Interview: Building a Marketplace – What Your Mother Never Told You

is Chad said I was running a little business called oDesk and I did that for about eight years and let me start by saying I have tremendous empathy for guys like Marco and everybody in the room because I know how hard the CEO job is I did it for a number of years and I can tell you right now is this being filmed shoot the venture world is so much easier at least that is now and as Chad said I think I know a thing or two about running market places but what I've also recognized is just being out for about a year I left last April and took a little bit of time off before joining Polaris it's moving so fast that things constantly change so I could try and tell you things about market places but I think we'll learn a lot more from people who are still doing it so that's why we're here to talk to Marc Evan we have great panel to follow so when we dive right in and I'd love to hear just a little bit about you and thumbtack and I think maybe your founder story what was the thing that compelled you to say hey we got to do this sure so my story is very easy I'm a college graduate that's all I got before coming and doing contact and I worked with my co-founders in college we started a non-profit together that was involved in the sort of social security advocacy reform advocacy of all things but it was a startup not on there we go and but it was a startup you know we wrote some software we helped get it distributed to 300 campuses around the country to help them sort of advocate and sort of organize and we ultimately had no effect on the national debate and but we had a huge effect on ourselves which is we realized how much fun it was to start something out of nothing rally people around a shared vision and just kind of go for it and so we decided to do it again but we decided to get out of the political arena and go for-profit and move to the west coast all of which were good decisions and this is actually where we did something that people tell you not to do which is decide to start a company and then go hunting for an idea and the common wisdom is to sort of find a problem that you have and sort of solve something that you know actually I think that's a bad idea because I think most of you are weird and not normal if you're coming to an event like this like me like Gary there's not sort of normal and if you extrapolate from yourself you're gonna potentially build something that nobody wants I think that's why there's so many travel apps it's okay to scratch that one off my list I had travel app as my next idea and so and so we really just said to ourselves post ourselves a very simple question which was what is the biggest problem we can solve a technology and none of us were nuclear physicists so we constrained that slightly to being problems we can solve with software and we just started talking and I sort of found an internship working with one of my co-founders and so we could spend the summer together as brainstorming and I have to admit that thumbtack was not the first idea we came up with second idea what was the first idea first ideas in the summer of 2007 was a financial accounts aggregator a way for you to track your spending you're saving if it sounds like mint it was exactly like me and it was a very bittersweet feeling in September of 2007 when mint launches and ends up winning TechCrunch 40 or whatever was called at the time bitter because we weren't in a Ketchum they did a great job and you know hats off this whole for 170 million dollars two years to the day but sweet because it was very validating and you know many people I remember my brother most specifically told us that our idea was stupid yeah he's like who the hell is ever going to give you their credit card information their bank information that's crazy I'm not going to do that nobody else is and I think that was a reasonable concern and yet it turned out to be wrong that if you brand it well and you sort of built trust and safety and sort of the messaging you can get people to use it if there's enough value for it so we soak for a little bit and then we went back to the drawing board and the observation that led to you know the next six plus years of work was honestly pretty banal it was why is it so hard to hire a plumber now here we were beginning 2008 where you could buy any product you could think of and in sort of four clicks and a week could show up at your doorstep you can stay in touch with all your friends anywhere anytime find any piece of information on any topic and yet you still to waste an afternoon to find a plumber that you're trying to pay $600 to to fix a problem that you have like that just made no sense to us and as we started to unpack that what we saw was that the solutions that were available online right the Yelp stages is the Craigslist of the world were nothing more than online versions of offline products they've gotten gussied up with pictures and reviews and some amount of sort of content that didn't exist offline but the end of the day the user experience was the same is it directory Yellow Pages or as a newspaper classified and you know we thought to ourselves you know naively at the time but it was like there has to be something better there has to be an easier way to greet customers and professionals together and it took us the better part of three and a half years to actually figure that out and make it all work but that was the sort of impetus from the get-go this feeling that there was an inevitable better solution out there and we just had to go find it and you know like good marketplaces and networks they don't just aggregate a market they actually enhance it and Angie's List was actually doing a pretty decent job of aggregating right I mean they had supply they had a man but what weren't they doing that you saw is the opportunity so at the end of the day I'm sure all of you have felt this by and large and you have a problem you have the money to solve the problem but you don't know who to hire and historically the way you solve this problem was by calling down a list of phone numbers either ones you found in the Yellow Pages or you found online but you yourself as the customer had to go hunting or fishing to find a professional who was available and interested in doing your job and similarly