Jake Nickell meets me in the front office of Threadless, happy to show me around. This is his place; he built it, figuratively, from an idea he had a dozen years ago, and so he has an obvious sense of pride, though a soft-spoken, easy-pedaled way of projecting it. “So we use this room in a number of ways,” he says vaguely, waving his hand.
No kidding. It’s not really a front office so much as a front playroom, a cavernous space that is only a small part of the 45,000-square-foot former FedEx distribution center in the West Loop that Threadless leased and rehabbed last year. (Click here for a photo tour). An Airstream trailer, where Threadless podcasts are shot, sits on one side; a sofa with crumpled cushions holds the back of the room, near the beer keg refrigerators; murals of parrots and exploding comic book exclamations—“WTF!?” “Awezome”—fill the walls. There’s plenty of room to project movies or race go-carts—both things Threadless employees are known to do. It’s like Pee-wee Herman’s playhouse reimagined by some goofy hipsters.
Moving at a fast pace, Nickell continues his tour. A boyish-looking 31, he wears skinny jeans, Toms shoes, and yellow-and-orange plaid socks. He’s so lean that he barely fills out his medium-size tee. On his left hand, in place of a wedding ring, is a tattoo of the letter S, for his wife, Shondi. “After I lost or broke four rings, this seemed to be the way to go,” he says sheepishly. How do you break a wedding ring? “It was wood.”
A hive of young employees—all dressed very much like Nickell—hover over scores of computers on two floors. In the warehouse, endless rows of shelves hold stack after stack, box after box of tees. There are enough shirts to outfit a small army, which is pretty much what Threadless does. The company sells more than 120,000 T-shirts a month to cool-hunters around the globe. As Nickell and I race-walk past the shelves, the placards identifying each design speak some secret hipster code: “Wild Rage,” “Bird Hair Day,” “Ride or Die,” “Bang!” There are more than 750 designs here; how can Nickell keep them all straight? He gazes across the room, over the sprawling shelves. Then he smiles and replies, “This is what I do.”
How Threadless Works
1. Anyone can upload an original T-shirt design to threadless.com. (About 2,000 to 3,000 are uploaded each week.)
2. Anyone in the Threadless community, two million strong, can rate the designs on a scale from zero to five.
3. Once a week, Threadless staffers check out that week’s best-rated designs and pick five to 15 winners.
4. Threadless typically produces an edition of 500 shirts for each design, selling them on threadless.com for $20 each.
5. In return, each designer gets $2,000, plus the choice of a $500 merchandise credit or $200 in cash.
6. If there’s high demand for a given design, more shirts are printed (upward of 10,000 for top sellers) and sold, with the designer getting additional money.
7. Threadless pockets profit margins estimated at 30 percent.
Threadless is a T-shirt company, sure, but it’s much more than that. It is one of the first companies anywhere to make crowdsourcing an essential part of its business plan. Just as Facebook lets users create customizable social networks to connect and collaborate with others online, Threadless gives its social network—two million people and counting—creative control over the products it sells. Anyone in the network can submit T-shirt designs that site members vote on, with winners printed and sold by Threadless.com (see sidebar for details). Back in 2008, Inc. magazine called Threadless “the most innovative small company in America.”
Revenues for the privately held firm have been widely estimated at $30 million last year (a figure that Nickell will neither confirm nor deny). But that could change dramatically if Threadless’s latest strategy—forging partnerships with huge national retailers—proves successful.
Gap sold a limited run of Threadless tees in the spring, followed by an early summer line of new designs, created by designers from Shorewood, Illinois, to Tangerang, Indonesia. A back-to-school line of new tees arrives in August. At presstime, Bed Bath & Beyond planned to roll out in June a back-to-school line of products (linens, wastebaskets, comforters, pillows) with Threadless designs. Add in Griffin iPhone covers with Threadless designs and customized laptop covers for Dell and you have the makings of a cultural juggernaut.
It’s an amazing accomplishment for any entrepreneur, especially one who isn’t cranking out computer code like Mark Zuckerberg. Nickell built his empire on T-shirts—not exactly a rare commodity. But he did capitalize on a key insight before most anyone else: the power of crowds.
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.”