How Jake Nickell Built His Threadless Empire

FROM SMALL TO XXL: You’ve heard of crowdsourcing? The 31-year-old founder of the Chicago T-shirt company basically invented it. Now he’s taking it to malls across the country

Nickell and his merch at Threadless’s West Loop headquarters   Photo: Taylor Castle

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In 2000, Nickell, then 20, was living in a tiny apartment in Chicago’s Buena Park neighborhood, working in sales at the computer retailer CompUSA and studying graphic design at the Illinois Institute of Art. An army brat who had moved often as a child, he had few friends in town. His girlfriend, Shondi, was away at Purdue University and could visit only occasionally.

With time on his hands, Nickell began spending hours online trolling various art and design blogs. His favorite was Dreamless, a site for illustrators and programmers. There he chatted with online friends and played Photoshop tennis, a game in which designers challenge one another to manipulate photo images in the most outlandish way. “I felt I was really part of a community there,” he says.

That year, Dreamless held an online T-shirt design competition for its annual New Media Underground Festival. Nickell entered and won. But nothing happened. No T-shirt was produced. No prize money was awarded. Dissatisfied, he proposed an idea to the other Dreamless members: What if there were a contest and the best shirts actually got made?

Nickell put up $500 to get the contest rolling. Another Dreamless enthusiast, Jacob DeHart, at the time a student at Purdue, matched it. In November 2000, Nickell and DeHart held their first contest on Dreamless, asking fellow users to submit and vote on the designs. Playing on the Dreamless name, they called the contest Threadless.

The duo received fewer than 100 submissions; five won. The winners each got two free tees emblazoned with their designs. But Nickell and DeHart printed more shirts than that—two dozen of each—and offered them to other Dreamless users for $12 a pop. They sold out quickly.

So the Threadless contests became a regular thing. But it didn’t occur to Nickell for some time that they had a real company, let alone a new community-based business model. “I like doing things without having complete reasoning behind it,” he says, sounding unlike just about any other businessman on the planet. “The reasoning comes later.”

In 2002, both Nickell and DeHart dropped out of college to concentrate on turning Threadless from a hobby into a full-fledged company. One of their crucial early moves was to start a massive word-of-mouth campaign. “We rely totally on Web interaction to spread the word about the company,” says Nickell, adding that he doesn’t believe in advertising. Which means that he spent a huge amount of time cruising the Web, posting comments on blogs, and engaging with Threadless followers, who in turn promoted the weekly contests to their family, friends, and associates.

While some people submitting designs objected to the fact that Threadless retains the apparel rights to all winning images—and pays relatively little for them (currently $2,000 for an image, plus the artist’s choice of a $500 merchandise credit or $200 cash)—most felt that the exposure for their work was worth it. By 2002, Threadless had signed up more than 10,000 members and sold $100,000 worth of shirts, according to Inc. Four years later, sales topped $18 million.

But the novice businessmen made plenty of mistakes along the way. In 2004, they launched a spinoff website, 15 Megs of Fame, where musicians could score their own songs. It closed in October 2006. “It wasn’t what people wanted,” says Nickell.

Neither was Extra Tasty, a community-based website for sharing cocktail recipes. Naked and Angry, a site where designers could submit patterns for wallpaper, home accessories, and even neckties, faltered too. “We didn’t know what we were doing,” Nickell admits. “We’d get a design and then we’d run around looking for plates or wallpaper. It seems simple now that the answer would be to outsource, but at the time we had a we-can-do-everything attitude.” (Still convinced that Naked and Angry can be a hit, Nickell has folded it into a sister site, Threadless Patterns.)

In 2006, Nickell and DeHart, by then Threadless’s chief technology officer, decided that they needed help, not to mention more funding. So they sold an undisclosed number of shares to Insight Venture Partners. “We were excited by the way they were merging content and commerce together on the Internet,” says Jeff Lieberman, a partner at Insight. “We saw a totally unique company.”

But it wasn’t the kind of company it had been when it first launched, explains DeHart, who left in 2007. “I just like the feeling of small startups,” he says, “the way you move quickly or change directions totally. Threadless had lost its small-business feel.” (DeHart retains an ownership stake in Threadless; he declines to divulge its size. He and his wife, Mischa, went on to found Spaceship Collaborative, an incubator for various Internet projects. He is currently working on a new startup, Picture Life, a members-only version of the photo-sharing site Flickr.)

