My guest this week is Marco Zappacosta. He is the co-founder and CEO of Thumbtack. Thumbtack is a local service marketplace that helps people like you and me find and hire skilled professionals. With Thumbtack, you can literally find a skilled professional for anything; I could even outsource the “honey-do” list from my wife.
My guest this week is Marco Zappacosta. He is the co-founder and CEO of Thumbtack. Thumbtack is a local service marketplace that helps people like you and me find and hire skilled professionals. With Thumbtack, you can literally find a skilled professional for anything; I could even outsource the “honey-do” list from my wife.
What is so especially amazing about Marco and is his story is that he is a self-taught entrepreneur. He founded Thumbtack as a startup right out of college. During our conversation, Marco shares that he and his partner founded their startup in the least conventional way possible. They didn’t start Thumbtack with a known problem but founded it and then brainstormed what problem they could solve.
Though it may have been unconventional, Thumbtack has grown to some incredible heights. We discuss this success throughout the episode as well as key tactics Marco used to navigate the 7 funding rounds that brought in over 400 million dollars from iconic venture firms. Tune in as we unpack the entrepreneurial journey of Marco Zappacosta.
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Marco Zappacosta, co-founder and CEO of Thumbtack
Marco Zappacosta: Hi, I'm Marco Zappacosta, cofounder and CEO of Thumbtack, and this is MY startup story.
James McKinney: Hello everyone and welcome to another episode of The Startup Story. We are just two weeks away from the end of 2020 and by this time you are probably just itching to jump into 2021 and make up for the progress we all lost due to the shutdown earlier this year. Well if that's you then make sure you tap into Grindology to help fuel your 2021. Grindology is an entrepreneurial subscription box that is created to help fuel your grind. Every shipment will include two bags of uniquely crafted coffee specifically roasted for you, the founder, the hustler, the entrepreneur, the maker and creator. Each shipment will include an exclusive mug that speaks to the unique nature that is you, the entrepreneur.
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My guest this week is Marco Zappacosta, the cofounder and CEO of Thumbtack. Thumbtack is a local service marketplace helping people like you and I find and hire skilled professionals. You can literally find a skilled professional for anything. In fact, I can outsource the entire honey-do list that my wife keeps for me. Hey, she doesn't care who does it as long as it gets done. What makes Marco's journey fascinating is that he is a self-taught entrepreneur who started Thumbtack right out of college based on the belief that he could help solve an age old problem: why is it so hard to hire a plumber or a piano teacher or any local professional? In fact, while discussing his entrepreneurial journey he shares how he and his cofounder started Thumbtack in the least conventional way possible. They started a business and then they brainstormed for a problem to solve. They didn't start the business for a known problem, they went reverse on that.
Well, while it might seem like an unconventional start, Thumbtack has grown to some incredible heights. In this episode we discuss the success of thumbtack as well as some key tactics Marco has employed to help navigate the seven funding routes that have brought in over $400 million from iconic venture capital firms like Sequoia Capital, Bailey Gifford, Capital G, Javelin Venture Partners, and Tiger Global Management, among others. You're going to love this episode so make sure you are listening in a place where you can take notes as we unpack the entrepreneurial journey of Marco Zappacosta.
Marco Zappacosta: Both my parents were and are entrepreneurs. They are also immigrants. They came here from Italy in 1976 thinking they'd stay for a few years, and 40 years later they're still here. What they did gave me not so much a specific inspiration in the sense of like oh I want to go be like my mom, or I want to go be like my dad, but it put it inside the realm of possible. That is something that I hear often people don't realize is true for them too. I grew up with it so they're the most impressive people I know and sort of my heroes, but they're also human beings who worked really hard and took risks, but were dogged about it. That gave me the point of view of saying oh that's possible, you can do that. You've got to work real hard and dedicate yourself to it, but it's possible. I feel really lucky that I had that, but I will admit that for a long time I didn't want or expect to be an entrepreneur. That was not my orientation whatsoever. I wanted to be a research scientist.
James McKinney: Oh, okay.
Marco Zappacosta: Yeah, I was really excited to study neuroscience in college and thought that was ultimately going to be my profession to be a researcher of some type. Then I spent a summer in a lab, a for real lab, and I was like, "Whoa, this is not for me." It is slow and methodical and narrow, and all the things that I didn't get excited about. It actually left me fairly disoriented because I was only 20 at the time so it's not like I had this long career, but you kind of told yourself this story, it becomes who you think you are and who you're going to be. Then very quickly, some short number of weeks in I'm like this is not me.
It kind of put me in this position where I didn't know what was going to be next and it kind of just let me explore curiosities and passions, and I promise this will connect back to entrepreneurship at some point, but the next thing I dug into and got sort of like nerdy about was pension reform.
James McKinney: Interesting.
Marco Zappacosta: Another very common 20 year old activity. But it was something that was kind of in the news. I dug into I had a policy class that I was super excited about. I ended up writing a couple op eds for my student newspaper about it, and it was that actually then connected me to my future cofounder because unbeknownst to me he was equally dorky about pension reform, arguably more than me because he actually ended up starting an advocacy group that was involved in the debate. I ended up joining them and taking a semester off from college to work on that.
It was that experience I think that really shifted my direction. We never called it a startup. We never called it entrepreneurship. But that's what it was. We had this vision for ourselves, we raised money from people that believed in us. We built a team, we organized, and we tried to make something happen. The practical impact of what we did was zero. The national debate did not notice us, but it is certain where I much more personally came to appreciate this is fun, building something out of nothing, chasing a dream with people I love working with, and just trying to make a go of it, this is what I want to be doing. So it's interesting and probably common where the thing your parents did you kind of write off and you say, "That's not what I'm going to do," but then you get a taste of it through some other day and you realize wow I get it, I get why you guys spent your careers doing this because it's just fun.
