Thomas Plantenga & Alex Taussig: Vinted CEO's Ultimate Guide to Scaling Marketplaces | E1114

1. 0:00 – 0:53

   Intro

   1. HSHarry Stebbings0:00

      Did you know Vinted is Lithuania's first tech (bell chimes) unicorn, but almost (explosion) nobody thought it would work?

   2. ATAlex Taussig0:05

      I think the prevailing opinion at the time was it was too hard to build a pan-European marketplace.

   3. HSHarry Stebbings0:10

      So how did they went from an almost-failing business-

   4. TPThomas Plantenga0:13

      By the certain point in time, it really went upside down.

   5. HSHarry Stebbings0:15

      ... to completely changing their business model?

   6. TPThomas Plantenga0:17

      Bottom line it comes down to, you completely kill all your current revenue streams, build new ones, and then the last money that you have available, you blow it on television.

   7. NANarrator0:25

      (laughs)

   8. HSHarry Stebbings0:25

      And now they are Europe's largest online secondhand marketplace with a $3.5 billion valuation. And this is how they did it. Guys, I am so excited for this. I've been a fan of the Vinted business for years. Thomas, I've been a fan of yours for years. I mean, you were last on the show five years ago. So first, thank you both so much for joining me today.

   9. TPThomas Plantenga0:48

      Of course. Very happy to be here, man. Fan of your show.

   10. ATAlex Taussig0:51

       Great to be back, Harry, after so long.

2. 0:53 – 6:08

   Becoming CEO of Vinted

   1. ATAlex Taussig0:53

      Thanks for having me.

   2. HSHarry Stebbings0:54

      Now, I want to start with a bit of a weird one, but Thomas, I heard that you never intended to be the CEO. So can I ask-

   3. ATAlex Taussig0:59

      Uh.

   4. HSHarry Stebbings1:00

      ... how did the opportunity actually (laughs) come to be, given that as a starting point?

   5. TPThomas Plantenga1:04

      Yeah. So I, um, I got involved with, with FJ Labs and we, we, we built a company there that we sold to, um, uh, to Wallapop, then we ran that for a while, and there you had investors, uh, Insight and Accel on the board. And then when we sold off to, uh, LetGo, I was kind of like without a job, had nothing to do, uh, but I was really enjoying it, living in New York, uh, was skating a little bit and thinking about what to do next. And actually the plan was to build something again with Fabrice, because I don't know, me and Fabrice clicked and it was good. So then they had Elodie from Insight Ventures who came to me and said, "Thomas, come for breakfast. I have this amazing company. You gotta come." And I asked about the company and they said it kind of like really didn't look good. I'm like, "Come on, I'm not gonna go to Lithuania while I live here in New York." And like, it's like, "No, I'm not gonna do this." Another breakfast, another pitch of li- of, uh, Elodie, and I'm like, "Okay, I'll take a call." So I took a call with, um, Mantas, Justas, and Vidas, and I remember these guys coming in, and they first told their stories about, you know, how they grew up in Lithuania, meaning growing up in the Soviet Union, like, Soviet Union falls apart, like, big chaos. These guys, brilliant, start building tech companies in Lithuania at the age of 13, 14, 15. Mantas built, like, a server company by himself that he sold. He was a data expert. Justas, uh, built an accounting software in Lithuania that is still this day one of the most used accounting softwares (laughs) in Lithuania. And Vidas was able to escape the Soviet because he was winning all these mathematics and, uh, programming medals, you know, those Olympiadas. So I, I hear these stories of these guys and I'm like, "Holy shit, these are, like, brilliant guys." (laughs) I'm like, "Okay, I'm in New York, I'm surrounded by a lot of, like, interesting people, but, like, would be really nice to meet them." Then they showed me, like, how the business was doing. They walked me through, and you saw, like, fast growth of the business, and then they changed the business model into what was, let's say, what the business model that Poshmark is using as we speak. And then the business started to collapse. So they showed me this graph and it showed how at a certain point in time, it really went upside down. And I thought, "You know what? I, I can learn a lot from this visit if I'm gonna do this." So we closed the deal. I said, like, "I need a consulting fee because I, I don't have any, uh, job. I'll come help you five weeks. Write me a good check for five weeks and I'll come over for five weeks." And it just directly it connected, like, um, I, I don't know, you sometimes have that with people. We really understood each other. We started working. Within three weeks, we had a plan ready, and I sat down with Mantas and, uh, Justas and Vidas, well, actually it was Mantas and Justas at that point in time. I walked them through these decks, like 80 slides of analysis of how we should change the business model, what we should do. Bottom line it comes down to, you completely switch your business model, you, (laughs) you practically kill all your current revenue streams, build new ones, and then the last money that you have available, you blow it on television.

   6. NANarrator3:58

      (laughs)

   7. TPThomas Plantenga3:58

      Meanwhile, you also have to fire half of all the people, close all the offices except of Lithuania. So I ran through the plan and I thought like, "Okay, after this they're gonna send me back to New York and say, uh, "I'm gonna find an easier way out."" So they started asking questions, very detailed analytical questions. I was answering them. I was like, "Oh my god, they're actually very interested in this." And then they looked at each other and Justas and Mantas looked at each other and were like, "Yeah, I think it's, uh, I think we should try it." Mantas was nodding, Justas was nodding, he said, "Okay, let's do it." I'm like, "Whoa, you're actually gonna do this?" (laughs) And because it's like risking the whole company, right? These guys were building this for, like, five, six, seven years maybe already. And I was like, "Okay, you're really gonna run this plan?" And then I was like, "Okay, if I'm talking this talk, I gotta walk the walk." So then I told them like, "Okay, I will help you pitch it to the board, and then if they're really gonna do it, I will just stay. You pay my Airbnbs and you pay my food, and let's, and, and let me help you execute on it." So then we executed on it, um, in the months after. And then, uh, and then it worked, and then we just, we just kept on working, kept on going, and then I think it's nine months in before I actually had a real contract with Vinted and they said like, "Uh, y- you can all go now." And I was like, "Okay, I'm really enjoying this stuff." (laughs)

   8. NANarrator5:11

      (laughs)

   9. TPThomas Plantenga5:11

      "So let's, uh, let's close the deal."

   10. HSHarry Stebbings5:13

       Alex, were you invested at this period? Or was this pre?

   11. ATAlex Taussig5:15

       Uh, this, this was, this was pre-Lightspeed, uh, investing.

   12. HSHarry Stebbings5:18

       Okay.

   13. ATAlex Taussig5:18

       We were aware of Vinted because, um, a number of us had been involved in various resell companies before in various marketplaces before. And frankly, like, I think the prevailing opinion at the time was it, it was too hard to build a pan-European marketplace.

   14. HSHarry Stebbings5:31

       Yeah. Yeah, yeah.

   15. ATAlex Taussig5:31

       Like if you, if you look, if you looked at Europe at the time, there were, there were sort of, like, sub-regionally dominant companies. There was companies that were dominant in the UK or dominant in Germany or dominant in France. But the idea that you could build something that was truly pan-European was a very controversial opinion and was not grounded in, in, in real data. And then on top of it, to, to Thomas's point, like, they hadn't figured out the business model. They had figured out how to, how to get a lot of...... people, you know, using the product and, and, and in a sort of listings marketplace kind of way. But they hadn't really figured out the solid business model, so it was not well-formed

3. 6:08 – 8:36

   Impact of Business Model Change

   1. ATAlex Taussig6:08

      at the time.

   2. HSHarry Stebbings6:08

      I wanna just ask on that, Thomas, 'cause you, going specifically, why did the business model break and go upside down, and what did you do to turn it around as specifically as possible?

   3. TPThomas Plantenga6:18

      Yeah, it's practically the, the value that the user gets out of it and the cost that you're asking. So they were asking something in the tune of 15% to 20%, uh, seller fee, which is like the standard thing that eBay and Poshmark were doing for years. But then in Europe, you had all these free classifieds, where you could meet on the street like Craigslist practically, and that's big in Europe. So they were launching this fee model while all the other also well-working platforms were practically giving higher liquidity at lower cost. So then practically, the value proposition was inferior. So then that's where actually, that were the fundamentals where our research started. Okay, how can we create a value proposition that is superior to what it is in terms of liquidity and pricing, and then gives a lot more comfort in terms of safety, transactional services, everything that's there? And therefore, we build it like these three revenue streams instead of only one revenue stream, that enabled us to bring the cost of the transaction completely down, and then generate extra cash out of other revenue streams. So practically, economies of scope, uh, created the ability to create a proposition.

   4. HSHarry Stebbings7:21

      And when you made that transition, did you see the immediate impact in terms of the resurgence of the business?

   5. TPThomas Plantenga7:26

      Yeah, so we did, we practically did A-B tests all around. So we had a lot of countries, and we just trolled around different propositions for a couple of days in different countries. And you immediately saw it. So practically, price elasticity on the fee was determined in multiple countries, and then we kind of like, you can corner it out where you need to be with your fee. And then that was very low (laughs) , so it was quite scary. And, uh, actually a, a good, uh, a thing is like, yes, we did all the maths. But then we had Modestas, our, you know, the person who was leading product. And, and he was like, "We calculated it." And he was like, "Okay, this is probably the point, but let's be a little bit more safer, and we make it 5% plus $0.70." And it was a bit of like a, "Well, let's just do it a bit higher," and that bit higher now-

   6. HSHarry Stebbings8:14

      (laughs)

   7. TPThomas Plantenga8:14

      ... it's 85% of our revenue (laughs) and practically all gross margin. So it's all, you know, there were a lot of s- lot of statistics, definitely. But also, a bit of luck with that, that, that we priced it there, obviously.

