This is Kristen O'Brien, managing editor at NFX and you're listening to the NFX podcast. Today, we're talking about how to build a $1,000,000,000 marketplace in this episode with Marco's Costa and Pete Flint. Pete is a partner at NFX and the founder and former CEO of Trulia, the real estate marketplace that merged with Zillow in a 3.2 $1,000,000,000 transaction.
And Marco is the co founder and CEO of Thumbtack, a marketplace that matches customers with local professionals, now valued at more than one point $7,000,000,000. Today, we're covering how thumbtack and truly Flint plays, series a fundraising lessons, and how short term metrics can actually hinder long term retention. Let's jump in. Today, we're talking about marketplaces. We're talking about thumbtack. Maybe just a way to introduce, the story.
Why don't you tell us about thumbtack and really the Morgan, like, how did you get going? How did you solve that critical cold start problem, from from 0 to something? All the way back. All the way back. So in many ways, we did what you're not supposed to do at the beginning and decide to start a business and then go hunting for an idea I'm happy to speak to the merits of that approach, which I think is undersold in Silicon Valley.
But really, the the heuristic we took was What is the biggest problem that we can think of that will inevitably be solved? And the observation that led to the last 10 years of work was why is it so hard to hire a plumber? You know, we weren't homeowners at the time. We're still in college, but when we sort of realized this and started thinking, and it's not just home services all local services, it's very rare for you to have to work so hard to spend money.
You know, all of capitalism is about enabling sort of your laziness to get what you want easily. And yet here was a category where people had the budget, had the desire, had the intent, and struggled to spend their And as we dug into that, it wasn't because there was a lack of labor or lack of supply. There are millions of great professionals out there who would love to find that work and do a great job for you. It was a marketplace failure. It was a matching problem.
And so how do you Pete, you know, how did you kick start that? That's because, obviously, the business today makes sense, but small company, no customers, no demands on no supply side. Like, what was the sort of typically there's a hack. There's a, like, there's a technique you employ to get going. We actually went very broad.
And in fact, that was something that focused our thinking because it forced us to find solutions to drive liquidity that were sort of category independent and geographically independent. And you know, this, like, super dorky phrase that we told ourselves early on was like, how can we create network independent value. How can we create value for our pros, the supply side, before we had any network of customers that would ultimately be the the draw. And, you know, day 1, you just don't have that.
So the sort of, hack or sort of, growth tactic that early on Pete us get going was we looked for where these pros were and where they were already hunting customers. And at the time, you know, 2009, 2010, that was Craigslist. And so we we built was a very easy tool for them to create a thumbtack profile.
And then with one click to republish that onto Craigslist importing all the pictures and reviews and metadata with a great sort of HTML layout which they weren't either interested or capable of doing themselves and was instantly valuable to them. Because we could say, Hey, You're on Craigslist, or it looks like you wanna be on Craigslist, we have this great tool. Just come fill out a profile. A free tool? Free tool.
Yeah. And what that did was attract pros, who were motivated to use the internet to find customers, who's exactly who we needed. And 2, it also gave us a relationship with them from the get go. So unlike a typical directory, which has a ton of content about, you know, millions and millions of entities that has no relation with thumbtack from the very beginning and still to this day has a relationship with every pro that you find Mhmm. On our marketplace.
Because we wanna connect you with a person with a pro, not simply with information about a pro. So that was the early sort of growth tactic that got So kind of it's a sort of classic classic growth technique of finding a scale destination that is attracting a similar level of demand and supply and figuring out a way to add value to that. Yeah. To, you know, the sort of on the positive side symbiotic relationship on the negative side is sort of siphon off that demand.
Well, there was only an opportunity because they weren't doing a better job. Yeah. And so know And it's very hard as a horizontal platform to really excel in in these vertical domains. They're very unique, you know, Craigslist could be this incredible juggernaut, and it chose not to be. Yeah. And that left the door open to Thumbtack Airbnb. All the personal sites could have been them. You know, it's incredible they could have built, but chose not to.
And then and then there was a I imagine a fair amount of SEO work as well. I know, you know, from my experience, it truly, you know, we we we similarly employed kind of SEO in the early days back in 2009 and 2010. It was a kind of like a viable strategy to kinda take a scale. And we use that as well.
And, the benefit we had was because pros were coming to create profiles that they were going to use to represent themselves on other platforms at Craigslist, they're very motivated to create a great looking profile. Yeah. And to give it a lot of unique content. And, for a long time, early on, and even today, we have shockingly little overlap with the other platforms that Pete out there. So think of a a Google, a Facebook, a Yelp.
This is a very long tail category that is very fragmented, that is still very opaque to sort of the internet writ Morgan. And our approach not only Pete a got a sort of like high quality, intentful relationships, but gave a sort of content that nobody else has, which for SEO, as you know, is gold and is what it takes. I'm curious your experience is often what we see in startups is growth is a series of s curves and that you'll sort of capture 1 sort of, one opportunity and you leverage that.
