Whatnot founder: This is the future of e-commerce

The episode opens with Grant Lafontaine, founder of Whatnot, discussing the company’s roughly $20 billion valuation. Shaan points out that this is larger than the combined market caps of Wendy’s, Under Armour, Hertz, Harley-Davidson, and American Airlines. Grant says the number feels “absolutely nuts,” but he deliberately tries not to focus on it because doing so could make him congratulate himself too early; Whatnot began only six and a half years earlier and still has substantial work ahead. Shaan recalls that he once called Grant to say he wanted to invest, but Grant said the round was essentially full. Shaan failed to follow up and jokes that the mistake cost him dearly. Grant says he remembers the exchange and had written it down. They then explain Whatnot: it began with collectibles such as Funko Pops and trading-card pack openings, but has expanded into nearly anything sold through live video. Shaan recounts buying a $34 crab from a fisherman on the app. The seller, whose username referenced loving crabs, had sold about 3,300 crabs and appeared to have made more than $100,000. Grant says seafood is one of his favorite categories and regularly eats it, while Sam remains baffled by the idea of receiving “internet crab” in the mail.

The hosts ask how Grant and co-founder Logan managed to get their first sellers, since marketplaces face the classic chicken-and-egg problem of needing buyers to attract sellers and sellers to attract buyers. Grant says marketplaces are among the most durable but difficult businesses, and that he and Logan chose one partly because their careers had been spent building consumer internet products and two-sided platforms. A B2B company seemed more painful because it was outside their experience. Grant tells two overlapping origin stories. The first begins in Tokyo, where he and Logan were drinking over the holidays, frustrated with their jobs, and decided to start a marketplace. They bought roughly 50 domains and initially considered building a better, full-service Craigslist. Grant soon discovered that delivery economics made little sense: used goods were often worth too little to support the cost of improving the experience and transporting them. The founders had around $100,000 to $200,000 in the bank, excluding Grant’s 401(k), and agreed that he would fund the company up to that amount before raising money. Their first engineer was in Brazil, and a designer accepted equity. Grant then looked through eBay categories using historical sales data. Collectibles were growing rapidly, and Funko Pops were selling in greater volume than comic books. He and Logan also visited Los Angeles comic shops, which were packed with Funko inventory. They believed the category had demand but lacked a modern social experience for discovery and conversation. Grant emphasizes that Whatnot was user-driven rather than vision-driven: the team was willing to change the idea whenever users showed that something was not working.

To solve the marketplace problem, Whatnot initially became the seller. Grant says the company authenticated inventory itself, rather than waiting for outside sellers to appear. Because it could not own tens of thousands of Funko Pops, the team built a pricing algorithm by scraping sites that listed Funko products. It estimated a product’s price from its previous sales and its liquidity; if an item had not sold often enough, Whatnot could not reliably acquire it at a sensible price. Grant also had a team in Brazil help find and purchase the products after customers ordered them. The company recruited buyers through Funko Pop influencers on YouTube and through a viral giveaway. Each week, Whatnot offered an expensive “Grail” or “Chase,” such as a $500 or $1,000 collectible. To enter, users had to share referral links or codes on Twitter, Instagram, Reddit, Facebook groups, and elsewhere. Each additional referral created another raffle entry, so people were incentivized to keep distributing the giveaway. Grant calls this the kind of “gritty internet entrepreneurship” that founders may not want to advertise years later, but says early companies cannot simply copy the obvious path of buying paid advertising. The first giveaway was poor: a $500 item generated only 104 entries, perhaps from 30 or 40 accounts, and no purchases. Grant was spending from his own declining bank balance, so the failure was painful. Instead of abandoning the tactic immediately, the team used the first group of entrants for later notifications. The next giveaway produced roughly 250 entries, suggesting that the loop might work. Whatnot launched its app in December 2019, opened to its first outside seller near the end of February 2020, and cross-listed that seller’s inventory on other marketplaces to give them enough demand to stay.