   8. HSHarry Stebbings8:25

      You sound like a VC pricing their portfolio. (laughs)

   9. ATAlex Taussig8:28

      (laughs)

   10. TPThomas Plantenga8:28

       (laughs)

   11. HSHarry Stebbings8:28

       "Well, 200, maybe 300. You know, let's go 300. Fuck it, fundraising is coming." Uh.

   12. ATAlex Taussig8:34

       (laughs)

   13. TPThomas Plantenga8:34

       (laughs)

   14. HSHarry Stebbings8:34

       Okay. And, uh, (laughs) and so we make those

4. 8:36 – 11:54

   Alex's Involvement & Expansion Plans

   1. HSHarry Stebbings8:36

      changes. Alex, talk to me then about how you re-interacted with the business. You said there about existing knowledge on the market. How did you and Thomas then build the relationship? And just take me to that courting process.

   2. ATAlex Taussig8:47

      Yeah, so, so we had, uh, actually at the time, um, we had a number of partners at Lightspeed who had, uh, interacted with Vinted at, at prior firms before they had joined, uh, Lightspeed. Uh, one of them was actually Lithuanian.

   3. HSHarry Stebbings9:01

      Yes.

   4. ATAlex Taussig9:01

      Um, so there was actually (laughs) -

   5. TPThomas Plantenga9:03

      (laughs)

   6. ATAlex Taussig9:03

      ... there were, I mean, there, th- think about like how many Lithuanian VCs there are. It's, it's, it's, there's not that many. And, and he, and he had a really strong relationship with, with the founding team, and, and then with, with Thomas. And so, the, we started to reengage. We, we had, we had heard that this had been figured out. And it was extremely counterintuitive for US investors, because in the US, there's, you know, four or five, um, relatively dominant resale marketplaces, you know, Thomas mentioned Poshmark, but there, but there, but there others. And they all have, you know, s- supply-side oriented, you know, business models. And so for us to hear that there was this company that essentially made it free to sell, and kind of had this listings origin, but was layering on these sort of demand side fees, was, was, was very counterintuitive. And at the time that it got resurfaced, 90% of the GMV was in France.

   7. TPThomas Plantenga9:55

      Yeah.

   8. ATAlex Taussig9:55

      So the, the, and France was going really well, but it was still 90% France in terms of GMV. And so we-

   9. HSHarry Stebbings10:01

      Why so, wh- wh- why, why was that?

   10. TPThomas Plantenga10:03

       Well, because, because you, we first really optimized for practically two years the business model, to really make it work. And, and, and then only we started expanding. And, and, and think about this, right? Many of our investors were already very, very happy that it was working in one country, and they were like-

   11. HSHarry Stebbings10:20

       (laughs)

   12. TPThomas Plantenga10:20

       ... "Do you really need to expand? Like, th- this is finally going well." Because they went through like seven years of rollercoaster. So, so (laughs) like, you know, it was also we needed some, um, some, yeah, we needed some, some, some, how do you say it? A bit more track record to get there.

   13. HSHarry Stebbings10:35

       Welcome to your Mind+1. (chimes)

   14. ATAlex Taussig10:38

       Uh, the, the, the, the, the story, the story we told ourselves was like, "Well, look, if you, if you had to s- if you had to gamble on like one market working," like you need it to be big enough that it matters, right? And you need it to have, for fashion as like a really important part of the culture and economy, and it needs to be connected to a bunch of other re- like countries that are, that are nearby, so it's that if you win that country, you can tip other countries that are near, via cross border. So France, France felt, um, you know, like the right country there. And then, you know, the other obvious one would be the UK, but as Thomas can talk about, the UK took many, many, many years to get right, and it kind of wasn't working when we invested. So when we s- when we saw the business, you know, we were, we were kind of betting on, a lot on Thomas (laughs) , actually. I mean, we, we were incredibly impressed with what he was able to do in partnering with the founders. And at that point, he had become the CEO. Uh-

   15. HSHarry Stebbings11:25

       Yeah.

   16. ATAlex Taussig11:25

       And, uh, the way, the way we often talk about it is that it was almost like a refounding moment for the company, right? And, yeah.

   17. HSHarry Stebbings11:31

       Can I, can I, can I interrupt and ask on that one?

   18. ATAlex Taussig11:33

       Yeah.

   19. HSHarry Stebbings11:33

       'Cause, you know, I've known Thomas obviously at this point for years. Uh (laughs) .

   20. ATAlex Taussig11:37

       (laughs) You could go back a long time, yeah.

   21. HSHarry Stebbings11:40

       I go back a long way. Uh, but like, you know, respectfully, we hail as VCs found a lot of businesses, right or wrongly. To what extent did that, "Hang on, it, it's not actually a founder-led business, and Thomas is the CEO, who's incredible, but has been brought in."

5. 11:54 – 12:59

   Thomas's Role as CEO

   1. HSHarry Stebbings11:54

      Did that factor into discussions?

   2. ATAlex Taussig11:55

      I mean, Thomas, when we talked to the founders of the company, it became pretty clear that Thomas was as close to a founder of this company as you can be without actually being there at the very beginning. And I, I, I, I believe that companies can have these refounding-... moments where, where, uh, a really, um, outstanding individual comes in with the right set of skills for a given moment in time and takes a company on a, on a, on a different trajectory. So in my, in my view, there's, like, some people that have this discrete version of, like, "Oh, so-and-so, you had to be there on day one. You had to own, like, I don't know, 10% of the company on day one to be qualified as a founder." And then there's a spectrum, and there's people who... and, Harry, you may have some in your portfolio, who are like, maybe they weren't there on day one, but they joined within the first year, and they've been critical to the business. They- they've invented some product that transformed the company. And so I think of, you know, Thomas joining Vinted in roughly 2016-ish as being a pivotal moment for the, for the company. And, and, and the fact that the founders eventually said to him, "You should be the CEO," I think-

   3. TPThomas Plantenga12:57

      Uh-

   4. ATAlex Taussig12:57

      ... is as big of a vote of confidence as you can

6. 12:59 – 15:17

   Vision for Vinted's Growth

   1. ATAlex Taussig12:59

      get.

   2. TPThomas Plantenga12:59

      When, as a VC, you ask the question, "If everything goes right, what could this be?" when you were discussing this ent- internally, making that decision, what was the discussion? If Vinted goes right, what is Vinted?

   3. ATAlex Taussig13:14

      There are a number of differing points of view on this. Um, I think it's very easy to look at a business and say, "What they do today is... how big can that thing be?" And that's gonna be the base case return for a later-stage investment. So we had that discussion, and we said, "Well, how, how big is resale?" Resale's really big. (laughs) It's- it's- it's actually, a lot of people think resale could be 20% of all apparel by 2030. So, you know, at a macro level, if we just did resale, if we just focused on peer-to-peer selling other people's clothing to each other, we could, we could probably be a $10 billion company. I think, I think the math pencils out. But you need to believe that, that that's a pan-European company. So you need to believe that this company does something that almost no one's been able to do, and actually use the sort of lead they have in France to catalyze an ecosystem that- that- that goes across Europe. And the thing that we saw in the business when we really dug in, was that, th- that, that Thomas and his team have been able to drive shipping costs down to the point where they were often the- the very cheapest option, and that this was a key strategic lever to not only winning countries, but to, like, extending between countries. And our theory of the case was that that was gonna be the strategic weapon that we used to sort of roll up the entire region, that by being the sort of cheapest shipping rails in e-commerce, for, starting with apparel but eventually other things, that we'd actually be one of the first to build a pan-regionally dominant company. So then if you believe that, (laughs) then you start to talk about companies, you know, if you look at regions around the world that have a dominant marketplace, including the US, um, with eBay back in the day, there are other things you can do. Payments businesses. There's other things that you can build on top of a highly engaged community of tens of millions of people transacting with each other. And so we said, "That's the lottery ticket. That's the thing that, if we get it right, could have what we call unbounded upside." But first, what we have to do is, we have to solidify France. We have to, we have to, we have to use this sort of shipping cost advantage to deepen into these other countries, and at some point, win the UK. And, you know, whatever, five years later, a lot of that's been done, and

7. 15:17 – 16:57

   Competition & Market Positioning

   1. ATAlex Taussig15:17

      that foundation's been set up.

   2. TPThomas Plantenga15:18

      Thomas, I'm about to pepper you with questions, but, and don't be offended by this answer from Alex-

   3. ATAlex Taussig15:22

      No, no, no.

   4. TPThomas Plantenga15:22

      ... but Alex, internally-

   5. ATAlex Taussig15:24

      (laughs)

   6. TPThomas Plantenga15:24

      ... if you guys marked the one reason why Vinted wouldn't work, what was that reason?

   7. ATAlex Taussig15:31

      I would say the one reason Vinted wouldn't work at the time when we talked about it, we said, "Well, if we look back, you know, five years from now and this didn't work out, why did it not work out?" The pre- the pre-mortem on this decision, right?

   8. TPThomas Plantenga15:43

      Mm-hmm.

   9. ATAlex Taussig15:43

      It's probably because France was a unique thing.

   10. TPThomas Plantenga15:47

       Yeah.

