STEVE CONINE: Great. Thanks, Scott. So we were brainstorming ideas for what we're going to do for our presentation with Zach Shulman ahead of this conference, and our nature would be to get up here and pitch you guys for 20 minutes on our current business and what we're doing, but he said we can't we can turn this into a sales pitch. You've got to talk about something that's exciting and interesting to the New York entrepreneurial community, Cornell entrepreneur community. So we kind of kicked around different ideas, and he said one of the things that makes you different and interesting is that you're co-founders, and you've been working together.
Now, we've been working together now for about 20 years, so it's coming around on two decades. We met at Cornell. We've been working together a long time. Why don't you guys talk about your relationship? And he says, one of things that kind of strikes me about you guys-- you're kind of like the odd couple. And I got to be honest, I'd heard of the TV show, The Odd Couple, but I didn't know who the characters were, what they looked like, what they were. So as soon as we get off the phone, of course I Google it, and right away I kind of know who he's thinking I am.
NIRAJ SHAH: It's kind of obvious, right? That's what I was thinking.
STEVE CONINE: And so we said, OK, we can work with this. So anyway let us introduce ourselves to you.
NIRAJ SHAH: So let me talk about Steve. So Steve fancies himself as a Renaissance man. So Steve-- the dining room table in his house he made himself in his wood shop in Vermont. He and his wife did a 200 mile coast to coast bike race across Costa Rica. The reason he's in a sling is that he's actually a very avid mountain biker, which involves breaking his collar bone on occasion, and this is Steve carving up ice at a lake house he has in Vermont and making furniture out of it.
STEVE CONINE: So on the flip side, there's Niraj. So Niraj definitely fancies himself sort of a business tycoon. I can tell you when the two of us were first starting our first company, he used to quote Warren Buffett, and Jack Welch was also [INAUDIBLE]. So he loved to aim high, and he had big strategic goals for us. And the trouble for me is that every once in a while things come along that kind of add fuel to the fire. So this is Niraj full page spread in this month's Fortune magazine. He's on the Fortune 40 under 40 list, and it's not--
NIRAJ SHAH: They offered to have Steve on it, too, but he's 41, so he got bounced.
STEVE CONINE: I just missed. The funny thing about this picture, too, is this got circulated around inside our company as soon as it came out, and Niraj has definitely been quoted on occasion saying I really don't like being outdoors. And so I don't know that he's ever actually canoed, but it does make him look out to have this gentlemanly pursuit, which kind of fits a little bit with his persona, so we were very excited to have this press.
NIRAJ SHAH: Or my father-in-law's canoe. So our journey is actually that of two Cornell entrepreneurs. We actually started our first company out of Cornell. So the way we meant is we were three doors apart on our freshman year floor at Cornell, and then without really planning it we end up starting a company right out of Cornell. And the reason we did that-- we were Cornell engineers. One of the elective courses we took our very last semester was the entrepreneurship course in the Johnson School at the time for undergraduates, which was the only entrepreneurship course at the time. We went to Cornell from '91 to '95, and you create a business plan as part of that.
So created a business plan, and without a whole lot of master planning, we ended up starting the business. It was a consulting business, and you can see the beautiful graphic design skills we had.
STEVE CONINE: Spent a lot of time on this logo.
NIRAJ SHAH: Back in the day.
STEVE CONINE: It was important at the time.
NIRAJ SHAH: Looking back now, I'm not sure what we were thinking at the time, and what we did is we ended up getting involved with the commercial internet in '95, and we built the first customer service system and the first real estate classified system for The New York Times for their launch on the web. We built part of Chase's discount brokerage online trading system. We built some systems for Merrill Lynch, and we got involved with the internet at '95, which is just when the Netscape browser first came out, so it was the very beginning, and it ended up being the beginning of what's really been a great journey for us here 18 years later.
STEVE CONINE: In fact, it's funny just hearing Yahoo get talked about a lot. I remember Yahoo was the thing back when we started this company, and when we got this listed on-- they had this what's new list on Yahoo, and the internet was so small that Yahoo would list out literally every site that was kind of new in a period of time. And I remember being so proud we made that list. We were on there for maybe a week before we got bumped down by people who were launching new things, so it was the very early days of the internet. And for us, it was the formative years in our career to figure out what we were both good at and how to work together.
