Three messages before we get started. First, TeamworkPM makes project management easy. Have you gone to TeamworkPM.net yet? They have subscription plans to suit all types of companies from one- or two-man operations right up to large organizations. TeamworkPM.net is trusted by Universal Studios, University of Austin, and the U.S. Army and so many other organizations. If you’ve been using a project management system and prices are going up or you’re not happy with it, try TeamworkPM.net.
Next, if you’re a founder of a tech company, I know that you need a lawyer who understands your business not just the law. You want someone who’s in the tech community, and that’s why I recommend Scott Edward Walker of Walker Corporate Law. He’s the one who startups turn to when they’re raising money or when they’re selling their companies. If you’re a founder and have legal needs early on, go to WalkerCorporateLaw.com and they’ll take care of you too.
Finally, have you tried Grasshopper yet after all these months and years of me talking about it? Grasshopper is the virtual phone system that entrepreneurs love. Grasshopper will give you a toll-free number, unlimited extensions, they’ve got call forwarding, voicemails to email, the whole shebang. It all comes at an incredibly reasonable price. Go to Grasshopper.com.
Here’s your program.
Andrew Warner: Hey, everyone. My name’s Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and home of the brand new mic that I’m testing out here today. Jake, what do you think of the mic here? Too intrusive on camera? You’re a guy who knows design.
Jake Nickell: I think it’s beautiful. It’s really taking up a good amount of screen space but not too much where it’s intrusive.
Andrew: All right. Cool. Big question for this interview is how does Threadless sell millions of well-designed t-shirts every year even though it’s not a t-shirt design company? I invited Jake Nickell, Threadless’ founder, to talk about how he built the company by creating an inspiring online design community. Threadless is a user-designed, user-submitted t-shirt web company. Jake, welcome to Mixergy.
Jake: Thanks for having me.
Andrew: Since we’re doing this by video, I saw, as I said in my intro, that you’re not in the t-shirt design business. I think that’s how I said it. I looked at you and you didn’t seem comfortable with the way I said that. Why?
Jake: Not in the t-shirt design business? We are, kind of. People are more just submitting artwork, but a t-shirt happens to be the canvas it gets printed on. In the beginning, we also did posters too, but it was always just a really convenient place to put the artwork. Every small town has a t-shirt printer. You can’t have too many t-shirts, where you only have so much wall space. It’s more about the artwork than it is the t-shirt.
Andrew: I see. Okay. I was just trying to say that you guys don’t design it all yourselves. That’s one of the amazing things about the business. I own Threadless t-shirts. None of them were designed by you guys, but they all have your sensibility, your feel to them. Sorry, you were going to say something?
Jake: Anybody can submit a design and we print the best ones that come in. We’ve had 80,000 artists submit in the past 10 years. We’ve printed about 800 of them across about 3,000 different designs. It’s pretty amazing to have that much variety from so many different people. It’s not just one person’s perspective of what the brand should be like. It’s really diverse, an array of art going on the products.
Andrew: I also had in my notes before the interview, I was going to say that you sell over a million t-shirts a year. You said, “No, we’re in millions and millions.” How old was the business when you sold one million t-shirts in a year? That’s a big milestone.
Jake: Off the top of my head, I would guess it would be in 2006. Six years into the business.
Andrew: Six years. Then the second million, how long did that take?
Jake: At that point, we were selling at least a million per year. I imagine by the next year there was another million at least.
Andrew: Oh, no. I mean like two million in a year. How long did it take to you to double your sales?
Jake: From there, probably another couple years, maybe in 2008 or so.
Andrew: Wow. That’s incredible growth. I should say, too, that you’ve got a new book out. Let me hold it up. “Threadless,” the book. What is in this book? What’s this book about?
Jake: We’ve been asked to make a book by different publishers for years, since probably 2006 or 2007. I think Harper Collins first approached us. Everybody wanted to hear the business story. The way this book came about was a book packaging company actually approached us about this idea of doing a book that had all kinds of different messages going on with it. It celebrates our community. It celebrates the business side and the stories of the artists too that happen and then all the other little stories. We never really had the time to devote to creating a book, but when the packaging company contacted us about being able to help us out with some of the really time-consuming stuff in doing it, we were all about it.
It was really neat to be able to tell so many different . . . because a lot of people look at Threadless, entrepreneurs look at Threadless, as being a really cool business story. Artists look at Threadless and they have their own interpretation of what it’s about. Then the consumers too. Being able to tell all the angles and finally figuring out a format to do that in the book, that’s what made us want to do it. With our 10-year anniversary too this year, it was too perfect not to throw out a book.
Andrew: I’m an entrepreneur, so I’m going to ask you about the business story. I’m going to want to find out how you got here, how you built it up, how you grew your community. Let’s continue talking just a little bit about the book before we get into this story of the company behind the book. What did the packaging company do for you? Did they help you pick the photos? Did they set out the outline?
I expected, by the way, when I got the book or when I heard that I was getting the book, I thought I would get a standard business biography, that it would include a few pictures in the center, a really nice designed cover, but the story of how you guys built your business. Instead, what I’m seeing is just these beautiful pictures with some of the . . . I shouldn’t even show it on camera. I’m not worthy with my little iSight camera to show these beautiful pictures because I can’t do them justice. Then the story’s told within the pictures. What did the packaging company do to help you get this put together?
Jake: A lot of it was collaborative. They brainstormed with us on how to be able to tell the story properly. Then they did the production work of it, the laying out all the pages, putting together a template that each year . . . the book is arranged by year. I think the first four years is the first chapter, and then 2005 and on each have their own chapter per year. They’ve just laid the whole thing out, did all the dirty work that’s involved in creating an art book like that.