   11. ATAlex Taussig15:47

       That, that, that there was something unique about France. They, 'cause it was very clear they had won France at that point in time, and it was, and France was, was, was, the, like, it was a profitable region, right? So it was, it was clear that that was working. But the, the, the con was like, "Yeah, but that's, that's a unique thing. France is unique for all these reasons. People in France like fashion a lot." Like, "That's not gonna work in other places."

   12. TPThomas Plantenga16:09

       Just to highlight this, this was the, this was the general thought. Like, like, people said, like, "France is just special. Leboucois is a special company." People were saying, "Just share your data with, uh, Wallapop. Help them out, because, like, you're never gonna of Spain. Just build something beautiful in France." And internally, we were like, "Hell no, we're gonna sharpen this tool. We're gonna sharpen this tool, and when we go out, we'll show it works." But it was absolutely 2018, two years after turnaround, still that was the prevailing thought, like, "Well, you have a nice business in France." So that was the prevailing thought. It could have just been a dominant French business- ... but it wasn't, and it wasn't because of the international expansion. And so I want to discuss that and understand that you've shown that your ability to build market share in now multiple geos from start. It's a really shit question, so I'm really sorry

8. 16:57 – 19:32

   Entering New Markets

   1. TPThomas Plantenga16:57

      for asking it-

   2. ATAlex Taussig16:58

      (laughs)

   3. TPThomas Plantenga16:58

      ... but how did you broach the chicken and egg problem of a new par- marketplace in a new country? Yeah, I think it's, it's an, uh, um, it all comes down to focusing on what's causal driver of success, and, and when you, when you look at Vinted, it's, it's purely that you create successful buyers and sellers. So, so the seller needs to become successful, then he comes back, becomes a buyer. So you really need to ensure that you build success for the people that come to your platform. So that means that the conversion rates are, are high, and that there are multiple drivers behind that. So the first one, obviously, is that your recommendation engines are working well, so that the right buyers see the right content. So that's basic fix number one. Number two, very, very important is that all the negative effects are mitigated. So that's really ensuring that all the security, trust, and safety stuff is, is in place. And then the third element is practically that all the things that facilitate transaction are completely s- seamless, so shipping, payments, the wallet, the transaction, everything. So those are practically your hygiene factors, and then you need to have an ability to kind of, like, see around the corner-... in terms of how you're gonna deploy your marketing investments. And there, you have to be, in the beginning, you have to be a bit brave. So you have to practically map out for yourself, "If, if I can get to this point, then that means I can, we'll have that efficiency. And from there, I can grow to here, where I will have this profitability," which gets into kind of forecasting magic that is not exactly a science anymore, right? And thus, you need to believe that there's a certain market, and then go in with, uh, a certain amount of investment to get to your first milestones at a certain efficiency. But that first big investment is always a risk. But because we walked France through all these milestones, and we really, like, fine-tuned that process, we then had a lot of confidence in making those investments, because predictions of these new markets could be tracked by the historical trends of France. So, so by staying long in France, we walked France through all these investment scenarios, and thereby we had a playbook that we then ruthlessly could roll out in all the other countries, and make upfront investments that looked like nuts to people. So I think up till 2020, 2019, most of the industry was just waiting until we would go bankrupt, because they thought, like-

   4. HSHarry Stebbings19:25

      (laughs)

   5. TPThomas Plantenga19:25

      ... "This doesn't make any sense." And, but b- they didn't believe our economics would make sense, they didn't believe that you could spend that amount of money and it would come back

9. 19:32 – 21:54

   Challenges & Failures in Expansion

   1. TPThomas Plantenga19:32

      to you.

   2. HSHarry Stebbings19:32

      So Thomas, when you're a pro podcaster, you'll really get professional note-taking when someone speaks.

   3. TPThomas Plantenga19:38

      (laughs)

   4. HSHarry Stebbings19:38

      Uh, but I was writing things, uh, that I really wanted to double-click on. You said about, like, uh, recommendation-driven for, on the buy side.

   5. TPThomas Plantenga19:45

      Yes.

   6. HSHarry Stebbings19:46

      I'm intrigued. Uh, how much do you want it to be demand-search-driven versus recommendation-driven on the buy side, and what does that look like today?

   7. TPThomas Plantenga19:56

      Yeah, so people come with a certain intention usually, and then they start clicking. So in that moment, the, the, the, the software needs to ensure that next to, let's say, the most relevant results, you also get other recommendations. So when you look at, um, li- look at Vinted, you'll see a feed that has, when you search for something, you get specifically what you want, but then when you go, for example, to the item, me- to the item, you also see what other items this user has. So you have, let's say, a mix of the both. And that really works, because then people are inspired to also look at other things that that person has. And very likely, when you are liking a certain sweater that a person has, this person probably has a certain style that you like, and probably the other items that they have are relevant but random in terms of what you were searching for. So, it is a mix of both that you need to, uh, need to, uh, address.

   8. ATAlex Taussig20:46

      And, and I, I just wanna add one subtle point on this, 'cause, 'cause Harry, like, recommendations are, are even more critical in resale than they are in, in, in new. And th- and the reason is, every item that you have on a resale site is unique. Um, in, in a lot of, in a lot of cases, it is. Sometimes you'll, you'll find power listers who will list a lot of things. But like, if, if you have this thing where you have only one of everything, well, definitionally, you have to actually serve more recommendations to that user in the same session to get them to, to transact, 'cause they're not gonna go really deep in a catalog of 100 SKUs. They wanna go kind of shallow in a catalog of 10,000 SKUs. So that's like a really, really hard user interface problem. And what it requires is building an app that's really fun. Because if the app's really fun to browse and window shop in, people will spend a lot of time in the session, and they'll have the opportunity to g- to see things as they, as they browse. And so the fundamental user experience is different. And wha- when we, when we looked at Vinted in 2019, it had social media, like, time spent in the app.

   9. TPThomas Plantenga21:47

      Yeah.

   10. ATAlex Taussig21:47

       And that was a really unusual thing for shopping, 'cause in shopping, usually you wanna show up, buy something, and leave. That's not what people do in Vinted.

   11. TPThomas Plantenga21:53

       No.

10. 21:54 – 30:03

    Retaining Sellers & Market Maturity

    1. TPThomas Plantenga21:54

    2. HSHarry Stebbings21:54

       Uh, h- how do you... I, I, I wanna dig into that, but I do also wanna dig into how do you define a retained seller? At what point do you have real confidence of their returning desire? Is it when they sell three items, five items, 10 items? What's that signal?

    3. TPThomas Plantenga22:10

       Well, o- obviously, the spectrum of probability goes up as transactions increase, but, um, uh, practically, the first two transactions are the most important.

    4. HSHarry Stebbings22:20

       Okay. So the first two transactions are the most important. Uh, totally get that. When you think about the, the markets that you've entered now, which one didn't go to plan-

    5. TPThomas Plantenga22:30

       (gasps)

    6. HSHarry Stebbings22:30

       ... and what did you learn from it?

    7. TPThomas Plantenga22:32

       I mean, like, the reality is, is that many things didn't go as planned, right? So, uh, th- like, i- the story from a, outside looks like, "Okay, they had France, then they went Belgium, then they went easily to Spain, then the Netherlands." That looks like a very smooth, well-thought-through story. But the reality was, we actually first tried to proposition in Germany, and that went like, "Mwah, okay, okay, okay." And then we kind of had board approval that we, you know, could test also in other things, and we saw France go, we did the case, and then we thought, "L- let's just go, we're not gonna wait for the next board meeting." They kind of gave the direction approval and we tried France and it took off. So it started already with one failure and then France came. Then, after France went-

    8. HSHarry Stebbings23:16

       Can I just ask, why did Germany fail?

    9. TPThomas Plantenga23:18

       ... 'cause, uh, we, we, we, we believe that in Germany, the shipping infrastructure is different than it is in, in France, so that really didn't help. Uh, so, so France, we had this beautiful company mo- Mondial Relay that really wanted to work with us, really gave us good prices, really helped us, and both of us, Mondial Relay and us, we magically grew together. It was really a symbiotic, uh, uh, collaboration. If you look at France, why it took off, that relation with Mondial Relay, the relation with Mango Pay, both of these French companies believed in us, gave us good contracts, and worked very closely with us. And then the marketing pricing in France was favorable. So those three things together helped us to do that. And then, then we got really excited, and it was, "Okay, let's just test some, uh, some stuff in the UK and the US," which horribly failed, and we're like, "Okay, let's get back to, let's get back to focus." And then we-

    10. HSHarry Stebbings24:10

        Why did that, why did, why did they fail?

    11. TPThomas Plantenga24:12

        Yeah, I mean, if I knew, then, uh, we would have, uh, working, uh-

    12. HSHarry Stebbings24:15

        (laughs)

    13. TPThomas Plantenga24:15

        ... model now in the US. But I think mostly...Like, if you look at the product Vinted in France 2016, 2017. January 2017, we launched the new proposition. That product is like a hundred times worse than what we have right now. And, and we were lucky that this worked in France, and that we then took... I think it's very good that the US and UK gave like horrible numbers after some marketing tests there. That we really started to focus to make Vinted France really, really work well. We said, "Okay. Let's just really go into the details. Everything must be better. Customer support, recommendations, shipping costs, payment costs." We... Like two years, we were like grinding, grinding, grinding, and then we said, "Okay, let's go Belgium." And then that was because Mondial Relay said, "You know, we actually have a network in Belgium as well. Do you want to go there? It will be very easy with shipping." And then we said, "Okay, we have confidence now. Let's do it." And then Belgium went quite easy. Um, but, but yeah. So, so along the way, many failures and many failed launches. Like the UK took, I don't know if it's six or five times before it worked, and the last time. I mean, Alec, you were, you were by then in the board. It was like, "Thomas, really? Again, the UK?"

