OfferUp could be the most valuable Seattle startup you’ve never heard about.
This little-known consumer Internet startup — which connects buyers and sellers looking to unload or pick-up everything from toaster ovens to tennis shoes to Toyota Camrys — has flown almost completely under the radar over the past four years. Intentionally stealthy, CEO Nick Huzar has politely rebuffed GeekWire’s efforts to learn more, including requests to comment for this story.
“Still not quite ready to tell the OfferUp story,” Huzar emailed GeekWire in March following one of our many attempts to get more information about the company.
But this much we do know.
The Craigslist challenger has raised gobs of money, including cash from high-profile Silicon Valley venture capital firm Andreessen Horowitz. And it has done so at a whopping valuation that has turned heads in the investment community.
Venture capital database PitchBook says the company has been working on a $73 million series C funding round since March that values OfferUp just north of $800 million.
Others say it is much higher. The rumor among the venture capital community is that OfferUp’s valuation has topped $1 billion — making the online marketplace one of the few (perhaps only) so-called “unicorn” companies in Seattle.
And, like a unicorn, OfferUp appears to have magically appeared on the Seattle startup landscape, surprising some long-time industry watchers.
As of earlier this year, OfferUp had raised about $20 million total. Corporate records obtained by GeekWire show that the company is looking to issue another 1.48 million shares at $49.79 a piece, a sale that would bring in another $73.5 million. OfferUp has the authority to issue a total of 27.6 million shares.
In March, Re/code reported that OfferUp was looking to raise between $60 million and $100 million at a valuation that topped $500 million.
The numbers weren’t always so big. OfferUp raised $385,000 as its first outside funding in 2012, back when it was going by the name of iDeal Technologies and DitchThis.
“We were in the Sahara for a year with no sign of water,” Huzar said of the startup’s early days, at a rare public appearance this past spring, at a StartupGrind event.
While many have never heard of OfferUp, nearly everywhere you turn in Seattle’s angel investment circles there’s a consistent buzz about the company. At cocktail parties and tech gatherings, investors talk in utter amazement about OfferUp and its high-priced valuation. Prominent venture capitalists who didn’t get into the deal privately flog themselves for possibly missing what many think could be the next Zillow or Zulily.
Others think the company could be wildly overvalued, the sign of a possible bubble.
Making things more intriguing is OfferUp’s avoidance of the tech press.
“If you know and are confident in your position, why go out and do it?” Huzar said of his media strategy at the StartupGrind event this spring. “I think you should do PR for a reason.”
While the 45-person company has amassed millions of users, it still considers itself in “stealth mode,” at least from a public relations perspective. It has never publicly announced a single funding round, or for that matter issued any sort of formal press release. There’s no press section on the OfferUp site.
There is a historical timeline on the Web site, which notes milestones such as securing new office space or launching a new Android app. But most of 2015 is a blank slate on the timeline, with the words: “What’s next? Stay tuned…”
Questions about revenue
Almost every Seattle venture capitalist met with OfferUp founder Huzar when he was getting started, some three or four times. Many said they loved Huzar, his excitement, passion and drive. But the idea of taking down Craigslist with a mobile app seemed too crazy.
And, of course, there’s that bit about making money.
Craigslist offers a free service, and so does OfferUp. That makes building a profitable business pretty tough for a startup that hasn’t scaled yet.
OfferUp doesn’t take any sort of cut on the exchanges it facilitates, the app doesn’t include any advertisements and — as far as we can tell — there’s no sponsored posts or anything that indicates the company has steady revenue at this point.
Even if OfferUp is able to claw its way to mainstream adoption, it’s still going to have to answer those difficult questions about how to turn those users into profits.
That didn’t seem to hold up Marc Andreessen, the legendary entrepreneur whose firm is a backer of OfferUp.
According to an article in the New Yorker, Andreessen saw big potential in a company that could rock industry stalwarts: “What if all this selling online—eBay and Craigslist—goes to mobile? How big could it be?”
Bill Bryant, a partner at Draper Fisher Jurvetson, whose portfolio includes rising stars in Seattle’s tech scene like Redfin and Chef, still remembers the day that he sat down with Huzar.
In a crowded and difficult market with an entrenched heavyweight in Craigslist, Bryant decided to pass.
“I didn’t have the vision at the time to say: ‘OK, with your 200 users here in a couple of Seattle neighborhoods you will eventually get to this market leading position of millions of users across the U.S.,’” Bryant said. “I just didn’t know how that could happen.”
Today, Bryant is just one of many investors who would put OfferUp at the top of his list — one many VCs don’t like to talk about — of missed opportunities.
Those early strikeouts with Seattle investors did not deter Huzar, who kept building and building and building.
And doing so quietly, outside the echo chamber of Silicon Valley and largely outside the view of the tech press.
One early investor who was lucky enough to take a flyer on OfferUp declined to be interviewed for this story, saying only that the company is being quiet “for a reason.”