Andrew: I see. I also heard that Seth Godin was co-author of the book or something. I don’t see him on the cover. I think he’s just got a few sections in here, right?
Jake: Yeah. In every chapter, there’s a “think piece” that’s done by a different person within a different industry. There’s a Harvard professor, the President of RISD wrote a little bit, the curator of the New Museum in New York City wrote a little bit. We have all these little think pieces that are just one or two pages of thoughts from these thought leaders in different industries. Seth Godin we’ve known since 2003, 2004. He reached out to us. Back when we first started, we were actually a web agency where we built websites for clients, and Seth Godin was one of our clients. We actually got contracted to design Squidoo but we ended up not doing that. That was right around the time where we stopped doing web work was when we started working with Seth Godin. I still keep in contact with him every now and then. His books are ridiculously inspiring. I really enjoyed “Linchpin.” I don’t know if you had a chance to read that.
Andrew: You bet. I did. I had him on here to talk about “Linchpin.” What I notice about Seth Godin, having just talked to him by email over the last few years, he’s incredibly responsive, he’s incredibly helpful. Having his name attached to your book has got to help you sell the book. He doesn’t ask you for anything in return, right? He didn’t say, “Do this, but why don’t you give me a few t-shirts to give out to Squidoo? Why don’t you guys redesign my t-shirt?”
Jake: No. In fact, he was the first person of all the think piece authors we had to submit his piece. It was pretty amazing.
Andrew: Let’s find out how you got here. What were you doing just before you launched Threadless?
Jake: I was going to school part time at an art school for multimedia web design. I was working a full-time job. I was a web developer at a small agency in Chicago. At work, I was building this website called DeepDiscountDVD.com. Do you remember mySimon and all those deal sites? You would look up a product and it would show you the cheapest place to buy it. DeepDiscountDVD was always the cheapest everywhere. It’s crazy. They sold like millions of DVDs every month. I pretty much single-handedly built the website for it, both design and development. I realized that I had the skillset to be able to build an e-commerce website and was looking for something of my own to sell. That, corresponding with the idea of Threadless, is how I was able to launch it. I launched Threadless with $1,000.
Andrew: Really?
Jake: Yeah.
Andrew: What I found here in interviewing entrepreneurs is that before they have the company that they’re here to talk to me about, they launched a few other businesses that didn’t do so well or that failed outright. Did you have any other businesses before Threadless?
Jake: Threadless wasn’t really intended to be a business in the beginning. It was more just a creative project. I had been doing little creative projects for a very long time. My first one, I had bunion surgery when I was like 14 years old or something. When they pulled the pin out of my foot, I actually videotaped it, and I made a website about the whole process of going through bunion surgery at this age. Actually got a lot of people who were trying to research what bunion surgery was about. I was always just making cool projects online about my graffiti or whatever topic it was.
I was a member of a forum called Dreamless, which was an art community online. My participation on that forum was to say, “You guys are all amazing artists. Post work in this thread that you would like to see made into t-shirts. I’ll print the best ones and actually make them into shirts.” I started doing that about one hour after I had the idea to do it. Within three months, I was already printing my third batch of shirts and shipping them all around the world. The first two years of Threadless, it was all just a hobby. I didn’t take any salary for myself. I had a separate bank account where the money from the orders would go in and I would use that money to just print more shirts. That’s all that the money was used for.
Andrew: I found a lot of companies were started by people who had audiences first and then a business idea later. I’m wondering how active were you with this community that then became your audience and the first customers and contributors to Threadless? How active were you in the community?
Jake: I was very active in the community before Threadless even existed for a couple years. Very active meaning spending four to six hours at night just communicating with these other people online from around the world and doing little JavaScript projects or just random things.
Andrew: What do you mean? What kind of JavaScript projects would you being doing in a chat room?
Jake: There aren’t really many forums like that that exist nowadays that I’ve found. I guess I started out on the Internet on BBSs dialing up. Then I got Prodigy and got in there, then World Wide Web was introduced and I found some forums. What we would do on this forum called Dreamless was just jam ideas off each other. There was never a thread that was completely pointless within the area of Dreamless that I participated on. There would be a legitimate project that somebody would want people to get involved in. You could go on and actually post your contribution. Some of the stuff was. . . like a quilt for example. Somebody would design a 100-by-100 pixel image and then the next person would design another 100-by-100 pixel image next to it that integrated parts of that one so they came together. You get 100 people doing that and then you have this huge image that was collaboratively made. That’s just one example of the projects.
The JavaScript stuff, the forum allowed all HTML to be posted so JavaScript, CSS, everything. When you post into a thread, you can completely change the page. A lot of it would just crash people’s browsers. It was just a fun way to screw around on the Internet and learn too. You learned a lot about development in doing so.
Andrew: Was it just about learning or was there business being done there? Were you getting paid for any of this work?
Jake: There wasn’t straight up business being done, but a lot of the people who participated did web design or web development as their day jobs. It was kind of a way to network and form these friendships. If you needed some development work done, you knew 10 people who were really talented because you communicated with them online. You could easily reach out to them.
Andrew: Can you give me another example of a project you participated in while you were a part of the boards?
Jake: There was also, similar to the quilting thing, this thing called Layer Tennis which is now a separate project that Coudal Partners does. LayerTennis.com. Somebody would post an image and have a link to the Photoshop file for that image, and you would then download the Photoshop file and then change up the image and post your version of it. It would continue and anybody could battle. Those things sometimes happened across forums. There was a forum called News Today. The News Today community would battle against the YayHooray! or Dreamless or whatever community.