    14. HSHarry Stebbings25:36

        (laughs)

    15. TPThomas Plantenga25:36

        Like, "You know that Depop is there. You're not gonna win this market. I mean, come on."

    16. HSHarry Stebbings25:41

        But, but I just want to understand. Like why did it work the sixth time when it didn't work the f- priya, priya, fucking hell. Prior five times?

    17. TPThomas Plantenga25:50

        Yeah. So, I think we always want explanations that are kind of like binary. We fixed this and then, then, then it worked. Yet, if, if you look at an ecosystem of Vinted, it is a multi-multivariant system. So, even within Vinted itself, you have all these factors like, uh, the different type of buyers, the different regions. Then you have the different shipping companies, the different payment companies. Then you have outside factors, which is like your competitors, uh, the fashion macro trends. All these kind of things. So, there are many, many things that have impact, so you never know exactly which of these things had the most impact. So, the things that I know that we really, really improved on in the last time when I went into it is that we really improved our shipping proposition, we fixed a couple fundamental things within payment. And then what we were very lucky with is that COVID opened a window of opportunity, that the marketing prices went down. People went more online, and then we actually saw that our improvements that we did before gave some organic growth, and then we felt bullish enough to put money behind that, and then it really took off. And then we just... Then when we saw those numbers, we saw like, hey, now it fits our market phase model, and then we just... Then we went all in. Like the whole company just focused and just go in.

    18. HSHarry Stebbings27:08

        I think there's one other factor as well, which is more of a macro thing, but the end of zero interest rates benefited us a lot. I remember when, early when I, when I joined the board. It was still, we're still in this era of like insane discounting by some of our competitors in various regions, and we had to make these hard choices like, "Do we, do we match the discounts? Do we..." You know, "How, how, how hard do we really compete for this territory knowing this is less profitable?" That all went away pretty quickly, um, post sort of the COVID, uh, fierce recession and inflation, and then with the, with the interest rates going up again and, you know, I think it's like one of these things where when the tide goes out, you see who's swimming naked. And the fact that we had a, had a great business model that, that we could port over there, um, allowed us to, to sort of take that, take that ground at that time.

    19. TPThomas Plantenga27:55

        And I think we were very scared. So Depop got sold to Etsy, and we were shitting our pants. Like, I thought Josh Silverman is gonna like take a big baseball bat and smash us into the ground, because Etsy is a company I very much look up to. They're a great company. Josh is a great CEO, and I thought like, "Okay, we're fried. If we, if we don't win now in, in, in the UK, we're, we're done. We're over." Like, "Thomas, you can go back to, to the Netherlands, and this was a nice ride, but see you later."

    20. HSHarry Stebbings28:27

        Was the UK a bet-the-boats decision, or was it not? Because you'd tried it so many times. I mean, respectfully, it seems like a two-way door though.

    21. TPThomas Plantenga28:34

        Yeah, yeah. Of course, but like at that point in time, can you imagine? Like, one of your big competitors gets bought by Etsy, which looks to us at that point in time, a company with infinite amount of resources and incredible, you know, technology team from the Silicon Valley. Like I mean, and then you're sitting there in, in, in like Lithuania with 200 developers and, and like a little bit of money on your bank account. It's like, yeah, you're scared. So, so yes, two-way door, but like maybe after this year, it might no door at all anymore, you know? So that, that was a feeling as well in the team.

    22. HSHarry Stebbings29:10

        There, there's two-way door decisions, but like even two-way door decisions that are important require a lot of management bandwidth and capital and time commitment. Mm-hmm.

    23. TPThomas Plantenga29:18

        And, and we, we... I think, I think like the conversation I remember having was if we want to build a pan-European dominant peer-to-peer marketplace business, we have to get the UK, and there's no reason we shouldn't get the UK. So we just gotta figure it out. And, and I think, I think it was just that persistence versus other, some other ideas that, that I think came up. We were like, "Do we really need to do that?" Like, "Is that existential for us that we have to do that?" Whereas the UK is like, "No, we have to do this."

    24. HSHarry Stebbings29:46

        So I, I totally get you, and I was, I was planning on discussing competition later actually, but, you know, joys of conversation is it changes and is fluid. Uh, I'm worried about Temu and Shein. I'm worried about Temu and Shein because I'm gonna get killed for this, and you know, I don't, I don't even... Yeah. Hopefully people don't know where

11. 30:03 – 34:21

    Competition with Fast Fashion Retailers

    1. HSHarry Stebbings30:03

       I live. But like the amount of advertising dollars they are spending-

    2. TPThomas Plantenga30:07

       Yeah.

    3. HSHarry Stebbings30:07

       ... is egregious.

    4. TPThomas Plantenga30:09

       Yeah.

    5. HSHarry Stebbings30:09

       I mean, they are funding Meta in a dr- a lot of cases. Um, s- how do you compete in a world of endless capital supply for ad dollars against Sh- Shein, Shine, whatever they're called, or Temu?

    6. TPThomas Plantenga30:23

       Well, I think for Vinted specifically.Um, Temu, Shein are spending money to attract buyers. And every Temu, Shein buyer can become a Vinted seller. And we're spending money to attract sellers of secondhand clothing. So for us, we're kind of like just out of that storm. Like so, so that storm just passes us and actually gives a whole new bunch of inventory that can be sold on, on, on Vinted. So yes, we see it a little bit, but that is not something that really dramatically impacts our growth at this point in time.

    7. HSHarry Stebbings31:00

       Does it not impact the ad dollars you're able to spend in terms of the effectiveness of those dollars?

    8. TPThomas Plantenga31:04

       No, be- because they really search for the buyers. So, so they have the content and they need to get the buyers. We need to get the content. So it's not that if somebody, uh, you know, bought Shein, it's not gonna be buying us anymore. So it's, it's ... I- i- in, in that sense, we, we're not suffering from it. But it, it's obvious that, uh, that, that companies who are directly competing with them, it's, it's incredibly difficult. So yeah, we're just protected by that our positioning is different.

    9. ATAlex Taussig31:33

       I, I also think of like the value proposition for resale is very different than what they're offering. I mean, they're really competing against H&M and, uh, a lot of fast fashion, Zara, like the fast fashion companies. Whereas-

    10. HSHarry Stebbings31:46

        I'm just gonna put, I'm just gonna put this out here. I'm gonna be an Ackman. If I can be an Ackman, uh, and no, I'm not talking about plagiarism.

    11. ATAlex Taussig31:52

        (laughs)

    12. HSHarry Stebbings31:52

        I'm gonna throw a short out there for Boohoo and ASOS. Ooh, I would not like to be them.

    13. ATAlex Taussig31:58

        It's hard.

    14. TPThomas Plantenga31:58

        Right.

    15. ATAlex Taussig31:58

        Um-

    16. HSHarry Stebbings31:59

        Yeah.

    17. ATAlex Taussig31:59

        It, it's, it's hard if you're, if you're in the fast ... I think fast fashion is getting reinvented right now by, by these guys. But, uh, the thing about resale and, and one of the reasons it's attractive is that you're getting very cheap price relative to the quality of the goods that you're getting. It's a- it's actually a great way to buy high-quality brands that, that you love, that you already wear for 80, 90% off. And that's not a value proposition that Shein and Temu are, are selling, right? So in, in some ways it, it's, it's actually a orthogonal thing, as Thomas said, um, but it's definitely a problem for, you know, the fa- online fast fashion retailers.

    18. TPThomas Plantenga32:36

        Yeah, and if, if you look at let's say the rise of these companies, everybody talks about, let's say, the cheap, um, like the amount of money they spend on marketing. But actually when you look at the fundamentals that completely changed the fashion industry over, let's say, the last 100 years, then it's actually the people who consistently found new levels of efficiency in production and shipping. So the non-obvious is that shipping is actually what is really, really important here. So these companies have completely re-innovated how fast they produce and how fast they're able to deliver from China and Turkey into Europe and the US. And, and that's actually, if, if you look at what, let's say, the Zara and the Zalandos did, they did that to the previous companies. And the previous companies did that to the previous companies before. So it's, it's, it's not only ... Like there's a lot of focus on the marketing approach, because that is in your face, but this marketing approach is possible because the underlying dynamics of the infrastructure that they've built is actually allowing them to spend that money on marketing.

    19. HSHarry Stebbings33:41

        How are they a- ... I, uh, I bought on Temu for the first time the other day.

    20. TPThomas Plantenga33:44

        Yeah, me too.

    21. HSHarry Stebbings33:44

        Um, I got a, a Bluetooth speaker that I don't fucking need and a pair of gloves that have some electronic warmer in it that I don't fucking need either.

    22. TPThomas Plantenga33:51

        (laughs)

    23. HSHarry Stebbings33:51

        And it came to about 11 pounds. Uh-

    24. ATAlex Taussig33:54

        (laughs)

    25. TPThomas Plantenga33:55

        (laughs)

    26. HSHarry Stebbings33:55

        W- how were they able to do delivery for free? I, that's where I really don't get that.

    27. TPThomas Plantenga33:58

        Well, there is one thing with Europe that I know, is that there is a loophole that if you send in a package under 150 euros, it's not taxed. And therefore, for example, companies like Zalando are actually having higher prices to send a package from Germany to Belgium than they have from China to Belgium.