James McKinney: It's interesting too, the nuance of the immigrant story is always an interesting layer as well when it comes to entrepreneurship because a lot of times, and I've really never had a guest on the show where the immigrant narrative ran through Italy. We've had India and Asia, Canada, but I don't necessarily consider that one an immigrant story, but nonetheless the narrative from that first generation American born if you will is education, education, education. The parents just push, push, push education but one of the things that I find it about your story is you didn't want entrepreneurship. It wasn't anything you wanted. Was that because you saw the challenges of your parents or was that because they were pushing education and that just tended to be where that meant for you?
Marco Zappacosta: No, I think my parents were always really good about letting us kind of develop our own paths and point of view. They were very open about work with us and was often a topic of conversation at dinner, but they never sort of said, "here's what you should go do," or, "You should do it too." It's interesting because actually you go back to my parents story it was a friend of theirs in graduate school that was actually the impetus for creating something because he and his family had a very entrepreneurial uncle. Again, this propagation of seeing it and understanding that it's possible that's so critical.
So no, my parents never pushed it on me but I do think that once the pension reform effort wrapped up and we started to say hey, what should we do next, my parents being technologists and me growing up in Silicon Valley and sort of seeing that all firsthand made me think well if what we're trying to do is have a big impact then we should build a technology company because that is how we can reach the most people and leverage our own selves in the best way possible. That was probably the biggest effect. When it got to sort of doing our own thing I came back home.
James McKinney: So let's talk about this pension reform startup that you had. So going into this interest, I'm using air quotes, this interest in Pinterest… no, false, this interest in pension reform, how old were you at this time?
Marco Zappacosta: Like 20.
James McKinney: 20. How did this become a point of interest for you because that is not something that 20 year olds are often thinking of.
Marco Zappacosta: This was around the time where President Bush was proposing changes to social security, so it was in the air. It wasn't out of nowhere that I got curious about it, and the thing that kind of got me was seeing that the debate was being dominated by the AARP when in reality these were all retirees sort of by definition who were going to be fine. The real debate should have been had by the 20 year old and 30 year olds for whom the system and whatever reform was to come was really going to impact. There was like a mismatch between the impact that I saw that this could have and voices from people that I thought were ultimately going to be affected, and that's what motivated me which is to say we could change things for the better for a whole lot of people and there doesn't seem to be anybody else talking about this or making some noise, so why don't we do it? And that's what motivated me. It does then connect to the broader entrepreneurial story which is they're both ultimately efforts to make big changes to make a big impact. They're different ways of doing that certainly, but the sort of spirit and my own personal motivation was probably the same for both.
James McKinney: And how did you transition from that to what ultimately becomes Thumbtack? How does your journey connect from pension reform to that because, and I ask this question, it does require you to kind of hang your hat up on one area and move on to the next. Obviously you're not on the ground preaching about pension reform anymore, you have something else that you're pushing. So in that era how hard was it for you to transition and say, "I'm done with this. I'm not going to be able to do anything on this anymore. It's now time to focus on XYZ," whatever that was.
Marco Zappacosta: It was sort of two separate things. My mother in particular was not enthused about my taking a semester off of college to go pursue this. She has since acknowledged how valuable and formative it was, but at the time I think she took the very reasonable approach of saying, "Hey, you started college just finish. Once you're done you can do this and whatever else you get excited about." On one hand, personally I knew I needed to finish college for my parent's sake probably more than for anything else, but then there was also the practical reality that the debate basically went away with Hurricane Katrina and the passing of Chief Justice Rehnquist politically just it went away. It was no longer the top of the stack of what was being debated so it was gone, and has been gone ever since. So both for my own needs of being a good son and finishing school, and also like it stopped being an issue that was under consideration meant that there was a reason to sort of hang those cleats up, finish school, but then and very purposefully get together with the same two people to start something new.
James McKinney: So your cofounders with Thumbtack were your cofounders with this pension reform operation? Wow, interesting.
Marco Zappacosta: Two out of the three, yeah.
James McKinney: Fascinating. So how did you transition from that to Thumbtack?
Marco Zappacosta: I was the youngest and therefore I just graduated, and I had the least going on, and least to lose. So I was probably the one sort of most actively pushing it forward, and then when it became sort of I don't want to actually real but plausibly real is when I got two of those guys to move out to California and sort of begin in earnest. One of them was a technologist and we had built a bunch of software at the student advocacy group, so he was the first one to join me and we started building what ultimately became Thumbtack in 2008.
James McKinney: So 2008 you start building Thumbtack, and we're going to unpack what Thumbtack is when we get to that season a little bit later. But at the time in your life, what problem were you trying solve that became the origin for whatever bit of code you were about to write that would become Thumbtack?
Marco Zappacosta: This is us kind of doing it the way you're not supposed to do, which is decide to start a business and then go on for a problem. I do think that approach gets a bad rap. You may have heard of a couple little companies called Amazon or Microsoft who were started in the exact same way, so I think it's totally viable. But what is critical in my mind is that you look outside yourself and you say, and this is literally what we said to ourselves, is what is broken in the world that will inevitably fixed by technology? That was the prompt that we used for a weekly call for us to sort of debate and come up with ideas. I'll admit Thumbtack was the second idea.
James McKinney: What were some of the ideas that came out of those weekly calls?
Marco Zappacosta: So the first idea that we got really excited about, there were a bunch that were stupid and that I don't even remember, but the one that we got excited about was a financial accounts aggregator, a way for you to track your spending, your saving, your budget and if it sounds like Mint it was exactly like Mint. So this is summer now of 2007. Mint launches in I believe it's September or October of 2007. So it was this very interesting moment where on one hand we realized we'd been beat. They won Tech Crunch, whatever it was called. They raised a bunch of money, built a great product, and it's like they're doing it, we're not. That was sad.