A year after DeHart’s departure, Nickell hired Tom Ryan, a veteran of Virgin Mobile and EMI Music and the founder of an early MP3 music retailer, to become Threadless’s CEO. In typical quirky fashion, Nickell insisted that Ryan spend his first three months on the job “making friends” with the 80-person staff instead of making decisions. Ryan gamely went along. “It was important for me to understand the company and how it worked,” he says.

Once the new CEO had settled in, Nickell became Threadless’s chief community officer, focusing on finding new members and promoting the brand online. “I got to concentrate on what I enjoy most and what I understand the best,” he says.

He also got a chance to spend more time with Shondi and their young daughter, Arli. Taking advantage of the fact that (in theory at least) a digital executive can work anywhere, he moved his family to Boulder, Colorado. It made sense at the time: all that fresh air, and Nickell loves to snowboard, kayak, and camp. “We kind of went overboard about living in a clean, outdoorsy way,” he explains.

Flights to Chicago for meetings got old quickly, however. “The travel wore me out,” Nickell says. “And I felt disconnected from the give-and-take of the office.”

By the time their son, Dash, was born in 2010, the Nickells were missing their old friends and relatives. In 2011, they put the Boulder house up for sale and moved back, settling in Evanston. “We love it there,” says Nickell. “It’s a real neighborhood. Kids come up and knock on the door.” He pauses. “But we’re still keeping an eye on the Boulder real-estate market.”

In one of Threadless’s small meeting rooms, which has a Mad Men–goes–funky vibe, Nickell sorts through the new product samples from Bed Bath & Beyond. They look ideal for the dorm-room set: colorful and eye-catching, revolving around peace signs, hearts, and abstract patterns. But what Nickell wants to point out is a small square on each item: a photo of the person who created each design, along with that person’s name and hometown. “That is what is really exciting,” he says. “It’s important to me that the story of the artist be told and respected.”

But can a focus on spreading the work of talented, often unknown designers—the heart and soul of Threadless—survive as the company expands from direct sales to a supplier to much bigger retailers? (Threadless has just one retail store, in Lake View.)

Nickell insists that it can. He says that he has rejected overtures from the likes of Target and Urban Outfitters. “I have nothing against either company,” he says, “but I really wanted a place where the individual artists would be acknowledged with their designs. Neither company could offer us that. Gap and Bed Bath & Beyond could.”

According to its CEO, Threadless’s growth strategy is multipronged. The company will keep selling tees on its website, Ryan says, and will add new kinds of products. It will become a supplier to more large retailers. And it will expand to entertainment brands (Threadless recently held design contests with the PBS show Sesame Street and with Disney and the Cartoon Network).

As for possible plans to take the company public, both Nickell and Ryan remain mum. “Our mission,” Ryan says, “is to get the world’s creative minds to make and sell great artwork.” Nickell puts it another way: “Respect the artist. Trust the community. And don’t let ourselves trip up by getting in the way.”

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2 years ago
Posted by anonymous12345

"You’ve heard of crowdsourcing? The 31-year-old founder of the Chicago T-shirt company basically invented it."

Uh... just as long as built into "basically" is ignoring the fact that crowdsourcing is merely a coined term for something that has been going on for 30+ years under many different names.. customer co-creation, consumer innovation, etc.

For a company as old as they are, they seem to be more in "throw crap against the wall and see what sticks" mode more than companies 1/10 their age. Tee shirt vending machines? Logos on garbage cans at Bed Bath and Beyond? Partnering with The Gap and bands no one has heard of all at the same time? Maybe I don't understand what their vision for the future is, but something tells me that the Jake who started Threadless would kick the ass of the Jake who currently holds a vanity title and seems to be the cashed-out mouthpiece while his experienced executive team drives what he built into the ground in pursuit of a fatter bottom line.

2 years ago
Posted by setpixel

Haters gonna hate.

2 years ago
Posted by pelaej

I'm actually really close to someone who works for Threadless in their warehouse. If you had the opportunity to sit and talk with this person about their views on how Threadless is run, and how they treat their employees, you might not have the same outlook on this company.