    28. HSHarry Stebbings34:15

        I got you. Well, you know, Europe regulates better than anyone else. So we'll, we'll get to that, my friend.

12. 34:21 – 35:22

    Breadth vs. Depth in New Markets

    1. HSHarry Stebbings34:21

    2. ATAlex Taussig34:21

       (laughs)

    3. TPThomas Plantenga34:21

       Regulation.

    4. HSHarry Stebbings34:22

       Uh, can, can I ask you, what's the r- and totally weird and random one, but actually first, h- we talked about like the difference between resale and, you know, what Shein and, um, Temu do. How do you think about breadth versus depth in each new GO? That's a really difficult decision.

    5. TPThomas Plantenga34:38

       The type of marketplace that we are, we are a two-sided network effect marketplace. Buyers and sellers, two sides. And the bigger we become, the more valuable the marketplace becomes, so you clearly see more listings. The more listings you have, the faster you sell those listings. So for us to get a bit, a model working in a country is crucial to get the depth because that's driving the, the network effects, and thereby, we go practically, we're in Europe, region by region, creating these working two-sided marketplace and then moving on to the next. And that not only goes for, let's say, a country. It also goes for a category. So also within our categories, depth is the most important thing. So I would say in our business, two-sided network effects, depth is what drives the fundaments to then

13. 35:22 – 37:59

    Time to Profitability in Each Region

    1. TPThomas Plantenga35:22

       go wider.

    2. HSHarry Stebbings35:23

       Can I ask, on that, when we think about the different regions that you've expanded into, what is the ramp time to profitability within each region? And how do you think about that maturation period to get to a good place economically in each region?

    3. TPThomas Plantenga35:36

       Yeah, so it gets faster over time, uh, for us. Um, and it depends, it, it also depends how aggressively you wanna go. So there are certain times that you say, "Well, at this size, I feel good and safe about my economics to take it a bit slower." And then, you know, you hit profitability earlier. Uh, but if there are more competitive situations, it takes longer. But it can be as fast as 12 months and it can be as long as, uh, three years.

    4. HSHarry Stebbings36:04

       Alex, to your, you know, position on the board, when you think about it and have that discussion, honestly, to what extent are you, (laughs) are you like, "You know what? Fuck it. We're happier to win the market and be less profitable for longer than let's be super disciplined and get to profitability as soon as possible"? How do you weigh that at the board?

    5. ATAlex Taussig36:22

       There's a few different levels of the analysis that we take into account. One is sort of the marginal transaction, right? So what are the unit economics on a marginal transaction? Is that a profitable? The second is at a country level, which is the question you just asked.... how long is it gonna take us to sort of get in the money at the country level? And it should be getting easier and easier over time because we have cross-border network effects. We have lower shipping rates across Europe. We have more brand awareness, more inventory in different countries. So it should get faster. And the third level is at the company level. (clears throat) You know, including all your operating expenditures. How, uh, what's the efficient frontier you're spending at? And the tricky thing about marketplaces is that you cannot grow arbitrarily fast. There is an efficient frontier that, that you wanna hit where you can balance supply and demand and fulfill a high-quality experience for both sides of the marketplace. And if you, and so I think what, one thing Thomas's team is really, really good at is figuring out quantitatively where are we on the efficient frontier for a given country, and that's the rate at which we're scaling. We have plenty of capital on our balance sheet. So we have to burn more, we'll burn more, but we wanna prioritize being at that efficient frontier. And it turns out that if you do that, you create a very healthy company because what happens is the older GOs start to produce cash flow that cover the newer GOs, and then there's a trade-off of, like, "We're not raising venture capital anymore." We're looking at our cash flow and saying, "How do we want to invest that cash flow next year? And what's the portfolio of investment opportunities and what's the time period over which those investments pay off?" And we're trying to balance some short-term and some very long-term investments. And that's the, so that's the discussion we have at the board.

    6. TPThomas Plantenga37:57

       Yeah, yeah. The old note-taking

14. 37:59 – 38:32

    Getting the Efficient Frontier Wrong

    1. TPThomas Plantenga37:59

       comes out again.

    2. ATAlex Taussig38:00

       (laughs)

    3. TPThomas Plantenga38:00

       You mentioned the efficient frontier.

    4. ATAlex Taussig38:01

       Mm-hmm.

    5. TPThomas Plantenga38:01

       Have you ever got where you are on the efficient frontier wrong? And why did you get that wrong analysis?

    6. ATAlex Taussig38:09

       Well, I, I could talk about Vinted and I can talk to that in general 'cause we have a lot of companies at Lightspeed where we have to make this judgment. I think we have something like 400 or 500 companies globally that we're investors in at this point. One of the biggest errors in judgment on the efficient frontier is when you're, you're attributing a lifetime value to a set of users that turns out to be wrong. The thing you know in the short term is your payback period kind of,

15. 38:32 – 41:47

    Importance of Accurate Projections & Cohort Analysis

    1. ATAlex Taussig38:32

       but if you're making judgments as to like, "Well, this is gonna be a, a user that pays off three to one or four to one," and the retention doesn't play out the way you thought it did, you can be in a bad spot. And the, the, the reason this is a really relevant question you just asked is we just came out of COVID, and, uh, I guarantee you if you look at any consumer company in 2020 and 2021, their cohorts look fundamentally different than they did in 2022 and 2023. They just performed different. People were adopting new behaviors. A lot of those behaviors did not stick, and a lot of projections at the end of 2021 going into 2022 before the collapse were based on cohorts that, that just were not the real thing. And that caused a lot of this sort of misses to plan in 2022 and excess cash burn. So you gotta be really confident that what your projections, uh, on a cohort basis are gonna be, are accurate. Um, and the more conservative way to, to, to, to do it, to think about the efficient frontier, is just to look at it on a payback basis and to look at it on a cash flow basis. But, you know, the trade-off to that is you're less aggressive and you might miss some long-term opportunities. So it's all about that discussion. Like, is this real? How confident do we feel? Why do we feel so confident? How repeatable is this? And it's a, it's a judgment call at the end of the day.

    2. TPThomas Plantenga39:47

       I think it's very important to build a growth framework that has all these things together in the stages of growth of each of the countries so that you constantly kind of check yourself, "Well, on a lifetime value, on a payback this, on a cash flow that, does it all still make sense?" So that you take context of all these elements and that you really stay very clear to yourself about what are predictive values and what are actually real truths. Because like, certain predictive values, uh, like if you look at LTV over five years' time it's like, "Okay, we hope that this is gonna be there." But like, obviously this is predictive value, it's not a real value. What's the actual payback now? How much did we earn? What is our cash flow? What is our burn? Yeah, you need to see all these numbers in context. It's like, like if you look at these businesses, these marketplaces are multivariate models. So if you're gonna steer your whole marketing investments on one metric, like a cost per or a certain payback, then like, you're, by definition you're wrong because all these variates are moving around and you need to, like, control them all.

    3. ATAlex Taussig40:45

       Just to give you one, just one more r- really tangible example in case your, your, your listeners are interested. I mean, early on in a company's life, in a marketplace business, one of the fundamental things that, like, never changes across all marketplaces is that more liquidity generates higher, and more inventory generates higher conversion rates. But there's, there's diminishing returns on that, right? Um, because the user can only see so much inventory in a given session. So early on, you're nowhere near that efficient frontier, and as you're, as you're growing the inventory in your marketplace, it looks like your conversion rate could be going up linearly. And you're like, "This is great. I'm just gonna add more and more and more. We're gonna invest linearly in more inventory." But then you hit that diminishing return. And so if your plan was that it was gonna be linear forever, well, hey, you're, it's gonna be wrong and you're gonna disappoint. And a lot of the times you have to even refactor the entire search experience, refactor the discovery experience, so that you can expose more of that inventory to your users and reclaim a new efficient frontier for conversion. So these are the kind of things that happen from a product standpoint, uh, that, that, that matter with respect

16. 41:47 – 45:34

    Complexity of Customer Acquisition Costs

    1. ATAlex Taussig41:47

       to what you're asking.

    2. TPThomas Plantenga41:47

       I am perpetually stuck on CAC (laughs) and that's why I was single for many years, chaps. Uh, but (laughs) but, but what I mean by that is like, you know, when you acquire your first users, in some ways it's cheaper because they're the most hardcore fans. They feel the need and the pain more than ever. But then in some ways, and so you think, "Okay, they're the cheapest and they'll get more expensive over time as that core saturates." But then you also go, "Well, you also have that trade-off of then you have increased brand awareness, you have increased word of mouth, you have network effects." Do customers get cheaper or more expensive to acquire over time?

    3. HSHarry Stebbings42:25

       ... from your perspective.

    4. TPThomas Plantenga42:26

       I think it's very important to define exactly, uh, what, what customers are. So if, if you would say from a blended CAC and payments, uh, CA- CAC and the payback, then absolutely should become cheaper over time. Like, the- these blended paybacks are just going down over time because your, your organic goes up, your motive y goes... that, that absolutely needs to come. But I think the, the story of direct impacted, uh, by marketing, new listers, sellers, buyers, whatever you wanna call it, uh, as the marketplace matures, you gotta have, at a certain point, to have a large share of the population and thus it, it becomes harder. So therefore, it's very, very important to consistently really look at the marginal cost and not the average cost of all your CAC, because that's also a very, very big mistake, right? You can say, "I have a CAC of this." Okay, nice, but what is, let's say, your first €100,000 spend, your second €100,000 spend, your third €100,000 spend? The CAC in each of these is, is, is wildly different, and there's usually a, a curve that goes like this. So I think averages are very, uh, uh, dangerous to steer on, and thus you need to always look at distributive values of, like, the marginal additional cost of what you bring in.