The flip side though it was in some ways very confidence building because we were right. We were just six or 12 months too late. It's interesting because we talked to our friends and family about that idea and I remember my brother making a comment, "Look, I'm not going to give you my bank passwords. Why would some random stranger do it?" Totally fair, reasonable, but what we saw and what they built was no, you can actually get over that. If you build a good product, if you brand it, position it in a way that gives people confidence and trust, and if you ultimately deliver value for it, people will give you this stuff. So it was kind of a little bit of a feather in our cap and it let us sort of go back to the drawing boards a little bittersweet, but more motivated that we were going about it in a thoughtful way.
James McKinney: How far did you get in this brainstorming and ideating around this financial solution?
Marco Zappacosta: Decently far. We'd started to raise money for it. We'd been talking to Yodlee. Yodlee's the back end provider that Mint actually uses to suck in your bank information, et cetera. So we hadn't like started building anything but we were definitely on that path.
James McKinney: That's remarkable, absolutely remarkable. So second on that list was, now again we haven't shared what Thumbtack is for those that may not be aware, and also too we're talking 12 years from this whiteboard session, so what was solution number two that you guys wanted to solve?
Marco Zappacosta: The inspiration for the last 12 years of work was the simple question of why is it so hard to hire a plumber? When you think about that, the world even in 2008 had made it very easy for you to find the information you needed and buy all the products you wanted with just a few clicks. Why was it that for this purchase category it was still so hard? It wasn't because there weren't a bunch of great pros out there who wanted that business. It was really a failure of the market in how it was a struggle to bring these two sides together and the more we dug into that, the more we realized all the online solutions at that point were really just versions of offline products, be they classifieds or directories. There's really no innovation in sort of reimagining what this experience could be given the sort of visually native world we now operated in. so we looked at that, we're like there's no way that in five, 10, 20 years in the future this is still going to be broken. It's just too important of a problem, too widespread of a problem, and we look around we don't see anybody else really making a good go of it, and that was enough for us to jump in.
James McKinney: You know that's interesting, so we had Ben Chestnut the founder of Mailchimp on the show, and one of the things when I asked him what problem were you trying to solve with Mailchimp. And it wasn't called Mailchimp in the beginning and it's skipping me as to what it was called, but at the time when they were developing Mailchimp all the email service providers were local installs. There was nothing that was cloud based. And also too they were thousands of dollars for these installs. He was trying to make it accessible because of his entrepreneurial journey and his upbringing, where his mom was a kitchen-tician as he says, doing beauty in the local neighborhood kitchen. He wanted to make it easy for small businesses to leverage the power of email marketing, just because his passion point was small businesses. And what I hear from you is very similar, especially when you use the plumber illustration. The plumber is never going to spend money trying to build some technical suite in order to acquire customers, and so I find it interesting that this is what you were trying to do with Thumbtack. But again version one of Thumbtack, what was it and how was it different than what we see today?
Marco Zappacosta: Version one was all about trying to work hard for the customer on their behalf. So at the time it was very easy find names and numbers, Google and lots of places would give you. But then you were stuck picking up the phone and calling down a list, and asking the same question over and over and over to find the one, maybe two if you're lucky pros who were available and interested. We said that doesn't make much sense. Why are you calling to begin with, and B why are you asking all these people the same question? What if we take your request, we sort of understand what you're trying to get done, and we take those project details and we do the work of going out to pros and saying, "Hey, are you interested? Are you available? How much are you going to charge for this job?" and we became a request for quote engine, and the value in that was that for the customer the pros came to them. They didn't have to go out and search for them.
And on the flip side for pros what they got out of it was that instead of buying clicks or impressions or putting their ad up somewhere where there's sort of no feedback, we were literally delivering them exactly itemized customer projects and they could decide if they were interested or not. For both sides, it was really an enormous time saver and a huge step forward in the experience. Now today, where we've evolved even further is that we've actually gone and done all the work of getting the pros to answer all those questions ahead of time. When are you free, where do you travel, which jobs do you do, how much do you charge? And so we could move past the request for quote experience and really deliver a much more ecommerce like solution where you as a customer search, browse, and ultimately just contact pros directly and that matching is all happening in the background automatically. So now we save you even more time and deliver an experience that gets you to a decision point much faster and much better than anybody else.
James McKinney: If I'm oversimplifying this please correct me. The first version your focus was really just to I'm going to say homeowners for lack of a better word, but to find the customers that needed professional services, whatever that may be at the time. And for my listeners, Thumbtack is a platform where you can find professional services in all kinds of categories. We're not just talking plumbers as we are in this conversation, or even home remodels. You can find photographers, you can find caterers. You can find professional services for anything. Maybe anything is a bit broad, but that's how broad Thumbtack platform is. But in version one when you launched, part of the challenge for platforms and those who might be listening and are considering building some type of platform, there are two sides that you have to serve and bring together. I think a lot of times we get hung up on well how do we get both of them. So you just went after the customer side.
Marco Zappacosta: Well, no, I told you the sort of the story of the experience framed from a customer perspective. But when you actually go and unpack how we got there we did start with the pro side which is I think very common of marketplaces. What we called at the time trying to build some sort of marketing dependent value. Because we knew day one we didn't have a network to offer, we didn't have customers to offer these pros, so what could we deliver for them that was valuable before that? What we came up with was a way to create a great profile, a business profile about you and your business, and then get visibility for that. Google, on Craigslist and other places we became sort of a way to syndicate your profile around the web. That was valuable before we had any customers of our own. What it did was it gave us a huge number of pros who began to invest in us and tell us what they did, what was great about them and put up pictures and all the sort of profile content that ultimately was then used as the magnet to attract the customers.
