NEXT

CEO James Reinhart,

left, and COO
John Voris turned
ThredUpfrom
a sharing piatform
into a distributor.

In the two years since I covered the

"sharing economy" for Fast Company
("spawned by a confluence of the eco-
nomic crisis, environmental concerns,
and the maturation of the social web, an
entirely new generation of businesses is
popping up," I wrote), dozens of platforms
have emerged to facilitate the selling,
swapping, and renting of every conceiv-
able asset. The success of Airbnb, which
reportedly has a valuation of $2.5 billion,
has spurred entrepreneurs to apply the
model to everything from pasta makers
to unused garage space.
But when it comes to business mod-
els, we're learning that Airbnb may be
more the exception. Tomasz Tunguz, a
VC at Redpoint Ventures, says a plat-
form's viability depends on the value of
listed items, the profit an owner can
make, and the cut for the intermediary.
Home rental is one of the few areas
where there's payoff for both owners
and renters. After that, the math be-
comes dicey. Says James Reinhart, CEO

PEER TO-PEER LEARNING

HOW SUCCESSES AND FAILURES OF THE RECENT PAST ARE RESHAPING
of ThredUp, a service for reselling
clothes, "A lot of sharing companies
weren't providing strong value proposi-
tions, but got caught up in the hype."
This has played out most starkly in
THE UTOPIAN DREAMS OF SHARING STARTUPS
BY DANIELLE SACKS the neighborhood sharing space, where
some 10 startups fell prey to the idea that

I
ob Coneybeer doesn't often drive the silver BMW Z3 parked near his house. neighbors were the optimal sharing
Rather, he purchased the convertible primarily for other people to use. "I group. "Developing an alternative to
bought the car to list it on RelayRides," says the Shasta Ventures managing Craigslist has proven difficult," says Ra-
director, referring to the peer-to-peer car-sharing platform that has received chel Botsman, coauthor of What's Mine
$13 million in funding from Shasta, Google Ventures, and GM Ventures, ¡s Yours: The Rise of Collaborative Con-
among others. For $15 an hour, anyone in San Francisco can rent Coneybeer's sumption. "People assumed that location
wheels. This arrangement, he believes, represents the future of car owner- is the primary factor. It's not" If the effort
ship. "You know in Austin Powers, when Dr. Fvil says '$100 billion' and puts his required to pick up the good is the same
pinkie to his mouth?" says Coneybeer. "Car sharing is a billion-dollar opportunity" as going to the store and the savings

40 FASTC0MPANY.COM MAY 2013 PHOTOGRAPHS BY JAKE STANCEL

NEXT

aren't significant, the motivation won't
be there for a marketplace to work.
Even car-sharing outfits are facing the
challenges of scaling. While people point
to the $491 million sale of Zipcar to Avis
as proof the model works (despite Zipcar
being an owned fleet, not P2P), Reinhart
has a more sober read: "It took Zipcar more
than a decade to build that business, and
they were barely profitable. My sense is
that this was not because of the econom-
ics of owning the cars but because of [low]
utilization." Craig Shapiro, founder of the
Collaborative Fund, which has invested
in more than 20 sharing startups, says the
gap between intent and reality is another
inhibitor: "If you tell 10 people about car
sharing, 7 wiU say, 'Sounds neat' But when
you say, 'Why don't you post your car on
RelayRides?' they say, 'What if someone
spills coffee?' And it drops to 1 or 2."
But an opportunity clearly exists for
companies that are able to provide real
value and an unrivaled experience. "The
first generation facilitated a transaction,"
says Shapiro. "Newer startups prolong
"A lot Of their involvement" DogVacay—which is
sharing targeting the estimated $8 billion pet
companies services and boarding market by connect-
weren't ing traveling dog owners with temporary
providing hosts—provides $4 million in liability
strong yaiue coverage, has developed an app so hosts
propositions.
but got can share pictures of the dog with its
caught up owner, and is exploring providing GPS
in the hype," collars so pups can be tracked. "I no longer
says think of us as a peer-to-peer marketplace,"
Reinhart. says DogVacay founder Aaron Hirschhorn.
"I consider it a service where we provide
the highest quality possible." ©

SHARED EXPERIENCES
How three companies are adapting to the modern stiaring iandsoape

THE PIVOT THESHOWCASER THE UNIFIER

THREDUP
Venture backing
$23 million
When James Reinhart,
then a newly minted
Harvard MBA. founded
ThredUpin2009, his
goal was to "build an
enormous business for
secondhand online." *
Initially, ThredUp helped
parents sell used kids
garments directly to
other parents. But by
2011, inconsistent qual-
ity had caused sales to
plateau. "The problem
with P2P is that relying
on customers to deliver
an experience is hard,"
says Reinhart.
So in 2012, ThredUp
inserted itself further
into the process. Instead
of having users mail
goods to each other,
ThredUp now receives
8,000 pieces of clothing
each day; it then vets,
photographs, and posts
the best of the lot. That
pivot revitalized the
company and opened
up a new business: logis-
tics. Says John Voris, a
former VP of operations
engineering for Netfiix
whom ThredUp hired as
Poshmark founder COO, "Suddenly our core
competency became
Manish Chandra wants to create
operations at scale."
fashion communities.
POSHMARK
Venture backing
$15.5 million
"There are few catego-
ries where an individual
has a meaningful
inventory of items,"
says Manish Chandra,
previously the founder
of social shopping
site Kaboodle, who
launched Poshmark,
a P2P fashion market-
place, in 2011. "Fashion
Is one of them,"
The site, which has
more than $1 million in
inventory added daily,
is organized around
each woman's closet:
Users can design their
own look and upload
photo spreads of every-
thing from handbags
to shoes, which are then
sold to other women.
To expand the commu-
nity, the service throws
both online and offline
"Posh Parties" around
specific designers
(Marc Jacobs or Chanel)
or looks (street style).
"I liken us to the early
days of eBay, when the
buyers and sellers were
the same people," says
Chandra. "It's not focus-
ing on buying and
selling, but on building
a community."
YERDLE
Angel backing
$500,000
"Everyone who failed
in the low-cost-goods
space says the model
won't work," says Adam
Werbach,cofoünder
of Yerdle, a platform for
the sharing of, well,
everything, "because
the value isn't worth the
hassle." Yet Werbach,
whose career has
included jobs at the
Sierra Club and Saatchi &
Saatchi, and cofounder
Andy Ruben, Walmart's
former chief sustainabil-
ity officer, think pioneers
bet on the wrong thing.
Early low-cost-goods
startups assumed that
people who live near
each other would want
to share. Yerdle figures
sharing is more likely to
occur between people
who have a relationship
and thus built its
platform on Facebook,
enabling users to share
via the social graph.
Its goal is to involve
traditional retailers in
the process as a means
of helping them foster
customer loyalty: a
store facilitates sharing
when possible; if not,
it sells you the item.

42 FASTC0MPANY.COM MAY 2013

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