And then you really sort of surfing a wave of kind of various various different Oscars and finding distribution opportunities, which, and the bigger you are, often the more opportunities open up. How how is, you know, over the last 10 years, how have those how have those sort of escrow's evolved and And perhaps how do you think also about, platform risk? Obviously, building a company off Craigslist. Mhmm. Craigs just end up shutting down a lot of those kind of like widgets.
How do you think about platform risk and alongside that? Well, day 1, you don't because you have nothing to risk. And so you're very happy to leverage some other platform to get going. Even with SEO early on, I think he was like, oh, man, this is a 0 marginal cost platform to attract customers looking for exactly what we offer. Which in our case was uniquely well suited because we are a search engine. At the end of the day, we are a place to find and hire prose, which is a search problem.
So it was a phenomenal fit in terms of channel. Now there was no doubt that there was risk to it, which we're very well aware of, but the ultimate hedge against that is to create something that has the stickiness that has the retention and the repeat usage such that even if sort of one channel in the early days is the dominant source of new customers as you Beller up your base of existing customers over time that overtakes and becomes the dominant channel. And that's true for us.
And I think that's why, you know, we are, at this point, you know, don't fear that problem. But it took years years to get there. But day 1, that's okay. And now, you know, we build our own direct relationship with these customers and word-of-mouth. And that becomes the most important channel that we have to be able to keep right.
And, it's it's been fascinating to watch Craigslist because that has been a kind of a source of many, many startups, but it is also a sort of classic kind of innovators dilemma for kind of one of a better phrase. They've been driven by the community but they they've failed their community because they've they've really been a slave to that and haven't really innovated on top of that. And we'll touch on this, but how does how do you not fall into that trap?
Like, many companies don't and we'll talk about reinventing thumbtack, but, like, What have you learned from watching Craigslist all these years about what they haven't done? Well, I mean, I'll speak to my own category, which is the one I know Beller. And I think the one important positive takeaway, which I think is not sort of emphasized enough, is the value of liquidity. I mean, it's absolutely mind boggling how big and important Craigslist even to this day still is.
Right, for a long time, Uber and Lyft were getting the vast majority of their drivers off of Craigslist. The biggest sort of, like, margin accretive player in the gig economy space was Craigslist. And that's incredible. And why were they going? It's not because it's safe. It's not because it's easy to use. It's not because it's beautiful and well designed. It's because it has liquidity. And it just shows how critical that is for a marketplace to both succeed and thrive.
And that was very clear to us. Like, look, the end of the day, we're a matchmaker. And if we can't come if you can't come and get matched with the right pro each and every time, you're gonna go elsewhere. And that has been the sort of overriding objective function to basically everything we've done. That said, you know, and this is sort of what we think about ourselves.
You can't get trapped in a current way of doing things you want to expect to survive sort of for the long term, especially in the consumer arena where sort of preferences are evolving and sort of the tools available to both sides are are sort of always getting better and better, you have to keep pushing that ball forward. And I think it's something I'm very proud of thumb tech has done sort of multiple times and sort of very critically over the last few years. But you can't stand still.
Gotta keep running. The the the experience that I've seen from from Craigslist as, you know, seeing on the housing side intimately the They lost the for sale category very early on and retained the Morgan rent category very, you know, for a long period of time, and now it it appears they've lost it. At least the recent data I've seen, which is but it is truly remarkable. But it lasted, what, like, 20 plus years? Exactly. It's truly remarkable that the liquidity has been there.
And particularly, the fragmentation facilitates that liquidity rather than sort of professionally, more professionally managed Pete managed marketing in the terms of real estate versus more long tail landlords is that that liquidity is highly persistent. Those network effects are very, very hard to break. And once you have them, you you're in a very strong position.
I think our category was very well suited to be disrupted because, when you think about what does well in a medium where the inventory is sort of expiring, it's perishable inventory. So rental markets being a perfect example that service professionals, though, are not that. You know, a plumber is a plumber today and tomorrow next week. And in by denying them a per permanent presence, you're denying them the ability to accrue reputation and through that, compete not just on costs, but on quality.
And that's the number one thing that pros hate about Craigslist. They say, hey. I love being able to access customers, but I don't wanna have to compete just on price. And that makes sense when you're selling your table, like, fine. You know, you you care about price, and that's it. But when you're selling your time and your labor and you are a true crafts person, you wanna be able to showcase that craft. And, you know, we really think of our pros as, skilled professionals.
You know, they're making on average almost 70 bucks an hour, in aggregate across the platform because they're providing a sort of quality, unique custom service. And that's exciting, but what they don't want is have to waste their time on marketing.
And online marketing in particular, which is new and ever changing and sort of very technically demanding, and increasingly the sort of, like, back office So, you know, our ambition for these pros is to let them focus on what they do best, serving their clients, plowing their trade, and abstracting away the rest, such that we can empower them to turn their time and talent into money. So looking back, what would you have done differently?
