremendous number of senior leaders in the business and at the same time continue to grow out original set of leaders into bigger and bigger roles.
And this bridging, I remember was one of your pieces of wisdom was, that creates a strength that is really powerful when you have people who’ve been with you for a long time, married with people who you are bringing in, needed for the next phase of growth and and bringing them together, and that to me I think is very unique about our company. You don’t see that a lot in Silicon Valley where every generation of leaders kind of churn and you know, the wisdom is let’s get the best people and these people don’t scale and that people…
And what I’ve found is that you know, nobody interviewed me every year to say am I the Right CEO for this job? Right. I was just given that job, right? Yeah, so I was like fine, you know, and so why should people who are working this team not be given that opportunity and that sort of the ability to give them the right level of support, not just by me but people that they needed too, has allowed them to scale.
And what happens today is that we have both a true north, which comes from people who’ve been around for a long time, and evolution and innovation, and now in time people become the true north because you know, for example, somebody joins three years back is there and that period of ’16, ’17,’18 was a tremendous year.
You know, growth in the senior leadership, growth in core leadership. For example Leann who joined us in the early days as a community manager now manages a team of hundred and fifty, hundred and seventy people that spans the world. And so so that’s sort of seeing seen her grow and take on that leadership role at different scales and stages has been a very interesting journey because as much as we are growing as leaders, you know, if you can have the other leaders grow…
And I really credit you for sort of that core nugget of wisdom about this bridging approach of first generation of leadership second generation the third generation if you can preserve the best elements, of course, some leaders will not work out and some folks… and all of that, but broadly if you can keep it along, it creates a much stronger business much stronger community.
James Currier: Give them new projects, give them new responsibilities put them in places where it serves them, and serves their transformation, their growth.
Manish Chandra: And we’ve seen that even in our community. We’ve seen people who have been with the community since the very beginning scale up, some people for a couple of years left and then rejoin and we’ve seen that in the company as well. For example, Maria who’s heading up our Canadian team left the captive couple years. We recruited her to now head up Canada and open a Poshmark Canada for us.
So so it’s just this ability to sort of create this ecosystem which can come together take the business to the next level. Maybe there’s different parts to the journey kind of go there and then come together and take it to the next level has been fun to watch and see and that gives me again hope that the culture we’ve created both in the community and in the company can continue scale, because scale and evolve of course and because it has to evolve naturally. But each of those things are very powerful because they are required for something to be healthy and viable for a long period of time.
James Currier: Totally and you know, you guys have a network effect now that just will not quit and we’ve seen how powerful those are and now you have a culture that will not quit and we’ve seen how powerful those are as well the DNA of that. Those two things combined tell me that this company is going to be here for a long, long time.Long after you’re retired which is going to be another 20, 30 years hopefully.
Now two things I wanted to get at before before we end here.Is there anything that we should talk about as lessons for Founders around your fundraising journey?
Manish Chandra: Very important. I think one of the things that I have found about the fundraising journey, is that the market feedback on your business, broadly is very accurate. Early it is different, you know when you’re doing it on the belief and if you don’t take that market feedback seriously and process it and factor it into your business, you will keep running against that wall. Whether that feedback is on growth, unit economic, profitability … Processing it is important how you act on it is of course up to you.
And so I would say the first set of point… In ’14 when we went out we got this feedback.We didn’t take it seriously, we thought, you know, these guys just don’t understand our business, dadada. In ’15 we did, and there’s a big difference… we accepted the feedback, we processed it and from that point onwards every time I have a meeting with someone whether it is a customer, of course, you know, you take your customers feedback seriously, and so why not your investors’ feedback on the sale of your stock, right, and so it’s very very important.
Yeah, and their specific suggestion how to fix it may be off, but their feedback on what how they see your business is going to be important at every stage and how you choose to act on it is yours, but if you don’t act on it and you reject it, then you would not be able to build the business next level which requires the next level of capital, fundraise, etc.
And so. So that has been sort of a journey that has been interesting at different stages on on fundraising. The second thing is the ability to simplify and simplify and simplify your message in terms of what you’re trying to do and be able to describe it is there.
And third thing is as the business scales and then business has real revenue, and real sort of economics that are happening, at that point in time the business is going to be valued more from, you know, metrics perspective and all of that and you better have sort of an understanding of that.
So those are different phases of the journey…
James Currier: You know, at the beginning, it’s on belief and personality and on you know changes in technology, and then it’s about, you know, the core metrics, and then and then later on it’s about the size of those core metrics, right? And those are three different audiences from a, from a fundraising perspective and they have different languages.