    5. HSHarry Stebbings43:40

       Did you mispredict because of inaccurate cohorts due to COVID?

    6. TPThomas Plantenga43:45

       We did not, uh, because, like, we got quite a boost through it and we know that we have this summer effect and these autumn effects, and we see just in summer, people go to the beach and then they're buying a lot less. It's, it's very obvious. And then autumn comes, weather changes, people are starting trading again, and whop, all the metric goes up. So we saw a kind of like, people were locked up in their rooms, and we saw a bit of a boost due to that. And it was very clear, like, it's because of that. So, and what we also knew was like, at a certain point in time, these people are gonna go out again into the parks and enjoy their lives. So we were actually very scared of, like, the after-COVID dip, and thereby, we predicted quite conservatively, and therefore, we were in a good place. But I think Lithuania, we have a very paranoid mindset. It's a country that's been run over by the Soviets, the Germans, and like, you know, if you live between Kaliningrad, Belarus, and Latvia, you, you kind of like are always aware that maybe something goes wrong. And, and us, like, when things go really well, you're kinda like, "Okay, this feels too good to be true. Let's be very careful."

    7. HSHarry Stebbings44:50

       You mentioned cash cow earlier. I think, Alex, you did. Like, and regions becoming cash cows and them being able to fund subsequent regions and subsequent, uh, projects. Which region is the biggest cash cow today?

    8. TPThomas Plantenga45:01

       I think without giving away too much, uh-

    9. HSHarry Stebbings45:05

       Europe. (laughs)

    10. NANarrator45:06

        (laughs)

    11. TPThomas Plantenga45:07

        ... I, I...

    12. ATAlex Taussig45:07

        (laughs) Europe.

    13. TPThomas Plantenga45:07

        No, I think, I think it's very logical. Like, we see all countries moving at the same trend. Older the country, the, the more it contributes in terms of free cash flow. That's practically... And then it's, obviously it's correlates to the population. So the older a country, the bigger a country, the more cash flow comes out of it. That, that's... and old, I mean old as in us entering. So yeah, that, I, I, I'm not gonna s- specifically name things, but that, that's how it works.

    14. HSHarry Stebbings45:31

        I totally get that. (laughs) Uh,

17. 45:34 – 50:20

    Determining Attractive Markets

    1. HSHarry Stebbings45:34

       c- can I ask you, the other thing is like, when choosing, like, new markets, what are these, like, top one or two things... Now, it's chiming here too 'cause like boards are very significant in terms of deciding where to go. What are the top one or two markets? You mentioned Belgium earlier, and I was like, "Why, why is he going to Belgium?" And you were like, "Ah, the transport," and that was why, and like shipping, and so it makes it... What are the core determinants that decide why you choose a market as attractive or not?

    2. TPThomas Plantenga45:58

       So, so we try to reason from probability of generating success as in eu- euro values. And if all probabilities in every countries would be the same, then you would just start with the biggest country.

    3. HSHarry Stebbings46:10

       Yeah.

    4. TPThomas Plantenga46:10

       Yet that's not, not the case. So the equations of product of probability of success and the size of a country, and the probability of success is defined by practically the level of competition, the level of development of infrastructure in shipping, in payments, uh, and maturity of e-commerce market. And based on such variables, you then come to a probability that you are gonna be successful. Then you rank those probabilities of success times the value of the market in an, uh, little Excel, and then you have your prioritization. When we are talking about France, second margin market Belgium, it was just the first time we were, after a long time focusing on France, were going out, and we said, "Let's just take a market that is the easiest." And thus, we took Belgium, kind of to warm up and have the lowest probability of failure. So we first went for a couple safe bets, and then we started to rank it as it is.

    5. HSHarry Stebbings47:04

       Alex, what does it look like at the board level? 'Cause boards want growth. Boards need growth. Yeah, we'd normally push and go, "Come on, UK. Come on, US." Like, (sniffs) we've gotta get the next round. (laughs)

    6. ATAlex Taussig47:17

       Well, (laughs) I think the thing to grok is that res- you know, fashion industry is $1.5 trillion globally. You know, it's many hundreds of billions of dollars in Europe and, you know, resale has grown from, you know, 1% of the market when Vinted started to probably 10%, 15% of the market today, and it's g- on its way to 20%. So you don't need to have that many people to have a sizable business, but obviously it matters the scale you're at. So the scale Vinted was at in 2019, Benelux was actually a reasonably sized marginal opportunity to go and could actually make a difference. As we got bigger, it became things like, like the UK and Italy and Spain that you had to go, you had to go in, and eventually Germany. And then over time, as you start to become dominant there, you start to not just think about growth in terms of adding people and the single, you know, transactors, but adding entire share of closet, is the term we use. Um, you know, how you get more of the stuff that is in that person's closet, and how you expand into new categories. And so there's different ways to think about layering in TAM, but there, w- at, at light speed, when we think about addressable market, we don't really think about it in dollars first. We think of it as surface area.We think of it as, like, how, "What is the surface area we're gaining access to here uniquely in our strategic wedge?" Because if you look at some of the best businesses, they've been able to take their surface area and continue to build and build and build on top of it. And that's actually where the TAM comes from.

    7. HSHarry Stebbings48:42

       Alex, sorry to, uh... What i- what is surface area? How do you guys think about that?

    8. ATAlex Taussig48:46

       Surface areas is, is the sense of like you might have 10 million customers but only 1% of their clothing is being transacted. But, you know, in the industry broadly, it's a fi- it's 15% of all apparel is sold in, in resale. So therefore, if I have 1% when I start, five years from now am I gonna have 15, 20, 30% of that person's closet? 'Cause if so, that's like a order of magnitude expansion at the customer level. So what really matters is not getting 30% of their closet at the beginning, it- it matters that you can land with that customer and then expand through them, through their share of closet in this case. And so the surface area, meaning the, the number of people you can touch, the number of people who experience the problem you're solving is actually a lot more important as a leading indicator of TAM versus the actual final TAM when all is said and done.

    9. HSHarry Stebbings49:34

       Got you. So you actually want that chasm to be greater between where we are now and that surface area. 'Cause if you were at 20% and the standard was 15, you were like, "Actually, maybe weighted we're already ahead."

    10. ATAlex Taussig49:44

        Yeah. I mean, to be clear, like it would be great if you could land with 30% of, of their stuff. It's just you're probably not gonna be ahead of what the market average is, you're probably gonna be less. And it's nice that almost every company actually grows into that. So I know, you d- you do a lot of enterprise investing as well, Harry, and, like, you know, you're often t- thought about the, "Okay, well, I'm gonna land at 50K ACVs but I really wanna get to 20, you know, 200,000, 300,000 million dollar ACVs." The same, the same thing exists in consumer, you know? It's, it's, you know, I wanna get that customer, I wanna get them to transact, and I wanna have a good payback period on that acquisition. But what I'm really going for with that customer is much, much larger than that initial set of transactions.

18. 50:20 – 1:01:33

    Government Collaboration & Relations

    1. ATAlex Taussig50:20

    2. HSHarry Stebbings50:20

       I do wanna discuss Europe. You know, Thomas, Europe is a tough spot right now, I think.

    3. TPThomas Plantenga50:26

       Yeah.

    4. HSHarry Stebbings50:26

       And you've said before how hard Europe is losing.

    5. TPThomas Plantenga50:29

       Yeah.

    6. HSHarry Stebbings50:30

       I agree. Why is Europe losing, in your mind?

    7. TPThomas Plantenga50:33

       Yeah. I mean, it's, it's very hard, right? I ask myself this question a lot, and I, I'm... It actually makes me anxious because, I mean, as a continent you need great companies that generate a lot of jobs, and pay taxes to build highways and, and hospitals and institutes to train society. And it scares me a lot when I see that, like, like the statistics about the value we create versus what the US is doing. It's, it, it really is, is difficult to see. I don't know what it is exactly, but there are a couple things that are quite different. Like, for example, in, in, in the Netherlands, if I'm back at home I love my friends, they're, they're amazing people. But when I'm around them, uh, i- it always feels like I'm an enormous workaholic. And, and, uh, people are telling me like, "Come on, dude," like, "Take it a step slower," and like, "Take, uh, Fridays off," and, uh, I don't know, "Start do," uh, whatever. And when I'm in New York or when I'm in Silicon Valley and I'm ar- surrounded by people like Alex and the people there, I feel like I'm the lazy guy. So there, there, there's-

    8. HSHarry Stebbings51:35

       (laughs)

    9. TPThomas Plantenga51:35

       ... definitely a difference in, between, like, uh... Because you've, you've... You know, the work ethics is very different. And I think Lithuania is a bit of an exception because they're a very young country, they really wanna build themselves up, wanna prove themselves, so there's a very strong work ethic there. Therefore, I feel very much at home in Lithuania. Um, but like in Europe, this work ethic is different. Uh, I think we have it very well, uh, things are arranged very well, and thereby people are enjoying life more. Which is not a bad thing, but, like, longer term it might have very bad impact on our, on our continent. So I think that's one. And then two, I think in terms of regulations, I, I think we're failing, uh, to, to stimulate the companies that we need to build for the future, are not able to tax, you know, Chinese and American companies in the right way. And thereby, you know, our ability to practically extract value out of the economy to pay our society, which is what tax should do, is, is failing to a certain extent. So our flywheel starts to slow down. The motivation is less, the extraction to stimulate, uh, is less, and then the flywheel goes slower. So it's, it's something I think is very sad, and I worry about it. It's, it's not good.

