Sneaker “stock market” co-founded by Dan Gilbert rockets to success.
In his 20s, Dan Gilbert announced a reason for his success: fun. “I’ve just always enjoyed going on to the next goal and achieving the next plateau,” he said in a 1990s story in Crain’s Detroit Business.
As of this month, a new mountain can be declared in Gilbert’s extensive business topography. StockX, a startup he co-founded and incubated with Josh Luber and Greg Schwartz — which launched just about 30 months ago — has raised a $44 million funding round, co-led by two of the nation’s most distinguished venture capital investment firms, GV (formerly Google Ventures) and Battery Ventures, the JN reports with approval of the company.
This infusion of capital values the business well into the hundreds of millions of dollars. Even adjusting for inflation, the business has grown its value quicker than many of the most noted businesses in the nation — from GM to Dow to Nike — during their early chapters.
StockX, which markets itself as “The Stock Market of Things,” creates a virtual marketplace for consumers to buy and sell actual sneakers; often these are limited-edition, in-demand and sought-after items. The company has a process to check the legitimacy of each item to ensure the transaction is authentic, a key part of its business model, which is done through four operations centers. The business also has created a price guide based on the data and analysis of these collectible items to offer real-time information to its customers and greater transparency to the sneaker marketplace.
That Adidas Yeezy Boost 350 V2 Butter your neighbor down the street wanted? Bidding is live now and starts at $258. The Converse Chuck Taylor All-Star edition you’ve always desired is being offered in real time, with bids starting at $135. It’s not uncommon to see some collectible sneakers bid in the tens of thousands of dollars. The “Nike Air MAG Back To the Future (2016)” is currently seeking $30,000.
You can use the marketplace to both purchase items and offer ones you own for sale. This original sneaker ecosphere has quickly grown into a sizable business, raking in well more than $2 million in daily sales.
“Now is the time for potential entrepreneurs to move here because of the access to capital and the chance to be impacting something bigger than just one’s day-to-day business.”
— Greg Schwartz
The company is based almost entirely in the city of Detroit, yet most of the region has not heard about it. StockX is taking a 10 percent fee on each transaction. Do the math: That’s hundreds of thousands of dollars coming back to this One Campus Martius-headquartered venture, day after day.
The StockX business model is rarely seen in the Midwest economy, yet the company proved early that not only can the business be centered in Detroit, but it can also have almost all its employee based here.
Its four operations centers are in Corktown; Tempe, Ariz.; greater New York (with plans for growth); and just outside of London, England. There is a small office in London as well. Most of the 400-plus employees hired during the last three years are well under age 40 and live and work in the city of Detroit. The company is predicting an employee base around 1,000 by the end of the year and an annualized revenue run-rate well in excess of $ 1 billion.
Genesis Of StockX
The roots of StockX began when Dan Gilbert, observant of his son’s interests, had the inkling of an idea to create a sneaker stock market. Gilbert asked serial entrepreneur Greg Schwartz of Bloomfield Hills to take the lead on this effort. Schwartz, current company COO, was thinking of a move at the time to the West Coast but saw this as a once-in-a-lifetime opportunity. He bet on Detroit when the region’s economy was causing many of his peers to flee.
“Despite challenging economic times,” Schwartz commented in September 2011, “I believe there is a very strong future for Michigan business.”
Since then, the lifelong Temple Beth El member has developed multiple ventures in the community, including Mobatech (while he was in school) and later UpTo, a mobile app around events that was funded by Detroit Venture Partners.
The native Detroiter graduated from Birmingham Seaholm High School in 1999 and received a bachelor’s degree in computer engineering from the University of Michigan in 2003. Schwartz couldn’t be more “proud, excited or humbled” to be a fourth-generation Detroit entrepreneur, working day-to-day not far from where his prior family members worked Downtown. He follows his father Mark, his grandfather Ernie, who just turned 96, and his grandfather Albert.
Schwartz and his wife were both raised in close-knit Jewish families, and Schwartz remarked on the deep importance it is to be close to the people they love in his hometown.
It was Sept. 3, 2016, when Schwartz realized StockX was a stand-out in the local startup scene. Prior to that, the company had 40-60 sneaker sales a day. Yet, on that day, they did a few hundred sales. They did more sales that day than they expected for many months because of the success of a certain model of the Air Jordan “Bred” sneaker.
Comparing the startup community in Downtown Detroit over the last five years, Schwartz said, “It is night and day. I started working Downtown in October 2011, when the startup community was just taking shape. More and more young people today are choosing to live, work and stay in the city. I think, over the next five years, we will see more and more young talented people come to the city.
