big business then. They weren’t, really—not compared with what
they’d become, an aftermarket worth $1 to $3 billion. Still, even in
2012, there was money to be made. In fact, for most of the people wait-
ing with him on that cold morning, the shoes would never touch their
feet; they’d turn around and resell them, fresh in the boxes, to some-
one they knew or on eBay for twice or three times what they paid.
Mornings like those could be tense. It’s a lot of anticipation, a lot of
people, a lot of money at risk, and not that many shoes. Jones had been
waiting only a few hours when an argument broke out. He remembers
how bitterly cold it was. And he remembers looking down at his feet,
where blood was pooling and soaking his Nike Air Zoom Tallac Lite
boots. Then he realized the blood was pumping out of an artery in his
arm, where he’d been stabbed. “I almost died,” he says, “over sneakers.”
But did it stop his love of them? “Never. Ever,” he says. Loyalty like
that is rare. It is also opportunity. And a few visionary entrepreneurs
were about to take notice and transform this small world of obsessive
shoe resellers into a massive, global sneakerhead industry of unicorns
and luxury brands, and VC money flying as high and fast as the ath-
lete who inspired it all.AFTER THE AIR JORDAN 1, collectible sneakers evolved. Brands began
dropping exclusive shoes in ever more creative collaborations—with
designers, musicians, influencers. Magazines and websites popped up
to report the latest news. A secondary market quickly followed, to the
surprise of nobody. That’s what happens with anything cool and limited,
be it Rolling Stones tickets or rare Magic: The Gathering cards.How does an entrepreneur begin to harness something like that? The
first step was simple: Open a store.
That’s what Damany Weir did in 2005; he created a consignment store
in New York City dedicated to reselling these preowned, often unworn,
sneakers. It was called Flight Club, and Jones describes it as “a tiny lit-
tle nothing”—a space that appealed mainly to hard-core fans. But this
satisfied the needs of the moment. It became a mecca for sneakerheads.
In the decade that followed, the sneaker world became chaotic. Brands
were releasing new limited collaborations regularly. Resellers were pop-
ping up everywhere. Several incidents of violence erupted, like the one
Jones was caught in. And counterfeiters were becoming a serious prob-
lem on eBay, which had become the resellers’ platform of choice.
But during that same time, a new kind of sneakerhead had also
taken interest. They were guys from corporate America who had fallen
for sneaker culture—and were now noticing all these pain points in the
scene. They wondered if they could solve them.
Two of these sneaker guys were Eddy Lu and Daishin Sugano,
roommates and startup cofounders in Los Angeles. They’d met at col-
lege in Berkeley and decided to leave high-paying corporate gigs on
the same day in 2007 to start...something. They weren’t exactly sure
what. They managed to raise $7 million for an app called GrubWithUs
(it helped people meet over food at restaurants), but they struggled
to scale it. And then, one day, Sugano paid $300 on eBay for a pair of
Air Jordan 5 Grapes that, upon arrival, were clearly fakes. “I was like,
How come in this day and age you spend that much money on some-
thing online and still have to worry if it’s real?” Lu says. “That was the
lightbulb moment: We can build a marketplace where we authenticate
every product, so the buyer never has to get duped.”
Flight Club, that store in New York City, had done this from the
start. But it was working at a small scale. Lu and Sugano went big-
ger. They built an app and called it GOAT (Greatest of All Time). Just
like on eBay, a seller can post a shoe on GOAT and ask for a price. But
when a purchase is made, the seller first ships the sneakers to GOAT
headquarters to be authenticated. If they’re real, the sale goes through
and GOAT takes 9.5 percent plus a $5 seller’s fee.
To get off the ground, Lu and Sugano used $1 million of VC money
they had left over from GrubWithUs. But after launching in July
2015, it was slow going. “There was one time in late September we
didn’t sell a shoe that whole entire day,” Lu says. “So at 6:00 p.m., I
went in and secretly bought a pair just so I could tell the team we sold
something.” Knowing they had to turn things around fast, the team
came up with an idea for Black Friday. They’d find a few hot sneak-
ers that were reselling on the app for $600 or $800 and let custom-
ers have them for the original $200-ish retail price. They sent emails
about this to the sneaker magazines, which wrote about the event,
and suddenly 100,000 people were trying to buy the same few sneak-
ers. “Everything melted,” Lu says. “The site crashed, and we got about
4,000 customer service messages saying things like ‘I tried accessing
the app for six hours; I skipped work; I skipped school.’ ”
As more messages poured in, Greg Bettinelli, a partner at
Upfront Ventures, which was one of their investors, called to see if
everything was OK. fSeptember 2019 / ENTREPRENEUR.COM / 45PH
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Then he realized the
blood was pumping out
of an artery in his arm,
where he’d been
stabbed. “I almost died
over sneakers.”