from the professionals perspective they had advertising solutions but they were just fishing blindly they were putting ads up on Yelp or on in Jesus hoping that a customer would see them there was no marketplace those bridging these two sides and matchmaking and what we realized is that there should be like tinder for plumbers as unsexy as that sounds what you want is a really fast way to get matched with the right plumber and that's they go on a date is that kidding and then have them come perform the service whoa whoa whoa keep it cleaning that's a family proud and so and and so that's really what we're doing we're a matchmaker for customers looking to hire professionals and so the way thumbtack is different is that instead of having to call yourself or reach out yourself we do the matchmaking so you come to thumbtack and you define what you're looking for you lay out the project that you're trying to accomplish we take that we then sort of match it against our list of professionals to send it to the ones who are qualified to do that who serve your area and we know have done good work for that type of job in the past and we ask them we say hey Joe hey Jane are you interested in this job so for the first time for these professionals customers are being brought to them they have an app they open it up and it's an inbox and it's an inbox full of potential customers and they can look at it they can see everything the customer told us and if they believe they're a fit at that point they pay some tag to be introduced to that customer and send through a quote and pass along all of their reviews and profile that we've collected and so then for the customer without having to do any work they're getting these introductions to qualified available and interested professionals with the price that they're willing to do the job for and all the reviews that you need to make a confident hiring decision so we've empowered you to sort of get to done much faster and much better than really anybody else so how many bids does a client get with each a submission so we cap it at five and our goal is to get you three to five what we found is that one to two 0 certainly is not enough choice you don't yet feel confident that you've really understood and what the market will charge for your service but once you get to 3 at that point you're very satisfied you like ok great thank you you've brought me real options and now I can choose among them because on thumbtack the average purchase price is pretty high $600 so it's not a it's not like a casual purchase this is you know your water heater broke you want to stain your deck you want to find a cater for your kids and graduation party yours you're spending hundreds or thousands of dollars and so you really care about who's going to come do it and the value and the service that you're going to get and so we want to empower you to make that choice quickly and effectively oh my gosh there's so many questions here so your business model is one of match so if I think about marketplaces like match.com for example it's kind of similar like you're going to introduce somebody to their potential me and if you're successful well then you lose two customers right because you know if you hopefully you lose two customers if you match a guy in a gallon they go they're gone right there's no need for them to be on that you're kind of similar so you have to charge a lot for that match because there's no monetization after the fact yeah so first off I think the matchmaking concept is exactly right and to unpack that a little bit if you think about a date and this is probably not the way most people think about a date which is why I said we're not normal it's a double opt-in matching problem right both sides have to say yes that's very different than a typical local commerce question of where should I go to get a bagel to buy my wife flowers which is actually a single opt-in decision if the store is open I can go in and buy flowers for my wife the the problem is directories solve the where should I go question very well but not the who can come to me question which is much more of a sort of dating and double opt-in type scenario now - Gary's sort of point about the monetization it's true that we just monetize the introduction unlike marriage one of the sides you know the professional sticks around forever and so we gain an enormous amount of trust and sort of brand love for bringing them a client that sort of hires them and pays them and that's why they stick around that's why we have 200,000 active paying professionals on the platform today which is more than yelp or Angie's List combined and we don't then monetize their future interactions be it sort of a subsequent job or a series of jobs in the future we hope to build out our path to facilitate the whole lifecycle of the job between customer and professionals so things like scheduling recurring payments a CRM system to stay in touch in our dream is to just be the substrate through which customers and professionals work together always but we don't believe you can force them into your platform or your marketplace you know Oh des Elance had the benefit to some degree of these services being virtual and so without the platform and their tools there was really no way to work together but the plumbers come into your house you know if you want to call them or talk to them once there they they're paying cash like we have zero shot at sort of keeping you inside our walled garden if that was our goal and so we don't even pretend to try we want to make great introductions and then give you any means necessary to sort of get the job done so there's no subscription fee for the providers the two hundred thousand providers there's no membership fee like Angie's List for the customer it's simply but you do you did come up with an innovative business model which is how do we make enough for the mats will you charge for other people for the introduction whether or not they get the bid so over time do providers feel like a thumbtack I just paid a play but I never get to play you know like no so I mean there is sort of maybe superficially that concern but for these professionals they evaluate us on an ROI basis dollars in and dollars out and so when they come to thumbtack and they build a great profile they start engaging