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Democratizing the Secondary Market - Making an Industry Accessible on a Global Scale

Kobie Fuller
General Partner at Upfront Ventures
+ 1 speaker
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2020 Startup Grind Global Conference
February 11, 2020, Redwood City, CA, USA
2020 Startup Grind Global Conference
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About speakers

Kobie Fuller
General Partner at Upfront Ventures
Eddy Lu
Co-Founder & CEO at GOAT Group

Kobie is a Partner at Upfront. He joined the firm in June 2016 after having previously worked at Silicon Valley­ based Accel, where he led investments including UserTesting, Campaign Monitor, AdRoll and Invoca (also an Upfront portfolio company). Prior to Accel, Kobie was the Chief Marketing Officer at REVOLVE, one of the largest global fashion e­commerce players based in Los Angeles.Kobie brings to Upfront expertise in SaaS businesses and marketing technologies. He has deep knowledge of emerging sectors including VR and AR and was an early personal investor in Oculus, later sold to Facebook for $2B. Earlier in his career, Kobie helped found OpenView Venture Partners and was an investor at Insight Venture Partners where he sourced notable early investments in Exact Target (acquired by Salesforce for $2.5B) and Instructure (NYSE: INST).Kobie graduated from Harvard University where he was captain of the track team, a multi Ivy league champion sprinter and still current school record holder.Current and Past Investments:- AdRoll- Bevy Labs- Campaign Monitor- Cordial- Exact Target (acquired by Salesforce.com)- Imceda (acquired by Quest Software)- Instructure (IPO - NYSE: INST)- Invoca- Jagex (acquired by Zhongji Holding)- Loyalty Lab (acquired by Tibco)- MetaCX- The Mighty- Monetate- Oculus VR (acquired by Facebook)- Openpath- Osmo- The Wave- UserTesting

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Lu is the co-founder and CEO of GOAT Group, the world’s largest marketplace for authentic sneakers. Lu co-founded GOAT in 2015 to help solve the issue of counterfeit sneakers in the industry, and has since raised $200 million in venture capital, growing the business to over 12 million users and over 600 employees.As CEO, Lu has helped build GOAT into the most trusted source to discover, buy and sell authentic sneakers and oversees the business, vision, and strategy of the company. The platform offers the greatest selection of sneakers available globally through company-operated retail stores, e-commerce sites and mobile apps under the GOAT and Flight Club brands.Prior to GOAT, Lu worked on various gaming apps, specialty food franchises and social dining app Grubwithus.Lu holds a B.A. in Computer Science from UC Berkeley and was part of Y Combinator’s Winter class of 2011.

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About the talk

A Fireside chat with Kobie Fuller, Partner at Upfront Ventures + Eddy Lu, Co-founder + CEO of GOAT Group talking about the Democratization of the Secondary Market and Making an Industry Accessible on a Global Scale.


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Alright morning startup grind. Morning, people people take at least traffic still super excited to have this conversation today with my buddy, Eddie. We're going to talk about a lot more than just sneakers when I talk about a lot of topics that are extremely relevant to everyone in this room from getting that initial idea and going all into making that company to having to do a massive pivot to look at CiCi's in the face and then telling you your startup in your back categories too small

to then getting to a very large Global brand such as go and try in the cargo passwords building a multibillion-dollar company so full of exciting topics. We're going to talk about today and have 20 minutes, but first off Eddie I really want to start off with one word that wants you to bring some contacts to family room rug with us. I'll start there. So when we started our started hurting my co-founder that she and I we were a completely different business when upfront investment

in us we were a group dining out where we brought people together at restaurants throughout the city to meet Network date excetera and it was a great low pressure way to meet new people. But in reality there so many freaking points. Kind of marketplace. Imagine. If you're vegan of the menu that doesn't have vegan options. You don't know if you were going to like anyone it's always a guy that's all girls are the only one that shows up with the restaurants too far. But if I'm doing something about a suit, there's just too many friction Point actually making that work. I'm a lot of people

actually still message me asking my lessons on grub with us and I try to help them in like hopefully this is solved one day where we can bring people together in a loaf of fashion way. Like it was it was honestly very tough soap. This was back in 2012 and up front invested and we had to Pivot cuz it just was not gaining traction at that time. My co-founder who is a massive sneaker Enthusiast. His first pair of shoes ever was a Jordan 5 grapes and he was 10 years old or his first pair of Jordans ever and they retro Nike that this thing where they re-release are retro shoes. So 23 years later.