So we have four things we want to just highlight that, as we look back on our career, we thought were pivotal points in things that we figured out. This is our original team. So you can see we were both into hair back then.
NIRAJ SHAH: My six year old daughter still doesn't believe I ever had hair. She sees a phot of me with hair, she's like no, no. That's Uncle Nick. I'm like, no.
STEVE CONINE: No, not. It's daddy.
NIRAJ SHAH: No, it was me. It was me.
STEVE CONINE: So this group-- so Niraj is on the left. The fellow next to him-- this fellow, Joshua, was a freshman at the time. Niraj and I were seniors. The woman in the middle is Alexi, who was my girlfriend at the time. She's now my wife. There's myself and this fellow, Tim Stones. And the thing that's cool about Cornell is, when you're an undergrad, you're surrounded by amazing, talented people, and it's easy to find people who are excited about being entrepreneurs and who are interested in pursuing something.
So we put this group together as part of this business school course. We got working together, and the school year wraps up, and we incorporate. And we end up taking money from my parents, Niraj's uncle, a friend of this guy Josh, and then the four of us are the other majority owners in the business. And Niraj and I are minority owners in the way we did the cap structure, but we set up what we think is kind of a fair cap structure. Great. So we get working through the summer.
NIRAJ SHAH: So a sub lesson here is when you're young you have no idea what you're doing. That's definitely a side.
STEVE CONINE: But you've got to figure it out pretty quick. So through that summer we worked together. By the end of the summer, Niraj and I have moved to Boston. Josh and Alexie-- Alexi is a year behind me at school-- they go back to school. So now Niraj and I are left basically running this business, working 120 hour weeks, working ourselves to the bone, realizing that if this is going to be successful it's going to really be large in part to our work, and the way we'd set up this cap structure was kind of opposite of that where we're minority owners in this thing, and it just irked us every day one when we'd get into it. And we finally said we've got to address it, and it forced us to have a conversation at a very young age that I think it opened the gates to say nothing is sacred, and we're willing to discuss everything.
Obviously having my girlfriend involved and having that dynamic, this fellow, Josh, was a young fellow, having someone who's kind of a complete third party investor that we really didn't know who was a friend of his involved-- it created this dynamic that forces us to sort through, and we recapitalized again. We ended up buying out the investors. We ended up buying out Alexi and Josh. It forced us to go through a time that was difficult for us both, but coming out of it we both were able to discuss anything, and it was a critical skill to get out of the way early on.
NIRAJ SHAH: The second thing I was going to talk about. A lot of these lessons are basically you learn from mistakes you make, and so the second one's about another mistake we made. And basically so we started our first business partnership. We were very young. We were just right out of Cornell, and so we really hadn't worked in other business setting yet in a full time job.
And so one of the things, though, we'd get into these disagreements. We'd be arguing about things, and these arguments just turn into these fierce arguments often about stupid things. And so one of things that we got very good fortune at is that over the first couple years of working together we actually figured out how to converse and how to sort things out. And that ended up being a really critical scale, because what you find is that a lot of business partnerships don't succeed, and the reasons they don't succeed-- there's a couple basic ones. And one of them often is that people get stuck on small things, and just like in a marriage, you really need to figure out how to work things out together. And we got good at that over time, and now 18 years later, it's one of our strengths.
STEVE CONINE: It's funny, too. When you're friends in school, it's one thing when you come out of school and all of a sudden you're taking really legit critical feedback from your friend it's a hard pivot to make, but once you get over it and realize this person has my best interests in mind, it was critical for us in our longer term success. One of the other things that we kind of felt out between the two of us over the early years was just our different skills. So coming out of Cornell, our first company-- Niraj was going to be the software engineer, and I was going to be sales and marketing guy. We get into it about a month in, and we realize we have it reversed. That it turns out Niraj is very industrious, and he's a hard worker, but more on the intellectual stuff. I tend to be more like the problem du jour-- my mother was a farmer. I was raised doing a lot of physical labor, and I'm willing to just get right into it and solve the problem today.