Going back 9 years ago, what what advice would you give your former self back the formative years? So I have a tactical answer and then a more philosophical answer. My tactical one is I would have focused on PR or And that seems like, or narrow and trite, but the point here is that it is a channel that can compound that you have to invest in, and that takes deliberate effort just like any other marketing channel that you have.
And I didn't appreciate that, and I under invested in it for too long early on. And, you know, I think task grab it took the opposite approach did a great job of investing in that, and I think became the sort of labor story in the sharing economy. That could have and should have been us. And that is something that I think we neglected and lost out on a lot of, like, brand building opportunities because of that. And I just thought about it wrong. So it's just a regret that I have.
The more philosophical answer is, we didn't understand the relative prioritization of what our customers and pros needed deeply enough such that we truly focused our development efforts. You know, we had this, you know, vision early on that we had to obviously make the introduction, but then, you know, facilitate scheduling and payments and all the steps between sort of not knowing who to hire and a job well done.
And, look, those are absolutely the right things to have on the roadmap, but you don't need to all of them day 1. And in fact, the reason that we were not focused deeply enough on the matchmaking is just we didn't appreciate that was the core need. So far and above everything else that that's where we should have focused longer and harder earlier. And I think we probably could Beller have accelerated our path by a year or 2, had we had that clarity early on?
Interest in the matchmaking because it often often in the the sort of the quality match you might mean deterioration in shorter metrics, but you'll see in retention metrics further down the line. That's absolutely the case.
So so you'd often when you're studying the kind of metrics on a day to day basis, you're like, you're just forced you're just focused on making the numbers go up today or next week, but you're not necessarily thinking about a year or 6 months from time when they're looking at a a second Yeah. And this is something that I think we came to appreciate and then ultimately Pete the company on. So, you know, now there's sort of three areas of of thumbtack.
You know, the first area was when we were really just trying to find initial product market fit and early, like, marketplace liquidity building efforts. That's from, like, 9 to sort of 12 into 13. Then starting in 13, we really had something that we were able to scale very aggressively. And from 13 sort of into 17, we were in that just like scale scale scale. Hold on.
But, by the sort of early 17, we came to appreciate that the request for quote model that had powered our early years was not going to generate the experience necessary to build thumbtack into the branded destination for hiring pros for whatever you need done. For the simple reason that it wasn't fast enough, which at this point in time, everybody expected their online experiences to be immediate and instantaneous, nor was it able to generate enough liquidity, enough supply.
And that was because to power request recorded experience, pros had to read and respond to every request as it came in, which was incredibly valuable for customers because they didn't have to go out and search themselves and call down a list of numbers, they could simply wait for pros to send them responses, which they knew would be intentful. Qualified available with a specific price, basically everything that you need to evaluate, whether that pro is right for you.
But in asking the pro to read and respond to everyone, that's a lot of burden. It's a lot of effort. And so you know, in early 17, we took the Beller of saying, hey. The only way we make Thumbtac into the sort of amazing experience it needs to be to become a sort of world dominant brand is if we automate this part of the flow for pros. Now keep in mind that we cover 500 different occupations. And these vary from everything from, like, a plumber to a wedding efficient, to a math tutor.
And we need to be able to generate estimates as well as pros generate them themselves sort of programmatically. And sort of like, it's a very compelling thing to say and to put in a pitch deck and, like, sell it's a much harder thing to Beller, harder than even we anticipated. But over the last couple of years, pulled it off, which feels really, really good. So this has been this has been the big transition then for the company over the last, what, 2 years. Mhmm. Transitioning.
So so just to clarify that. So moving from a a lead generation marketplace to being really more of a transactional marketplace where you're Flint to sort of almost instant booking? Correct. Yeah. Because I don't actually like the lead gen, word. I think it's a it's a very misused word. And the re the reason I react that way is like Google and Facebook are lead gen companies too. But they're typically not thought of as lead gen.
I think the traditional association with lead gen is that you're a pass through, that you are an affiliate that you buy low and sell high and have no enduring relationship with either side. Thumb tag is all about having a long term enduring relationship with both sides. It's true we monetize sort of customer contacts or introductions, which you could call a lead, I think, quite fairly.
But like Google and Facebook, we think that's the right point to introduce harmonization that actually makes the experience for both sides better. And that doesn't mean that a pure transactional model would somehow make this a marketplace in a way that we today are not. Maybe it's, like, saying, match.com is a lead generation service. You know, you're not gonna perform the transaction. You got it. That's per se, like, online. That's a great comparison.
But you are gonna you're providing a huge amount of value to facilitate an offline interaction. And interestingly initiated online. And it's the and putting that payment friction makes the match better. Yeah. Because, you know the quality and the Exactly. Know, how serious someone is? So the thing that changed is instead of thumbtack being a sort of asynchronous experience where you had to wait for responses, we made it instantaneous.
