Max Chafkin, a staff writer the US Entrepreneurship journal Inc. Magazine, has written a great report on Threadless for the June 2008 issue of the magazine. It is available in a free online pre-press version now.
Max tells the entire story of Threadless, starting with the episode of a meeting at MIT where the Threadless guys gave one of their first public presentations. I had the privilege to be part of this meeting, and it is fun to read about it in paper (especially as I am at MIT in the moment, writing these lines from the same building where we had the initial meeting with Threadless).
Max did a great job in documenting the history and genesis of Threadless, but also reflecting on its future. Here are some quotes of Max' analysis of the case, but head to the website to read the entire article:
On Threadless' Size and Development
This rapid engagement propelled the company through four years of phenomenal growth, beginning around 2004. The user base grew tenfold, from 70,000 members at the end of 2004 to more than 700,000 today. Sales in 2006 hit $18 million — with profits of roughly $6 million. In 2007, growth continued at more than 200 percent, with similar margins. Though Nickell refuses to disclose the exact revenue number — perhaps because he now counts Insight Venture Partners, a New York venture capital firm, as a minority shareholder — it seems fair to assume that Threadless sold more than $30 million in T-shirts last year.
Ask Nickell what he makes of his company's whirlwind success, and he will respond rather sheepishly. "I think of it as common sense," he says. "Why wouldn't you want to make the products that people want you to make?" Indeed, the idea that the users of products are often best equipped to innovate is something many entrepreneurs know intuitively.
And it is supported by a growing body of research. A study published last year in the Strategic Entrepreneurship Journal suggested that the vast majority of companies are founded by "user-entrepreneurs" — people who went into business to improve a product they used. Meanwhile, studies by von Hippel and others show that in industries as diverse as scientific instruments and snowboard equipment, more than half the innovations generally come from users, not from research labs.
On user innovation and the resistance of traditional companies to adopt it
Some companies actually punish these people by cracking down on unauthorized innovations. Apple has famously "bricked" — that is, electronically disabled — iPhones that have been enhanced by their owners. Other companies pay lip service to user innovation but have trouble following through on the concept. "Companies are very good at creating platforms for external input, but they're very bad at using this input," says Frank Piller …
Threadless is an exception to this. "You could say that what Threadless does is trivial, but it's not," says Harvard's Lakhani. In fact, the very triviality of Threadless's product — something as low tech and as commoditized as a T-shirt — proves that vibrant online communities can drive all sorts of nontechnical businesses. This should be encouraging news to entrepreneurs. Customer communities have become exceedingly inexpensive to build and manage; blogging software and social network platforms, for example, are now available for free from a handful of start-ups. "We thought that open source could only work in software, and now it's being successfully applied to a product as mundane as a T-shirt," Lakhani says.
On Threadless' Corporate Culture and Work Style