Andrew: Battle to do what? To see who made it the most interesting, the most creative, the most participants? What was the goal?
Jake: Yeah. There would never really be a true winner. It was just showing off your skill set or contributing to the project in some way.
Andrew: Do you remember one of the projects that you worked on? What did it look like?
Jake: I remember one where people built an isometric pixel town where it was an isometric plane and everybody was designated a certain area of it and everybody designed their own little pixel-based houses. I remember it ended up being just this huge city that would fill a big poster. It was everybody’s contributions mixed together.
Andrew: Oh, cool.
Jake: All of these projects were really collaborative. I think that’s why Threadless is what it is, because my background is in doing all these collaborative projects where multiple creative people would be working on things together.
Andrew: You went on the boards and you said, “Let’s have people design t-shirts. We’ll pick the best ones and I’ll go make them.”
Jake: Yeah.
Andrew: How did people pick the best ones or did you pick them?
Jake: It was consensus in the forum. There wasn’t any polling or voting or anything at that point. It was pretty clear which designs people got excited about that were submitted. We had no exact number of how many were going to be selected. In the first thread where this happened, we chose five. There were maybe 30 to 50 submitted. We chose five of them and printed them up. The people who designed it, they got just a couple free copies of their t-shirt. There wasn’t any cash prize or anything like that.
Andrew: People in the forums paid to buy the t-shirts so they could wear them.
Jake: Yeah. It was off people’s usernames at that point. The first design ever is called Prate. Prate is the username of one of the members of the forum. She made a design that just said Prate in five different ways going down the shirt. She’s featured in the book there, on one of the first pages of the book. She’s actually married to another guy, Dustin Hostetler, who goes by the name Upso, who has also been printed on Threadless.
Andrew: Let’s see if I can find her in here. Oh, there it is.
Jake: Yeah, there’s a picture of her and her husband.
Andrew: I feel so bad showing it on my camera here because the camera stinks.
Jake: There’s the Prate shirt right there.
Andrew: There’s her husband, I guess. This is, by the way, a shirt that I got just before I went to Argentina. Do you see that? Did it come out okay? There it is. Do you see that? It’s the Party Animal shirt.
Jake: Yeah. The guy, I can’t remember his name, John something I think, lives in New York and I think he’s in his 60s. He went to art school in New York City. He took a picture of, I believe, his wife in front of the bull on Wall Street with the rock hand going on. That gave him the idea to come up with that design.
Andrew: I wasn’t sure if I should wear it though in Argentina because I think in some parts of the world, this means you’re cuckold.
Jake: Oh, really?
Andrew: I said, “I don’t know the culture here. Should I wear the t-shirt? Should I not?” I ended up just wearing it around the house. Meanwhile, no one in Argentina wore t-shirts anyway so I would have stood out one way or the other.
Jake: People don’t wear t-shirts in Argentina?
Andrew: They’re so freaking formal. They don’t wear flip flops. They don’t walk around in cargo shorts. Maybe t-shirts sometimes, but they seem very formal. Even in the heat of the summer of South America, they’re very formal those people. How are you collecting payments for the t-shirts?
Jake: You mean when somebody buys a shirt?
Andrew: Back then.
Jake: Oh, back then. Yeah, it was funny. We had something like 1800MerchantAccount.com or something where you can sign up for a free merchant account to be able to process credit cards. In the early days, whenever an order would come in, I would actually call up a number and type in the person’s credit card number to charge it. It’s pretty scary that that actually went on then. Luckily, we never ran into any problems. That probably happened for the first year and a half or so.
Andrew: At what point did you decide to create your own website and move it outside of the message boards?
Jake: Right after the first batch of shirts. We started in November of 2000, and I believe that we had our website up and running by February of 2001.
Andrew: Okay. In between, there were no contests running. You were just servicing the orders that you got?
Jake: Yeah. In November, we posted that first competition so we probably had the first shirts made by January and then were able to have them up for sale by February.
Andrew: How hard was it to get the first shirts done?
Jake: Not very hard. I had actually made some shirts before for a skating team in high school so I was kind of familiar with . . . it’s very simple to get shirts made. You just send an illustrator file to the stringhorn.
Andrew: Now your site looks stunning. People go to it for inspiration. They go to it to copy your idea and bring it maybe to another industry. It’s known as a well-designed site. I’m wondering what that first version looked like. What did the first website look like?
Jake: It was pretty bad, very bad. I remember it had this weird thing where the first Threadless logo was just pixelated drawings of the word Threadless. It was like squiggly lines were used throughout the website. I remember we had a little button on the bottom of the site that straightened all the lines. A little line that divided the news posts was all squiggly. We were always just screwing around with different fun things you can do with server-side scripting. We were just learning server-side scripting at the time too. The logo itself too got straightened out. It would turn from these squiggly lines to just Threadless written in Arial or something. It was a horrible website.
Andrew: As someone who really cares about design, how hard was it to put out a website that, in retrospect, you look back and say is a horrible looking site?
Jake: Even though it was bad looking, it had little fun experiments going on on it, like that straighten thing. That was my contribution to the forum. I was living in this world where I was going to school for design and working as a developer. I had this weird fascination about how do I use my coding skills to do weird, experimental things that are more design based? That’s where the JavaScript experiments I was talking about earlier, it was kind of about that, the right code to make the page turn different colors. Actually, the creator of that forum called Dreamless, his name was Joshua Davis, and if you go to JoshuaDavis.com, that’s what he does too. He makes art with code basically. There was a lot of that going on in the forum. The people who were coming to the site, even though it wasn’t super visually impressive, there was still interesting things going on under the curtain.