And yet we did that by working very, very hard to retain the same quality, that same intent that our matches had before.
And we have a sort of metric to track this, and we're very proud of how far and and, you know, we feel like, we are now able to generate these sort of machine matches that have the same revealed sort of, appreciation by our customers, as well as humans, these human pros were able to do And, like, it shows us that we were right and that this was possible, but, man, it's a real grind. We get into that, how you how you figure that out.
And so the, you know, seen from, historically from speaking people at Airbnb and eBay, this sort of edition of this kind of instant booking or buy it now that those sort of product enhancements of a pre existing service have made is enormous. Enormous benefits, like, offer relatively sort of, simple on the surface, but always complex behind the scenes. And that And that sort of consumer desire for desire for confidence and convenience is sort of is overwhelming. And an evergreen.
I think, you know, even if I don't know anything about your marketplace or your business, if it's a consumer business, I can almost always say something to the effect of, hey. If you make it easier and better for your customers, you will drive more engagement and more retention. And in our case, it didn't take a marketing genius to say, hey, customers want faster responses and they want more responses that are equal or better quality.
Yeah. A very simple point of view it's executing on it and making it really happen, especially in our case, like some of the examples you cite, like e eBay and Airbnb, where you have hyper fragmented sort of small business base. So think about what we had to change for these pros. We had to move from a world a request for quote world where they could read and then deliberately choose to pay to respond to each and every request. So they had total discretion. It was there were no minimums.
They could just pay for what they wanted. Mhmm. To now, they give us their sort of targeting preferences, where they travel, what they do, how much they charge, we generate those estimates for them, and they pay when a customer contacts them back. Now they have to trust us to represent them Beller represent them as well as they would themselves, and we are charging them for that.
It was an enormous leap of, enormous transition that required a big, big change in the sort of trust, the amount of trust they had in us. I'd be interested in the transition.
And I've seen kind of personally that evolution at Currier and then through the merger of Zillow There were several business model behind the scenes on the back end kind of innovations, the consumers generally see it, but the pricing model changed a couple of times while I was around the company and then, you know, within Zillow, it's changed a couple of times again in the kind of big ways. And these are They are incredibly challenging to pull off Yep.
In a kind of execution, but necessary because your consumers typically move on. Your supply side typically kind of has different expectations. And if you are not enhancing the consumer experience, then you're in in how they're gonna fail because someone else is gonna come up.
And I think we've seen, I guess, particularly in your area, how there's been probably a number of vertical specialists that sort of, you know, hoping perhaps to pick off just sort of, you know, just in the way that companies picked off Craig's list back in the day in in certain verticals. They are, you know, they're trying to pick off.
I would venture to say, you know, having seen a lot of these verticalized companies, that particular the ones that would call themselves sort of a managed marketplace where the labor is often sort of contract are subcontracted directly, that they will struggle to get to scale, have not seen it work really at all in in any vertical. And we've talked to a lot of these folks.
We think that we have more liquidity in any one of these categories than they do and through that, provide a better customer experience, even if the depth of the product experience does not match. Because at the end of the day, the number one feature is do you have a great pro available for me when I want it for roughly the price that I'm willing to pay? That's a very, very hard problem that we are able our scale to solve more effectively than these tailored verticalized companies.
So, I think a lot of people overapplied the Uber experience to this category thinking, oh, wow. If I just sort of abstract that away and make it a one click experience, it'll just be magical in the same way that ride sharing was. And I think they misappreciated how much nuance is in these local service categories, whereby right sharing is really a commodity where you don't care so that you is appropriate.
But when you're talking about spending 100 or 1000 of dollars, when you're talking about your home or your wedding or your child, there's a real need to be able to express your unique preference. And through that, you need to sort of reveal sort of the true total availability of this marketplace you can't simply just dispatch whoever is at the top of the list.
So, yeah, I'm I could imagine that there's a certainly, it's more challenging to facilitate liquidity in 2019 because the sort of craigslist or SEO or the sort of Facebook, there's there's the distribution channels are a a more challenging, but but at the same time, I guess the product experiences are, as for consumer perspective, the product experience, your expectations have increased substantially over that the last 10 years.
And so how do you think about facilitating a horizontal platform, which obviously has the benefits of scale of cross, you know, sending fitness trainers to dog walkers, to to other people that that that scale, how does that that that's clearly a kind of asset to the company, but trying to create vertically specific product experiences that over deliver.
In those use cases, it must be an enormous challenge It's a big prioritization challenge, because while we are horizontal, we have to customize and develop things that work for the specific occupations and categories that we do serve. And similarly, we wanna push the envelope on our own experience.
And, basically, we typically have multiple things going on at once where know, the vast majority of our effort is on moving the sort of horizontal platform forward releasing features that apply, if not, to all categories, to most, And at the same time, have a sort of more, you know, hypothesis driven sort of more experimental set of initiatives that we're trying to push it forward for a much smaller subset of categories. And you'll see that, and you'll see us continue to do that.