So we quickly realized that Niraj was a much better CEO sales guy. He was great at figuring out where we were going, where we were going to have problems, and making sure we were getting ahead of those things. He was great in negotiations, and so he got us some great leases on [INAUDIBLE] space, and I was good at just getting the stuff done.
NIRAJ SHAH: I did other things, too.
STEVE CONINE: He did other--
NIRAJ SHAH: We're not actually in the real estate business.
STEVE CONINE: Yeah, I know. I know. It feels like we are in the real estate business some days, but we figured that out early on, and then going forward Niraj has always been the CEO, and I've--
NIRAJ SHAH: Today we have about a 300 person engineering organization, which Steve runs, and the engineers today-- they have no confidence that I actually have any engineering skill, which is largely true. So I always explain to them that I actually taught Steve Pearl back in the day, and they ask Steve this question with total disbelief, and he actually confirms that it's true.
STEVE CONINE: And I have to say, yeah.
NIRAJ SHAH: And I think it makes them think more of me then at that point.
The last thing, we tried to come up with these four key lessons. We tried to keep them to be really simple basic things that we think make a big difference, and this last one is about align motivation and goals. And one of the things I referenced is that earlier a lot of business partnerships don't fail. I think this is probably the second most common reason they won't fail. One will be that you're arguing about a lot of things. You don't figure out a good way to work together. The second would be that you actually have very different goals, and if you have very different goals, the problem is sooner or later that becomes a very big problem.
And in our case, we got very lucky in that, over time, because we shared this whole journey, we ended up with very similar goals because of our aspirations were similar and our experience base ended up being very similar. And in this case, when we started this company 11 years ago, our goal was actually to get involved in a business that we thought we'd enjoy tremendously and that we thought we could grow to be really big over a period of time, and we weren't terribly concerned if it was a really long period of time because we had a already started two other companies relatively short in duration, and our goal wasn't to build something and sell it. Our goal was to build something that we thought could be significant. And this kind of alignment of goals goes really far, because in any entrepreneurial journey there's highs and there's lows, and on the days that are lows, it's kind of good to know that you have shared goals and you have someone else you can lean on.
STEVE CONINE: I remember early on, when you first start a company, obviously you have nothing to lose if it goes to zero, because it was zero yesterday. And then you get a year into it, and all of a sudden you have something. You're starting to pay yourselves, and it's a little bit more risky to say, well, are we willing lose it all? And I think that right away we both had the mindset of-- and even today, yeah, this thing could go to zero tomorrow, but let's keep pushing hard, because we really want to win it, and we really want to go big. Getting those discussions out when we were younger, whatever helped a lot.
NIRAJ SHAH: So we also had the benefit of seeing things go to zero in the sense that, when we sold our first company, it was during the dot com boom, and so we did sell for a little bit of cash and a lot of stock. And then we saw the stock just go up, and up, and up, and up, and up, and then we got see the stock go down, down, down, down, down, down, down, and so there's a lot you learn, too. You learn something when you make money. You learn more when you lose it. So we had that benefit, I guess. Expensive lesson.
STEVE CONINE: That was an expensive lesson, but a very good lesson. So now we get to do the quick short sale sales pitch portion. So today we run a company called Wayfair. We're the leading online retailer of home furnishings and home decor in the US today.
NIRAJ SHAH: So we'll keep the company commercial really short, but we'll just tell you a little bit about what we do. So as Steve mentioned, we've growing into being the largest online retailer home goods. We have four online brands-- Wayfair, Joss and Main, AllModern, and we actually acquired a fourth brand, which is a New York based design brand called DwellStudio this summer. In size, this year our order volume will be a little over a billion dollars in order intake, so we've grown it to be decent sized. Growing still at a fast rate. This year we'll grow over 50%, and the market we're in is just really, really big, so despite that size we actually think we can grow at that kind of pace for a while. And that's one of things that gets us really excited, because when you're growing in a big market and we're full of ideas of more things we can do for the customer to make their life better, which involves obviously building more and more of a leadership position. It's really exciting for us. We put together a great team. Our team is over 1,400 people now. We're based in Boston. We have approaching 1,000 people right in downtown Boston, and it just lets us really just-- it makes it fun every day. Just it's always a lot more you can do.