Grant says Whatnot’s first month was extremely small. In December 2019, the company completed about 30 sales, and the first two weeks produced only one sale each. A Funko influencer partnership generated the later sales, although the team also made pricing mistakes: buyers found underpriced items, including an example where a $500 Funko was offered for $150. Grant describes those buyers as “bounty hunters.” The major inflection came when Whatnot launched its first live-auction product in July 2020. The founders had entered Y Combinator in January, raised roughly $250,000 from YC and people in their network, and grown the team to about six and a half people before the seed round. In March 2020, total transaction volume was only around $20,000–$25,000. By September, after live auctions began driving more than 100% month-over-month growth, monthly sales had reached roughly $250,000–$300,000. Whatnot’s take rate was about 10%. The company ended 2020 with $2.3 million in total sales and approximately 17 or 18 employees. The following year ended at about $163 million in sales with around 100 employees, and the year after that reached approximately $1 billion. Grant attributes the acceleration to a live experience that buyers found genuinely fun and that could transform sellers’ businesses. During COVID, for example, a comic-shop owner whose physical customers disappeared could find more buyers on Whatnot than within a local radius. Grant says the team’s other major unlock was learning how to launch multiple categories quickly; supply and user engagement could cross-pollinate across collectibles, fashion, food, and other categories.

Grant argues that investors initially dismissed Whatnot because “Funko Pops” sounded like a small market. He says the mistake is assuming great companies must begin in enormous markets. A four-person startup cannot compete effectively in a mass market, but it can create an exceptional experience for a narrow group and then expand. He cites eBay as an example: the real first item was reportedly a broken laser pointer sold to a broken-laser-pointer collector, while the more polished Pez-dispenser origin story was used for public relations. The hosts also compare this pattern with PayPal, which began as a tool for eBay sellers rather than Elon Musk’s broader vision of an online financial institution. Grant says the popular “visionary founder” story often obscures the actual work. Stories can persuade people to follow a company, but they are not necessarily evidence of what caused success. In Whatnot’s case, the customer was the priority: if users did not want the product, the founders were prepared to change it. Grant says the important question is not whether a founding idea sounds grand, but whether the team can build something users love and respond to what happens. He credits Y Combinator with seeing potential when other investors disliked a Funko marketplace. Grant and Logan had relevant backgrounds—Logan had run engineering at resale marketplaces, while Grant had worked at Facebook and YouTube and had previously founded a company—but they also built and launched a product in about a week so the YC interview could focus on something real. Grant says they were good at execution and consistently did what they said they would do. YC later supported the company again, including when larger investors were still passing.

As Whatnot grew to 1,400 employees, Grant says he did not need to transform into a stereotypically corporate executive. Earlier, he had made the mistake of assuming that impressive executives and people from famous companies would automatically know how to operate at Whatnot’s stage. He now looks for people who can explain specifically what they are doing and why. His central management lesson is to remain “maniacally focused” on the underlying problem and not let conventional pathways dictate the solution. Grant describes his strength as getting to the root of what is actually happening and how the team knows it. He gives a discovery-system example: Whatnot must balance comics, women’s fashion, fresh food, the UK, and many other areas in its recommendation feed. When a metric falls, a team might say an A/B test proves what happened. Grant presses them to examine individual sellers, changes in impressions by category and country, and the effects over a longer time horizon. A feed change can alter buyer behavior, which changes seller behavior and contaminates both sides of an A/B test. Looking at seller elasticity—how much a business grows or shrinks as viewership changes—can reveal that taking impressions from some sellers damages their businesses more than improved engagement helps others. He dislikes elaborate language that makes simple issues sound sophisticated. If someone uses a fancy term, he asks them to explain the idea as if he were in middle school. Sam compares this with Emmett Shear at Twitch, who used simple questions to expose when teams themselves had not reached the root of a decision. Grant says Whatnot’s culture is explicitly about getting to the right answer, and executives are told that their prior methods are not beyond challenge.

Grant says he learned to temper his directness as Whatnot grew. In the early Slack channels, someone might be told plainly, “You did bad work. This is bad. Let’s fix it.” That could work among a small group of founders, but with 1,400 employees, the same delivery might make someone cry or prevent them from doing their best work. He tries to remain authentic while adjusting to the context and imagining what treatment would help another person produce excellent work. He explains that one reason he left Facebook was a highly politicized product review. He had worked late to prepare a project that many senior executives had disagreed about, but the person running the review simply yelled at everyone. Grant says he now understands what the leader was trying to accomplish, but the approach could never motivate him to do better work. His principle is that being mean, combative, or nasty almost never produces the best work. Whatnot instead tries to create a culture where people can challenge ideas without treating the challenge as personal. On speed, Grant says, “If you think you’re moving fast, you’re probably not.” If a company has time to talk about how fast it is moving, it may not be moving fast enough. Looking forward, he predicts live commerce will eventually represent more than 30% of e-commerce. Today, the largest US and European live-commerce businesses account for only single-digit percentages, while China is around 40%. He expects major sellers to generate more than $1 billion annually and sees opportunities in wholesale marketplaces, inventory sourcing, and multi-channel networks that help sellers operate live-shopping businesses.