TheRealReal: From Sparkle Pony to Unicorn. Really!

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TheRealReal is a luxury marketplace for high-end European luxury brands – and now art.  The luxury goods market is a $300+ Billion market worldwide (original sale not re-sale).  I guess that qualifies as a rich niche.

TheRealReal solves two real customer problems.  Let’s say you regularly buy the latest Loubies at $1000+ a pop. You wear them a few times to parties or a benefit then what do you do with them?  You can let them gather dust in the closet, give them to charity for a tax write-off or sell them on TheRealReal and recapture some of the original value.  If you’re a savvy shopper, you do the latter.  That’s the consignor story.  For the consumer, TheRealReal makes luxury accessible — great brands at discounts up to 90% off original retail.  You can find a (pre-owned) Chanel dress on TheRealReal for the same price as a (new) Diane Von Furstenburg wrap at Bloomingdales.  Great value!  If you’re a dude, it’s kind of like buying a Ferrari 458 for the price of a BMW 5 series.  Get it?  Plus all the product has been vetted by experts so you know it’s the REAL deal (this is a big market differentiator by the way).

Last month, Julie Wainright (the founder and CEO of TheRealReal) walked the board through her three-year plan outlining a huge and achievable future.  It wasn’t just a walk, it was a joy ride. We applauded loudly and often; then resoundingly approved the plan.  As an investor, there is nothing more gratifying than a company with all metrics dramatically up and to the right. #itsabeautifulthing   (VC investors include Greycroft, Canaan Partners,, Novel TMT Ventures and Interwest).

While Julie was mapping out the future, I looked back at her 2011 pitch deck to see how the business is tracking against her original plan. (The company launched mid-2011 and I invested in January of 2012)  Often the pitch plan is super ambitious (why shouldn’t it be?) and few companies hit or even exceed it.  [Look at  I invested in Fabulis – a gay social network – and 18 months later it became a super fast-growing ecommerce site.  Bigger and better, most definitely — but very, very different from the original plan.  That’s early stage investing.  Roll with the punches.  Flex with the pivots.  Hope for the #win.]  In 2012, TheRealReal exceeding its original revenue projections by almost 50%. In 2013, the company really popped – blowing through Julie’s original revenue projections by 350%.  2014 looks to be another stellar year.

Back in ’11 when she was raising seed capital, the investing community didn’t – uh — fully value Julie’s background.   She had to hustle, bootstrap and hustle some more to get the company going.  Why?  She fails the pattern recognition algorithm that (too) many investors use today:  She’s experienced.  She’s not a technical founder. She didn’t work at Google.  She’s a woman.  She’s over 50.  Those things can count against you in the Valley.  Beats me as to why.  I found the company on Angelist, met Julie for breakfast (loved her instantly), did a due diligence check the next day at the company’s tiny office/warehouse in a seedy Marin strip mall and quickly pulled out my check book.  Julie is super smart, scrappy and determined.  She’s an operator.  I knew she’d kill it and I couldn’t wait to see investors pounding on her door when she got the company going and that’s precisely what’s happening now.

So what’s the magic formula for TheRealReal?

In addition to a wide selection of luxury products vetted by experts, a great UX and terrific service, it’s three things:  1) Excellent leadership;  2)  A great business model;  3) Superb execution.

Leadership:  Julie is a seasoned leader.  She knows ecomm cold.  This is not her first rodeo.  I like that in a founder although most of the companies I invest in have first-time — maybe second-time — CEOs.  She has disaggregated the business into all the important economic drivers and has developed metrics for each one.  She holds her team (and herself) accountable for every metric.  If there’s a miss its clear why it happened, who’s responsible and what’s going to be done to fix it.  Julie has built a culture about delivery.  Set a goal.  Deliver.

Business model:  TRR brings in merchandise from consignors, vets it to ensure authenticity, styles and photographs it, writes descriptions, loads the product up on the site, collects and fulfills orders then cuts consignors a check when an item is sold.  The average transaction size is about 6x a typical ecommerce company (you read that right) and the annual customer value is off the charts. Take Zulily — which is a good public market comp — and add a zero to the annual customer value reported in their S1 and you have the TheRealReal.  Really.  How the hell?!  Look at the brands (Chanel, Hermes, Louis Vuitton).  Look at the average price point (couple of hundred dollars). Look at the target customer (well-heeled women).  That’s your answer.  Plus many buyers are also consignors — which creates a virtuous cycle of consumption and consignment.  There is NO working capital tied up in inventory (it’s a consignment model).  Last year, I visited the new warehouse and saw very little merchandise.  I said, “uh, Julie, where’s all the product?”  Her reply, “Mark we often sell through 80% in the first 24 hours a sale is live on the site and we have to pick and pack from the photo studio.”  That’s called inventory spin, not inventory turn.  With a *huge* average order size, efficient customer acquisition and little working capital, the unit economics are…well…luxuriant…maybe even decadent.  Julie is building a powerful brand in the luxury segment and she’s taking the top off Ebay.