And the last thing I'll just hit on is just the company is 11 years old. One thing that we did was a little unique compared to a lot of other competitors we have is that we actually bootstrapped it for the first nine years. So we came up with a model that was capital efficient, so that a very small amount of seed money that we put in was able to get us very far. And so as a result, that long term vision we had of building something really big over time-- everyone was aligned around that because the equity was only held by people in the company. The equity wasn't held by anyone who was a financial institution with a time frame on a return, and so the first time we took an institutional money, we were actually nine years old. It was two years ago. We were already doing half a billion dollars in sales, and so that ends up being a great position because now you bring in a minority investor who is going to have limited control one on how they're going to want to approach it from a financial outcome standpoint, and then frankly there's always the dilution benefits, but really the biggest win is how you can focus for a long period of time when everyone is rowing in the same direction.
STEVE CONINE: And the fun thing about Wayfair is it's a real reflection of Niraj and my personalities, and we've really focused a lot on the culture of the company.
NIRAJ SHAH: That's us lying on a pile of stuff we sell.
STEVE CONINE: This was in Inc. Magazine last summer. We were the cover article on Inc. Magazine, and they literally had this lay in a pile of stuff with a camera over our head.
NIRAJ SHAH: It was a huge pile. 30 feet up.
STEVE CONINE: You'd think that was funny.
NIRAJ SHAH: I'm like, is this going to come out good?
STEVE CONINE: But we've really focused a lot of effort on the culture. Niraj and I sit out-- and the floors in Wayfair are completely open, and Niraj and I sit out right in the middle of the floors with everybody else. And I always the new hires, hey, look, you're starting today, and we're obviously 1,400 people. You've got to remember, when we started this company it was Niraj in a room, and then it was five of us in a room together, and then it was 20 of us in a room together, and we knew each other intimately, and we conversed on any level about anything. We still want to have that culture today. Anyone here is totally accessible. Feel free to reach out to anyone. Just keep that in mind that that's where we come from, and that's what the mindset we want to have this place be.
NIRAJ SHAH: People say, oh, what kind of people do you hire? We basically say we try to hire people who are bright, people who are hardworking, people who are analytical, and people who are team oriented. And they say, OK, why those things? You say, well, those are actually the things we don't know how to teach anyone, those things. So they either have them, or they don't have them. If they don't have them, we have no confidence we can teach it to them. We actually believe we can teach them anything else about our business, so we actually care a lot less about subject matter expertise. We just care about getting great people.
And so we kind of covered this, but this is just sort of-- for business partnerships to work, I think you've got to be aligned around what your goals are, and you need to treat it like a marriage where there's going to be good days and bad days, and getting hung up on small things is generally you regret that. And my wife will tell you I'm still getting better at it, and I'm not great yet.
STEVE CONINE: And she'll tell me this, too.
NIRAJ SHAH: But you know, we've only been married for 10 years, so I still have a long time to learn. I still have a long time to learn, and Steve always jokes about how his lifestyle is a lot healthier than mine, but he's more likely to die in the next 10 years than me. So we got that.
STEVE CONINE: Ridiculous.
NIRAJ SHAH: We're going to wrap up with something fun, and then we'll take some questions.
STEVE CONINE: So the last thing-- we definitely have learned that getting in front of a large crowd and personally embarrassing yourself is a great way to build a great culture in a company. We've done these quarterly videos inside Wayfair for the last couple years now that are kind of spoofs, but they're things where our culture kind of shows through in these, and so we put together three short little clips from different Wayfair videos that we've done that we thought we'd share with you guys for fun. So I'm not sure. Do I push this to make the video roll.
NIRAJ SHAH: I think these guys will probably roll the video.
STEVE CONINE: These guys? OK.
NIRAJ SHAH: I think it's a separate file.
-Selection can't save you now, Niraj. Looks like you could use a hand. What the f-- don't worry. The two of us can. Ugh. He hits really hard. Say goodbye to your server [INAUDIBLE], Steve.
-So some potential investors call us up. Yeah, what's popping?
