Investing in the “Circular Economy”

Over the past eight years, I’ve invested in five used-goods companies — NiftyThrifty, TheRealReal, OfferUp, Revivn and Remoov.  Two have turned into BIG companies; one of which — TheRealReal — IPOd last year.  Inspired by my first investment in the category, I studied the segments I believe have most promise.  Serendipity got me started but the rest came through focus and intention.  Spray and Pray is a portfolio strategy but it is not mine.  I’m more of a “craft” investor. 😆 I focus on a segment and keep chipping away, hoping to find a diamond.  Here’s how I’m spinning it up in the Circular Economy…

In 2011, Topper — a first-time founder — pitched an online thrift-store in a cold but persuasive email. Topper had suppliers who could provide vintage t-shirts and other items for $1 a pound — about $.20 an item — that he could sell for $15+ while benefitting the environment.  Nice markup!  Mission-driven concept. We’ve all seen how much pollution and waste is produced by the apparel industry making clothing for a populace that ever more rapidly discards it.  The company was aptly named NiftyThrifty.  This pitch came before the “Circular Economy” entered our lexicon. Topper had been selling used clothes online with success and wanted to build a real business.  Because he was a first-time founder with little work- and no startup experience, part of my due diligence was lunch with his dad where I said “I’d be disappointed if he lost my money chasing this business but I’d be horrified if he took the money and ran off to a beach in Mexico.  Please tell me he wouldn’t do that.”   The answer was “no, he’s a good guy, he wouldn’t do that” so after some market diligence (p.s. thrift stores are a $10B business) I wrote a series of checks to get the company started on the basis of my research, a stack of tshirts, a powerpoint and a dream.  It’s often like that in early-stage venture.  We went on to raise several million dollars, hired a great team, launched, got to $40K in monthly revenue but couldn’t break through beyond that.  NiftyThrifty ended up in the trash heap.  It happens.  But Topper recycled the idea and is still at it with another new concept in used clothing. He is an indomitable entrepreneur. I am so thankful to have invested. It was karmic because my return on that investment was ultimately significant.

How?!  That investment led me to several promising companies, one of which IPOd last year.  Serendipity, karma and some focus on a thesis…

In 2012, another founder pitched me via cold email a local marketplace for used goods called OfferUp.  The app had recently launched in Seattle and had 3,000 listings.  After a conversation I was interested. Smartphone penetration was up to more than one-third of the population. Craigslist and Ebay were not mobile and OfferUp made it 1-2-3 easy to post an item for sale.  I had a meeting in Seattle with a potential partner (largest thrift store chain in America) for NiftyThrifty so I met with Nick, the founder of OfferUp, his team mates and a couple of his F&F investors. Great people!!! I did my homework and ultimately wrote a check.  OfferUp has become a powerhouse in local listings and recently acquired LetGo.  The combined company has a massive footprint.  Both apps are top 10 free shopping apps in the Apple’s app store — right up there with Walmart and Target.  I’m looking forward to seeing where Nick takes this important company.

While I was doing my due diligence for NiftyThrifty and OfferUp in 2012, I went to AngelList as I always do to poke around. I came across TheRealReal (authenticated luxury consignment).  The moment I saw it, lightbulbs went off in my head.  I could see this was right for so many reasons:

  • The traditional consignment experience was awful.  You drop something off and wait months and months for it to possibly sell then you have to chase the check.  Liquidity is painfully slow.
  • The market is highly fragmented, filled with mom and pops.
  • Fakes abound on sites like Ebay.
  • Luxury goods drive a high average order value.
  • Sellers could unlock value in their closets, buy more new items they could later consign and buyers could purchase luxury items at an accessible price.  Nice two-sided marketplace with a potential fly-wheel effect.

I met the founder, Julie Wainwright,  for breakfast, visited their tiny office in Marin County (north of San Francisco) chock full of merchandise, did my homework, invested and joined the board. When I joined, the company was doing $80,000 a month in GMV (sales on the platform), around the time of the IPO (June 2019) it was doing about $80,000,000 a month in GMV — a 1,000 increase!!!  I’ve written about the experience previously.  It was awesome.

I was on a roll in used goods, owning that thesis.  😂

Fast forward to 2016.  My friend Nathan (whose company I had invested in previously) introduced me to TheRealReal of corporate IT called Revivn.  They offer a white glove service where they come in, take used hardware away and repurpose it (revive it!) so it doesn’t go in the landfill.  It’s a white glove service that gives old hardware a new purpose.  The company has been easily profitable since I invested.  I’m very interested to see where Anthony takes the company.

In 2015, I was introduced to a founder also focused on used goods.  Luis was building a company called Remoov. Let’s say you do a big spring clean or you’re about to move and you have a big pile of junk that’s too much for you to sell on OfferUp or TheRealReal and you’re not really sure of the value anyway. You call Remoov to come pick it up. They take it away, evaluate it and either sell it, donate it or recycle it. If there are any proceeds, they share them with you.  35+ million people move a year in the US so it’s definitely a large addressable market.  Luis pitched me in 2015 when they had one operation in SF. I was interested but declined and asked to stay in touch. Luis continue bootstrapping, built a good business and decided to expand to Phoenix. He did a superb job keeping me updated on the business and in 2019 I (finally) invested and referred him to another investor that wrote a big check.

I’ve done high- and low-end clothing, and accessories. I’ve done computer hardware. I’ve done home goods. What’s next?