with customers and win this business we deliver incredible ROI and they love it and they never leave because it's effectively an ATM and they learn how to operate it and they learn how to take money out of it and so they recognize that they don't win every job but that's no different than their entire life as a business owner right not every phone call they got turn it into a job not every email they got turned into a job and our sort of promise to them is we'll make introductions to customers who want to hire somebody like you but then it's on you to sell them right you've got a hustle you've got to prove while you're the guy or gal for the job and they totally get that and they appreciate it because thumbtack is the most performance-based marketing solution they've ever had and so you're not in the middle of payments so they pay you based on whether or not they get accepted for the gig and just one tactical question what if nobody gets the gig you send over five bids nobody gets it do they still pay or do you reach on them the money how does that work so our promises get you introduced to a customer who wants to hire so if they don't read your quote the quote that the professional sent to the customer will give a refund because that's not a real introduction they never saw what you said but once they read it that's when our charge is effective and so the charge stands irrespective of whether the customer hired or not thankfully we've built a platform and have a great enough network that customers hire at a very high rate and our why that these professionals are seeing is pretty immense so there's now over a billion dollars a year in commerce going through the platforms we don't move the money but because we have these quotes because we get feedback on who's getting hired to reviews we know sort of the marketplace activity and you know a billion dollars keeps a lot of pros happy so you you mentioned one metric more than a billion dollars and I would say a round of applause but I want to take the time to do that but that's that's a huge accomplishment a pretty short amount of time to have a billion dollars of gross market value going through your platform so kudos for that that's one metric that you can measure your success it's how many dollars are going through what are some of the other key metrics that you worry about and I'd love to hear you said the providers are very happy and obviously you have to keep the clients happy you'd be great to talk about NPS or anything you use there yeah so I think at the end of the day success is all about engagement so we look at higher rate so how often a customer hires a professional and that's an indicator of how well we've solved their problem how quality our matchmaking was how effective our pros weren't selling themselves and we look at how often they come back so if they have a great experience how likely are they to come back in the subsequent 30 or 90 days thumbtack is not a snapchat you're not going to use it ten times a day because you're spending $600 a pop but these are things that as a household you need many times a year so we track how off and you're coming back and how that's trending and then on the professional side we look at the retention so how engaged are they relative to the number of offers that we send them for how long of a time period and we MPs both sides so MPs as Gary mentioned is sort of Net Promoter Score to measure it's pretty rigorous and tough measure of how happy you're making your audience and we measure it on those sides and what are you comfortable talking about what your MPs is for clients and providers yeah so the one that we've talked about is on the client side so when we get you three + introductions wavin MPs of over 50 and it's not surprising right imagine your life and here you are wanting to get something done it's been on your to-do list forever somebody maybe at home is nagging you to get it done but you don't know where to go and somebody tells you about thumbtack or you find this online you tell us what your project is and ideally within the hour we've got you three to five qualified introductions from great professionals and you're on the way to getting it done you can understand why people love it and because it solves a real problem that they have in a way that sort of empowers them to do it you know I hear people say you know speed quality and price pick any two you know or pick one what well and as you're talking I'm saying oh you're about quality know you're about speed or maybe you are about price maybe you're not but what how do you look at those metrics and what do you think is the priority for thumbtack so I will cheat I will combine price and quality into value and say it's about speed and value because when you're doing the stuff this isn't like intertextual you just added speed you tricked me and you added all three so you're gonna you're saying it's about quality impress ah most efficient matters - we got to do all of them so at this isn't this is a chore right hiring a plumber is a chore it's not something that you crack a beer open and lean back and you're like yeah now I'm going to hire a plumber so like we have to like we have to get it done for you because you're not like if you're not trying to spend your time doing this and more importantly than just solving your problem quickly we have to convince you to hire one of our people because when you're in get it done boat maybe you shoot off an email to that friend who lives down the block that has all the connections and you post on Facebook hey anybody know a good plumber and so to make sure that we are the network that solves your problem we got to move quick there's no way around it but when you're spending hundreds and thousands of dollars you really care about value and I think everybody in here you know even if they live in this zip code or the codes around it like they still care about value you want to make sure you're getting a fair price and that means that you're getting sort of quality service for that price and so we work hard to make sure our pros are delivering that because that's that's what customers care about we found that customers rarely pick the lowest quote but they've also rarely picked the highest quote right we're looking for value they don't want the sort of bargain basement