-Hello, Niraj. Yo, we got two warehouses. We got two day shipping. I'm practically the best home furniture guy in the business.
-Tell them our engineering is the bomb.
-Sometimes they forget the most important part of our business. We got night clubs. We got liquor. We got weight sets.
Sir, you have--
-That's how it's done.
-(SINGING) It's the most stressful time of the year, standing in line, waiting for the cashier. Can't find what you want? Don't despair. You could be shopping on Wayfair. Want the best stuff for your holiday? Shopping all day leaves you no time to play. Rather stay home in your underwear? You could be shopping on Wayfair, where our great service shows that we care. Come check us out. We don't mind if you stare. Decking in your house like a millionaire. You could be shopping on Wayfair.
NIRAJ SHAH: The fellow who's naked there was also on our freshman year floor. He's our VP of product. We've worked together for 18 years, as well. He's another Cornellian. So if we have time, maybe we could take a few questions.
SPEAKER 1: Awesome. Thank you, guys. Thank you so much.
NIRAJ SHAH: And there's seven or eight videos on YouTube if you're interested later. You can check them out.
STEVE CONINE: If you want to waste time.
NIRAJ SHAH: The channel is called the real Wayfair, I think. And you could actually see our television commercials, as well, if you want.
SPEAKER 1: So there are a bunch of questions that I saw on the social interwebs, and then here's one that one person's asking here, OK, well the inevitable Amazon question here. So what are your thoughts on outside pressure for-- or no, was that Batman villain in the show-- is that Amazon? And how do you think about outside pressure from competitors in your space?
NIRAJ SHAH: So Amazon is obviously a physical goods ecommerce. Amazon's a huge force, and so that question comes up a lot. We actually think home is a pretty different category. The two categories that we think are sort of fairly distinct from a lot of categories where Amazon's great are home and apparel. Now, we don't sell apparel. We just focus on home, but home has this element where there's style and inspiration that play a big role. It's visually shopped. There aren't really brand names that you know when you think about furniture, and decor, and lighting. And frankly there's an emotive piece to it that we think we're pretty good at, and then the last piece is selection.
We offer a selection of seven million items, and it's very hard to use Amazon's distribution model for the items we sell. The example we always use is the paper towel market in the US is a $7 billion market with about 50 SKUs. The lighting market in the United States is a $7 billion market with about half a million SKUs, and everyone wants a different chandelier. We have 20,000.
SPEAKER 1: So it's really a different business model. So there's another question I saw about bootstrapping for nine years. So I also had an experience of bootstrapping for five years, not nine. What were some of the costs and benefits of making that decision, and as you recall, what are the gains and losses of making a decision like that?
STEVE CONINE: It really keeps you honest, I think, to yourself, because it's basically you're making a decision every day on what's vitally important, and it kept the culture very honest, too, around this is my money. I'm spending-- we would make a point, look, if you want to buy this server, that's fine, but half of it's coming from Niraj. Half of it's coming from me. And it creates a culture where people-- you want people who are making decisions in a business to think about it the same way they'd think about if it was their personal decision. And when you're bootstrapping it, it's so it's so close to being your personal decision that it's easy to imbue that into the culture of the company, and you end up with a team that just, I think, makes smarter decisions as a result if they think about it that way.
NIRAJ SHAH: Not having money obviously helps you be-- you really care about where you invest. So it forces you to make really-- you've got to pick your spots, and I think that kind of focus generally helps a start up, and I think you can sometimes get too much money. You start trying to do too many things, you're not actually doing each one well. So I think that it's worked out really well for us. I think sometimes a disadvantage of being bootstrapped could just be if you have well financed competitors who actually put the money to very effective use that could potentially make it more challenging for you, but frankly we had competitors who were fairly well financed, and in the end, we've ended up becoming a leader, so it's worked out for us.
SPEAKER 1: And I guess that pain of seeing the declining cash balance-- it really makes you understand the granularity of your business, and if you don't raise money too quickly, you don't risk ever being incentivized to do something you don't love. It sounds like you guys are always having fun, and this was part of the culture from the very beginning people. People were there for the right reason.
STEVE CONINE: Yeah, it's very much a work hard, play hard-- play too hard sometimes-- culture.