Manish Chandra: And if 20 investors are giving you one feedback, particularly venture investors, and you’re not processing it fully, and then your missing something, feedback would be around TAM right and you might be like I’m in a big business. Feedback could be around unit economics, your cost of sales. They are real feedback, and a lot of times I find founders sort of disbelieving it and taking it very personally and of course I took it personal all of us will take it personally, but being able to process that and figured out how you sort of act on it so you can come back is very important.
James Currier: And come back in a simple way. I think I think your point about simplicity is so key. I think as Founders we want our souls to be seen and validated. We want the investors to validate how complex our lives and our businesses are, and how smart we are to have overcome what we’ve overcome so far, and how far we’ve come.
And really they just want it to be incredibly simple because they’re looking at another six deals that day and they’re like, what are you doing? Why? And so it’s it’s sort of little heart-wrenching to make it more simple and more simple, but that’s what’s required to actually communicate and you find that’s true with the customers as well. So seeing those venture people as… Those investors as customers. Simplifying for their benefit is part of the journey.
Manish Chandra: The other dimension I think in the growth journey is being able to attract and grow the team that you have.
And I think making the room for people around you and growing them is really really important, and each area of growth and financing, there will be people who will come and join your team, who are going to leave and it takes time to make room for them right at each stage. Onboard them properly, figuring out to work with them the right partnership how to sort of bring it along.
And at each stage because you’re attracting, and then you find that founders who are able to do that incredibly well, you know. ScottCook or even Mark Zuckerberg and many others just have different scale of businesses that you end up building right? Because at the end of the day, it’s all about not just the community you’re creating, not just the team, but the community of leaders that you’re creating around you.
James Currier: So identify, attract, and then onboard. Integrate.
Manish Chandra: And getting the best of that talent and and sometimes the talent comes from network. Sometimes you have. Get people who are great professionals active, you know, so executive recruiting in something sometimes people say, oh it doesn’t work and I find it to be an incredible tool to get best access to the best talent out there. And that money is hundred, hundred X ROI across the board and that’s super, you know important.
And the third thing is. I feel like at each stage of the business, you have to change how you operate. And last year middle of last year, I was going through this sort of six-month process in the first half of 2018, where I felt like I was just writing from one meeting to the other and just you know, sort of like feeling very stressed and tired and exhausted and prior to that and never felt that.
It was just sort of like, what’s going on? And so I sat back and scratch my head and said, you know, how do I sort of refactor how I operate? Because clearly I’m creating all of this stress, people are stressed everyone sort of… and we should be really energized.
And so I created something called CEO time. So instead of going to meetings, now meetings come to me. And what I did was each CEO time is given to a functional leader who needs to engage with me and they’re usually the repeated every week or every other week. They create the agenda. They prepare for that meeting and in those two hours, they can either ask for a decision, educate me, brainstorm, inform me, or sort of change something in their teams and they invite the right cross functional teams for that.
And those two hours, I’m a hundred percent focused on them and their business. So whether it is around data or product or HR or what have you and you make a lot of decisions in that process and it has completely streamlined my calendar and then these executives are sort of reworking it.I’ve stopped, you know, I can sit here and talk to you for an hour instead of running to 10 meetings because the calendar is completely restructured.
And that has been a meaningful shift and I couldn’t talk about it because I wanted to practice for at least a year now. It’s been a year and it’s working reasonably well, I mean, there’s stuff you have to fix that’s been very powerful for us.
James Currier: I wanna ask one more question, which is what’s next for Poshmark?
Manish Chandra: So for us we’re very excited about three things. One is including more of the world in our community. So we are planning to launch Poshmark Canada, very soon and super excited about it.
James Currier: So right now it only operates in the only in the United States?
Manish Chandra: Only in the United States today. So it’s very exciting. I think by the time probably this podcast goes live, we’ll be live in Canada.
Second is we believe that our social commerce platform can serve beyond fashion. And so we intend to go into … adjust in categories and sort of open up there. So the first broad category beyond fashion that we want to open up is home and home decor which is, you know, in many ways by consumer journey 15 years started there so I’m excited about that. And third thing is coming up with new ways in which people can engage with each other and interact with each other on platform, you know things like video, things like styling, you know, different kinds of communications.
So we expect to to sort of evolve and energize around that.And so which is, you know, again the same thing. More people, more ways in which they can transact, and sort of sell and buy, and then just more love between them.
James Currier: Wow.This reinvention, this constant reinvention Manish, changing, you know, the places you lived every two or three years as a kid, and now you’re changing how you run your business every two or three years. It’s the same thing. It’s an amazing superpower you have, that’s amazing.
That’s a great way to end. Thank you Manish. Thank you.
So that was Manish Chandra from Poshmark down in RedwoodCity, California. This is the NFX podcast. You can learn more about network effects, growth, fundraising, and building iconic companies at nfx.com. Follow us on Twitter @nfxguild.