price there are times right maybe your turn hauling junk and you just need it out of here and you're just looking for cheapest way to do it that happens but you're painting your apartment you know you're building a new fence putting a tree house for your kids like yeah price is not the only criteria it's mostly home services yeah so it's about fifty five sixty percent home services in terms of gmv second biggest is Event Services so photographers DJs caterers wedding bands things like that then we've got instruction so for kids excuse me tutors and singing coaches and then wellness so personal trainers fitness instructors personal or massage therapists things like that so all of this is very inspiring and we're looking at this guy and has a billion dollars of gmv a year going through very very successful company unicorn lots of funding how much have you raised today we raised one hundred and fifty million dollar only one hundred and fifty million dollars to date and but you didn't start there like marketplaces are really hard you talked about chickens and eggs and you know I think about your business and there's this hyper local problem the plumber in San Francisco does you no good in San Jose and he definitely does you no good in LA and you don't have liquidity like it what if you have no wall paper hanger and I call or I I want a wallpaper iron so how did you where did you start and how did you expand against a horizontal and you know the geography the categories the quantity the quality like how did how did it grow right where'd you start I'm having flashbacks yeah I'm trying to get him to sweat if you want to sip a beer before you answer go buddy so here's right to give you a sense of the trajectory we started 2009 and over the course of our first three and a half almost four years we'd raise six million dollars and in the next 15 months we raised 144 million dollars which is indicative of how long it took us to get the flywheel spinning to get the product right to get the business model right but also indicative of when we did it just sort of took off and the early days as sort of Gary was talking about is all about building the quiddity marketplaces are in the business of providing liquidity matching you with whomever you're looking for we have the challenge unlike an eBay on like a oDesk where we don't have one network you only care about the professionals that can serve your home or your child and so the truth is it's a total grind there's just no other way around it and the way that companies solve this problem and there's great blog post and titled and come for the product stay for the network and to unpack that if you think about you have to pick a side and typically you pick the supply side because they're more motivated because they're the one earning money and so they're on the hunt for customers all the time so as we did we pick the service side the this fire side but then how do you get them to show up because you can't credibly promise them more business because you don't have any and so often you start by offering the tool in fact oDesk has to store it and it started as a tool for managing sort of outsource sort of workers and thumbtack started by offering a tool to our service professionals to post on Craigslist and so we said hey come to thumbtack fill out a profile and then we'll give you sort of a really easy way to post a pretty good-looking profile on to Craigslist you know there are customers and you are trying to advertise yourself the great thing is that was a powerful sell it got thousands tens of thousands of professionals to sign up so much so that we then had a magnet we had enough of a mass of professionals that we could begin to attract customers directly to us and here's when we finally were able to sort of ditch that Craigslist tool and instead of having to sell that we could sell credibly to a new professional hey we've got more customers which would bring in more professionals which would help bring in more customers and that flywheel then really got spinning but it took the better part of two two and a half years in three years to really get going so are you just strategically brilliant or did you just sort of look into it like how did you navigate through the whole time have you always been you know sort of a year in advance I know this is what we're going to have to do or if there been times where you're like ah let's just go this way and you know talk about a couple of pivots or key decisions that you made that just turned out to be so luckily right I think we're just really stubborn and we just never gave up - my co-founder has described the early years as wandering around in a dark room looking for the light switch right you're just kind of like patting the walls you know it's somewhere you know it's usually sort of yay hi you don't know where it is and so you're just tapping around and we knew there was a light switch there's always a light switch in the room you should have to go find it and so we I think the framework I use is not particularly sophisticated was what is the most existential threat to the business and that's the only thing that matters and so at first it was getting more getting suppliers those suppliers nothing else matters so we sort of iterated on that came up with the solution then it became get customers no customers it's all over we figured out how to do that then it's like okay how do we really refine the product experience such that it makes both of these people happy because if they're not happy you know nobody's happy and and then finally it was sort of the business model I think here's an example of sort of how we iterated through something so the business model we have today the introduction based model is actually the third model we've put in place and we've put in sort of six variants total and it first started as a commissioned model because we'd look at a company like or eBay or Amazon and we say to ourselves well everybody's using everybody's monetizing on a commission that must be the way to do it and I think you know intellectually that may be the purest way to monetize a transaction but turns out when you're dealing with real-world transactions that's really hard to pull off practically simply staying in the loop closing out the transaction knowing who won when and for how much