    10. HSHarry Stebbings52:45

        Uh, no, I, I... Listen, dude, I deeply fucking worry about it. I've... You know, I live in London, I bet my career on Europe. I, I didn't move to America when I could have done. And so I, I share your concern. I guess my question is subsequently... And the UK, I think, is particularly bad. You know, we can thank ourselves for, you know, regulating Figma. But my point being, what can we do about it? Like, when we think about the taxation policies towards US, China, other nations outside of the EU, and when we think about regulatory on M&A comp- competition, what could we do to change it and what would you suggest?

    11. TPThomas Plantenga53:17

        I think there are two elements in this. It is our own behavior as CEOs and for-profit companies to, uh, show the way in how we can be constructive for society. So it's building fair companies, to a certain extent, that give their fair value to society in terms of taxation, in terms of kind of revenues back go into society, and, and that, that all helps to, to, to, to support society. So actually, as a company, be grateful for the society that allows you to build there. Because then if you do that, you're in a position that, I don't know, governments and society will trust you. So then when you will signal that certain things are harmful, not good for society, not good for your business or, uh, uh, the economy, then there will be trust and there will be listened to and then act upon, I think. So I think it's important to show as a company that you have the best intentions. And although... And showing it by doing it in a right way, and then getting trust from governments, and then have an open, transparent conversations with governments to help them to structure it. Because it's not that these-

    12. ATAlex Taussig54:25

        ... people in politics are like, "Oh, let's build some, uh, nasty regulations to bring this continent down." Like they're trying really to do their best, and it's a complex job. And I think only if we collaborate with high integrity with each other we can get there because it's complex. Like it, I, I don't know exactly what the silver bullet is, but that's the only way out, I think.

    13. HSHarry Stebbings54:43

        I think you have a, a nicer view of the regulation environment than me, uh, but (laughs) , uh, I'm gonna just hold by that 'cause Alex, Lightspeed have an office in Europe now. And I was chatting to a, uh, a, a investor who will re- remain unnamed 'cause he's a buddy of mine. But he was like, "Dude, why are you in Europe?" Like, "You've had, like, Adyen, you've had Spotify. Revolut's not liquid yet, but it will be in that ilk, but that's it." Like, come on.

    14. ATAlex Taussig55:14

        Well, w- so we actually have multiple offices in Europe, uh, which is, uh, so it's even, we're even crazier by your, by your logic, Harry. Uh, we, you know, uh, we have, uh, a lot of folks in London, but we also have a partner in, in, in Paris, and one, another partner in Berlin. And we've made investments in probably half a dozen European countries in the last few years, um, maybe even, maybe even more. And we've always been, you know, investing in, in the Euro zone. Um, we've had an Israel office now for, for more than 15 years, and some of those investments have, have been in, in Europe, out of there too. So, uh, I just think it's really hard to ignore a region that, you know, I think in the Euro, in the continental European zone is something like 340 million people, uh, another 67 million or so in the UK. Um, in aggregate, that is more than we have in the US. The economic growth isn't there, as Thomas said, but the spending power is and the consequence, and that, that's a critical mass of, of people. It's i- it's this, it's the same size and scale as, as some regions like Southeast Asia and Latin America. Like, s- you know, Brazil is, you know, about 220 million people.

    15. HSHarry Stebbings56:16

        Hm.

    16. ATAlex Taussig56:16

        And so y- y- you certainly can't i- ignore it. And the, and the question is more like, okay, well, if everyone has the same basic needs and wants, how are those needs and wants served? And, and what kinda companies can you build there that solve some of these problems? Because one way to think about it is what Thomas said, well, it's tax policy or its regulatory change or its cultural changes. There's also companies... And companies can change things significantly. I mean, Amazon and Netflix, that have completely changed how, um, and, and, and Facebook have, have changed a lot about US society. And I think when you start to have businesses that can truly extend across the region and help improve people's lives by providing products and services they want, you can actually change things, and you can show the example for how other people can do it. I think it just so happens that if you look at most of the investment community in Europe, and this is, I guess, where I, where I'll be a little critical, if you go back 10, 15 years ago, most of the investors in Europe probably had more of a, you know, traditional banking, private equity kind of background and probably had a little bit of that conservativism. And Thomas, in your, you know, you may have felt this in, in other businesses or you may have friends who have felt this. But, d- there's just, like, less sort of pushing to really go for it. Whereas nowadays, with, with, with folks like Lightspeed, you know, which is a global firm, partners all over the world, we're trying to take that Silicon Valley mentality and inject it in, into every region. And it turns out we can find some people, like Thomas, who really do wanna go for it, and a few of them will, will build significant businesses, and those businesses will set the foundation. So I would just encourage you to ask the question 10 years from now. (laughs) Now is a hard time to ask the question, but I also think there's a number of companies, th- some of which we're in, some of which others are in, they're actually defining what the European future's gonna look like.

    17. HSHarry Stebbings57:55

        Can I ask you, Thomas, from your experience, do you find the European versus the US venture product very different?

    18. ATAlex Taussig58:03

        Yes. It's k- like, like day and night. Like, if you look what kind of, like, seed stage term sheets get to the table of, like, people I know building companies, and they get, like, in these small markets that, in Europe, what, i- it's like financial rape. And it does a lotta damage. It's, it does a lotta damage because if your first term sheet in your seed or in your Series A is, like, absolute rape, then who's gonna step in after that? You just handicapped the company. So and I think, you know, I really learned what are quality S- VCs by working with Lightspeed, Accel, Insight, all these companies. All these investors that we have are, like, of a breed that is hig- high quality. And then later, I learned about what's happening, you know, underground in the Netherlands, Lithuania, and you look at those terms, and you're like, "You should've never agreed to this." And, but the founders are also not aware of what's possible. So I think there is a break on it, but, uh, because there's not enough ... it, it's a little, it's, it's a theoretical benefit, but here's a real thing that's, that's sitting in front of me. And, and it's not just in Europe. I mean, we hear this in Latin America, we hear this in Southeast Asia. You know, it, it's a repeated thing because the people who tend to finance things are not the, the, or are not, like... Silicon Valley's weird. Silicon Valley has this, like, weird risk-loving kind of culture and, and we also know that it's a repeat game. We know that we're gonna be playing the game with these people for decades, and so we've got to treat everyone right. And so it's, it's a, it's a very unique thing. But the good news is the arrow, the directionality is going towards the vision, Harry, that I think you, you, you've espoused.

    19. HSHarry Stebbings1:01:10

        Ca- can I ask you, Thomas, when we think about the teams themselves, often people, uh, say that it's harder to get the talent. I do want to touch on, before we do a quick fire, just some conventional wisdoms that a lot of people are like, "Yes, we're all aligned," and VCs love this too because we're, you know, largely sheep, um, but you know, one of them is the Rule of 40 is the new black.

    20. ATAlex Taussig1:01:29

        Yes.

    21. HSHarry Stebbings1:01:29

        Uh, you've said before that this is maybe, uh,

19. 1:01:33 – 1:05:45

    Debunking the Rule of 40

    1. HSHarry Stebbings1:01:33

       BS. Why is the Rule of 40 is the new black maybe BS, and how do you think about that?

    2. TPThomas Plantenga1:01:38

       Like when you're evaluating a business, and I'm, I'm not a VC, but wh- when you're doing that, it's, it's really about the fundamentals, and, and practically those fundamentals come down in how fast can you recycle cash to get that machine growing. And obviously if you, at a certain point in time, make a scatter plot and you put, like, a high growth ratio and a high profitability ratio, then you get the best companies. If you make that tighter, you, you get them better. So at least you get a good selection with a high, uh, density of good companies, right? So- but that then saying that that is a causal rule that drives to create big companies, that's absolute bullshit, because I can have a company that is actually declining while I'm milking out a lot of cash and I will get to a Rule of 40, but obviously that is not a good company. And what I've seen over the last period of time, so like a, a year ago or something like that, is Rule 40 started to pop up in our board meeting. I was like, "Okay, Rule 40, how, ah, okay, that kind of makes sense. Like, yeah, I get it." But then all of a sudden this whole investor community thinks that it's kind of like a physics law and start to apply it in a way that it's nonsensical anymore. So, so, so I think that that's like... I, I'm so surprised by that, how I then meet young venture capitalists completely going gung ho on this and not understanding the fundamentals that are behind it anymore. And, and, and that's something that really surprises me, like how can these communities of, like, mega talented, mega smart people all of a sudden as a herd just go one thing and only talk about Rule of 40 anymore? Like... (laughs) It's... I, I, I don't know what's going on.

    3. HSHarry Stebbings1:03:14

       It's 'cause they, it's 'cause they, it's 'cause they b- listened to an All-In podcast and David Sacks says something and they're like, "Aha, yeah, there we go."

    4. TPThomas Plantenga1:03:21

       Yeah.

    5. HSHarry Stebbings1:03:21

       That's the one.

    6. TPThomas Plantenga1:03:22

       I, I don't know. I mean, as, as Vinted, we're beautifully happy with this development in the VC world because we, we do very well by that rule, but like, it's, yeah, it makes you wonder, right?

    7. ATAlex Taussig1:03:32

       It's, it's a, it's a, I, I think a lot of, um... There, there are these dangers with these frameworks that you confuse output metrics with input metrics.

    8. HSHarry Stebbings1:03:41

       Mm-hmm.