SPEAKER 1: Can you play too hard? So what is another question here? How and when did you have that first conversation about establishing your company culture?
STEVE CONINE: Wayfair-- I think it was just a given. I remember getting into Wayfair. We had just come off of-- well, we started a professional services business, which was it's 100 week plus job. Everyone's got your cell phone. If a client is having a problem, it's a major problem because you only have three of them. We then started a company that didn't do as well in the mobile phone space, got out of that business. When we started this business, we were very both deliberate around we want a business that's going to be we're going to be in this for a long time. It's going to be a marathon. We've got to set it up in a way where we love coming into work, but we're both starting to get married. We're starting to have kids, and we want to have a culture that can come in, work 50 hours a week. That is an extremely focused amount of time. Go home, rest, get some sleep, and you're so much smarter when you're rested, and you're thinking, and you're sharp. And we just very deliberately from the get go set it up around that, and we live that lifestyle. And then obviously everyone who has joined us would see us doing it that way, and it became the culture of the business.
SPEAKER 1: So far sleep is becoming a competitive advantage of the tricks of the trade here.
STEVE CONINE: Hey, sleep is awesome, yeah.
SPEAKER 1: And a follow up on that is so you started working together at Cornell, and we have people in the audience who actually lead Cornell from the academic side of things. What does a university do to make more of these stories happen? What can they do support this sort of thing to actually happen?
NIRAJ SHAH: I remember for-- we went to college a while ago now, but at the time, the only entrepreneurship course was the one we took. I know there's a lot more now, and so I think that availability of those courses I think is very helpful, but I think things like the ELAB, things that provide folks who have a lot of energy and desire, and they have an idea, but they've never done it before. I think any of those constructs I think go farther, and then I think the last thing that just helps a lot is when there's a culture where that's something that's viewed as a positive thing, and it's an exciting thing versus getting the job at McKinsey would be the most positive thing, because I think there's some tension there, and a lot of people are looking to make a good decision. And I think if entrepreneurship is viewed as, if that's for you, that's a great decision. I think that goes really for. So I think those would be the things that pooped in mind for me.
SPEAKER 1: One last question here. So I know a lot of folks here are actually starting businesses, and many people have co-founders. What is, especially in the early stages when you have just disagreement about all sorts of things-- what would be your quick pep talk to a co-founder who is trying to resolve a disagreement as the odd couple that's stuck together for so many years?
NIRAJ SHAH: I think through one other thing that really works well is when co-founders have complementary skills. If they're too overlapping and they both effectively want to put the same role the company I think that gets to be a challenge. If they are complementary, I think that can work very well, but I think then what you need to do is trust each other in their areas of expertise, and I think most issues get resolved that way. And then on occasion, yeah, you've got to hash things out, but try to do in a way where you listen, and you debate it, and then you do make sure you drive to a decision fairly quickly. You don't let things linger.
SPEAKER 1: Got it.
STEVE CONINE: Yeah I would say I definitely am more of the hot headed side of the couple in the relationship. Niraj is much more calm and collected. I think my pep talk would be you've got to remember he's always got your best interests in mind, and an even though he's telling you something that you just slaved away for the last two hours, or whatever-- two weeks building out this amazing new piece of code, and you come in and show it to him-- he's like, oh, that's crap. That will never sell on market. Don't let that get under your skin. He's got your best interest in mind. Likely right. Don't get heated up about it and get back to it with each other, because you can make each other much more successful as a pair than you can on your own.
SPEAKER 1: So the trust component, I guess.
STEVE CONINE: Absolutely.
SPEAKER 1: When you're picking a co-founder and you don't know what it will be like to go through life with them, if you can trust them, I guess that's a good place to start.
STEVE CONINE: Absolutely.
SPEAKER 1: Than you both.
NIRAJ SHAH: Thank you.
STEVE CONINE: Thank you.
SPEAKER 1: Absolutely.
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Wayfair.com co-founders Niraj Shah '95 and Steve Conine '95 take turns telling the audience about the other -- sharing their strengths in business and their leadership styles while at the same time poking a little fun at themselves as leaders -- at the second Cornell Entrepreneurship Summit NYC on October 11, 2013.