So you know, now that we have this sort of instant matchability, you can see us start to get the instant book, and then through that, the ability to sort of be relevant, not just at the point of introduction and booking, but throughout the life cycle of that job. And, you know, the dream is for us to be the end to end experience for all of these categories.
And, you know, I think we will get there faster than starting with one vertical all the way deep and then trying to line up other verticals alongside of it. Don't think you see any of evidence of that working at all, rather than sort of being able to sort of layer in this functionality as we sort of develop a deeper and deeper understanding of how to pull it off So it's so, again, thinking of your back in the early days, would you have done would you have done anything different?
And I think I think about this Morgan experience of going through these business model, pivots almost, several times that it's sort of hard to imagine doing something that different because you kind of you sort of need to put one foot in front of the other. You have finite capital. You have finite users. You kinda need to share knowledge, finite knowledge. You kinda need to start by sort of solving a discrete problem.
And then using that as a, you know, a starting point to, to make the transition. I I think the, I guess, the almost the the only the only piece of knowledge I wish I had was, like, changes are constant and that you kind of like, if you are not over I know. If you're not innovating on your product experience, then you are almost failing because your consumer expectations have moved on. During the, you know, the period of 2, 3 years since you've been scaling the business.
But if your product experience has not moved on and and you're not if you're not able to kinda innovate on that. And so that there's a degree of almost which these hard transitions are are very painful for companies, whereas if the if the in the organization, if there is a expectation of of incremental transition or consistent transition, then it's like, then you don't have to almost sort of rip the engine out as you're flying. You're just like, fixing the propeller.
You're fixing one wing or fixing another ring as it wing wing as you're flying. So tell me about, you know, perhaps as you as a CEO and founder, how have you managed that transition internally? And what are what are some of the lessons from that?
When I look back on this transition and think out the things I would do differently, they're all about how we set expectations internally, not necessarily like the order in which we built things or, you know, specific features that I wish we did or did not do, but much more about expectations setting, which what you realize is the key to maintaining confidence, trust.
And I think we should have been more honest with ourselves, 1st and foremost, and then through that, the whole team, about how big of a change this was and through that, how much uncertainty and speak to the steps that we knew were next and the mark of success of being through that. And then when we had more visibility add that in. But I think and again, it's hard to know.
In some ways, it was a benefit knowing being naive early on because it was like, well, yeah, of course, this is the right direction. So let's go do it. And then you get into the muck and you're like, oh, god. But you've kind of burned the bridges behind you, so there's only one direction to go. So there's like, that's helpful. But I think we could have communicated the the magnitude and through that, the uncertainty more clearly.
And I think it's a really hard thing to do as, like, a leadership team, a leader, it's hard being vulnerable with that uncertainty. But I think, you know, the partners that you want in the journey and the sort of smart thoughtful people, they're gonna see through it if if you don't own it, and it's better to just share that and engage with it and sort of, help people sort of come to terms with it collectively then try and sort of minimize it. So that was a big learning.
Maybe shifting gears a bit to the future of marketplaces. So how, you know, you've you've looked at, you know, you've been in this industry for 10 years and and you've seen an evolution. Like, I'd love to kinda get a sense of where you see marketplaces heading. There's obviously enormous fertile ground here at NFX. We have our own kind of perspectives on that.
We we have a a broader thesis on so called Flint enabled marketplaces where we're starting to add a lot more sort of traditional financial services or fintech component into that in addition to increase consumer experiences. How do you what do you see as the next wave of interesting marketplace businesses? So, you know, one dimension that I think is not sort of apparent to most folks is how much human capital is out there and how hard it still is to find that and hire.
And, obviously, this speaks to thumb tax category. But I would say it more broadly. You know, we don't touch education or Beller care or international remote work So they're but, you know, if you look at the trend over the last, you know, 10 years in the sharing economy, really what you've seen is a capital assets, homes, and cars being brought into marketplaces and through that, been able to offer enormous consumer surplus and value. But these are capital assets.
These are things What we really have not seen at scale is the same for human capital for the time and talent Flint we all have that I think is ultimately the biggest resource this world has and certainly this country has. And still the sort of category that is most opaque so I think we are in the very, very early days of sort of labor or service or human capital marketplaces.
However, you wanna think about it to dramatically increasing the efficiency through which the sort of two sides of that transaction can find each other. And through that, for human capital to find a market for itself and bring itself to market. There's so much latent potential, and this gets to the sort of, like, broader view of tech as sort of a force for good just as much as it can be a force for bad.
And I think it's a reflection of people's narrow view of tech as a substitute for labor, while I think it can also be a compliment to labor. And so what thumbtack really does, and there are other platforms, we're certainly not the only one is it enables the amazing diversity of human talent that's out there to find a broader audience for itself.
