20VC Why Your Board Are Right 50% of The Time, Biggest Lessons From Being Mentored By Reed Hastings & Raising $130m in Funding and The Balance Between Growth and Capital Efficiency with James Reinhart, Founder & CEO @ ThredUp

In this episode of 20 minutes VC, host Harry Stebbings interviews James Reinhardt, CEO and founder of ThredUp, an expansive online thrift and consignment store. Reinhardt discusses his journey from a graduate student with a closet full of unwanted clothes to leading a company that has raised over $130 million in VC funding, emphasizing the importance of leadership in inspiring and leveraging the talents of others to achieve collective success. He shares insights on managing board relationships, maintaining conviction while being open to change, and the balance between aggressive growth and capital efficiency. Reinhardt also reflects on advice from Netflix's Reed Hastings and the strategic pivot from children's to women's fashion that propelled ThredUp's growth. The conversation touches on the challenges of fundraising, investor dynamics, and the potential paths ahead for ThredUp, including international expansion and possibly going public.

• Harry Stebbings introduces the podcast "20 minutes VC and Founders Friday."
• James Reinhardt, the founder and CEO of ThredUp, is welcomed as the guest.
• ThredUp is highlighted as the world's largest online thrift store and consignment store.
• James' background includes positions as a Goldsmith Fellow in social enterprise at HBS and a Bill George fellow at the Centre for Public Leadership at the Kennedy School.
• Acknowledgements are given to Leah Busky at Fuel and Tim at Redpoint for their contributions to the show.
• The show's sponsors, Ring and Cooley, are introduced with descriptions of their products and services.

You are listening to the 20 minutes VC and founders Friday with me, Harry Stebbings, and I'd love to see you behind the scenes here on Instagram at H. Stebbings 90 96, where you can submit questions for the show and suggestions for future guests.

This quote is Harry Stebbings introducing the podcast and inviting listeners to engage with him on Instagram for show-related interactions.

Now, James is the founder and CEO at Thredup, the world's largest online thrift store and consignment store.

Harry Stebbings introduces James Reinhardt and his company ThredUp, emphasizing its status in the online thrift store market.

Before that, James co-founded Beacon Education Network, a charter management organisation serving low-income students on California's central Coast.

Harry Stebbings provides background information on James' previous work, highlighting his experience in social enterprise.

• James shares that the idea for ThredUp came from his own experience as a graduate student with clothes he couldn't sell.
• The concept was born out of the realization that many people have clothes they no longer wear and there should be a better way to sell them.
• As a child, James aspired to be an architect, reflecting his interest in building and the creative process.

Yeah, lifelong dream. The minute my mom bought me my first pair of used, you know, thredup got started because I was a poor graduate student and I had a closet full of clothes that I wasn't going to wear.

James humorously remarks on his childhood aspirations before detailing the practical circumstances that led to the creation of ThredUp.

I think I was always interested in building things and things, the creative process.

James reflects on his childhood desire to be an architect, which he connects to his inherent interest in building and creativity.

• James Reinhardt discusses his leadership philosophy, emphasizing the importance of inspiring others to do their best work.
• He believes in leveraging the talents of those around him to accomplish collective goals.
• James' methods of empowerment and inspiration have evolved with the growth of ThredUp, from leading by example to utilizing video, presentations, and written work.
• Scaling himself as CEO has been a challenge, requiring a willingness to learn new things and unlearn habits from running a smaller company.

I think my philosophy, though, is, ultimately, leadership is about inspiring other people to do their best work and to want to do their best work with you.

James Reinhardt explains his leadership philosophy, which centers on inspiration and enabling others to achieve their potential.

I think as a company grows, now we have several thousand people across the globe... I think how you communicate and inspire is different.

James discusses the changes in leadership style necessary to accommodate the growth of ThredUp and the increasing number of employees worldwide.

I think you have to constantly be in a position where you're willing to learn new things and forget the way you used to do them.

James emphasizes the need for adaptability and continuous learning as a CEO in order to effectively manage the scaling of the company.## Inspiration and Scalability

• James Reinhardt discusses the transition from inspiring his team in small groups to finding scalable ways to inspire a larger number of people.
• He emphasizes the importance of receiving candid feedback to improve his leadership approach.

"And now I have to figure out a much more pragmatic, scalable way to inspire the troops. And so that's a process. And I think I'm learning every day, and I'm humble enough to try and get people to give me really candid feedback about how to get better."

The quote highlights the challenge of scaling personal leadership style to a larger organization and the ongoing process of learning and adapting to this change.