Andrew: What I mean is, I could see somebody listening to this and saying, “Hey, you know what? I’ve got to launch a new site. I’ve got to launch a new feature. I know if I try to make it perfect, it’ll take me forever and I won’t launch. But I have my reputation at stake here. How do I launch it and still have it represent me and still have it be something I’m proud of without having it take forever?”
Jake: For some reason, I don’t know why, I didn’t have that fear at all. In fact, we redesigned our entire website literally four times a year in the early years. We would just be like, “I think this would be cool. Let’s push it out there.” People would react positively and negatively. I don’t know. I was just doing my thing. I was excited about putting this new thing out there. I knew it wasn’t perfect. It was just I had this drive to create things and I wasn’t worried about being perfect.
Andrew: How much of the culture of the community that you are a part of encouraged you to just put stuff out there and get feedback and improve? How much of it came from that culture?
Jake: A ton of it. I think a lot of the most successful artists on Threadless right now have that same type of drive, because you look at some of their first work and it’s really bad. A lot of it is really horrible. In fact, I’ve done this twice so far at HOW Conference and then Adobe MAX. We flew in like four or five artists from around the world. I hosted a panel where I asked the artists about their creative process and how submitting to Threadless over and over again. Some of these artists have submitted 150 times and been printed maybe 10 times. I think it’s fascinating, the idea.
In fact, the name of the panel that we’ve been doing is “How to Stop Worrying and Learn to Love the Bomb.” The idea being just drop the bomb out there, put it out there and don’t worry about it. You’ll grow from that. Even though those first submissions were failures and they didn’t get printed, without those, they wouldn’t have grown to be the artists that they are today.
Andrew: Why?
Jake: I think that’s important to put that out there even though it’s not perfect. You’ll learn so much from it.
Andrew: How does bombing in public make an artist better?
Jake: You get feedback. If you are able to take that feedback and use it to further your drive rather than discourage you, then you grow from it. A lot of artists do get discouraged, and businesspeople, when they bomb. Some people, it just lights a fire.
Andrew: How do you create a community where the feedback is supportive, where it’s helpful, and it’s not critical? I know even in my own blog posts, I put up an interview with a guy last Friday. Over the weekend, I think I’ve gotten dozens of hate comments for him. It’s really hard to keep the comments focused on useful information and not just allow the guys who are mad haters to take over and start trashing. In an environment where you’ve got designers who are putting themselves out there, that could ruin the whole atmosphere. How do you keep it on track?
Jake: We actually have another forum out there called YayHooray!. It’s the opposite of Threadless. Well, not really. It doesn’t have the focus that Threadless has. First of all, I don’t take credit for creating that. It’s the people who have come on to Threadless, got inspired by something, and joined that create that environment. I actually don’t post very much on Threadless. I’m constantly on the blogs lurking. I read so much on there. I chime in now and then. Really it’s not about you creating that thing, it’s about inspiring other people to want to be a part of it and create that within each other. I personally don’t go in there and comment on every single person’s design. It’s the community commenting on each other’s designs.
Andrew: Did you do that in the beginning or did you delete some bad comments or did you thank people who commented and gave the kind of feedback you were looking for to encourage more of that? Did you do anything like that?
Jake: No, we didn’t. I never deleted comments or anything like that. I think one of the things, and this is so basic, that has led to such a strong community, and I guess Wikipedia has a similar thing going on, is the contributions people are giving to Threadless, especially in the form of creating a design and posting it, are significant. They’re spending six hours on average probably creating a design to submit. When people are spending that much time and energy to contribute positively, it’s hard for somebody to come in and spend that same amount of time and energy to contribute negatively. Usually I think when people are contributing negatively on a forum, it’s just going in and trolling. It’s a post here and there. They’re not sitting there for six hours just trying to destroy things.
I think with Wikipedia, people put so much energy into making a perfect article and all the research that goes in behind it, that if somebody comes in and just clicks delete, that negative contribution isn’t as significant as the positive one. On YayHooray!, one of our other forums, there isn’t really the focus there. There isn’t a way that you have to contribute positively and put so much effort into it. I think that’s why it hasn’t been as quite a positive community.
Andrew: Ah, I see. If you give people more room to spend more time contributing positively, then they’ll just overtake the negatives.
Jake: Yeah.
Andrew: How do you do that? How do you get people to spend over an hour, over five minutes on a site where they’re just submitting a t-shirt? How do you get them to spend that much time contributing positively?
Jake: That’s a good question. I don’t think I have the answer to that. The fact is, when I started Threadless, it could have either fizzled out into nothing, but for some reason, the first person came on, was inspired by something and decided to contribute a significant amount of time of themselves into it. That snowballed. I think you just have to inspire people to do that. Do things that are awesome enough that will inspire people to contribute.
Andrew: How do you do that? If I just leave my audience with, “Hell, things just sometimes happen,” I won’t get an understanding of really why it happened to happen at your company, why Threadless is special. It’s not special because, shit, things sometimes happen. It’s special for a reason. I want to understand why and how. How do you inspire people to spend that much time?
Jake: It was very real in the beginning. People weren’t coming to Threadless in the same way that you would go to Coca-Cola or something. The brand was a community from the start. It was born within an existing community. Already there’s a desire to contribute and interact with other people that you have already shared interesting experiences with in the past. It was really about relationships. It wasn’t about pushing a corporate agenda or anything. It was about making cool stuff together. I guess as a business going into it, you just really need to have . . . if you want people to contribute to a community, you need to have something real going on that’s like real relationships and people actually wanting to work together on things.