And through that sort of earn more money and reach its own aspirations and also help all these end customers, you know, paint their homes and cater their weddings and tutor their kids. So I think, we are in sort of like day 1 minute 2 of that. It is still so, so early. And I think people underappreciate how big that's gonna be.
See, it teaches now about, making the transition and and managing that transition and your own kind of vulnerability as a as a founder, CEO, making that like talk to, you know, talk to other founders perhaps about how the benefit of vulnerability as a as a leader and kind of sharing perhaps the the challenges that you face as a as an individual and the and the challenges you face as a as a leader the organization and how you manage through that.
Yeah. So I think the tension comes about because in many ways, you are cheerleader in chief. When you sell new employees, when you retain current employees, when you're selling investors, when you're talking to the press, you are by definition out they're selling and putting out the story of the business and why it's so great. And then there are moments where that is not the mode that you have to be in. And instead, you have to be sort of, like, real talk in chief.
And the fear, certainly in my fear, is how do you do how do you balance those two things in the right way? Because, the the the end goal is to have complete and utter confidence that you will succeed, but admit every potential flaw or thing that might get in your way and own it in a truly humble humble and sort of intellectually honest way. Like, that's the ideal. Yeah. Yeah. Total confidence and we are gonna win no matter what, but holy shit, if we don't fix these 11 things, we are screwed.
And I think leadership is ultimately an exercise in self awareness and coming to recognize yourself better and through that how you can then put yourself out into the world. And, you know, one of my, like, things that I've learned is when I'm scared, that's usually actually a sign that I should lean into that and share because if I'm scared, then somebody sore ton of other people.
And even if I'm not visibly scared, the thought that someone may think I am scared is something that will scare them and worry them. And so those are the exact moments to acknowledge that fear. And then unpack it for Pete. Like, hey. That's I I am scared that this might not work. What we're trying to do has never been done before. In our early experiments, we saw some clear opportunities for making this work, but also some challenges that are gonna be really hard to surmount.
But what gives me confidence is x, y, and z. Yeah. Like, that is, It's scary and hard to do. Yeah. It is. I I I can I it echoes a lot of my experience and know, and and vividly, I'm kind of recalling back and experienced in 2008 when, you know, during the midst of the global financial there was, like, running an online real estate company? It was like, no one believed that we would survive and and the employees were kind of enthusiastic.
And I think there's a you kind of and I and I was like, you know, scared shitless, literally. And, and you and you feel you need to maintain the motivation, enthusiasm, but if you're everyone is kinda reading the headlines, if and they're everyone knows what the and the smart and thoughtful people. And they're smart. And so if you are sort of hiding anything from them, then you would lose their trust and lose their respect.
And I was, frankly, you know, a a lightning Beller moment for me was when you know, ended up having a very sort of candid conversation around the changes of the business, what we needed to achieve. And then you know, and having faith in the team to live on that. And real and then seeing in a matter of weeks, how the team had risen to the occasion and started sort of creating incredible product plans and ideas and execution.
Which was, you know, realized that, you know, that old adage are kind of problem shaped. It's sometimes a problem halved. That the team was kind of bracing these things. And, it was it was truly a turning point for me as a as a leader, how that how that helped to turn things And I think Morgan and your sort of respect as a as a leader is also magnified within the organization as well.
Totally. And I think another thing that I was certainly hung up on is like, well, I know that there's people who are worried. I don't want this to push them the wrong way. And have them say, hey. You know what? I don't wanna be a part of this. But actually, in retrospect, I wish I had. First off, the vast majority of people worksite and indeed believe And look, for those who didn't, you know, they deserve a handshake and a hug and a goodbye. And, like, we don't need that around.
We need believers. We need people with conviction. And these pivotal moments by definition are ones not everybody's going to agree to. And actually revealing that is a a very powerful and cleansing thing for the organization because those detractors are gonna continue to detract in just more subtle ways in the comments they leave in docs or the questions they ask ask or the way they push and prod. And some of that is healthy.
You have to be intellectually honest with what's not working, but if you're truly not a Beller, Mhmm. Well, then you should mention something else. Yeah. I mean, there's plenty of opportunities in Silicon Valley and and these sort of refounding events almost kind of create a sort of emotional commitment, which is critical for the next wave of execution and and innovation. So so, so we talked a little bit about kind of internally.
You know, I'd love to get your perspective on, on, like, fundraising and kind of also board management. And, you know, how do you obviously, you're a private company, but managing managing the other constituents and and then and any advice for founders who are fundraising right now, what are some of the lessons that you've learned?
So I think the Biggest lesson that I wish I knew early on in my first sort of professional round that I went out to raise is my series a. Was that you have to be very clear not on just what this next investor is looking for, but the one after that.
Because that's what they have in mind, and they're thinking of this investment as one that gets you to the proof points, to the derisking events, to the numerical targets that then entice the next round investors and really working backwards from that such that though current round has confidence that, sure, you have to execute.