James McKinney: Got it, interesting. Okay from a landscape perspective you mention Google a few times. Who else was on this scene that people were leveraging to try and find the plumber or the electrician or the gardener? What other solutions were out there at that time?
Marco Zappacosta: There was Craigslist. There was Yelp, Angie's List, Home Advisor which was and is our closest competitor. And then there was like a slew, and when I say slew like hundreds of startups trying to go at this in various ways, often more verticalized. We were more unique and alone in our approach of being very broad from very early, but hundreds of different companies trying to do this at the same time.
James McKinney: I wasn't sure where Yelp was on the scene at that point in time. I know they didn't start in the professional services world so I wasn't sure if they had kind of gotten to that area just yet.
Marco Zappacosta: Yeah, Yelp has always had this sort of mix where on one hand they're known for restaurants but most of their revenue actually comes from home services so they've always had a big role in this space.
James McKinney: Okay, interesting. So from that time until now, from a funding perspective and anyone can go to Crunch Space and find this out, I think you just last year closed your Series F I think I saw, so numerous rounds of funding. From a monetization standpoint, when you started Thumbtack was the objective venture capital and then delayed profitability for some period of time and just grow to scale? What was your thought process in the early days? Because now the reason I'm asking this question is I wonder if you were to start Thumbtack now would you try things differently?
Marco Zappacosta: We knew that this was something that not only needed venture capital but would really benefit from venture capital. The reason is it is something that requires a huge fixed cost investment up front to build the platform and to seed the marketplace, and to drive that sort of early growth funnel. But once you get to scale it can be enormously profitable. That's exactly what venture capital exists to fund, those sort of more moon shot bets that require a lot of work upfront, a lot of investment upfront, but if you get it right like in our case our goal was to end up serving every homeowner in the United States. It's just an absolutely enormous opportunity and incredibly levered platform. Yeah, we saw that from the beginning. Our goal was always to build a very big company really because we wanted to have a very big impact, and that's how you do it. That's how you serve millions of customers and support millions of small businesses is to get very big, and that's what we wanted to do.
James McKinney: When you think of your objective and your mission to serve and make a big impact, do you think more on the customer side, the homeowner side, or on the small business side?
Marco Zappacosta: I believe at our core we are really about empowering people. Where you see that most distinctly is on the small business side, the professional side. These are folks where this is their livelihood. This is how they put food on the table. So showing up and being able to help them, and to be able to help them in a way where it lets them focus on what they do best and get closer to realizing their own dreams and ambitions is incredibly rewarding. It feels great when you can help a pro who clearly is an incredibly talented professional but maybe has no online marketing experience or just doesn't like the part of the job where you've got to be thinking about your ads and where to spend money, and we get to just take that all off their plate and say you know what you just respond to customers and deliver a great customer experience, we'll get you in front of the, we'll do all that work. That's why pros appreciate us and stay on the platform and invest in us because we let them focus on the fun part and where they really deliver value and honestly, typically why they got into the job in the first place.
James McKinney: I love that answer because I love small businesses. I love the local entrepreneur and people when they think of entrepreneurship they tend to not think of the local mom and pop shops, the local professionals. Especially a lot of my listeners because they're building something technical or some type of ecommerce solution or product or whatever, they tend to think at a very large scale but it's the small business. It's the local operations that obviously unfortunately took a huge hit during COVID but except for home professional services. Home professional service went through the roof during COVID.
Marco Zappacosta: Not all of them but thankfully some, yes they did. I always tell our pros when I get to meet them and talk to them, you and I are the same. We're doing the same thing. We're building our companies, we're trying to achieve our dreams. We're struggling, we're fighting, we're strapping. It gives us an enormous amount of empathy for them and really motivates us to deliver a lot of value for them because we know what they're going through, and in many ways going through it with a lower margin for error than we are because they don't have venture capital behind them. They don't often have big teams or partners and what not. It's funny being in a room with a ton of pros where you realize it doesn't really matter the industry or the type of business they're building, entrepreneurs tend to be cut from a similar cloth. It's just like energizing to be together with a bunch of them.
James McKinney: Yep. Interestingly too in that same room what are some of their challenges and obstacles, and how similar are they across the entire room. The scale may be different but I feel like the challenges and obstacles and headaches are probably very similar.
Marco Zappacosta: They're always the same. Growth is number one. Finding your next customer. It's managing your operations and delivering a great customer experience. Different flavors at different times for different businesses, but that's kind of it for everybody and we're all just trying to achieve the highest possible level and deliver on that mission. So it is great to bring these people together. Our motivation is often to let them develop relationships and connects among themselves because they can help each other just as much as we can help them.
James McKinney: That's true of entrepreneurship everywhere. I'm all about networking. But let's talk about… let's get back to Thumbtack and some of the challenges and obstacles that you had to overcome in building it. Obviously in the technical space in that scene, 2008 to let's call it 2015 we'll say. Obviously 2008 was the greatest recession in US history. There were some challenges inside of starting a business inside of that. I don't know what the venture capital scene was like during that era as far as if it was easy access to capital, but what was your challenge in the first half of Thumbtack's life? Because it's a very different challenge now-
Marco Zappacosta: Oh totally.
James McKinney: … that you have hundreds, maybe a thousand employees. I don't know how many employees you have now.