Execution: Everyone knows and says ecommerce is all about execution.  It’s true.  Everyone is assigned goals and they deliver.  When there’s a problem it gets fixed.  Quickly.  The company has scaled nicely without major hiccups – remarkable in ecommerce.

I predict (humble brag?) that this company will pop out of the shadows soon and you’ll see it for the unicorn it’s becoming.



PS The Hermes bag and the two pieces of art presented are available on at the time this post was published.

I want to love Bitcoin. I really do.


I sat down three times to write this post and aborted mission every time. I hoped more research, conversation and consideration would get me off the fence. I just can’t get there.  I’d sure like more dialog though so please read my post and share your insights.

I’m very drawn to the virtual currency space.  I can envision a sprawling, open ecosystem.  The Bitcoin ecosystem is exploding.  VC money is pouring in.  The media is going crazy.  I see sparks of genius (peer-to-peer, distributed, decentralized, open-source, low/no fees) in the design.  Bitcoin has solved some really interesting problems (that distributed general ledger is brilliant).  I can feel it’s potential in my gut.  But I think there are some intrinsic flaws in Bitcoin’s design as a virtual currency and it’s keeping me from jumping into the ecoysystem with both feet.

I spent two wondrous years (2008-2010) as the steward of a significant global “virtual economy” when I was the CEO of Second Life.  At the time, Second Lifers were doing over US $500 million (yes, five hundred million US dollars) in user-to-user transactions via the Linden Dollar (Second Life’s micropayment mechanism).  That’s a big number – especially considering the average transaction is a buck or two.  I can’t claim any credit for creating the staggeringly robust virtual economy called Second Life – that goes to Philip Rosedale and other brilliant Lindens before me.  But I was an eager student and I learned a lot about micropayments and virtual currencies from the creators and participants in the economy.

Despite some key differences, I think the Linden Dollar offers a valid comparison to Bitcoin.  Bitcoin was designed to be a peer-to-peer virtual currency whereas the Linden Dollar was designed by Linden Lab (a central authority) as a micropayment system for transactions *within* Second Life.  Yet because the Linden Dollar is a medium of exchange and because you can trade Linden Dollars on an exchange with a floating rate, I think it offers some important lessons for Bitcoin.

The Linden Dollar works brilliantly because:

  • It is ubiquitous:  If you want to buy and sell virtual goods in Second Life you have to use Linden Dollars so everyone transacting does.
  • The price is stable: The price rarely fluctuates more than a few percent. People can buy Linden Dollars to use as a medium of exchange without worrying too much about the risk of massive price fluctuations.  Linden Lab operates partly like a central banker and is able introduce liquidity into the system when needed. Diligent Linden Dollar traders can turn a nice profit — which motivates them to participate and smoothes out price fluctuations.
  • It is trusted:  Linden Lab employs crack fraud detectors so the community is “protected.”  To transact, you need a Second Life account and there is a money trail.  Bad actors are banned.  I believe this is essential.
  • Regulators accept/tolerate it: SL and the Linden Dollar got plenty of scrutiny and are still operating.  Nuff said.
  • Friction is low:  To be an effective medium of exchange, a virtual currency must be super easy to trade between partners and transaction fees must be minimal. There were no transaction fees imposed on merchants or customers in Second Life when they use the Linden Dollar for transactions.  The experience must be easy to navigate. Second Life isn’t always easy to navigate.

Let’s look at Bitcoin through the same lens:

  • Ubiquity: It’s not possible to know precisely how may bitcoin holders there are but you can look at the currency exchange transaction volume and see that it’s a thin market.  According to there are six – yes six – businesses in NYC that accept Bitcoins. Another source says there are 13.  Conveniently, a handful are within a quarter mile of my home in Brooklyn.  Yet, the user base is growing quickly as evidenced by the growth of startups like Coinbase.  Clearly we are incredibly early on the adoption curve.  Can Bitcoin become ubiquitous?  Can it ride the hype cycle up then cross the chasm to wide-spread adoption?  The answer depends on the following…
  • Price Stability:  Obviously it’s early, but Bitcoin’s price is highly unstable and varies dramatically across currencies and countries at any given moment.  This attracts traders and speculators but is not good for merchants and customers.  In contrast, the trading range for the Linden Dollar has been very, very narrow.  Stability gives people confidence and is an absolutely fundamental requirement.  I don’t agree with the argument that the hyped price of Bitcoin will drive widespread adoption although the media attention is sure helping.  I think the hyped price is expanding the chasm Bitcoin must cross to get to widespread adoption.  Remember Gartner’s hype cycle and trough of disillusionment?  I’ve walked inside that trough. It’s ugly and the exit wall is steep and slippery.  My libertarian friends will unfriend me for this, but I do believe Bitcoin needs a mechanism for addressing significant price fluctuations…even if it’s done algorithmically.  Supply should be variable and it’s not.  Yes, the bitcoins can be infinitely subdivided but the absolute supply is fixed.  It can’t exceed 21 million bitcoins.  Up to that point, the rate of supply increase is determined by miners’ processing abilities (i.e., computing power).  As a tactic, pegging supply to computing power is sheer genius.  But as a strategy I think it is flawed.  Bitcoin is built like a dam without a floodgate.
  • Trust:  Because Bitcoin is decentralized and users are anonymous, fraud is a major concern.  How do you know if your trading partners are reputable?  How are fraudsters caught, punished and deterred?  This could be a major opportunity for third-parties to develop value-added services but it’s a problem today.  And it is a cost that must be added later. Trust is a major factor in adoption.
  • Regulator tolerance:  Regulators are looking carefully at Bitcoin, as you’d expect. There are some positive noises from some corners but there is one feature of Bitcoin that will give most regulators heartburn and that’s anonymity.  I understand the desire for anonymity.  But I have to ask myself what kind of person or entity actually needs total anonymity.  I don’t.  Sketchy types (from tax avoiders to drug dealers) do.  Central authorities can make it incredibly hard to move value out of Bitcoin into the “official” monetary system.  That’s a problem.  A big problem.  I’ve heard the argument that Uber is “breaking the rules” and continuing to operate in key markets but that’s a weak argument.  Pissing off local taxi and limo companies (and the politicians that support them) is very different from building a virtual currency that can be used for nefarious purposes.  Regulator tolerance/acceptance/approval likely will require dialog but whom would regulators talk to?  Where’s the Jimmy Wales or Philip Rosedale of Bitcoin?
  • Minimal friction: Bitcoin is complicated and feels like an “insiders” game.  In some ways, it reminds me of Second Life.  You need a big brain to enjoy Second Life.  The interface is for creators and power users.  It’s not a casual experience.  As a result, services built on Second Life – like the currency exchanges — tended to be complicated because the underlying platform was and still is complicated.  Compare that to Twitter, Facebook and Apple’s IOS — which are pretty intuitive.  The services/tools/experiences built on those platforms are likewise pretty intuitive.  One could argue that a service/tool/experience that makes Bitcoin easy and intuitive could win the day.  I can’t think of many examples of services/tools/experiences that simplified complex underlying platforms.  Simple begets simple.  Complex does not beget simple.  Can you think of any?

So where does this all get me?  Well, there are plenty of investment opportunities and I see fellow investors jumping in.  I think I’ll stay on the sidelines for now.  When you invest in a startup you don’t assume the founders have it right but you assume they’ll get it right.  My biggest problem with Bitcoin is that it has some systemic flaws and I’m not sure – given the way it’s constructed – that they can be addressed, or who will address them…so I’m reluctant to invest in the ecosytem.

Outsider Art, Edmonton and Granify


Half my deals come via referrals from people I know and trust — mentors, fellow angels, former employees, etc. (e.g., Say:Media, 140Proof, Thank you friends! The other half are deals I find on my own — companies whose products I love and/or entrepreneurs I admire (e.g., Twitter, TheRealReal, MommyCoach)

I’ve gotten to know Giordano Contestabile (@giordanobc) because we’re both early investors in TheRealReal.  We both made very early bets that Julie Wainwright would build the world’s premier online consignment shop and that’s precisely what she’s doing!  SHE IS KILLING IT!  You’ll hear a lot more about TheRealReal in the coming months because Julie is building a break-out company — a unicorn in the making.  Really!

Back to Granify.  In September, @giordanobc introduced me Jeff Lawrence, the CEO of Granify.  Jeff and team are building what I believe will be an ecommerce powerhouse based on a simple mission: help online retailers make more money.  How?  Granify tracks your customers as they travel through your ecomm website, predicts whether or not they’ll buy and if they’re predicted not to buy, understands why, then presents them exactly the right message at exactly the right time.  And BOOM! they convert.  SWEET!  If you talk to any ecomm CEO, she/he’ll say their biggest headache and their biggest leverage point is on-site conversion. #TRUTH

Jeff and I chatted.  I was impressed. I like simple solutions to complex problems.  I like that their dashboard tells you exactly how much you’re making from their service.  I like that they only make money if you make money.  I like companies that productize rather than servicize solutions. The ecomm space is massive.  