They retro. This was 2014 2013 and he had to have them so if you want to eBay the largest sneaker marketplace of the time. These pair of shoes, he got them. It was so upset. They turn out to be fake. He kept complaining to me and we were just like how come in this day in age. We're spending $300 on a pair of shoes and we stopped at worried if it's real or fake. So since we are pivoting anyway, we're just like hey, why don't we build an ark Place based on trust safety and authenticity. So how's that conversation with your an investor group restaurant eating app, and then where do sneakers like

the thought of God? Well, you know, you know, what sound was crazy. So it wasn't a favor from God With Us right to go get it and flip it again in us as operators. We some of our investors wanted us to get Apple hired some of us wanted to return the money. I'm so in and wanted us to return the money and I don't know if we were stubborn or stupid or whatever. We're just like now we're going to figure out we're going to figure it out. So when we told them that we are going to Pivot into sneakers and I asked a bunch of our

big investors. Like Hey, we're going to do this massive Piven to sneakers on if you guys want the money back you guys go you can have it as soon as pennies-on-the-dollar but whatever and thankfully every single message was like, you know, what at this stage it's worth more to you than it is to us. So just keep it there for them and they stayed on but it was not easy that the one thing though Greg are partnered up front. He used to work at eBay and he saw that the sneaker Market is the growing if you like

kids don't collect trading cards anymore. They don't collect a lot of things but you like the sneaker Market is actually growing so he believes in Us in so so how does goat actually work? Because we are a Marketplace based on trust and safety anytime you buy something on Goat the seller actually ship sits in one of our facilities. We have about 12 throughout the world. Now, where are authenticated look at every single snake are the authenticated and they quality check it because even if you buy something that's supposed to be in you in condition. There might be a

scratch on it. There might be a scuff so we check for all those things for a condition and authenticity before you repackage it and send it to the buyer that way the buyer gets that just at retail life experience and go deals with all the messy Marketplace issues and the guards to the authentication process. I saw firsthand the links your team goes through. I mean literally I saw someone smelling a shoe smell a smelly shoes that actually see if it comes for CERN Warehouse be closer to where I actually Factory has it smells you talk about is how in-depth that process

is. Yeah. I mean last year we we we found over 72 million dollars are ovary prevent. It's 72. Dogs of fakes going through our our system. So it's a big deal. I mean like he's the most counterfeit brand in the world. And if you talk about smelling it's kind of like that new car smell where you just used to that one smell and Nike just has the same glue the same material that they always use. So when you smell something from a fake Factory any other use likes different synthetics that use different materials, you can instantly tell if something is off and are authentic. It is a big part of

the training. I mean obviously touch feel look except for but then smell is a big component of that authentication process. I don't want to know the interview process. Tell us what's the most expensive sneaker right now on goat and how much I mean we have we have a ton. I mean we have like the Nike mags I go for 50-60 Grand we have the undefeated 4S which are the very first collaboration Jordan did with a brand. I mean that now collaborations are all over the place of Virgil abloh and all these

Brands but the undefeated Jordan clubs. The first one that goes 450s Grande Travis Scott actually came by to fly from New York one day and bought a pair of so I don't know about The conversations you've had. I'm sure that many VCS and also I'm sure friends and family who I'm sure said sneakers. That's a super Niche company is a super nice Marketplace. Like if you have the opportunity to sell this for a couple of million dollars to dump it mean how did you really have the resilience to believe in your passion

and God in the park on building? What's now of several hundred million even bigger company, you know, what's funny is that so Kobe used to work at Excel and our every single fundraise we've had it's been tough because every single investor is worried about the time. They're just like this is a small-market XL passing us are series. They just so you know. Number Friday meet a partner meeting. Someone looked at me is like sneakers. I mean it was very hard raising our series a round because very few investors understood the market during her series XL came into our round. It was probably

the easiest I never did because everyone saw the star of the Sea of Attraction, right? But even to this day I move we raised almost a hundred million dollars now, we raise our series the little over a year ago to this day investors still worried about Tam and even a year ago when I was fundraising there looks like it's the thing to people really buy sneakers over retail price. Like why would anyone do that? Right at least sophisticated investors running billions of dollars? And so you just have to be resilient. You have to just keep grinding it out and just have to tell

the story and explain why this phenomenon just increases I mean, you know when I was a kid going to high school you can wear the same dirty pair of sneakers every single day and be okay now every kid has to have Rock a different different pair of sneakers to school because it's an expression of your Yourself and how is it in also invaded Silicon Valley still likes of Marc benioff like crazy Sneakerhead talk about the phenomenon that is sneakers from just kids to the Silicon Valley Elite. Actually. I'm have a funny story about that. So we launched go in