Andrew: I see. Okay. I can see how coming from a community where that already existed, where you invested a lot of your time into it and a lot of your passion into it and others did the same, how bringing that goodwill to a new site can help carry on the same spirit of the previous site. By the way, the company’s called Threadless because it used to be a thread on the Dreamless website. Once it was no longer a thread and was a website on its own, it became known as Threadless, right?
Jake: Yeah. Threadless started as a thread on a forum called Dreamless.
Andrew: Cool. That’s a cool name.
Jake: Thanks.
Andrew: We talked about some of the design of the first site. What were some of the features that you included in the first version because they were just essential?
Jake: The voting was there right from the beginning. Submitting designs, you actually emailed them. Just emailed them as an attachment, and then I actually made the thumbnails myself for everybody. Buying, it was very similar to what the website is today. It was submitting designs, scoring them, and being able to buy them.
Andrew: What about commenting? Was that available?
Jake: Yeah. That was there from the beginning too.
Andrew: Okay.
Jake: There wasn’t a forum in the beginning where there is a forum now. We actually started out with no forum. Then we added a forum. Then we removed it, then we added it back again.
Andrew: Why?
Jake: I think we removed it because people started talking about things that weren’t about t-shirt design. Then we realized that people wanted to talk about things that were outside of t-shirt design, so we put it back in.
Andrew: Why is that important? Why, if you’re running a community that’s focused on a goal, why would you want to also allow people to have conversations about their birthdays or their outside interests?
Jake: It just furthers the relationship building that goes on. People wanted to learn about each other outside of just seeing their t-shirt art. You’re in there contributing daily, and you really want to start building relationships more than just the standard t-shirt stuff.
Andrew: Do you have an example of how that happens? What kind of conversations somebody in a community might have that would foster a relationship without necessarily being about t-shirts?
Jake: People post about just a cool thing they saw online and then they comment on that. People like to talk about TV shows or anything really that they can rally behind as having common interests in things. I think they’re just trying to relate to each other.
Andrew: Okay. All right. After that first version was launched, what was some of the feedback that you got from your users?
Jake: The first version of the website?
Andrew: Yeah.
Jake: One of the first things we added was the ability to choose that you buy a shirt. I think a lot of people were rating the designs based on just how much they liked the artwork. It could be I would give this a five because it’s amazing, but it’s not something that I’d want to buy or wear. That was a feature that we added pretty quickly. Another thing was the designs would sell out and people would want to buy them after they sell out, so we added a feature called a reprint request. Every week we reprint designs in addition to printing new ones. That’s what we use to determine what to reprint. Our customers tell us that they want this to be reprinted.
Andrew: I see. If you get a certain number of reprint requests then you’ll go ahead and do that.
Jake: Yeah.
Andrew: Okay. What about legal requirements or incorporation or making sure that you have the right person’s permission? How much effort did you put into that in the beginning?
Jake: None. The company was an S Corp under my name. It was just filed through my Social Security number. Of the $1,000 that we used to start Threadless, about $800 of it went to printing t-shirts, and $200 of it went to an accountant just to figure out how to become an S Corp. That’s the extent of what we did legally to get set up. Not an S Corp, a sole proprietorship. Sorry.
Andrew: You set up an S Corp. You’re a business right from the start.
Jake: Sole proprietor.
Andrew: Sorry?
Jake: A sole proprietorship.
Andrew: It wasn’t an S Corp?
Jake: No.
Andrew: Okay. A sole proprietorship should be $0 to set up, no?
Jake: Yeah. It was just advice really from an accountant because I didn’t know that.
Andrew: So $800 is for advice on how to set up a sole proprietorship?
Jake: No, the $800 went to printing the shirts and $200 . . .
Andrew: Oh, right. Yes. I had it all backwards. All right. I see. You really didn’t go into this with the idea that one day you would be the t-shirt king of the Internet?
Jake: Absolutely not.
Andrew: Just doing something cool.
Jake: Yeah.
Andrew: Wow. All right. At what point did you realize that this is a business? This is going to be my livelihood. This is going to be not just a startup, not just a flip it, but something that will stand for what I believe in.
Jake: I quit my job in 2002. That’s when I started to take a salary from the company. At that point, we were a web consultancy firm basically where we were building websites for clients. Some big ones too, like McDonald’s, Kohler, and like I said earlier, Seth Godin. From 2002 to 2004, our income was mostly coming in through our web agency type work. On the side, Threadless was still a creative project but also proof to our clients that we knew how to build an e-commerce website.
By the end of 2003, we were noticing that the income that was coming in through Threadless from t-shirt sales was starting to get larger than our agency income. In January of 2004, we fired all of our clients and we started focusing 100% on Threadless. What actually ended up happening is we ended up focusing 100% on our own projects, and we started launching all these other projects like NakedAndAngry.com, which is still up, IParkLikeAnIdiot.com. We had a music site called 15MegsOfFame.com. In 2004, Threadless was paying all of our bills. It was really a business at that point. In about 2007 or so, that’s when we were like, “We really need to focus 100% on Threadless.”
Andrew: Why didn’t those other sites take off?
Jake: I Park Like an Idiot was just a fun project where . . . we’re actually still selling bumper stickers through there that say “I Park Like an Idiot” on them. Where we were parking at our office, people would take up three spots or something with one car. We thought it would be fun to sell those bumper stickers. That was never intended to take off.
15 Megs of Fame was a music project where any independent band could put their music up to be listened to and scored. The idea was to try to get record deals for the top-scoring bands. We just ran into a wall contact wise. We never really met anybody in the industry that could help us make that happen. We didn’t have the time to devote to it with what was going on with Threadless. We also never really were in the mindset that we could hire people to do our work for us. It would really take a lot for us to ever hire anybody. We did everything ourselves until it became so painful that we couldn’t do it anymore. I think if we would have hired the right people to help us with 15 Megs of Fame, we could have turned it into something more.