especially if you're not in the middle of the money if you're in the middle of the money it's easier but still hard but still hard you know you look at a lot of local marketplaces and they they haven't really been able to do it many have not and so that didn't work we tried a subscription model where that was much clearer to professionals we're able to collect very effectively got millions in recurring revenue but it had a fundamental problem in that it actually made the experience for the customer worse because when you charge a professional a flat fee what's their incentive about which customers to respond to all of them exactly right and that means that as a customer you're not getting particularly qualified responses you're just getting pros for spraying and praying we're acting very rationally I should add it's not like they were being stupid they were being very smart but it made our customer experience worse so we have to throw that away and which was pretty scary right so we raised our small for the now normal back then series a of four and a half million dollars and we were doing two two and a half million in recurring revenue and we turned it all off and we turned it all off to move to our introduction based model because we knew and sort of had tested it and to be better for our customers because it qualified the matches better and actually then proved to be better for the professionals too because if aligned our fees to the value they were getting just getting introduced to customers and ultimately hired but we we have the benefit of never having done anything before and so we're very naive which is healthy because it means you sort of take a fresh perspective on things and you know we didn't know you couldn't build a self-serve small business advertising platform we just figured you could and so we went out and did it and I think our saving grace is that we we ended up being more stubborn than naive so we managed to figure these things out so so let's go back over the seven years and take us to a moment take us to your oh shoot moment where you know you were faced with a really thorny decision and you know you've probably lost some sleep over it although I have on the venture capital side I spoke to an entrepreneur and I said how are you sleeping at night he said I sleep like a baby as a CEO he said I wake up every three hours crying so take us to that take us to that moment where you you couldn't sleep you were faced with this thorny decision and you know it was your oh shoot moment I am some time we almost died and that was the fall of 2011 and that's where we're trying to raise our series a so a little back story in June of 2010 we raised an inch around 1.2 million but job high quality great angels and and all of the feedback had been I think reasonably hey go make sure you solve this chicken-and-egg problem go build the quiddity show that you get that flywheel spinning and you'll be set and we took that to heart it made sense that was by far the biggest problem and challenge in building this marketplace and so we worked super hard on that and now here we were the summer of 2011 and honestly we're we're pretty we're feeling pretty good about ourselves because we had solvent and he was growing it was moving in the right direction and so you know chest chest puffed out we went out to go raise a $10,000,000 series in you may remember from me just saying we raised a four and a half million dollars here's a and that's because we were beat down we had 44 meetings in let we talked to 44 different firms and we got two yeses and yes they were from the last two firms we talked to and that's how it works did the pitch get better did the roof on so the pitch got better the ask got more appropriate and actually we jumped into gear because the feedback we got was hey guys Congrats on getting a flywheel spinning we don't believe you're going to be able to make money or like yeah but we haven't tried you have to you have to acknowledge that there's real value being created here we'll definitely be able to figure out a way to make money we had a story that was better than that about the plan to get there but people were just sort of shrugged and said you know what we don't believe you which was brutally frustrating because what they're saying is that they didn't think we could do it and it was just a naked dislike of us or unappreciative us there's no fun and and that off also sort of you know went for tea at you know sort of supposedly very smart and well-respected firms and say no and say you we don't believe you can do it then you start doubting yourself and your team starts tatting itself and it sucks a lot and now thankfully we took the feedback to heart we said you know screw you guys we can make money we put in place the subscription model it copped pretty quickly where it will show that at the end and a couple of VCS appreciated that we would be able to make this work and they sort of invested in us and now we've made them on these con paper a bunch of money so Marco what you know sort of a valuable lesson you got you got rejected by forty frumps all right a good friend of mine started a little company they silly idea DVDs via the internet called Netflix and they were turned down by forty farms and he said it was like I'm not going to use his words but he said it was incredibly painful for for six years and so well weld um what I've learned switching from operator to venture capitalists I said I'm never going to be that guy that sugarcoats it I'm going to tell entrepreneurs why I'm not interested I'm going to look him straight in the eye and say it's just not for us and here's the reason why and what I found is that it doesn't serve the venture capital as well you're a jerk you don't love us well these guys did so tell me about that in your experience do would you rather have people give it to you straight and like really mean it or would you rather they make you feel good and you know to tell you know in a nice way or would you rather have the feedback I'd like to believe I'd rather have the feedback you know it stings I don't maybe like a handful the ones I really like so actually in this interactive get it made you better right you you honed your pitch and you got better at telling the story because you took the feedback to heart right hundred percent and