Threadless uses the power of crowdsourcing to sell more than 100,000 T-shirts a month. Company founder Jake Nickell talks to Oliver Lindberg about how he turned a simple hobby into a multimillion dollar business empire
Jake Nickell has certainly done alright for himself. Nine years ago, at the tender age of 20 when he was still living in a small apartment in Chicago, he submitted a T-shirt design to an online contest held by a small web design festival in London. He won. Today, he’s the founder and CSO of multimillion dollar empire Threadless, the biggest community-centred T-shirt store on the web. It sells more than 100,000 T-shirts per month and Jake’s just moved into his new self-designed 5,000 square foot home in Boulder, Colorado.
Jake Nickell and his friend Jacob DeHart (now no longer involved with the company) started Threadless as a hobby. They invited anyone to submit artworks and had a small but steadily growing community rate the designs. They printed the best ones on T-shirts, with the winning artists receiving cash prizes. Both Jake and Jacob had no business experience whatsoever. In fact, they didn’t even know that what they were doing had a name. “We learned that what we were doing was called crowdsourcing about three years into the project,” Jake chuckles, “and ended up being the prime example for it. We just started Threadless as a hobby, not to be a business. Not only did we not know the business model was crowdsourcing but we didn’t know there was a business model. Today it’s the core of our business. It affects every department: the way we market, the way we do our customer service.”
Before Threadless, Jake had dabbled in web design and development, so he simply applied what he knew and developed the entire fulfilment system from scratch in-house. “Some of the stuff we did was hilarious. We had this scrappy do-it-yourself mentality to getting the orders out of the door. And it worked for quite a while. A lot of the things that we learned, we still have applied today. All the shipping software is still developed in-house.”
Jake’s used a lot of common sense and trial and error to run the business. For the first year, for example, the team charged customers’ credit cards over the phone. Inevitably, the lack of business training led to expensive mistakes. “We used to ship our packages via FedEx and had it linked up with our corporate credit card. For every package we shipped they would charge our credit card individually. And since we were only shipping packages once a week, we’d ship 200 to 300 packages in a day and our card would get charged 200 to 300 separate times. What we didn’t know: there was a limit on how many charges you could do per day. So FedEx would charge 150 of them and the next 100 would all get declined. Decline fees are $5 for every one, so that all builds up and we’d end up owing FedEx $50,000. And that was when our revenue for the year was just $600,000.”
In 2006, Threadless reached critical mass. Managing the growth and figuring out how to ship thousands of T-shirt orders in a day turned into the project’s biggest challenge. Jake felt like he couldn’t do it on his own any more. He considered taking outside investment. “We met Seth Godin in New York because SkinnyCorp [the company behind Threadless] was going to develop Squidoo at some point. Through that we got to know this amazing businessman who helped us craft a deal with Insight Ventures. We had meetings with probably 20 different venture capital firms and a couple of private companies wanted to buy us outright but we decided that Threadless still had tons of potential and we wanted to grow it. We were doing fine moneywise but we were looking for help with the business side of things, and Insight has been really great. We do board meetings every two months, and they help us stay focused and prioritise. They’ve given us some great advice and continue to come up with excellent ideas.”
There’s one area of a traditional business that Jake Nickell still doesn’t want to touch, and that’s advertising. “We’ve experimented with advertising pretty recently and have had mostly negative reactions to it,” Jake explains. “It’s always been something that we’ve felt is not right for us. Me and Jeffrey [Kalmikoff, Threadless’ chief creative officer] used to work at four ad agencies, so we have a pretty strong understanding of what advertising means and how evil it is.” He chuckles. “With our company it’s all about trust and honesty and we just don’t like the idea of pushing our brand on people who otherwise wouldn’t hear about it. We like the idea of it spreading via word of mouth, organically, naturally. It’s not that we don’t market, we just don’t advertise. I’d rather somebody hears about Threadless through an article in a magazine than an advertisement in a magazine.”
This strategy has worked wonders. Threadless’s community has grown to more than 850,000 people, submitting around 600 designs a week and creating a buzz around the site. Styles have come and gone and the designs have also become a little bit more mainstream, as Jake admits. He compares it to a band getting popular – you lose some of your core fans and gain more new ones. “Starting off, when it was just a tiny, very opinionated community, it was all about what’s happening right now within design. It was a little bit more forward thinking. But that doesn’t appeal to most people.”
For Jake, giving up some control and letting the community run the site is part of the fun. “Instead of just dictating what should happen, I have a really open philosophy when it comes to both managing and working with our customers. I mean, that’s the whole point of the company: we trust them to tell us what is right and we agree with the general consensus of the community and adapt to it.”
Sometimes, however, the consensus needs tweaking a bit. The T-shirts that get printed aren’t chosen 100 per cent on the votes. “It’s about making sure we have variety,” Jake explains. “One time we had a Star Wars submission that got printed and we immediately got tons of Star Wars designs submitted and a lot of them scored really well. But we didn’t want to become just a Star Wars T-shirt company. We try to push the community, too, and experiment with new styles, stuff that hasn’t been accepted by the mainstream but we feel might be headed in that direction. If we find that people who have a lot of influence within our community are really gung ho about this certain style that hasn’t been adapted yet, we’ll try it out. Sometimes we look for designs that have scored lots of very high and very low ratings, because those are usually controversial.They create some excitement because people debate and talk about them a lot, and they tend to sell really well, even though the average score may not be that high.”
The Threadless team – around 60 to 70 people – is actively taking part in the community but until recently there wasn’t even a community manager. Now, as Jake explains, they’ve become a bit more aware and have started putting things in place. The site – often hailed as an example of a great user experience – is also about to get a facelift. Jake, who still does a lot of the coding, explains: “We do see flaws in our user experience now. The site has been around for so long. People are always talking about Web 2.0 but we feel like we’ve been using those ideals for a long time now. It’s almost at the point where we’re not keeping up with what a lot of newer Web 2.0 companies are doing right now, so we’re constantly making changes to the site to improve the flow of information, more like a structural redesign.”
Exclusive partnerships with other companies are also in the pipeline – a big step for a company that’s been very inward focused from the beginning. And then there’s video. Threadless experimented a little bit with its Threadless TV format but Jake thinks they haven’t quite cracked the code for video yet. In the long run, however, it’s the community that makes Threadless. As long as people continue submitting designs, Jake has nothing to worry about.