Andrew: Who was “we” at the time?
Jake: Me and my partner Jacob, who was there from the beginning. He was in the company and it was maybe a couple other people. Jeffrey, I don’t think he was in the company quite in 2003. Craig Shimala, who still works for us today, he was there helping us ship orders. It was still a very small team at that time.
Andrew: What happened to Jacob? Is he still a part of the business?
Jake: He left in 2007.
Andrew: Okay. How’d you guys separate?
Jake: It just eventually happened. He was, I think, more into the technology side. He wanted to go on and do more technology type projects.
Andrew: I think you said, was that just after you guys did your first million in t-shirt sales or just before?
Jake: Let’s see. 2007, that would be after.
Andrew: Okay. And he still walked away from this thing?
Jake: Yeah.
Andrew: Wow. You guys still friends?
Jake: Not really.
Andrew: All right. Anything you can talk about there?
Jake: I’d rather not.
Andrew: All right. I’m not a good enough interviewer to know how to push to get . . . that’s the worst way to ask a question that would get you to open up. “Anything you want to talk about there?” “No, of course not, Andrew.” I’m going to get better and better as an interviewer, and I’ll figure out how to pry information like that out of people.
Jake: If you want to be that way.
Andrew: Yeah. I was just going to say, it probably isn’t really relevant.
Jake: I talk a little bit about it in the book.
Andrew: It’s not that it’s not relevant, but I don’t want to push people to say what they’re not comfortable with. I want to give them a forum to be open, otherwise we end up getting bad information. What about this? How did you get customers beyond the people who were on the forum?
Jake: It was all very word of mouth. We really didn’t start doing any advertising at all until the end of 2008. That’s when we started dabbling in it. Even today, we do very, very little advertising. It’s the same way that we got people to submit designs. It was just try to do awesome things. What’s really neat is when you have a community that is so involved in what you’re doing that they’re spending hours and hours of time a day. Whenever they’ll contribute that much time, they like to talk about it to all their friends as well. Even though their friends may not join in to that degree, they’ll still come check out the site and maybe make a purchase and even spread the word from there. Really, the designs are what really make Threadless grow. The designs on these t-shirts are incredible. They inspire people to buy them too. People want them.
Andrew: I know when I talked to Jeffrey about it, he said that when somebody submitted a design and had it up there for voting, there was an incentive for them to get their friends to come in and vote and register an account so they could vote and be a part of the community so they could vote. Do you guys do anything to encourage that?
Jake: Yeah. We have little tools in place in the emails that we send the artists after they submit encouraging them to spread the word about the design to help it get scored. It’s not super advanced. A lot of our website is still 10 years old. There are a lot more advanced things you could be doing on the web right now to push social interactions like that. Really, if something is cool enough to share, people know how to share it whether there’s a Twitter or Facebook button on the page or not. It’s very easy to copy and paste a link or just tell people to go check something out.
Andrew: It is, but you can do even more. You can enable them to upload their address book, show them their friends on Facebook, make it easy for them to connect with the people who they already know and send a message to them. Do you do any of that?
Jake: A little bit. What’s interesting is the reverse of that. You can have the most robust toolset in the world for sharing stuff, but if you don’t have an awesome thing that people actually want to share, they’re not going to use it. We focus more on the other side of it. If we’re going to prioritize our time as a company and what we’re working on, we’ll focus more on making sure that the stuff people are creating is awesome and that we have really awesome people contributing than we will in creating toolsets for artists to be able to use.
Andrew: Who do you look to for advice and help? Where do you learn how to become a better entrepreneur, better owner of Threadless?
Jake: I listen to our community and I listen to our team. I have started recently reading a lot of interesting books I see out there like the “Linchpin book” and Zappos’ book I read. Most recently I read Daniel Pink’s book “Drive.” I found that to be really inspiring. The main places I look are within our community and within our staff. Those are the people that I’m trying to please. It’s very easy, I think, to just look directly at that and notice people are discouraged here or people could see improvement there and attack it directly.
Andrew: I’ve heard people say that the reason Digg is kind of a waste of time instead of a place where you can find useful news is because they just listen to their community on everything. They give in to their community. They let their community take over. Sometimes that does create a mess. It does bring down the quality to the lowest common denominator. How do you avoid that at Threadless?
Jake: Actually, I feel like Digg has done the opposite. Their users are all pissed off right now because of the changes that have been made.
Andrew: That’s right now. Over time, their site has seemed to give in to their community a lot especially when you compare it to, say, a Hacker News which is very curated. I saw them kill a couple of stories that made it to the top of Techmeme because they were just gossip about the tech industry. Hacker News wants to have a well-curated but user-submitted and voted-on news list. Digg, on the other hand, tries to embrace the community to the other extreme. How do you keep the community from taking over and their demands from getting out of control? How do you know what to listen to?
Jake: Even in our scoring process and how we choose designs, I think the philosophy we use there is what we use throughout the site. To use that as an example, it’s like curated participation. We’re not printing only the top-scoring designs. We’re looking at maybe the top 200 scoring designs per week and from there narrowing it down to the designs that we’re going to print. We do curate the stuff that comes in to Threadless. For example, if we were doing Digg, if Digg worked the way Threadless works, all the stories that were submitted would be dug by people, but the front page would be curated by Threadless where we’re seeing, “Oh, the community thinks all these stories are really cool, but we’re only going to push these 10 because we think they have the most variety and the most interest.” If I’m going to choose 10 stories from these 200, these are the 10 we’re going to choose.