you know when when I talk to founders now we're raising money and and they sort of get some feedback I always caution them not to over index on any one VC sort of response because they don't know you that well they just have one look at the business but when you start getting the same feedback from three four five people that's something to take to heart because at that point they probably zeroed in on something that is a genuine risk or problem with your business and this payments this sort of business model issue came up and I think it Sequoyah a bunch of credit who let our be and they called it out one hundred percent it said we like you you like this market or impressed by what you've done we don't believe you have any idea how to make money and that means we can invest but if you ever figure it out please come back and you know that was I at the time to know it was true but it turned out to be true because when we put in place our introduction based model and we the first month who was rolled out was March of 2013 so we've been testing it for six eight nine months prior to that the first month it was rolled out 100 percent nationwide was March we showed up we called and it just went great it just worked the data was just awesome and so mid-april like six weeks in we called Sequoia we said hey you know how you guys told us to ever call you if we figured out what we think we figured out you want to see it and I said absolutely they had us in the next day and you know I think two weeks two and a half weeks we had a sign turkey and they had this sort of intellectual honesty to tell us what the problem was and when we showed up and proved that we had solved it they jumped up that's awesome that's great story so you had said earlier I paraphrase but you it's a ruthless prioritization was one of the keys to your success he was taking the single most important thing in the business and solving for that and not not trying to take on too much I heard a great quote it might have been Paul Graham and he most startups die of indigestion not of starvation and so of all the things you can do are you ruthlessly prioritized on the right thing what's that single most important thing now so the funny thing is it's still liquidity I mean seven years later we've been fortunate to really grow our customer demand the challenge is when you grow that as fast as we have you got to keep this supply side there and so our problem is still you know to this day we don't have enough professionals on the platform to consistently deliver customers exactly what they want which is three to five relevant great introductions so we're still working on fixing that but you've expanded geographically and category wise you already in education and lessons and other things yeah 1,400 categories in every city in the United States which compounds the challenge of this problem but it's still our problem and you know you look at a there's still supply constraint a lot of markets Airbnb still supply constraint and I know postmates struggles to get all the courier's it needs to deliver sort of all the deliveries they have to do so it's actually a pretty common phenomenon when marketplaces really hit and they get a lot of customer traction that actually scaling the supply side attracting them educating them activating them becomes the biggest bottleneck I think there's a valuable lesson here Bob Kegel who's a partner of benchmark or was a partner benchmark one of the founders of the firm said to me early on he said Gary we love oDesk it's a it's a good business he said if you're in a marketplace business where you have to recruit for both sides you're done he said what you want to be able to do is recruit for one side and have the other side come organically and the best marketplaces are ones where if you do recruit one side it can bring the other side and you get this momentum going so if you think about uber I was in New York and they're recruiting for drivers they have a billboard and it says $50,000 no it says make $5,000 a month guaranteed and for drivers but what that also does is it brings riders right we tell each other how great the services maneuver is spent zero dollars on client acquisition so I they like to say that yeah I think it's so people think you have to save it they subsidize it they subsidize they give you a coupon here's 10 bucks they children out even more I use money on like uber uber pool yeah and they do that to drive demand they know that they lower the price to drive demand they can live and they become sort of monopoly so they do what time they spend out there spending hundreds of millions of dollars on customer sort of a quiz that can afford it so what about you so you you're constrained by providers now you have to go get clients talk about client acquisition how do you get your clients on the platform yeah so we have the benefit to some degree that we don't need to educate customers about this problem if your water heater is broken you're looking for somebody if you want to sort of paint your kitchen you're looking for somebody so our biggest challenge is first off awareness so helping a customer know that we are there and then confidence that we can actually solve their problem more effectively and better than anybody else and so on the awareness front historically it's really just been organic search and word-of-mouth and that has carried us to where we are now and we are now beginning to test sort of real brand marketing so in four cities United States there's TV ads showing thumbtack actually for the last six weeks is anybody seen the side the way this is not one of the cities so if you're in San Diego I saw it on Facebook so what are your employees posted it's fantastic yeah it's really good so it's our first four right so we really haven't spent any money on consumer marketing so no paid search SEM no I mean it's but per sense just to learn and play with it but no because you know we figure we're still supply constrained why sort of buy these ads and the great thing about brand marketing is it gets both sides and so we went out with the message that we wanted to resonate with customers and get them excited about thumbtack but also that a professional could see themselves in the ad and say hey that sounds awesome for me too I want to be on that platform and it's worked