BUT Jeff was in Edmonton (that’s in Alberta, Canada —  just a quick 4 hour and 12 minute flight from NYC) and I couldn’t break away to buzz up there and meet him.  It’s also fiendishly COLD in Edmonton (it’s the northernmost city in North America with a population over one million, according to Wikipedia) and I’m a warm weather friend.  (Today Edmonton will reach a high of 10).  Initially, I was concerned that the company was in a relatively remote location. But then I thought about Omniture.  A billion dollar exit.  Built in Utah, not Silicon Valley.  OK.  I started thinking remote might be good — if it’s cold, people stay indoors to write code and mine data. Hackathons and investor pitch contests are not an everyday distraction. OK I’m warming up.  Granify kept coming up.  I had lunch with another NY angel, Jerry Neumann @ganeumann who worked for the private equity firm that took Organic private back in the early 00s when I was the CEO.  He could have been a d*&k back in the day but wasn’t.  In fact, he was — and is — a super nice guy.  It turns out that Jerry is also an investor in Granify.  I figured it was worth another look.  Jeff made a trip to NYC.  His story was even more convincing in person and he closed me on the spot.  Yay!

I’m an art lover and like many NYers I make the rounds to the big shows when they swing through town.  I particularly enjoy the Outsider Art show.  The work is fresh, dynamic, unaffected and unfiltered.  If you like art porn, check out Eugene Andolsek — a true savant (see photo above).  I have a few of his works.  As an investor I’m a bit of a contrarian and certainly an outsider.  I don’t do the cool kid deals because I’m not a cool kid (I never was).  Just sayin’.  

Three of my recent deals are “outsider deals.”  They’re outside the Silicon Valley/Alley bubble.  OfferUp is in Seattle.  Snapwire is in Santa Barbara.  Granify is in Edmonton.  I see a pattern here.  

What do you think?  Do you shy away from OOT deals?  Or seek them out?


One of my early investments goes public! Go TWTR!

Yes!  Today is indeed an exciting day and the PERFECT day for my inaugural blog post.  Why?  Way back in 2007, I made an investment (my third early-stage investment after Say:Media fka Videoegg and Kidzui) in a quirky, quixotic idea called twttr.  Today, TWTR began trading on the New York Stock Exchange.  I’ve invested in 17 early-stage companies since I started in 2005 (the list is here), and Twitter is the first to go public.  Hugely exciting!  I cannot describe my elation today.  I was moved to tears. I am so grateful to Ev, Jack and Biz for letting me join their adventure, and so grateful to Dick, Adam and the Twitter team for managing such an incredible expansion. I am so grateful to the universe. Wow!  Deep breath.

Twitter launched when I was running a web development and digital marketing agency called Organic. I loved the idea and wanted to find a way to use Twitter to help one of our clients connect their rabid fan base using mobile phones.  Hey, mobile connectivity was a novel idea back then. Biz kindly listened to my pitch and generously shared his ideas but told me Twitter needed to focus on making the service work and wouldn’t have time for a bespoke project.  Ah, the power of focus!  Good call Biz 🙂  I felt the promise of Twitter and I could not let it go.  So, I went back and asked the guys if they’d take an investment from me.  The answer was yes.  Six years later, here we are.

I’ve been wanting to blog for awhile but I didn’t want to be that blogger with “a big hat and no cattle,” as they say in Texas.  So I’ve been waiting for the moment where I felt I’d earned the right to opine and I think today’s liquidity event for Twitter is as good a moment as any.

I decided to call my blog Quixotic Ventures.  Why?  My grandmother loved art and  Salvatore Dali was one of her favorites.  She had that seminal engraving of Don Quixote you see everywhere (it wasn’t quite so trite in 1969).  I remember her telling me the story of Don Quixote at six.  As I was thinking of names for the blog, the first thing that came to mind was Don Quixote…tilting at imaginary windmills, hence Quixotic Ventures.  Early stage investments are quixotic:  “Foolishly impractical.  Marked by rash, lofty, romantic ideas.”

Yeah, that’s early stage investing all right — especially the way I do it.  I look for founders who have lofty, romantic, impractical ideas.  Transformative ideas.  Ideas that change an industry and in some cases — like Twitter — the world.

Thank you for your time.