Andrew: Ah, I see. You won’t end up with a lot of Glenn Beck, Sarah Palin stories over and over the way they do on Digg. I don’t have a problem with Digg. It’s just a different kind of community. You can see that the quality of the community changes when it’s curated.
Jake: To use the Sarah Palin example, the equivalent on Threadless would be when we had a Star Wars parody design win, and all of a sudden we had all these Star Wars parody designs submitted that scored very well. If we were Digg, our whole homepage would be a bunch of Star Wars parody designs. We’re looking for a variety. So we curate it.
Andrew: I see. Why did you guys not go after funding at some point earlier? Why didn’t you decide to, especially when the money was out there and flowing, jump on that?
Jake: I really honestly didn’t even know it was an option. I don’t know. I was raised in the Midwest, and we never used credit cards for things. I really only knew how to spend money I had. The concept would have been very foreign and scary to me. Plus, I’m glad I didn’t. It just seems hard to give up that much control of your company and having to pay that back and stuff.
In 2006, we did sell a minority share of the company to Insight Venture Partners. It was around the time where we were growing to that million shirt number and we were having a lot of operational problems. We weren’t able to ship orders on time. The business was starting to suffer. So we were looking for more help on a business side, and we wanted somebody invested in the company to give us that help rather than hiring a contractor or something like that. It was a way for Jacob and I to take some money off the table and what we’ve built up to then.
Andrew: I see. I didn’t know that. What was going on then? Was this the time where you almost blew your Christmas orders or you actually did blow your Christmas orders? It was.
Jake: People ordered shirts for Christmas and they would arrive in January.
Andrew: Wow. What happened behind the scenes that caused that?
Jake: Just the sheer volume of orders. We were having no problem growing the community and our sales and stuff like that. We were having a problem managing our growth, keeping up, not just in fulfilling orders but our servers. Our site would just be down for a couple days. There were times when we would reach the maximum amount of dollars that we can process in our merchant account, so we just simply could not even take people’s money for the last three or four days of a month. All kinds of shipping problems with FedEx. We were just hitting some walls.
Andrew: I heard that in my interview with Jeffrey. I’m trying not to duplicate what Jeffrey and I talked about in this interview. He did take me through a large part of the story of Threadless. How did getting that investment help you overcome those problems in the future?
Jake: They had a program called Insight Onsite. They actually physically sent people out here and helped us get our shit together.
Andrew: Really? Like what? Can you give me an example of what they taught you or how you did things differently afterwards?
Jake: Primarily just how to run our warehouse, and then also from a tech side, how to properly scale our servers. We really ended up just working with a different host at that point that was able to better scale with us. They got us in contact with that. The warehouse just helped us out with different . . . it was mostly about hiring I think that we were having problems with. We needed to have a certain amount of part-time staff on hand. It was pretty basic stuff, but we just didn’t have any idea how to do it.
Andrew: I think I interviewed a company that was going to become the Threadless of greeting cards. There are other companies that aspire to be the Threadless of another industry. Have you guys ever considered doing that too? Have you ever tried?
Jake: Kind of. I think with Naked and Angry, that’s probably one of our other companies that is most similar to Threadless where designers could submit tiling patterns and then we would make products out of those. We made neckties and dishware and handbags, umbrellas, wallpaper, all kinds of stuff. I think going forward, we’re actually looking to do this. Looking back at the past 10 years and we’ve created this amazing art community and we’ve been making t-shirts with them for the past 10 years, but there’s so much more we could be doing with these 80,000 artists around the world. Going forward, we’re looking for new ways. We’re trying to do it mostly through partnerships rather than starting up separate businesses. If we were going to do Naked and Angry today, we would call it Threadless Patterns and it would exist within the Threadless network of artists. It would be area where people can submit patterns. Rather than us producing the products, we would work with the top umbrella company or the top [inaudible 53:02] doing dish sets.
Andrew: Let them produce it and let them ship it out to your customers. You just deal with the community.
Jake: Or their customers. We would look for a partner that can both manufacture the products and have good distribution to get them to the customers.
Andrew: I see.
Jake: What our strength is as a company is community-driven design. It can be applied to so much more than just t-shirts.
Andrew: How did you figure out that that was the strength of the company? I introduce you as a t-shirt company. A lot of other people see you as a t-shirt company. At some point you might have seen yourself the same way. How did you know this is what our core competency is, this is what we’re focusing on?
Jake: It’s always been something we knew. The thing that really makes me realize it is that the company lives and dies by the art community. As soon as the artists stop submitting to Threadless, Threadless has no more purpose. We won’t have products to sell again. That’s what we are. We’re an art community. Really in the past few years, we’ve done some partnerships. We’ve done some flip flops recently. The community was really excited about designing for flip flops. We’ve proven that we can do more . . .
Andrew: Are you wearing them now?
Jake: . . . than just t-shirts. I’m not because it’s snowing out here.
Andrew: Okay. Before we end, let me ask you something. I’m looking at this interview and I’m thinking back. I feel like I was trying to ask you questions about how . . . it’d be like asking the guy who created the mural behind you how he decided to draw that finger of Bugs Bunny pointing the way that it did. What am I trying to say? Saying that it’s hard for me to find out from artists what makes them special and what makes their product special. You don’t sit around thinking the way that some entrepreneurs do in business plan format. How do I get into your greatness? How do I get into the reason why someone like you has done what he’s done and is who he is?