great and we got to keep testing our way to sort of hone the message on the buying strategy but I think you know over the next some point the next 12 months you know you'll see us on TV and just as good after awesome well I just got the by hand held up I guess that means five minutes left I'm shocked I thought we were just getting started you haven't even had a chance to finish your beer let's turn it over to you and say any any questions for fur markup I'll repeat the question so where are your thoughts about what's happening with instacart and how they're converting marketplace thoughts on instacart and how they're converting like to 1099 w-2 issue and so I think it's a very real separately familiar with this so there's a with marketplaces there's a there's this interesting question as to who's the employer of record so are you a marketplace where you're connecting two sides so you can think about thumbtack where they're not in the middle of the transaction they're mainly creating the platform where a buyer and seller can come to me eBay eBay is not in the middle of the transaction they're creating a platform where I sell a used good to Marco who buys my use good just a marketplace or instacart where you call instacart are they a reseller as far as you're concerned they are the one throat to choke so there's a question over who's the employer of record for the employee yeah I think it's a it's a very real issue and one where what has happened is the these companies have moved faster than the regulation and I think it's reasonable to call out that the relationship between these workers and the platform is is kind of different from both the traditional salaried employee as well as the traditional independent contractor so Germany actually has the concept of a dependent contractor which is this kind of like indem in between and so I think it will take years but I do think we will see sort of regulatory change to deal with this in the short term I think it's a huge business risk and so Haney homejoy in our categories I believe instacart as well uber as well lyft have all been hit with lawsuits claiming from their sort of suppliers claiming that they should be treated as full-time employees and the courts is actually not the courts as rugged regulatory body in California recently ruled uber as case that they should be treating their folks as employees so this will play out in the courts it'll get appealed and it could go very far but we don't have this problem because this sort of Gary said we are a platform where a marketplace and so we haven't spent too much time worrying about it you know I think these companies are going to have to evolve and the tricky part is so because the thing that goes unsaid maybe is that on thumbtack on oDesk the people are the marketplace you're hiring a developer or you're hiring a plumber that's what's sort of being marketed and being connected and so it's not a commodity but an instant card or uber right the supply the labor is a commodity and it's getting squeezed and that's a structural reality of their model that when you hire an uber you don't care about the guy or gals name straight commodity renting the backseat of a car and so these these these people are caught in a tough spot and because they want to drive the price down because it's commodity and they know commodities are all about price and speed and it's not pretty I don't know and yeah these marketplace businesses that are not really marketplaces it's more of a leveraged talent business or a what I call a reseller where you don't care if it's a monkey driving the car as long as the monkeys a good driver I don't mean to be this way but I just want to sort of reinforce this point where I think these businesses are going to have a tough time claiming that they're not the employer of record so any of these businesses that look more like a reseller where as far as you're concerned you're hiring nuber I think they're they're going this is all going to play itself out and regulation is going to have to change over the years so that's a couple quick questions one is how did you stay alive from years that you were building this thing and second one is what's what's keeping other people so so just to repeat the question number one is how do you stay alive while you were building liquidity and you didn't have enough to make money did you focus geographically or by category or what kept your head above water and then the second one is what's your moat around your business why couldn't somebody else replicate what you've done so to the first question and you just pay yourself very little and it's the benefit of sort of doing in three at college not being married on any mortgage you can afford to that so we worked out of a house for two years many people did not earn very much money at all and you just you just spend as little as you can I got but how did you get all of that work done you couldn't have hired everybody locally to do the work how did you do that so we found so so what they were a huge onus customer so I said I was the shameless plug that's my back we still are we had seven hundred people on the platform it's a huge part of making thumbtack work so curation at scale requires humans smart humans are available all around the world oh that's great platform to connect with these humans we use their 7or people that we think of as full-time employees now technically sort of we contract with them through oDesk but at the end of the day they enable us to sort of deliver the service and qualify everybody to review all the content and pictures to make it as high quality it can be so we are big believers of the power of sort of global labor now back to sort of question ah you just pay yourself very little and that that is a powerful thing for two things one is you're ruthless about your prioritization because you don't have money to waste you know sometimes it gets a little nasty so I I gotten a little fight with one of my co-founders you wanted to buy a fancy office chair and I thought I was total and so he potted himself and then you know a year later I paid him the foreigner bucks back and the company once we had more money so you can take it too far and we you know maybe for a while did but that's what it takes you just don't die and it's it's easy not to die you just don't run