Marco Zappacosta: Almost 1,000 yeah. As a point of historical context Thumbtack started August of 2008 and I believe it was four or five short weeks later Lehman Brothers goes under, and it's the like true apocalypse and I remember sitting there, just two of us sitting in my brother's living room, and we look at ourselves and we're like we're not going to get jobs doing anything else for a while. We might as well stay focused on this, but man we're going to have to be really lean and mean. We're going to really have to stretch the dollars we have because there was that famous Sequoia Capital deck "RIP Good times" and that was literally the message from the venture community. I think that was really in some ways lucky looking back because it gave us both the time and also the lack of FOMO to just stay focused and dogged about what we were trying to do. I worry and sort of feel for entrepreneurs today where there's so much noise and so much pressure and expectations of hitting it out of the part right away, and that's just not how it goes. We didn't have that because the world was kind of on ice for those first few years, and let us stay really lean, focus on our customers, talk to them a bunch, really try to build for them and serve them. I don't know how it would have gone had we started in a different time because it took us a while to sort of figure out how to put those pieces together.
James McKinney: What was the capital situation like during that era? Was it just absolutely dried up? I just can't remember hearing… obviously because of the startups we see today we know they started in that era, but I just can't remember too much about the accessibility of venture capital during that period.
Marco Zappacosta: It was there but the bar was much higher because there was fewer investors and there was also just fear in the air. Venture capital is abundant when everybody is being greedy and all they see is sort of things going up and to the right, but when it flips and people are fearful it dries up. We raised friends and family money 2009 and what I always tell people is the reason you start there is because these are the people that are betting on you. They're betting on you and they're betting on your vision and your dream. We had shown up, this was June of 2009 and we'd built V1, we started to drive usage. We obviously had not figure it all out but we were serious and we'd made progress. With that plus personal connections with these people, that was enough to raise our first bit of money.
Then we raised from professional angels a year later in the summer of 2010. That was probably our first real taste of like true Silicon Valley investors and those people were critical. This was before angel investing was I think what it is today, and these are folks who had success themselves and what they brought was obviously money but much more than that. They brought experience. They brought connects and they brought really support. That was invaluable to us. We raised from a bunch of great angels in 2010 and that's really sort of teed us up to then go raise venture money in the future.
James McKinney: Let's do a compare and contrast between your first five and your last five. We're kind of in that 10 year sweet spot for Thumbtack. When you think of your first five years, what were the greatest challenges you were trying to solve and what are they in the last five years?
Marco Zappacosta: So I spent a lot of time convincing people in the first five years, whether it was investors or prospective employees, that there was a "there" there. You've got to remember this was before Uber was Uber and Airbnb was a Airbnb. Honestly, people did not believe in local as a category. They did not believe that technology would be able to make inroads into the local commerce that was in the real world. That was something that I struggled with and it made it a real challenge to raise our first bit of venture money. A lot of people had lost money on the sort of web 1.0 versions of these products.
It extended to some pros too. I remember some conversations with pros who literally told me, "You know what, this internet thing it's not for me. I'm going to keep doing things the way I've always done things." From my vantage point being whatever I was, 23 or 24, I knew they were wrong. I'm not going to convince a 40 or 50 year old small business owner that the world is changing if they don't already believe it. So we were early in some sense, sort of before this all happened and catalyzed and that made it hard because it was not obvious. Now the flip side of that is it let us build our foundation and plan our routes, get going, make a lot of progress before the rest of the world realized just how big of an opportunity this was. That was one big challenge. And then secondly the early challenges about finding product market fit and about inventing something new, and that is something that I've often described as searching for a light switch in a dark room. You're touching a lot of walls, you're bumping into stuff, you're turning around, you're getting frustrated. And then finally you just flip the switch and that zero to one, off to on process is hard and meandering. You don't get great feedback, you just get no, no, no, no, no. But it is critical because it was through that that we really came to understand our customers, our pros, what was needed between them, and what we could do and how we could leverage technology to solve that.
And so while the sort of first five years were really all about… more like first two or three years, were really all about finding that product market fit, then the focus was really on scale and growth, and you've got the kernel of something but you want it to grow into something really big. Those sort of one to 10 or one to 100 challenges are very different. That I think is sort of a high level summary of the difference. But interestingly enough we kind of went back to our roots over the last couple of years where we really rebuilt Thumbtack from the ground up. We realized that we need to push the experience even further forward to realize our ambitions, and we rebuilt the whole thing. So this stuff comes and goes. We've earned our stripes. It's taught us a lot. But through it all we've tried to have fun doing it. You've got to be motivated by the problem you're solving and the people you're working with because otherwise it can be tiring and a little bleak.
James McKinney: Yeah, no kidding, no kidding. One of the things you said when we talk about the challenges of the last five years is about scale. Scale does require a capital infusion. Again, I just mentioned earlier last year you closed your Series F, a lot of rounds of funding. You must be really good at fundraising but also too you've mentioned how you completely rebuilt the Thumbtack platform to really take the business to the next level to serve the pros and the homeowners if you will, the customers, at a new level really wrapping in a lot of customer experience on both sides. Again, capital intensive. So let me ask you, you must have some framework, some idea if you will, some formula to what a winning pitch looks like. For you, what does that look like? How do you view pitching for capital?
Marco Zappacosta: That's a good question and I don't know if I have a formula for you, but I'll walk you through my thought process. First thing that I think you've got to do is understand your audience. Specifically when you're raising money recognize that these investors who, at whatever stage they are, they are thinking of this as a bridge. A bridge from where you are to a future state where you will be enticing either to some other future investor, you'll be ready to go public. Wherever that destination is, you've got to understand what they're solving for, where they're trying to get this business because that then becomes a way marker for you to say is this story going to make clear to them that this business with their money is going to get there. So I think the first thing is just known your audience and understand what are they trying to accomplish, and ensure that your story gives you confidence in that. That's general.
More specifically I'd say is remember that this is a story. This is a narrative. That's how humans sort of absorb content and also get excited about things. There is obviously a ton of data that goes into it, and ultimately to get people over the line the spreadsheets have to convince them just as much as the story. But that narrative is critical for creating that connection, that spark, that excitement that without having that there's just no way you're going to make it over the line.