“I love seeing all the energy that is Downtown — new restaurants, new developments and new retail establishments launching regularly. Now is the time for potential entrepreneurs to move here because of the access to capital and the chance to be impacting something bigger than just one’s day-to-day business.”
Shortly after Gilbert brought Schwartz into the idea, they realized they needed more than just business, e-commerce and technology expertise. They needed an expert in the sneaker culture and they found that in Josh Luber, 40, who became a co-founder of the business and its CEO.
It’s part of a remarkable story of the business that Luber wanted to create the exact type of marketplace that Gilbert was envisioning at the time. Luber, a native of Philadelphia, had an earlier business called Campless, which focused on data for sneakers, similar to what the Kelley Blue Book offers for automobiles. There was also a blog akin to “Freakonomics” about the economics of collecting sneakers.
Today, at StockX, Luber is most focused on human capital — on building the right team and how best to scale the people side of the business. He also works on public relations and investor relations, with investors ranging from noted entrepreneur/investor Steve Case to Eminem, who joined a funding round in early 2017.
“We’ve been very fortunate to have Dan as a co-investor. We’ve never had to worry about money or runway,” Luber said, referring to the money they have readily available and that they were not pressured to raise more capital too soon. “This most recently announced round includes a further commitment from Gilbert and a half-dozen other strategic investors.
“We never intentionally set out to get the biggest names involved; it happened organically, many just started helping.”
Gilbert, founder and chairman of Quicken Loans and Rock Ventures, and chairman of the Cleveland Cavaliers, told the JN, “StockX is redefining eCommerce as we know it — a platform of ingenuity and serendipity, with first-of-its-kind market-leading technology built in Detroit.
“StockX is a classic example of a company (and there are many others) that is keeping young talented Detroiters at home, but also attracting talent from all over the world, while at the same time experiencing hyper-growth,” he added. “We are continuing to invest in more of these technology-centric, talent-attracting companies that will add to the momentum taking place in Detroit.”
Josh Levine of Huntington Woods has known Luber for a little more than three years. He remembers their first dinner meeting well, as it was right after Luber moved here.
“Josh walks into our house and immediately had to excuse himself to take a call,” Levine said. “He disappeared into one of our rooms for 20 minutes or so. It turns out he was in the last stages of finalizing his new business deal for StockX — and this was about 10 minutes after just meeting Josh for the first time.”
Luber, who received a BBA, MBA and law degree from Atlanta-based Emory, lives with his wife, 6-year old daughter and 3-year-old son in Birmingham. When he and his wife have a spare moment, they are exploring synagogue options for their family.
Levine points to Luber being a voracious worker as a key attribute that sets him apart. “It’s clear he absolutely loves what he’s doing and spends most of his waking hours thinking about and executing on how his business can be more successful,” Levine said.
“Josh shared with me on multiple occasions his vision for his company and, in a very short time, that vision has become a reality and so much more. There were many times that my wife, Shayna, and I would go out with Josh and Patricia and, after the evening was over for us, Josh was heading back to his house to put in a few more hours on the business.
“Josh turned a hobby and a passion into a wildly successful business,” Levine said. “He combined creativity, common sense and foresight to identify a massive disconnect in a marketplace most of us never would have considered.”
Drawing Young Talent
Behind the massive growth of the business are stories of young adults in their 20s and 30s who can now live and work in Detroit and be a part of a growing tech opportunity. One such example is Josh Sklar, who is 27 and lives Downtown. Sklar joined StockX as its 21st employee on June 20, 2016. He works on the technology side and was drawn to the big idea being furthered, the greater transparency it is offering to customers and the chance to be involved with a tech upstart with a strong team behind it.
“Everyone has a mentality to get things done,” Sklar said. “It’s contagious and it’s evident.”
While Sklar was originally nervous about the social network he’d have Downtown, he began to thrive as soon as he moved to the city. He sees an involved and tight-knit Jewish community. He lists Chabad in the D as one of his favorite Jewish communal resources. He has regularly hosted its events and is drawn to the welcoming approach of the Pinson family to engage all in Jewish-related events.
To a peer considering a move today, he says he’d suggest they absolutely do it. “There’s a growing, developed Downtown atmosphere. You’re missing out if you don’t.”
Sklar restated one of his favorite quotes, from Sheryl Sandberg, when he thinks of the opportunity with StockX and the chance to live and work in Downtown Detroit: “If you’re offered a seat on a rocket ship, don’t ask what seat. Just get on.”