Key Moments
How I launched a marketplace with no buyers and no outside sellers
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Key Moments
Whatnot built a $20B marketplace by starting with zero buyers and sellers, focusing on a niche, and leveraging unusual growth tactics.
Key Insights
Whatnot achieved $2.3 million in sales by the end of 2020 with 17 employees, growing to $163 million in sales and 100 employees by the end of the following year.
The company initially solved the marketplace's chicken-and-egg problem by being the sole seller and authenticating all items, later buying inventory from other online stores.
Early growth tactics included partnering with YouTube influencers and implementing a viral giveaway mechanic for rare Funko Pops, requiring users to share to enter.
Whatnot was initially conceived as a 'better Craigslist' but pivoted to a collectibles marketplace after analyzing eBay's sales data and observing trends in physical comic book shops.
The founder emphasizes a user-driven approach over a visionary one, stating that 'If customers do not want that, you're dead to rights.'
Live commerce is projected to be over 30% of e-commerce in the next decade, with Asia already at 40%, indicating a massive market opportunity.
The improbable beginnings of a $20 billion marketplace
Grant Lafontaine, co-founder of Whatnot, shares the unlikely journey of building a company now valued at $20 billion. He highlights that the company's immense success is still just the beginning, emphasizing a focus on the problem ahead rather than past achievements. Whatnot began six and a half years ago, with a significant amount of work still to be done. Lafontaine recounts turning down an investment from Shaan Puri early on, a decision that he admits cost Puri dearly. The platform itself is a unique marketplace that started with collectibles like Funko Pops and trading cards but has since expanded to include a vast array of items, even seafood like live crabs, demonstrating its unusual and diverse inventory.
Overcoming the marketplace paradox: No buyers, no sellers
Starting a marketplace is notoriously difficult due to the inherent 'chicken and egg' problem: how to attract sellers without buyers, and buyers without sellers. Whatnot's initial strategy was to solve for one side of this equation by being the primary seller on the platform. Lafontaine and his co-founder, Logan, acted as the early sellers, providing all the initial inventory. To add value, they authenticated every item sold. When a purchase was made, they would then go out and source the item from various online stores, employing a team in Brazil to help locate the specific products. This method allowed them to build demand before they could realistically onboard external sellers. They developed a pricing algorithm by scraping data from multiple sites, considering liquidity (how often an item sells) to ensure they could secure items at a reasonable price for resale.
Pivoting from 'better Craigslist' to a collectibles focus
The initial concept for the company was a 'full-service Craigslist,' a business idea that Lafontaine quickly realized was economically unviable. The cost of delivery for low-value used goods far outweighed the potential revenue. This realization came after extensive research into delivery logistics. Simultaneously, the team was building the core payment system, which would be necessary for any marketplace. Lafontaine began searching for other broken marketplaces and found himself looking at eBay. Observing that collectibles, particularly Funko Pops, were trending heavily on eBay and seeing friends re-engage with childhood nostalgia items, he and Logan visited local comic book shops, which were packed with Funko Pops. This led to the pivot towards building a collectibles marketplace, focusing on Funko Pops because they saw more of them selling on eBay than comic books, indicating a strong demand for this specific niche. They felt the product experience for collectibles hadn't evolved and saw an opportunity for a more social and engaging platform.
Leveraging 'black hat' and unconventional growth tactics
To acquire buyers in the early days, Whatnot employed creative and unconventional growth tactics. One key strategy was partnering with Funko Pop influencers on YouTube. Lafontaine recalls calling every influencer, facing initial skepticism, but eventually finding an ally through a prior connection. The second major tactic was a viral giveaway mechanic within the app. They offered high-value 'grail' or 'chase' items, like a $500-$1,000 Funko Pop, and required users to share the platform to enter the raffle. This system allowed for unlimited sharing through referral links and codes, encouraging users to spread the word to friends and family. This strategy effectively took over Funko Pop subreddits and Facebook groups, generating significant buzz and user acquisition. While not explicitly labeled 'black hat' in every instance, these were aggressive, non-traditional methods to gain traction.
The strategic advantage of starting niche and being user-driven
Lafontaine stresses the importance of a user-driven approach over a visionary one, stating that the company's success hinged on listening to customers. While investors were initially hesitant to invest in a 'Funko Pop company,' Lafontaine argues that all great companies start in niche markets. Competing in a mass market with a small team is nearly impossible, so focusing on a specific subset of users and building an exceptional experience for them is crucial before expanding. This strategy mirrors early eBay, which also began with a very niche focus. The key is to build value for a smaller group and then use that foundation to grow outwards. This approach acknowledges that customers' needs and desires are paramount; even the best vision will fail if customers don't want the product.