But if you do and you deliver on the things that you say you're gonna deliver on, then they're confident that the next rounds investors we'll see that as well and have confidence. And, basically, every round is a bridge round, and you have to recognize that and talk about and internalize what that next set of objectives is. And I didn't get I didn't know that the first time around, and, that made it harder for me to be.
So being transparent you know, post or during a fundraising event being explicit around this capital will achieve these particular metrics or milestones So to achieve what you think is gonna be sufficient to kind of raise the next capital? Yeah. Correct. So let's make it more explicit. So you're raising us your series a, which is effectively your 1st growth round today. Which is It's true. Yeah. How it should be thought of. You guys are in the venture business.
Everybody else is in the growth business. And so you don't have market fit Pete, you probably don't have much business model risk, though you probably have some. But, it's still sort of TBD how quickly and effectively you can scale.
So knowing that your Series B at that point then really becomes a pure growth equity investment you have to be able to tell the story to your series a investor, but here are the key milestones and the things that I'm gonna derisk and accomplish And if I do those, I know I will be set up to raise a Series B in 18 or 24 months. So the, like, you know, use of proceeds, the sort of, goals should map to what that series B investor is ultimately gonna look for.
And I don't think you need to be explicit about it. And in fact, I think it's better if you're not, but that series a investor will certainly appreciate that. And, you know, my version of that is public markets. So, in thinking about what people today need to see to have confidence that, you know, their investment will have a good return is that we are set up to ultimately go public escalating the things that are required for that.
And they need to see me speak to that to have the confidence that we've internalized that, and our plans are gonna reflect that.
So as you think about the market you're in, as you think about the the wave of competition, we've you've shared that the the belief that some of the vertical specialists are gonna struggle How do you think competition more broadly, perhaps against the the huge incumbents, Facebook, Google's, which are sort of seemingly permeating kinda almost every aspect of digital business these days. So interestingly, you did not name our biggest competitor. Which in my mind is word-of-mouth.
The vast majority of these transactions are still sourced by you texting your neighbor or knocking on somebody's door, asking a friend. Now it's true that some of that is now mediated through Facebook or through Nextdoor, but the search paradigm is via your social network. That's ultimately what I'm competing with. 90, 95 plus percent of the GMV is transacted through social networks, not through a sort of marketplace like ours.
And that's really something I think a lot about, which is like, how how can I be better than word-of-mouth? Well, one, I can be broader. I can give you more selection. Your neighbors have hired 0 or 1 plumbers in the last few years. And the odds that their plumbers right for you is very, very low. But you go to them because of trust. So can I accomplish the same sort of level of trust and confidence that this person gonna do a good job while giving you dramatically more selection?
So that's that's, I think, my biggest motivation because when I think about the defensibility that we have, it's really the relationship with these hundreds of thousands of small business owners across the country in 500 different occupations. And not simply like that we know each other, but that they've integrated with thumbtack. They've told us all of their preferences and sort of targeting criteria. And I know they've done it more deeply with us than any other platform. But I I I hear you.
I think the the sort of offline sort of non digital component is the opportunity or market share is sort of de minimis versus the opportunity, but I'm gonna push back a bit because I I think there's, you, you know, you're a sophisticated CEO.
You're like, you're probably kind of running kind of like you know, half a dozen different analysis Beller time looking at kind of different competitors in the space who who have a similarly or smaller kind of market share, like as a, you know, as a as a CEO running a company, then how much do you think about competition? Like, and and how much how much are you kind of monitoring activities from from other people?
And and I I think you you're you're probably acutely aware of what everyone's doing at, you know, one time. And I care a lot about being acutely aware. Now interestingly, historically and certainly at the start, it was driven from a fear. Like, somebody's gonna beat us. And, oh my god, who else is out there? What are they doing? Now it's from, like, what can I learn? How can that sharpen my own point of view?
And to speak specifically to sort of the, like, the competitive set that you've you, I think, were actually asking about. So you do have the giant, you know, internet, you know, companies, Facebook, Amazon, Google. Facebook was trying to do this inside of marketplace and shut it down.
They obviously could come back to it, but I think this is they have the tyranny of being so global and so Morgan, and local services is so, like, market specific that I struggle to believe it will be very high on their list to generate, the type of return that they need to see over the near term.
Google I think this does not play well with their DNA in the same way that they did not win in e commerce because they don't have the operational willingness to go deep with these pros and these small business owners, I don't see any of the any evidence of that And so I would presume that the way it plays out is they develop an ad unit so that they can capture sort of a better take than what AdWords can do that's specifically tailored and one already exists in Google Home Services.
But I don't fear them doing it sort of themselves. And then finally, Amazon, I think, is from a DNA standpoint by far the best place, but, what I've seen is that they have moved away from our approach because they weren't able to make it work and now tried to do it in a truly commodified way as a way of offering services to spur big ticket home goods sales. So if you're buying a treadmill or a dishwasher or a washing machine, most humans myself included need somebody to come set it up.