out on and what about the moat yeah and then the moat is it's really our art community and by that I mean the network of professionals that we have who are active and engaged so you know you can think of thumbtack as a search engine right you're trying to get a project done and you're asking the world which plumber is available for p.m. on Thursday to replace my broken water heater and that's a query but there's no database on earth except thumbtack where you can actually ask that query and get a response the reason we can get a response is these professionals have signed up they've told us what they do where they do it what their specialized in and they are active participants in our arc applies there's 200,000 of them or active is that enough liquidity or could somebody attack you by category or by geography could I go out and create push pin and go aggregate a category where you're not strong and offered for half the price so it's are you price low enough or you know what's them I think price is something that you can't really undercut us because we're charging close enough to zero on the professional side that they care much more about volume and how qualified how effective the experience should they pay for a bid are you comfortable talking about yeah it's anywhere between three and $25 it's awesome so you're not going to cut us on that and actually I would argue and this was a bet we made early on that in building liquidity you actually had more of an advantage being horizontal and being broad than you do being very vertical so from a product experience maybe you can argue that being vertical sort of helps better define sort of your use case and build sort of a more elegant solution but from a marketing challenge of attracting suppliers and then customers being broad actually gives you a lot more leverage to do things that a vertical eyes player can so you know homejoy and handier to sort of agencies or what did you call them at leverage talent average talent companies in the cleaning space we're bigger than both and just cleaning and that's one of the 1,400 categories so I think there's just power to breath and it's something that again you often hear that the opposite advice which is pick a niche pick a vertical in this case that was wrong let's have one more question let's go to the back so yeah I'd like to leave a scrub money yeah so yeah how we thought about making money off the money that you're moving is that something like this like a striper we pay the payments business is brutal it's a business I don't want to be in the margins are miserable so yeah it's true that they you know a stripe will charge you two and change but most that goes to the banks for the interconnect fee and Visa and MasterCard so the margins are razor thin if you if you hear a square CFO talk now and she will talk about how they are building their business on the assumption that in the long term there will be no margin from the payment processing business because it's a straight commodity and what you know companies care about is how cheaply you can do it and so it just get squeezed and squeezed and squeezed so we believe weren't the demand origination business we're marketplace we connect customers and professionals and facilitate transactions the reasons we get points many many percents out of that billion dollars is because of the value that we're creating if you're merely facilitating a transaction that's already going to happen you get basis points and how do you get paid so how are your providers paying it was that credit card ACH or what's your payment vehicle its its credit card and PayPal and we tech we use Braintree and because we integrated before stripe was really as big as it is now stripe is great too but yeah so I the payments I believe will be a value that we offer to our professionals one day so there's probably if you look at all of our businesses 200,000 businesses they're probably processing something like a hundred billion dollars a year about five hundred thousand a pop in in gross transactions and you know we'd love to facilitate that at some but not to make the extra incremental revenue but merely because it expands the value of our plastic unit and stickier so that will come but the motivation is for the sort of value to the professional not to us well I hate to end because this has been yeah I could - I'm really having a blast hopefully you got value out of it just one last question and we can end on this one what guidance would you give to all these or some of these aspiring entrepreneurs in the audience you know sort of one piece of sage advice that helped you to get to where you are today recognizing the journeys not done yet but what would you tell the folks in the audience I mean I think it comes down to two things you have to have a deep burning passion for what you're working on and I think that means two things you have to believe it's inevitable you have to believe that even if you fail at it somebody's going to do it and you have to sort of believe that with every bone in your body and because otherwise you're not going to be motivated because there's gonna be times where it's not obvious that you'll figure it out or not obvious you're going to win and it's that inevitability or the belief in it that carries you forward and sort of related to that I think it's being enamored not necessarily with the product or the service that you're creating but with the impact that it has you know I've talked a lot of people who are like oh I'm building this thing because I love working on this problem and I tell them hey are you are you gonna say the same thing to me in your - or your for your eighth I think you get bored of problems pretty quickly but it's the impact that you can have through what you're building and the various problems that you're going to solve that I find sort of eternally motivating or at least today ever more motivating so have a passion pick something that you really enjoy hopefully you're good at it and to the extent that that's a big market opportunity you've got the try factor so please join me in thanking Marcos at Picasa you

Channel: OrrickTotalAccess

Views: 32,841

Rating: 4.8666668 out of 5

Keywords: marketplace, startup event, silicon valley

Id: ruYkGTamLyY

Length: 49min 34sec (2974 seconds)

Published: Mon Jul 06 2015