The pivotal shift to live selling and rapid scaling
The business experienced a significant inflection point with the launch of its first version of live auctions in July 2020. This transition marked a dramatic increase in growth, with the company achieving 100%+ month-over-month growth. By December 2020, Whatnot had $2.3 million in total sales and 17-18 employees. The following year, sales jumped to $168 million with 100 employees, and by the next year, they hit $1 billion in sales. This explosive growth was fueled by the engaging live selling experience, which proved transformational for sellers. During the pandemic, many brick-and-mortar stores closed, and sellers found Whatnot to be a more effective sales channel than their physical stores, sometimes generating more revenue online than they ever did in person. The platform's ability to connect niche sellers with a global audience of buyers, rather than just local foot traffic, was a critical factor.
Cultivating a culture of seeking truth and rapid learning
Lafontaine emphasizes that personal growth as a leader involved not changing too much, but rather learning to operate at scale. He highlights the importance of maniacal focus on problems and opportunities, combined with nimbleness in execution. A core principle at Whatnot is a culture dedicated to finding the 'right answer,' which involves deep dives into data and rigorous testing. Lafontaine often questions teams to ensure they truly understand the root cause of issues, pushing them to explain complex concepts in simple terms, akin to a 'middle school' level of understanding. This Socratic approach, inspired by experiences at Facebook and discussions with others, aims to uncover genuine insights rather than relying on surface-level metrics or jargon. He believes that being disagreeable but not rude, and fostering an environment where truth-seeking is paramount, allows the company to make better decisions and avoid the pitfalls of politicized project reviews or unclear communication.
The future of live commerce and opportunities on Whatnot
Looking ahead, Lafontaine predicts that live commerce will constitute over 30% of all e-commerce within the next decade, a significant increase from its current single-digit percentage. This projection is based on trends seen in Asia, where live commerce accounts for around 40% of e-commerce. This vast market, potentially trillions of dollars globally, presents numerous opportunities. Whatnot already hosts sellers doing nine figures in revenue, including individuals who started with small operations and scaled to hundreds of employees built entirely on the platform. Opportunities exist for peripheral services, such as wholesale marketplaces supplying inventory to Whatnot sellers and multi-channel networks (MCNs) specializing in helping individuals run their live shopping businesses. The company itself is focused on expanding into new categories and geographies, aiming to continue its rapid growth trajectory.
Mentioned in This Episode
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Common Questions
Whatnot initially acted as the seller themselves, sourcing and authenticating products. They focused on building a buyer base through influencer partnerships and viral giveaways before opening up the platform to external sellers.
Topics
Mentioned in this video
A marketplace platform that started with collectibles like Funko Pops and expanded to include a wide range of items, including live selling.
A fast-food restaurant chain, mentioned as part of a comparison to Whatnot's valuation.
An athletic apparel and accessories company, mentioned as part of a comparison to Whatnot's valuation.
A car rental company, mentioned as part of a comparison to Whatnot's valuation.
A motorcycle manufacturer, mentioned as part of a comparison to Whatnot's valuation.
A major airline, mentioned as part of a comparison to Whatnot's valuation.
An organization that provides resources for entrepreneurs, including a guide on gaining attention for new businesses.
A furniture retail company, mentioned in the context of researching delivery logistics.
A platform where the host frequently buys old denim, suggesting it as a potential niche for the host on Whatnot.
A technology company, mentioned as an example of a company that started in a niche market.
A technology company, mentioned as an example of a company that started in a niche market.
A financial technology company, used as an example of a company that started niche before expanding.
The original company founded by Elon Musk that eventually became PayPal.
A social media company, where the guest previously worked and had a significant product review experience.
A video-sharing platform, where the guest previously worked.
A live streaming platform, mentioned as a past employer of the host and a comparison point for ecosystem development.
Collectible vinyl figures, which were one of the initial key product categories for Whatnot.
A holographic Pokémon card discussed as an example of a collectible.
A media franchise and collectible card game, mentioned as a potential initial category for Whatnot.
A collectible candy dispenser, mentioned in relation to eBay's early product stories.
A type of collectible squishy toy that has become a popular trend on Whatnot.
The username of a seller on Whatnot who specializes in selling live crabs.
An online marketplace and classifieds website, initially considered as a model for Whatnot before pivoting.
An online auction platform, mentioned as an earlier marketplace experience.
A tool used to pull sales data by category on eBay for market research.
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