• James Reinhardt balances passion for the company's strategy with the ability to change his mind based on new data or changes in the world.
• Reinhardt believes in having conviction about new strategies and being able to passionately advocate for them.
• He criticizes leaders who sit on the fence and emphasizes the importance of decisiveness and adaptability.

"I think you need to be passionate and have incredible conviction about the strategy that you're pursuing and why it's the right approach and get everybody really excited about that."

This quote underscores the importance of having passion and conviction in the strategy being pursued to inspire and motivate the team.

"I don't think it's wrong to change your mind, but I think it's wrong to not have conviction about the new approach."

Reinhardt expresses that changing one's mind is acceptable as long as there is strong conviction behind the new direction.

• Reinhardt discusses pivoting the company based on data and customer feedback, while still pursuing the original vision of reinventing the secondhand market.
• He emphasizes the need for organizational flexibility and responsiveness to customer needs.

"Pivots are a change in direction or change in activities in pursuit of the same strategy. And so my vision was to reinvent the secondhand market and make it better for buyers and sellers in 2010."

The quote explains that pivots are not a change in vision but rather a change in tactics to achieve the same end goal.

"Building a peer to peer business was not the right way, and that the data and the qualitative feedback from customers suggested that there was a better way."

Reinhardt acknowledges the importance of data and customer feedback in realizing that a change in business approach was necessary.

• Reinhardt values the direct and blunt advice he receives from Reed Hastings, focusing on key career and management insights.
• He appreciates the clarity and directness in Hastings' guidance, which helps him in decision-making regarding his management team.

"Reed and I have known each other a long time. I think he's a super busy guy. So when I have my moments to spend time with him, I really focus on."

This quote shows the importance of utilizing the limited time with a busy mentor effectively.

"If you have great people working for you, you can manage a lot of them. If you don't have great people working for you, you have too many direct reports."

Reinhardt relays advice from Hastings that the number of direct reports is manageable if they are competent, implying the significance of building a strong team.

• Reinhardt comments on the venture capital industry's focus on familiar themes and the challenge for founders in less understood markets like women's clothing.
• He suggests that founders should seek out investors who are naturally inclined or adaptable to understanding their industry.

"A lot of them don't have experience with women's clothing. Surprise. And so, no, I don't think there's anything wrong with that."

Reinhardt acknowledges the lack of experience among VCs in certain industries and does not see it as a fault.

"I think it's the way the ecosystem is supposed to work."

The quote reflects Reinhardt's view that the VC ecosystem functions by matching founders with investors who have the right interest and adaptability for their industry.

• Reinhardt describes the evolution of fundraising from early stages, with a focus on vision and team, to later stages, which are more data-intensive.
• He notes the variability in the difficulty of fundraising rounds and the misconception that it gets easier with each round.

"In the early days you're looking for people who can suspend disbelief and see the future and are willing to be on that journey with you."

The quote describes the type of investors that are sought after in the early stages of a startup—those who are visionary and willing to take risks.

"Every round has a different level of difficulty. And it's been surprising to have my early rounds be challenging, then the rounds be easier to do than some of these later rounds being challenging."

Reinhardt shares his experience that fundraising challenges can vary with each round, contrary to the expectation that it becomes easier over time.## Fundraising Dynamics

• As companies progress through fundraising stages, investors become more selective, participating in fewer deals.
• Entrepreneurs may underestimate the selectivity of investors in later fundraising stages.

every time you're asking folks to pick you over just the two or three other investments they might do in their year.

This quote emphasizes the competitive nature of fundraising, highlighting that investors may only choose a few companies to invest in each year.

• Market sentiment suggests capital efficiency is increasingly valued over aggressive macro growth during growth year rounds.
• The importance of capital efficiency can vary depending on the business and market category.
• In winner-take-all markets, aggressive investment may still be prevalent.
• The presence of large billion-dollar funds indicates a continued willingness to invest heavily in certain companies.

I think it depends honestly on the business and the category that they're in.

James Reinhardt suggests that the emphasis on capital efficiency versus aggressive growth depends on the specific market dynamics and business models.

• A CEO should manage a board with transparency and efficiency while maintaining the ability to make autonomous decisions.
• The board's role is to trust the CEO's decision-making and ability to pivot when necessary, not to drive consensus for every decision.
• A CEO should keep the board informed and ensure they are not surprised by decisions or insights.
• Entrepreneurs should feel empowered by their board, not unsettled or overly dependent on board consensus.

the board hires you, right? They're your boss, and they hire you to build the company they invested in you to build.

James Reinhardt explains that while the board is technically the CEO's boss, their role is to support the CEO in building the company, implying a level of trust in the CEO's decisions.