And they know that to break into those categories, they need to offer that to you. But in these sort of, like, you know, more traditional or or sort of more our bread and Beller, like an interior painter, they don't have any of that. And attempts of it have failed. And it speaks to the fact that it's fragmented. It's also not organized.
There's no publicly available metadata like, skews that you can use to jump start your sort of, like, ontology, nor is there any point of aggregation like a wholesaler or a distributor that you go sign one deal with. And instantly, you have, you know, sports goods as a category is now available on on your e commerce site. So I think it's uniquely fragmented and sort of opaque digitally, which makes it very hard to break into.
And the competitors that we honestly look to the most are a one hand, Angie's home advisor, which is the sort of, merger of home advisor and Angie's list, which is our purist competitor, and then Yelp, which is thinking hard about this category and trying to monetize it better. And I think, you know, happy to speak to both of those, but, like, you know, I listened to the earnings calls or, actually, I read the transcripts because earning calls are slow and boring. But, I read them every Currier.
And we have a a team internally sort of in the finance team that catalogs it that reads it. We think about it. And we discuss it as a leadership team because that is critical to stay abreast of and to learn from. Not to copy, not to sort of react to, but to learn from. Yeah. I I I wrote a a piece most recently about, hyper competitive battles and the sort of the the classic battles that I experienced in Truly versus Beller, and you see Uber versus Flint. It's a kind of popular public narrative.
And I think there was one component in there, which was more focused on sort of, peer competition around what can be what can be copied often will be copied, and the importance of culture and then call importance of brand. Brand is just much harder to, to Pete. And and it's and it sounds like this brand for you is, you know, in the billboards around San Francisco. That's, that's increasingly a big push.
So it's a huge push to be and and how so how do you what does thumbtack as a brand, what does that Morgan? And and and how does that manifest itself in the product experience as well? So I think at the end of the day, we need to be the most trusted place to hire the right pro for whatever you need done. That's the aspiration, such that you can accomplish anything with thumb tech.
And, you know, people need to trust that because 1st and foremost, it delivers So I think your product and the service that you deliver is the fundamental sort of arbiter of whether you can or can't be or live up to your brand promise. But then also the personality of the brand needs to reinforce that point of view such that it feels I mean, the point that brand marketers rightfully make is that people remember feelings and emotions, not value propositions, not statistics, not facts.
And so the way that your product or service makes people feel is going to be that key thing to generate a memory with them and through that drive retention and repeat usage. So, fundamental, it's something that feel like It's the part the product is the brand in digital businesses. It reinforces the brand and needs to create that. Correct. Kind of re remarkable experience. That you remember and you returned to. Yep. Exactly.
So so we talked about the the future of marketplaces and you know, there are there are some schools of thought that things become increasingly online and increasingly digital. Certainly, I've seen that in kind of through the evolution of the last 20 years in marketplace businesses, like, how how do you see that? How do you see the future of of of that online to offline interaction. Oh, so I think you're right.
I mean, the broad trend is towards digitization and digitally native sort of experiences mediating the exchange of goods services really everything. You know, at the end of the day, like, what we facilitate is the exchange of time for money. You're renting somebody's time with dollars. And I think to take your point a little bit further, I think it's about removing key points of frictions rather than taking the transaction online.
I think I often talk to marketplace founders who are sort of with this notion of whether they should sort of be transactional and find a way to bring the transaction sort of within their sort of Marketplace. And my first question to them always is, are you solving your problem or your customer's problem? And when you push on that, what you often hear is like, well, I I really wanna be a commission driven business model. And I think that sets me up for success.
I think that's what people wanna see. And I push and they're like, well, yeah, for customers, it's not that bad. It's like, well, then why are you wasting your time doing that? Like, in my case, you go talk to 10 homeowners, 10 busy moms, 10 potential customers of ours, and ask them the most painful part of getting something done, 100% of the time, you will hear finding that pro, finding and trusting that they found the right pro. You, I have never heard paying for that pro.
Now I wanna make paying magical and effortless But not if it comes at the expense of making finding and hiring effortless, and that has to be the core. And once I am sort of not a 100%, but, you know, further along than I am today, I will add in those other steps. But actually, from a motivation standpoint, in part to fuel the matching.
Yeah. Yeah. Because it makes a better and better matching experience, not because of something that I want as a business, be it the business model opportunity or the ability to track GMV more explicitly such that I can put that as sort of the top line in my Pete and L Yeah. Because consumers don't care about the end to end marketplace dynamic. They they care about the, a successful transaction. Better. Beller. And look for something like ride sharing, payment was key.
And it was, I think, a key way to make it know, booking was a big part of it, but being able to walk out that door Yeah. And not worry was a a big, big enhancement. But paying your painter you spend very little mental energy worrying about or, sort of like, it doesn't grate you. Now we can make it better and we will but it's not my first order concern. So, Mark, great to have you on the NFX podcast. Thanks for joining us today. Pete, thanks for having me.