This stealth mode tactic is not unusual, and it was perhaps most famously executed by Seattle e-commerce powerhouse Zulily, which shocked the investment public when it finally filed to go public. By that time, it had annual revenue of $331 million and more than two million customers.
At the 2014 GeekWire Summit, Zulily co-founder Mark Vadon finally disclosed why he kept thing so low profile in the early years.
“When you are drilling and you hit an oil patch, the last thing you want is people coming and drilling right next to you,” said Vadon, adding at the time that it is important to put press off as long as you can.
Has Huzar found the next great tech oil patch? A possible Craigslist killer?
It’s probably still too early to say. But the entrepreneur has won respect and praise — and to some degree, wonder — from Seattle-area investors. And it also appears that he’d taken a key play out of the Zulily playbook.
“He [Huzar] did it under the radar. Nobody I know locally in the investor community was talking about OfferUp. He just did it quietly and appears to have some scale,” said Bryant. “It was a shock, but a pleasant shock.”
There was one exception to Huzar’s low-profile approach. In June, the entrepreneur spoke at the Startup Grind event in Seattle. It was a rare appearance, and it offered a few clues into his business approach and PR tactics.
Huzar — who attended Washington State University and worked as a product manager at T-Mobile from 2002 to 2005 — said he’s happy to keep his mouth shut and take notes while his competitors give away valuable clues in the media.
“I made this mistake at my last company, coming out like, ‘Hey, look at us.’ And then it didn’t mean anything,” Huzar said, referencing his now-defunct social media startup Konnects. “I think too often people go out there and really shout up on a mountain what they’re doing.”
“For us, I’m really focused on our users and giving people a great experience,” he added. “Getting an article in TechCrunch doesn’t help me at all. So what’s the point of doing it?”
An ‘improbable’ superstar in the making
OfferUp is basically Craigslist for mobile devices.
It’s designed to make selling unused stuff — like the old tennis rackets or lawn chairs laying around your house — dead simple.
In researching this story for GeekWire, I spent some time testing OfferUp. While the buying experience was on par with other sites, it was when I listed an item for sale that I recognized a difference.
Creating a listing on my smartphone was free and took about five minutes.
I opened the app, took a photo of a TV wall mount I bought last year (which was still in the box). I typed a one sentence description and listed it for $10.
Six would-be buyers messaged me within a couple of weeks. The messages arrived in the app like text messages, so there was no back-and-forth with Craigslist-style email aliases.
I ended up meeting one buyer and making the exchange outside of my apartment.
Curious, I asked this OfferUp customer why he used the service. A frequent shopper on the site who buys everything from small trinkets to a washing machine, he said he liked the ease-of-use of the app, but he still uses Craigslist, too.
Can anyone unseat Craigslist?
OfferUp is not alone trying to unseat Craigslist — which was started in 1995 by founder Craig Newmark, and ultimately wiped out much of the classified revenue base of the newspaper industry. To this day, Craigslist has stuck to its basic design and no-frills approach, creating a possible opening for mobile-centric competitors.
Carl Mercier, CEO of Toronto-based VarageSale, is one of those companies trying to take on Craigslist (and OfferUp for that matter). According to Mercier, it’s going to take more than just a mobile app to topple the 800-pound gorilla that Craigslist has become.
Craigslist has been so dominant for so long, that it’s the first thing people turn to — unless you can show them something significantly different, he said.
VarageSale, which is backed by Sequoia Capital, has tried to separate itself by building deeper communities of people who all live close to each other, so you don’t feel like you’re selling to strangers.
“It’s by reinventing how things are done, not incremental improvements,” said Mercier, who declined to comment directly about OfferUp’s approach.
Mercier added that it’s a challenging space, with what seems like a new competitor jumping in every week.
Bryant said he was intimidated by how large OfferUp’s user base would have to become before it would reach critical mass. It had to be unusually dense, he said, since most people aren’t going to drive across town to pick up a $10 TV mount.
“What he was outlining at the time seemed really improbable,” Bryant said. “At the time, he had literally hundreds of users. In order for this business to scale, he would have to conquer every significant urban center, every neighborhood.”
Huzar talked candidly about the struggle to selling his idea to investors at the Startup Grind event, saying he felt “pretty tapped out” after so many rejections.
“I was being really aggressive and networking and trying to meet the right people to bring on this journey, and I went down to the valley 15 times in 12 months,” he said. “That was tough.”
He added that fourteen of those were complete failures, the other led to his series A funding round. In 2013, records show OfferUp raised about $5 million in series A and then another $15 million in a series B in 2014.
The company’s investors now include Silicon Valley mega firm Andreessen Horowitz. It’s also been backed by The Gramercy Fund, which invested in other well known Seattle startups like Porch and Buuteeq. Locally, the Alliance of Angels also got onboard early.
“Raising capital and realizing, as some of you may find here in Seattle, when you have big, crazy consumer ideas, this is not the place to feed. Trust me,” Huzar said. “That was again where I was saying, ‘Man, if I can’t raise money, we’re lights out here.’ And I just started getting on a plane.”
Editor’s note: OfferUp is a GeekWire annual sponsor.