    9. TPThomas Plantenga1:03:42

       Exactly.

    10. ATAlex Taussig1:03:42

        And Rule, Rule of 40 is an output metric. It's like, I did a bunch of things and the, and the business spits out this number and it happe- and it's that you add the revenue growth to the EBITDA margin and they happen to add to 40%. And then what a very smart public analyst, equity analyst realizes that if you correlate that with the multiples, prevailing multiples in the market, there is a much higher correlation with that than with raw growth, which was what it was during the zero interest rate era. And so that's why it started popping up more is because that correlation started to, to, to go up and, and that still persists to today. That's, that's... If you look at companies that are trading at 10 times revenues, they, they tend to have Rule of 40 or more. But, e- to Thomas's point, for operators it's, it's kind of irrelevant because they're doing, they're working on the input metrics, they're working on the things that define that efficient frontier of investment and they're trying to think like, "I have this balance sheet. I have my management team, I have my own bandwidth. What is sort of the value maximizing set of activities I can do with all those resources and, and then, like, the growth will, will, will come, you know, if you, if you do those things?" The last thing I'll say on the Rule of 40 is actua- I actually think it's a, it's a useful output metric. So it is an output metric, but it is a useful output metric if you use it that way. It's really hard to boil down the sort of vast majority of public companies into, like, one number. And this notion that you can balance growth and profitability is actually, I think, a really useful concept and it's driven a lot of really, I think, good discussions about what that trade-off is. But ruthlessly just focusing on one metric is never the right way to run a business and you always have to be cognizant of, like, what's input and what's output.

    11. TPThomas Plantenga1:05:15

        Yeah, exactly. So if you are in a board meeting and you decide that you're gonna optimize the company towards Rule of 40, then you're doing really stupid shit. Like-

    12. HSHarry Stebbings1:05:24

        (laughs)

    13. TPThomas Plantenga1:05:25

        (laughs) ... that's just dumb. You should work from the input metrics where you say like, "I'm gonna make these investments because they're gonna generate this type of cash flow in the future. And yes, in the future I will have healthy growth and profitability," fine, like, but not optimized directly towards that. See it as an output in the future, but, like, yeah, it's dangerous

20. 1:05:45 – 1:17:36

    The Flaw in EBITDA Margin Optimization

    1. TPThomas Plantenga1:05:45

       to do this.

    2. HSHarry Stebbings1:05:46

       Can I ask another one that you said was, uh, maybe a little bit of a conventional wisdom that needs to be debunked? EBITDA margin optimization.

    3. TPThomas Plantenga1:05:54

       Yeah.

    4. HSHarry Stebbings1:05:55

       (laughs)

    5. TPThomas Plantenga1:05:55

       (laughs)

    6. HSHarry Stebbings1:05:56

       That says it all, Thomas. You go for it, my friend.

    7. TPThomas Plantenga1:05:59

       Yeah. I mean... (laughs) I mean, like, look, again, an output metric, and it's not something that actually fundamentally matters. Like, what do you want to have rather, a business that does 100 million of free cash flow at 5%, or let's say 10%, or do you want to have a business that does, uh, 5 million of free cash flow at 70%? 70% EBITDA margin says nothing, it's about the...... absolute amount of EBITDA or free cash flow. Like, a business is valued on money. More money that comes freely out of it is better, doesn't matter under which ratio that money comes out there. And we've been looking at Excel files so much that we've seen very great companies with high EBITDA margin, but it doesn't mean that it by itself is a good thing. The only thing that matters is the absolute amount of cash flow that comes out of it.

    8. HSHarry Stebbings1:06:52

       Alex, how do you think about that when investing today and analyzing new companies, trying to understand where e- EBITDA margins can go to?

    9. ATAlex Taussig1:06:59

       Well, you know, (laughs) the, usually the highest EBITDA margin businesses have the lowest growth, right? And so it's this kind of funny thing where, um, you know, the business... Like, eBay has a great EBITDA margin. It hasn't really, it's not really growing and it's kind of losing market share every single year to other companies, like Vinted, that are doing more innovative, you know, things. And, and, and it's been, it's become a real problem for them. And so, but, but what we do think about is, okay, we have to underwrite this business to some outcome. That outcome is more likely actually to be the enterprise value is gonna be determined more by the EBITDA profile of the business over the very, very long term. So is there an inherent, um, you know, uh, uh, infrastructure that we think will yield a, a certain EBITDA margin over a certain percentage if the business, you know, chooses to do that and flow cash? And so we have certain businesses we invest in. We invest in a lot of software businesses a- at the application layer. We invest in a lot of infrastructure software businesses, security businesses, marketplaces, social media, et cetera, et cetera. And in, in each of those cases, there is a best in class company that has best in class EBITDA margins. And so you go, like, in marketplaces, like, is this business potentially like an Airbnb? Like, like, with, when you look at the, the characteristics of that business, they don't take inventory, they just kind of do payments and trust and safety, but, you know, the gross margin line, it's a fairly light lift. And then they have a huge marketing advantage relative to other people in travel. They spend something like 18% of revenues on marketing, whereas Bookings and Expedia spend 30%, and that's because they have unique inventory. And so you, you take an example like that and you go, "Well, if we can replicate that in this other industry, like apparel or home goods, well, maybe we could have that EBITDA profile because the fundamentals of the business are not that, that different." And so you use these kind of, like, rules of thumb and look at best in class, and then you project forward what the business would trade at at a reasonable multiple of that EBITDA, and that's how you understand your underwrite. But it's, it's a, it's a little bit of a triangulation exercise, um, and you're playing for best in class. But just 'cause you have a high margin doesn't mean it's a great business.

    10. TPThomas Plantenga1:09:08

        Yeah.

    11. ATAlex Taussig1:09:08

        It could be a shrinking business, uh, at a high margin.

    12. TPThomas Plantenga1:09:12

        And, and I think, like, let's be honest about it, right? If you have a very good big margin, it's nice, brings a lot of safety, but, like, people feel, let's say, that the high margin is the safety thing. But if the absolute number is not big, it doesn't bring any safety, doesn't bring any real value. So it, like, it really needs to be seen in context of the absolute value. Otherwise, it's just a-

    13. ATAlex Taussig1:09:32

        And, and, yeah.

    14. TPThomas Plantenga1:09:32

        ...

    15. NANarrator1:09:32

        rache.

    16. ATAlex Taussig1:09:32

        Yeah, and, and it also could be, could be an opportunity for someone else to come in and undercut you too. I mean, I, I think that's the main thing. Like, what I actually think is a better framework than margin is, like, what's your return on equity? Like, what is your... When you make $100 million in investment, you know, in the coming year, well, what do we expect the return on that $100 million to be over the ensuing five years? And that's a hard thing to calculate but, you know, if you can be really good at a company at deploying capital and seeking an equity return on that capital, I mean, that's how you compound for 40, 50 years. And so if you, if you say to me, "Well, look, we're gonna make this investment, but it's gonna actually lower our EBITDA margin," I'd say, "Well, how much EBI- how many EBITDA euros or dollars do you think it's gonna add to the business relative to the investment we're making?" That's the thing that really matters.

    17. TPThomas Plantenga1:10:17

        Yeah. And, I mean, look at th- look at one of our successful companies, Costco. Like, the one thing they did is they kept that margin low, and thereby they kept on winning and kept on going. So it's really in context of everything else. You should never say, "An industry should have this margin," or, "It's dangerous and you, you can actually kill an industry with it by adopting that."

    18. HSHarry Stebbings1:10:36

        Do you worry about going public because of the education that would ensue for retail investors, for the street, to understand the nuances of what we said there, to understand some other nuances of the business which aren't as obvious to everyone else as they are to someone like us?

    19. TPThomas Plantenga1:10:54

        I think when we go public and, and it's the same as when now talking to venture capitalists, your numbers needs to be obviously clear on, that it's working. Like, it needs to be obvious. And, and I think if it's not, then you can be lucky that you raise a round at a good valuation, but it needs to be razor sharp on, like, how you're converting cash into future cash flows and how you are growing your business and how you're building defensibility. And I think I'm not worried about it because every time I s- talk to somebody about Vinted that they didn't know our financials, they were, uh, they were very skeptical about it secondhand. "Who's buying secondhand? Is this ever gonna be a business?" And then you show the financials and they're like, "Holy crap, how many people are doing this?" And, and so, so I think, like, you need to be very specific to be able to explain how you gonna create value and, and, and, yeah, so, so, so I'm not too worried about it. I think it will be the same game as in private.

    20. HSHarry Stebbings1:11:53

        So I wanna do a quick fire round, so I say a short statement and then you give me your immediate thoughts. Does that sound okay?

    21. ATAlex Taussig1:12:00

        Go for it.

    22. TPThomas Plantenga1:12:01

        (laughs)

    23. HSHarry Stebbings1:12:01

        Thomas, who, Thomas, who's your biggest competitor to you?

    24. TPThomas Plantenga1:12:04

        Biggest competitor to Vinted?

    25. HSHarry Stebbings1:12:06

        Yeah.

    26. TPThomas Plantenga1:12:07

        Um, I think it's, um, Adevinta.

    27. HSHarry Stebbings1:12:11

        Okay. Alex, what's Thomas's biggest strength and what's his biggest weakness?

    28. TPThomas Plantenga1:12:18

        Be honest.

    29. ATAlex Taussig1:12:19

        ... be honest? Um-

    30. TPThomas Plantenga1:12:20

        Yes.

Episode duration: 1:23:42