Jake: I found that people that have a more strict business background, where maybe you have a business degree think about, my feeling is, how do I get my idea to fit within the rules of business? The way I think about things is how do I give my own creative twist to it? Maybe think how do I make this different than the way it’s supposed to be, rather than how do I get this to fit into the way it’s supposed to be?
Andrew: Yeah. Have you been interviewed by someone who’s done that in the past? Who’s done it well?
Jake: I actually spoke at Women’s Wear Daily last week. Kenneth Cole spoke on the same day. His story I found to be really inspiring on how he started his business. I had no idea about this. He had his shoes designed and he had the manufacturing set up for it. He just needed to write orders. It’s like a week before Fashion Week in New York City. His option as a women’s shoe designer at the time was to rent out a room in the Hilton, and then people would come to his room and he would try to sell them on his designs during Fashion Week. He was like, “I have a friend who owns a trucking company, so maybe he’ll let me use one of his semi trailers and I can park it on Madison Avenue right there during Fashion Week.” He calls up the city to try to get a permit to do that. They’re like, “You cannot park a trailer on the side of the street unless you’re a utility company or you’re filming a movie.”
The next day he actually changed the name of his company, and it’s still called this to this day, to Kenneth Cole Productions, Inc. He called up the city and is like, “I’m filming a feature-length film next week called ‘The Birth of a Shoe Company’ and I need a permit to park my trailer here.” He got the permit, and he sold 40,000 pairs of shoes in two days. He broke the rules to do that. He thought about it from a really creative perspective I think.
Andrew: How have you done that?
Jake: I think I more accidentally did it because I wasn’t trying to start a business in the first place.
Andrew: Do you have an example of how you came up with the creative answer? The world didn’t give in to it because it just didn’t understand it right away, and you found a way to not say, “I’m walking away from this creative idea because the world sucks,” but, “I know how I could squeeze it in within their rules and they’ll be happy with it.”
Jake: It’s the business model that differentiates us I think. It’s the whole crowd-sourcing thing where all of a sudden our customers are making our products. That’s the business model that didn’t really exist before Threadless, at least in any form that I knew. We’re used as the prime example of that. I guess that would be our differentiator.
Andrew: All right. You do think differently from the way that I think and the way that other entrepreneurs who I’ve interviewed think. I think much more sequentially. You think much more creatively. Even this book, I should have known. Ordinarily, if I did this interview I would have known that you wrote about Jacob in your book, and I would have known what to talk about and what not to or where to push or where not to. It’s because of the way that you laid out this book. You didn’t lay it out the way business books are usually laid out, like I said in the beginning. Otherwise I would have taken it home and I would have read it one page at a time. Even the book itself looks like a coffee table book that you dip in and out of. It’s not sequential. I don’t know how to jump into this. I would like to be able to create something like this, but I just can’t process it. I’ve got to find a way to do that because I feel like that’s the future. The future isn’t who’s going to be able to think sequentially and go from step A to step Z in a business plan but who’s going to be able to come up with a unique idea, own that creative idea, and then find a way to make it fit in the world the way you said Kenneth Cole did.
Jake: Whenever we’re looking at a situation . . . take a meeting for example. For me, you’re meeting with five people in the company. I don’t know how it works with you, but in our company, we have people throw weird ideas all the time. I like to always take the most ridiculous idea that comes out of a meeting and that’s the thing that I want to do. I think it creates a brand’s personality too. Just try to do weird things.
Andrew: Like what? You’re 10 years old, you’re no longer a startup. By now, you might have decided not to go crazy, not to take the outrageous ideas.
Jake: I was asked recently, “If you had a thousand dollars to start your company, what would you do with it if you already had the product to sell?” My first thought was we should go buy one of those semi-automatic t-shirt guns and go take it around and do funny stuff with it, record it, and post videos and stuff like that. I just don’t think that’s what most entrepreneurs would do with the only thousand dollars they have to start their company.
Andrew: I don’t think that if they had more than a thousand dollars and they were doing as well as you were would call one of their future companies Naked and Angry.
Jake: Yeah. Right? Threadless’ slogan is Nude No More. Naked and Angry used to be the slogan.
Andrew: Ah. Cool. I did an interview last week with Sir Ken Robinson where I asked him why should we care about creativity? Who gives a damn? We’re in business. We’re not painters. We’re not kindergarteners. I think I understood it in this interview. I can see through you, through your experiences, how creativity does help you shape the future.
Jake: I think there’s a place for both too. I don’t think there’s one way of doing things. Just because our business was successful with the creative twist doesn’t mean all businesses should work that way. It sure is fun doing it this way I think.
Andrew: It’s inspiring. The website of course is Threadless or Naked and Angry. Go check out Naked and Angry. The book is “Threadless.” Pick this book up. It’s beautiful but apparently it’s got a lot of substance to it too. Thank you, Jake. Good to meet you.
Jake: This was fun.
Andrew: Cool. Same here.
Jake: Nice to meet you.
Andrew: One more thing before you go. The t-shirt. I kept wanting to ask you but I said, “Stay focused, Andrew.” What does the t-shirt say?
Jake: It’s keys from a keyboard.
Andrew: Says, “I am. . .”
Jake: It says, “I am ALT of control.”
Andrew: Right on. I should have worn one of my Threadless shirts. Instead I got nothing.
Jake: It looks like your microphone’s on your shirt maybe. It’s a good future design. That should be the Mixergy official shirt, that microphone on the shirt with Mixergy below it.
Andrew: I like that. All right. Cool. Thanks, Jake.
Jake: Right on. Nice talking to you.
Andrew: Same here. Thank you all for watching. Bye.
This transcript brought to you by www.SpeechPad.com.