2015 early in 2016. We still don't have much traction yet, but we started seeing these massive purchases like $3,000 a thousand dollars and instantly were like I was fraud it has to be fraud because who's buying these things but my co-founder who was like the only fraud he was really look at the emails and it was Jack at twitter.com Adam at twitter.com. So Jack Dorsey Florissant Adam vanhoose a CEO back then and we are just like crazy. What if we're scared that is just fraudulent order. So I emailed them just enough just as a fraud check and was like Hey, we're big fans.

Thanks for ordering. Please. Let us know if you need anything. And so I'm Adam reach out to have to say hey. Thanks so much. I'm actually looking for this pair of Yeezys that you don't have on your site would love it. Yeah, just letting you know and so being Scrappy entrepreneurs. We scour the internet for these pairs of shoes. These are the shoes and we finally found it. We bought them and we put on our site and I emailed him back to say hey Adam, magically put these the shoes

would love to hang out and magically we had a flight next week. So we flew up we hung out with them. It was great and because of that he is not one of our board members and he's been amazing. So but yeah, it's got to do some of those Small and Scratchy right just figure it out. But that's that's how we started to just realize that you know, we're all disruptors here. Right? We want to be in the fridge allistic. We want to be unique. I think you know when you're interested you can pick

brown or black but sneakers are like I was saying earlier true expression of yourself, and I think it really speaks to the Silicon Valley crowd where it's like I can be unique I can have my own style and wear sneakers about future growth in how I just thinking about expanding Market size expanding the company you've made the decision to go into another category being apparel. How is that process of making that decision and talk to us a little bit about what you're doing there. What turns out you can't just wear sneakers out onto

the street you got to actually wear clothing as well. So it was a very natural completion of a story. We we dressed people sneakers. We actually really worked hard on building our brands do we build French trust with the consumer and with that, you know, they do really wanted to have a secure ate the whole outfit right? Cuz you know, it's like Kobe you about that pair of those pair of Jordan Ones on Goat. These are the apparel item that'll look good with those Shore and one so it's like just the completion of the story that we think and it's not just it's not a

stretch. It's not like we're trying to be this crazy vertical eyes marketplace where it where we call ourselves the global platform for style and that's out opponent is just we just want to make people look and feel good and then Global he's now expanded into Asia and Europe talk about that decision and also the complexities that I'm sure you've faced the guards to extending your brand overseas. So when we this was kind of the end of 2018 early 2019 China was already are our biggest International Market seconds to the

US in terms of our our sales and what we are seeing we didn't localized anything at that point. But we were saying was that we saw videos on the Chinese version of YouTube telling people how to purchase on Goat. So they would just videos of this is the buy button. This is what you click. This is where you enter your credit card details and we are just like wow, it's alright, it's our biggest international country, even though they have to jump through hoops to kind of transact on a soap. We are just like, all right, let's make sure so we we actually when is the market we we interviewed

a whole bunch of people we interviewed by GM's of uber China of Airbnb China at wework China excetera. And so that we could understand how to learn China is of course the typical market for Western North and we realized if you competed in a domestic Marketplace China if you get killed because the Chinese up starting to outrun you at work you all day long that the reason why we knew go had a shot was because of the cross-border aspect. We thought that we were Western brand. I mean the Chinese consumers very scared to fix because a lot of fakes are generated from there. So

they want to trust the Western Brown. We are bringing Western cultures into China and there's actually a lot of sizing mismatches where and preferences. I mean in China for for instance. They prefer the Jordan mids a lot of times worst of the Jordan the Jordan highs and of course, I'm sizing a lot of the smaller sizes going to China versus a lot of the bigger sizes cell in the Western World. So we saw that we had an opportunity. So we started go in what we did was we localize language look like currency and we created a WeChat mini program because we have such an important part