Now, I know there will always be that one person who has a negative outlook on things, and in this case that person is definitely me. But I wouldn't say anything unless I felt as passionate about it as I do this. The truth is, is that Threadless really doesn't treat their warehouse employees all that great... The pay is pretty bad, the hopes of becoming a full-time employee are slim to none and health benefits are so expensive that if you do have the opportunity to work full-time and buy into their health plan you can't really afford much of anything else once you do. Up until recently (I'm talking a couple of weeks ago) they were scheduling their part-time employees to work full-time hours without the option to buy into their health insurance plan. I guess they realized that it was illegal, so now they schedule their part-timers to work just enough hours so that they're legally under a full-time work week (hmmm, sounds like Walmart). I heard a story about how one employee approached management looking to see if they would hire them on full-time. This employee mentioned to them that they felt they deserved full-time employment because of the hard work they put in, including overtime. Managements response was that overtime is a privilege. Pretty sad, considering employees only work overtime when there's a sale and it benefits the company. The icing on the cake is that they don't even have a human resources department where an employee could have some type of outlet. I think at least Walmart has that.

I realize that it takes everyone in a company to make the company successful... but warehouses seem to be a pretty central part of a companies existence. Especially a company that does a majority of their sales through their website. I also realize that it probably doesn't take an exceptional amount of skill, or a college degree for that matter, to work in a warehouse. But when a company claims to be great, or people claim that a company is great, I would think that in order to be great you'd need to be that way from the inside out. To be great I would think that you would treat your employees great, not just have a great product (which, by the way isn't that great. Their t-shirts are incredibly cheap and they have products returned to them constantly).

I've found that once you peel back the trendy facade of Threadless, and dig a little deeper, it's not so appealing anymore. It makes me sad to know that this company's appearance is a central part of why people find it so attractive and think that it must be a cool place, it must be awesome. I know, I was one of those people. Not anymore...

2 years ago
Posted by Jake Nickell

Thanks for the article, Chicago Magazine! My wife opened up the magazine and saw that picture of me and just laughed uncontrollably for like 10 minutes, pretty hilarious photo. Nice one, Taylor :)

I wanted to address PELAEJ's comment about our warehouse. While most companies in our position would likely outsource their distribution to a third party, we feel that our warehouse has become a hugely important part of our culture here at Threadless. Some of the most creative people I've met work in our warehouse. Artists, musicians, comedians. Many of our warehouse staff has moved into full time roles. Many even into positions on the office side of Threadless as well. Mike, Dustin, Kim, Steve, Jen, Kara, Bob, Tristan, Joe, etc… nearly 20% of our current office staff started in our warehouse, and that's in addition to those who have moved to full-time roles within the warehouse. They now play key roles in our company in nearly every department here from marketing to creative, tech, production, customer service.

As for part-time vs full-time, unfortunately we can't have everyone all work full-time hours all the time because there just isn't enough work to do every day. When we have a sale and our volume increases by as much as 10 times, we need the flexibility to accommodate that. In addition to our part-timers having the ability to earn more hours during those times, we also bring in as many as 90 more temporary workers during these times.

For health insurance, we offer a variety of plans to our full-time employees and pay 75% of the premium (and 100% of dental, vision, short/long term disability & life insurance). There are very economical options for our staff.

PELAEJ, I'd love for your friend who works in our warehouse to come discuss this directly with me.

2 years ago
Posted by Wylieknowords

Great photo of Jake Nickell. I have been sending slogans to Threadless and voting for artwork for over two years. Thank you Chicago Magazine for explaining better how Threadless works. A few weeks ago Threadless stopped sloganeers from sending in a daily slogan. Now we must collaborate with an artist or become an artist. I was so angry and sad I wrote a few large comments. Then I calmed down and discovered there were artists who needed design ideas and slogans who reached out to me. I hope to submit artwork next week. When I tell artists in Richmond, Virginia about this company in Chicago that prints a small photo of the person who created each design, along with that person's name and hometown, they are shocked. Most businesses treat inventors, writers, and artists as kleenex to use and throw away. To me crowdsourcing is fun. Going to Threadless to vote 0-5 for artwork from around the world is a video game for me. I learn a lot and love to help artwork get printed. (I've helped 150.) How did I discover this Chicago Magazine article? I have a Google Alert for 5 subjects. One is slogans. It brought me to you. I have one Chicago slogan:
"Chicago--NY With a Personality & Better Pizza." Most people think of Threadless when you say "crowdsourcing" or Tees. That always brings you back to Chicago. "Threadless gives crowdsourcing something to wear." www.knowords.com I used to write for Richmond Magazine and Virginia LifeStyle. I'm happy to have discovered Chicago Magazine. I've been all over the world and never to Chicago. Makes me want to visit. Just read about Chicago Impact this morning. To me Chicago is city where things get done without a lot of fanfare or spin. Five years ago I first heard about Threadless and this new invention called the Kindle. I've been explaining both for years. Good job on this article. Look forward to reading more Chicago Magazines.

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