I think my goal was always, first and foremost, to ground them in that this problem was immense and that it was inevitably going to be solved because the world was going to do that, and that we were the company that was going to win in that race and here was why. Often you'll see pitches where it instantly starts getting into the product, or it instantly starts getting the service being offered when really where you've got to start and where you've got to ground is in the problem and the opportunity to get an investor to really appreciate how big that is and how ripe it is for disruption. I would always do a lot of work there and thankfully I could always say, "Hey, this probably happened in your life," and they'd tell me some story about some project that they couldn't find a pro for, and the disaster that it led to.
So I was operating with confidence because I knew that this was something that they all had. But then once you get them excited about the opportunity it's like why us. You've heard people talk about like what's our secret, what's your unique approach. With this what you have to do is give them confidence that you understand the market, you understand the dynamics, you understand what the other players are doing and that you then have an approach that is not just unique but is unique and right. You've got to unpack that for them. I think this is a job that founders need to be great at because it's not just pitching investors. That happens rarely. But you're kind of always selling whether it's somebody you're trying to recruit, a partner you're trying to sign up, a deal you're trying to get done, storytelling and communication and getting people excited I think is a core part of the job. I don't think there's one way of doing it. You meet a lot of different storytellers who do it in their own way, but you've got to be able to get people excited. That is just fundamental.
James McKinney: You know that storytelling element, it's obviously a lot of communication at a strategic level. As your organization has grown, as Thumbtack has become larger, more complex, how critical has communication been for you personally as a leader and how challenging has it been especially in the last eight months?
Marco Zappacosta: Oh man. So, so important. You basically at some point there's a shift where information spreads by osmosis and you can just sort of count on the right people hearing it because we're all kind of in the same room, we talk to each other all day every day. To a time where you then have to be much more explicit about communicating. The investment in internal communications becomes as critical as your investment in external communications, and in some ways more important because this is your primary audience, these are your partners, your employees. These are the people who have to both understand the strategy, feel heard and feel like they're participating in decision making, and ultimately be excited.
So it is something that when I talk to founders at similar scale and ask them what's been a big surprise over the last couple years, the most common answer is how important internal comms is, how much work it is, how much I need to dedicate myself to it because often we come to the job thinking very externally and I think a lot of CEOs and founders they're thinking about selling a new vendor, selling a new deal, hiring a new person, getting an investor. But over time you actually end up focusing that energy more and more internally, and it is more important than any other constituency that you're going to pitch.
James McKinney: How disruptive has the last eight months been specifically for you though, and the organization as a whole? You have a lot of employees. You have a big organization.
Marco Zappacosta: Yeah, we do. I mean look it's been a total rollercoaster. Taking you back to January or February we were on fire. Came out of the gate strong this year and were feeling great, and then late February we started to see the tide turn when COVID started to come stateside and municipalities started to shut things down. Then March and April were really ugly. We were just staring at the edge of a cliff. Ultimately had to let go of 35% of our staff-
James McKinney: Wow, wow.
Marco Zappacosta: … because we weren't sure how long it was going to last. The business at its made year was almost 60% smaller than what it was the year before, and we didn't know if that 60% reduction was going to last a week, two weeks, two months, two years, and we had to make an educated guess and ultimately be conservative. Here's where we ultimately turned out to be really wrong in the best of ways, where demand, once fear subsided, once you stopped being terrified of seeing other humans, you kind of went back to your life and in some ways your home became even more important. So we became more relevant to you. So we went from a world where we were a fraction of where we were last year to exceeding our original growth plans for the year pre COVID. That caused some whiplash. You go from saying goodbye to your friends to being worried about your job, to all the sudden seeing the numbers flying back up and then you sort of wonder is it going to stick, is it going to go back away, is this just pent up demand. So it has been, I think it's been a real test for our leadership team and look, in these moments I think the only thing you can do as a leader is put it out there. Be raw, be open, and share because what I told people is I can't answer questions for which there were no answers to. But for the ones we do have answers to I'm going to tell you exactly how we got there and why, and what that means for you, and really try to treat them as partners like I would treat my cofounders or my executive team because it's only by doing that that I think you retain the trust and the loyalty even through hard, scary times.
James McKinney: How hard was it to be in a position you are and not have the answers? I think a lot of times as founders especially or even executives of decent size organizations, we think we have to have the answers to everything. We think we have to have this persona as someone who knows what the next 10 miles of this march looks like. One, that isn't true. It's a position of humility to be able to operate in that realm of saying, "I don't have all the answers." Obviously I don't know your disposition going in. was that challenging for you to be of that person that didn't have all the answers?
Marco Zappacosta: No… I mean look, I have the benefit of starting this company knowing nothing and so generally my approach has been like, "Hey I don't know anything. Here's what I think and here's why, here's what we're doing." That's kind of just always been my MO and I think in this moment that was useful. Look, I think the important thing is we're reminding people about the things that aren't going to change. Hey, here's who we are, here's our principles, here's our values, here's our mission, here's what we're going to go do. All of that isn't changing. Timelines, tactics, strategies, all that's going to have to get reassessed but you came here for these core things, what we do, how we do it, who we do it with, none of that is changing. We're going to keep being who we are and we're going to keep being the best version of that we can be.
But obviously the road between where we are and where we want to be got a lot curvier and a lot bumpier, and we're going to have to go through that together. Leaders tend to make mistakes I think hiding fear or uncertainty from their colleagues and their employees. You forget that look, you hired really smart people who are really intuitive and empathetic. If you had this fear as a founder, 50% of people also have this fear in the organization.
I've actually gotten to the point where I use my own anxiety and my own fear as a sign of oh this is important, I actually have to go do this as opposed to being like oh this is scary I've got to lean back. No, this is scary therefore it's scary for all those people, and if I don't say something their fear is only going to get worse. It's gotten to the point where I use that as a trick to leaning into that feeling.