• A CEO must discern which board feedback is insightful and which lacks necessary context.
• Board members provide valuable market intelligence and perspectives but may not have the granular understanding that comes from day-to-day operations.
• Board meetings often prompt CEOs to reevaluate long-held beliefs and assumptions.
• Balancing board insights with intimate company knowledge is a challenge for CEOs.

Well, it might be 54%, I'm not sure. But look, I think the board, they get incredible market intelligence.

James Reinhardt acknowledges the value of the board's market intelligence while also noting the limitations of their involvement in daily company operations.

• CEOs must trust their instincts and leverage their deep understanding of the business when making decisions.
• It's crucial for CEOs to communicate their decisions clearly to the board, backed by data and research.
• A successful track record of decision-making can build trust with the board, allowing for more autonomy in contentious decisions.
• CEOs need to balance being contrarian with being correct to maintain board confidence.

And so I think entrepreneurs who start to feel like the opposite, that they're constantly just hoping that the board agrees with them. I think it's a very hard way to run a company because it's very unsettling.

James Reinhardt expresses the importance of CEO confidence in decision-making and the potential difficulties when a CEO is overly reliant on board approval.## Capital Deployment and Growth

• There's an inherent tension between pursuing aggressive growth and maintaining runway and capital efficiency.
• James Reinhardt believes capital should be deployed to generate outsized long-term growth.
• Investments should either grow the market opportunity or the company's ability to attack that market opportunity.
• Capital should be used to drive long-term enterprise value, not for short-term comforts or excess staff.
• Companies get into trouble when capital deployment doesn't contribute to growing enterprise value.

"The way that I think about it is, is the capital that you're burning or deploying, ultimately generating outsized long term growth."

This quote emphasizes the importance of ensuring that the use of capital is aligned with the goal of achieving significant growth over a long period.

"I can tell you that the same decision to have a really fancy office or hire the 9th person on the finance team when we probably only need six, those decisions actually don't create 710 year enterprise value."

James Reinhardt contrasts decisions that contribute to long-term value with those that do not, such as unnecessary office luxuries or superfluous staffing.

• James Reinhardt values evidence-based decision-making over opinion-based.
• He often uses the phrase "if all we have are opinions, let's go with mine" to emphasize the importance of bringing facts to a debate.
• He learned the value of credibility and trust at a young age and applies it to his professional life.

"Well, I mean, the one that I used this morning already was, if all we have are opinions, let's go with mine."

This quote reflects Reinhardt's preference for fact-based decisions and his approach to leadership when faced with subjective opinions.

• James Reinhardt's approach to difficult situations involves maintaining perspective, as things are never as extreme as they may seem.
• His coping mechanism has evolved from having a glass of wine to a more mature approach of stepping back and putting things in context.
• Helping the team to lower the temperature and making a decision after careful consideration is his current strategy.

"I generally, these days, I really take things in stride because things are never as good as they seem, and they're never as bad as they seem."

This quote highlights Reinhardt's philosophy of balance and perspective when dealing with challenges.

• James Reinhardt is open-minded about the future pathways for Thredup, whether it involves going public or staying private.
• The focus is on building the business in various dimensions: domestically, internationally, offline, online, and exploring new growth vectors.
• Success for Thredup is contingent on having investors who trust in the company's long-term vision.

"I think what we will need is we will continue to need investors that trust us to build a huge company over the long term."

This quote underscores the importance of investor trust in Thredup's long-term growth strategy and Reinhardt's openness to different future scenarios for the company.

• James Reinhardt would like to see more women in Silicon Valley and VC, and a community that reflects greater diversity.
• There is a desire for the tech and venture capital ecosystem to be more representative of the broader American demographic.

"Well, I'd certainly like there to be more women, and I would like it to be generally more reflective of the american community that's more diverse."

Reinhardt expresses a wish for increased diversity and inclusivity within the tech and venture capital sectors.

• James Reinhardt recommends the book "Sapiens" for its profound insights into human history and society.

"Oh, if you haven't read sapiens, I'm reading it right now. Sapiens is amazing. So read sapiens."

This quote reveals Reinhardt's current reading choice and his endorsement of the book for others to read.

• An incident in third grade taught James Reinhardt the importance of credibility and the impact of one's actions on trust.

"And I'll never forget my principal in elementary school coming up to me... telling me that I'd spend my whole life earning credibility, earning people's trust. And if I made one bad decision, I could throw all that away."

This quote provides insight into a pivotal moment that shaped Reinhardt's understanding of the value of trust and the long-term consequences of decisions.