of the Chinese ecosystem soap. We went full full and we have a team about 35 in Fort Worth for two people in Shanghai right now to service that that market so that's on the demand side. Of course on the supply side. We know sneakers are a worldwide markets. So we have a we have a facility at Distribution Center in Hong Kong. We just opened one of the UK and we just seen that when you have a local presence, it reduces costs for sellers to sell in to go because now they can just ship locally to the local Distribution Center in just in a month the UK sales in Forex just be just because we

have no choice but I was talking about competition got one very large competitor with stockx. You have a number of small off starts that are nipping at your heels. How do you stay ahead? What do you do to compete? How do you potentially leverage brand as your weapons are really just capitalize on customer finity and loyalty. Can speak about the competitors but in terms of our our vision and what we think a lot of some of our some of the other guys there transaction marketplaces, it's it's about making that sale on that transaction and

nothing else right in doesn't create good long-term brand value or long-term customer value vs us we are trying to create a brand. I mean, we we want we think very long time we have this whole augmented reality feature in a wrap and a lot of times we are showcasing product that isn't even for sale. We showcase kind of unreleased fragment Jordan Ones or weaving, you know, sometimes God will put like the Travis Scott Jordan Ones $3,000. We know that most kids can't afford a $3,000 pair of shoes, but we do it so that we can generate the next generation of sneakerheads. You might not care

about sneakers now, but if you're playing with it, and they are doing the try on feature maybe in the future, you're like hate when I do have money. I was nostalgic about that pair of shoes when I was a kid playing right? So now I'm going to transact because I have money right we've ghosts built an aspirational friend and people tell us this is something that is counterintuitive people think that goat is only for a limited Sneakers but 40% of our sales rash under retail price because now we're just the best place to buy sneakers. Regardless of its kind of super expensive $2,000 or it's $50 and

we really think it's cuz we built an aspirational brand. I mean think about I equated walking to Tiffany store No One by our very few people by the hundred-thousand-dollar diamond encrusted necklace, but you want to stay you shopped at Tiffany. You want to get the blue box. So you buy the $100 bracelet and you walk out right in the same with goat where you experience the Travis Cason augmented reality, but you walk out with $150 pair that looks like the Travis Scott's because you want to say you bought on coke and that's the long-term Grand Valley that were trading so that people are at

can have Affinity towards a friend and we've been seeing it with LTV is going up. A lot of them brand actually wanting a partner with us cuz they see us ourselves at the marketing channel. Not just the transaction Marketplace a clue about how also you're helping democratize the whole industry of just sellers being able to compete with traditional retailers is Ghost unabling those folks to Leverage The Marketplace to create their own businesses. He talks about that initiative know what's crazy about traditional retailers. You walk into a Footwear store. There's maybe like 200

unique styles on the wall, and it's only like this year's Styles and stuff sold out. So it's kind of stuff that's left over not the not the cool stuff. Right and so on hope we have over 60,000 unique styles that you can choose from and it gives people so much access to the time for the democratizing piece. If you want to eBay right now and you type in these pair of Union Jordan 1 size 10, you might see a hundred different listings and you have to sift through Every single listing look at it every seller star rating every sellers photo set in might take it 2 hours to buy a pair

of shoes on Goat. We consolidate everything into one SKU page and sellers compete against each other without to Paige sellers don't have to build up a reputation anymore than the guy who buys one pair of shoes can compete against the guy who is a massive power seller because it's just buyers just care about price and what they want to buy right? And so we really democratize that because go deals with all that other stuff and we've really help the smaller it like I I love talking to parents are always like my my kids like a mini entrepreneur now because I didn't know they learn how to sell

and buy them go in like make money for themselves. Very cool. We have a little over a minute left any parting words of wisdom you have for the Stop Bryan Community here today. I've made a lot of mistakes. I think so in turn the pivoting. I mean stuff stuff happens, right, you know the the mistake we made from Heaven from God with us to the next idea before well before it goes with a Fact that we're like, hey, we have all this IP from grub with us all this restaurant data. We weren't passionate about the idea that we are but we like hate that kind of safe face until like sewer investors were

still in the same general vicinity. Let's pivot into this this thing and it was just not good cuz none of us are past medical or just building it for building something sake so I would say if you're in a predicament just like just have a hard reset and say what what I'm doing next what I want to spend the next ten years of my life doing it right? Awesome. Thank you for sharing the story everyone except Eddie here.

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Kobie Fuller
Eddy Lu