James McKinney: Yeah, yeah, Oh my goodness, I love it. You know I appreciate all that insight too from a leader of a massive organization and the importance of authentic communication. But I also want to get back to some of the changes taking place in thumbtack, which led us to the pitch discussion and that is the fact that you've revamped Thumbtack to use your words "from the ground up" completely reworked the experience of it. Why did you do so? And what is the experience now for both customers and pros? And then how does that set you up for what the next five or 10 years looks like?
Marco Zappacosta: The why is very simple. We weren't good enough before. We have always had this dream of saying to all homeowners, all these busy consumers we are the best place to find and hire pros, that for whatever you need come to us and we will connect you for the right pro to get it done. That's the right pitch, that's what people want to hear. And the challenge with our old model is that it was inconsistent. When it worked, it was amazing and better than anything that was out there, but it didn't work every time and the reason was because we were asking too much of our pros. It was too much work for them to have to read and respond to each and every request that came their way. And what we realized was it was actually getting harder the more volume we got.
Ideally a service gets easier and sort of better the bigger it gets, but for our crews we were just inundating them with more and more and more, and they literally couldn't keep up. It basically put us in this position where we had to accept that as a reality and therefore forever lower our ambition. Now, we were already a business generating tens of millions in revenue, and we could look forward and see ourselves doing hundreds of millions in revenue with that so it wasn't like a bad outcome, but to be the Kleenex of our category required a solution that was bullet proof and we did not have that.
What we committed to was to build product and technology that removed this burden from our professionals, while retaining the control and specificity that made the original solution so great. So the magic of Thumbtack 1.0 was that each response you got was worth your time as a customer because they were prequalified for being available, for being interested, for having a price, for coming to your location. You didn't have to ask those questions, it just became like is this pro the right one for me, is there a good fit, is there a good chemistry. What we didn't want to do is just show you a list of pros and then put you back where all these other directors had. So the only solution was to go to these pros and say, "Hey, we need you to tell us all the stuff ahead of time where exactly you travel, which jobs you do, which jobs do you not do, how do you price?" And so we had to build a quoting engine and customize it, and make it easy enough to use or these pros could for the first time, often they never had done this before, could basically enter their rate card and their travel radius, their calendars, all the things we need such that the matches we make programmatically were as good as the matches they were making themselves.
It took us the better part of two plus years to really get that really right and really working. The magic is that now when you get to Thumbtack any time you contact a pro we know that they are a fit, they match all of your requirements, they've already told us that, and they've already committed to respond to that customer and so they're hyper motivated and deliver a great customer experience. We believe that our solution now is by far, it's not even close, the most effective way to get in touch with a pro who is a good fit for your job and ultimately get to done. That fulfillment engine, that ability to meet demand in a reliable way is something that we've never had before. It's literally what I would tell people historically like what I was most anxious about Thumbtack, whether we could do that or not. Now we have.
James McKinney: That's awesome.
Marco Zappacosta: Yeah. And the fun part is A we get to go tell people about it and market that story and drive growth, which is already happening, but even more is we get to dream bigger. We get to go even further because we've accomplished this sort of big task and we really get to dream about how can we really help partner with homeowners to make fixing, maintaining, improving their home a truly delightful experience because there's a lot more there that we can do for them and really become a trust partner to homeowners everywhere that people turn to whenever they need to do something around the house.
James McKinney: That's incredible, and I want to ask this question not to make false assumptions or not to poke, but is it because the previous version wasn't exactly what you were hoping for in the fulfillment of your mission to be the best experience for the homeowners and the pros, that there wasn't a lot of noise around Thumbtack? I feel like within the last year we've really started hearing more about Thumbtack. Is it because of this new experience, now you have it, now it's time to just put your foot on the gas and go and let the world know about them?
Marco Zappacosta: I'm hesitant to let the marketing get ahead of the product. We've all had that experience where you land on some webpage, download some app and the first screen sounds like the best thing since sliced bread, and then you start using it and you're like wait this doesn't actually do anything it says it does. That sucks and I don't want to be that company, I don't want to be that guy, probably to a fault. Good marketers always sprinkle a little bit of magic on top of the product experience so I could use a little bit more, but I also have the view that over time the best experience does win.
This is certainly part of my personality but even more we've been at this long enough where I've seen waves of companies come and go. Some of those got a lot of hype. From my vantage point, that's hype, that's not real. I have used it, I've talked to pros, I've dug into it. There's not a "there" there, and sure enough hype only takes you so far. I know that long-term what will make us a success is a great experience that creates a ton of value, that becomes invaluable to you in your life. If we do that, the rest will follow. And if we don't do that, nothing else will follow. That's always been my focus but we're not going to be shy about it now. We think we've got something really special and we're going to put it out there.
James McKinney: I love it. We've got a couple more questions but I want to talk about that hype that you mention from other startups that have kind of come and gone. It is hard to ignore that hype. It is hard to stay in your lane, to stay at your speed, and just trust in your process, in your strategy. Was it hard for you?
Marco Zappacosta: Oh, for sure. Early on we kept a list of startups competitors. We would freak out when there was a new one and we'd dig into everything we could. We'd read about the founders, the investors. And there was actually one really early on before we'd even started building called "Do My Stuff" I think it was called. It's gone, long gone. I remember talking to my cofounders about like okay, should we think of something else? That's scary and existential to us. But after we'd been at it three or four years and you sort of have seen the hype cycle come and go you get a little thicker skin about it. The tricky part though is when those narratives really effect the thinking of the outside world.
What I mean by that, so when Uber really started its rise in I don't know when it was, 2011, 2012, 2013, something like that, Uber for X became the sort of next thing that everybody should be doing. So we had so many investors tell us, "Well why don't you do Uber for plumbers or Uber for this?" It was so hard to explain to them, "Hey wait, Uber is this commodified marketplace, they don't care about who the driver is, just trying to go from A to B as cheaply as possible. Very different than hiring a roofer or wedding caterer. Those are the things that you really care about. It's actually more like dating than it is like driving somewhere." Look, I consider myself an effective communicator and a good storyteller, and I know I didn't convince a lot of people. But what that highlights is people just tend to copy/paste from what's working in the world, and don't actually have a deep understanding of the market and the problems and the dynamics.
I think it highlights a core skill that entrepreneurs need to be successful, which is a tolerance for cognitive dissonance. Which on one hand you have to listen to what's going on in the world and be really in tune because that's how you learn and kind of spot new things, and sharpen your own thinking. But at the end of the day you have to believe that you're right and they're wrong. You've got to stay humble enough to listen and learn, but stay confident enough to trust your gut and to take that next step and keep moving, because otherwise you're not going to get anywhere. It's a little bit nauseating to go from one to the other, but I think it's really important.
James McKinney: Yeah, oh that's incredible. You know I want to honor your time and this has been absolutely remarkable to sit with you and hear about your Startup Story and your entrepreneurial journey, and just all the thought process that you've shared with us as you've built Thumbtack. But I also want to honor our listeners time and I have three final questions that we always wrap up with to kind of hear your perspective from where you sit. And that first one is about entrepreneurship in and of itself. Not everyone wants to be an entrepreneur, but for those who do want to there's some appeal to the entrepreneur lifestyle or narrative if you will that is out there, do you think anybody can be an entrepreneur?
Marco Zappacosta: I would say I think entrepreneurs can come from anywhere, but not all people are well suited to be entrepreneurs. In some ways I'd kind of push on your construction a little bit and say typically the people who want to get into it for the title are not going to be set up for success, whereas the people who get into it because of what it can enable- an impact, a problem that can be solved, a dream that can be achieved- those are the people that I think can be successful. If you were to interview a bunch of them, I think the single biggest trait that would come across in all these entrepreneurs is just doggedness, stubbornness, just like fight. Not everybody wants to do that, that's okay, you don't have to. It's really the people who get into it for the glamour of it who are severely disappointed at how little glamour there is and how much grind it is. Yeah, look, they come from everywhere. There's no one mold, but it's not for everybody.
James McKinney: And that's why I started The Startup Story because there was this narrative of entrepreneurship that was like if you build it they will come, if you launch an app you'll be massively successful. There were so many false perceptions of what entrepreneurship was and for myself having this graveyard of failed startups in my past, it's like you know what I just want to hear from more founders on their perspective and their journeys, and put it out there so people understand and have a full 360˚ view of what entrepreneurship really looks like, not what you're seeing out there. And so thank you for that perspective.
But one of the other things that I try to bring to the audience is this idea and this truth that we don't do this alone. The solopreneur, the one who just sits on a couch and punches through code and becomes this massive success, that is an anomaly and not the norm. but it makes for great headlines, and so when you see it enough you begin to think it's the norm. So this next question is about gratitude. When you look back across your entire entrepreneurial journey who are all the people that you look to with such immense gratitude for their contribution to where you are today?
Marco Zappacosta: I've got to put my parents at the top of the list by far, and again it's just for setting an example. For showing me what was possible and I think the biggest thing is not just that it was possible but what it would take to be successful. It would take a decade or two. It would take a lot of long nights. It would take doggedness and dedication. I feel lucky because I saw that at the dining room table. I know that a lot of people don't have that good fortune. I appreciate what you're doing and I think what is emerging now where more of these stories are shared, so somebody who doesn't have it at the dinner table can still see that it is an opportunity for them, that it is still possible. My parents will always be at the top of my list for all that.
James McKinney: I love it, absolutely love it. And the last thing to pull out of your Startup Story and to give to my listeners. We've been talking to tens of thousands of entrepreneurs at a high level about your journey on how you accomplished what you've accomplished. And I want to give this opportunity for you and one of my listeners to have a coffee moment if you will. And so if you were sitting with one of my listeners enjoying a cup of coffee and they were just trying to get some mentorship from you, what would you say to the entrepreneur who isn't quite sure they're going to be able to make it into 2021 because of what has happened to them this year within their business? What would you like to leave that person with?
Marco Zappacosta: The way that you're going to feel about this year is more about what you put into it than what you get out of it. This pandemic, this catastrophe is not your fault. You didn't choose it, you didn't do it, but you've got to deal with it. It's going to mean different things for different ones of us. Some it will be a help. For many it will be a destruction of what they've created, and that's not on you. but what is on you is how you showed up and what you put into it. That is what you're going to take away with. and so if you could end this year with your head held high that you stayed true to your principles, you stayed true to your values, you stayed true to yourself this will be something that you can grow from and feel proud about. The output, what comes of it, sometimes is just out of your control and you've got to be comfortable with that and sort of get back up.
James McKinney: Once you've had a few moments to process all the value that Marco Zappacosta brought us in this week's episode please hit me up on Linked In, Facebook, or Instagram and share with me your thoughts on this episode. And lastly if you've been around The Startup Story for any length of time then you know how much emphasis I put on the idea that entrepreneurs support other entrepreneurs. And like I mentioned at the top of the show, Thumbtack is useful for all the needs you might have where it would be best served to have a skilled professional handle it. Or maybe even a situation where just don't have the time to handle it. Visit thumbtack.com and knock out that to-do list or the honey-do list today. I say it in every episode because I believe it with my very being, entrepreneurs support other entrepreneurs so let's show up for Marco in a huge way as a way of saying thank you for all the value he delivered to us today, and visit thumbtack.com and hire someone to get your things done. All right, now for my personal ask.
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