Used TV Prices are Too High!
Priceonomics investigates the scourge of modern society - the inflated prices of used televisions.
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Priceonomics Raises $1.5 MM, Users Unfazed
Priceonomics just raised $1.5 MM in seed funding. Raising seed capital isn’t a triumph by any measure, but we’re enormously grateful we get the opportunity to build something we love. We get to go on the journey to build the definitive price resource so that no one gets ripped off ever again.
We raised the money from SV Angel, Spark Capital, Andreessen Horowitz, CrunchFund, Crosslink Capital, Y Combinator partners, Michael Ovitz, top angels like Joshua Schachter, and early Google engineers. TechCrunch has the full announcement here.
It’s a little awkward announcing our funding, because what’s the point really? None of our users noticed when the money hit our bank account. We decided this announcement could be useful for two audiences:
- Engineers who want to join our team, or
- Other entrepreneurs who could benefit from our observations from raising money for the first time (or at least find it interesting)
So, here we go - a quick note to engineers and then our experience raising money for the first time.
Quick Note to Engineers and Hackers: If the idea of algorithmically cataloging every washing machine ever made and then determining their fair market price appeals to you, join us! We are a happy clan that relentlessly structures data and makes information digestible.
We’re hiring! Email omar@priceonomics.com or check out our jobs page.
Onward, what we learned raising money
To entrepreneurs and startup voyeurs, here’s what we learned raising money for the first time. We’re trying not to present any advice, but instead just present some observations from our limited and idiosyncratic experience.
1. We tried to follow Y Combinator’s advice to minimize time fundraising and get back to work. Our goal was not to die from lack of funding or die from losing focus on the product. All $1.5 MM was committed within 10 days of YC demo day. Once we hit that number, we got back to work on the product. When we were fundraising, it was actually hard to work on the product.
2. Commitments are important, but money in the bank is better. Logistically, there are still a lot of steps from a verbal yes to money in the bank. One of our co-founders (Michael) was designated “the closer” to make sure the deals formally closed and he dominated that role.
3. The first money is important. It seems unlikely anyone will give you any money until someone actually gives you money. If we noticed any hack in raising money, it is get someone to give you money first. SV Angel was the first investor we talked to and they offered to invest and set the basic terms. They were enormously helpful and we’ll always remember how important they were for us.
4. Our legal bill was $0. We used the standard YC documents and the platform clerky.com to handle all the paperwork. We also leaned heavily on YC’s in-house lawyer, Jon Levy. Thank you Jon!
5. Even when you’re able to raise money from awesome investors, it still feels like you’re failing. For every Andreessen Horowitz that tells you they want to invest, 3 investors give you the cold shoulder that same day. We raised $1.5 million in 10 days and pretty much the whole time we didn’t feel very good.
6. Inbound leads close, outbound leads don’t. Almost all investors participating in our round round contacted us or requested an introduction to us. Conversely, when someone told us, “Oh, you have to meet Investor X”, Investor X typically didn’t seem that interested in meeting us unless it was their idea originally. If there’s a second hack in the process, it’s to generate inbound interest in your company (which is a difficult hack to figure out).
7. ~$500,000 of the capital we raised were from people who cold-emailed us at “info@priceonomics.com.” Check your company’s public-facing email address!
8. Very few investors tell you “no”. Overwhelmingly, they just never email you back, even after they were the ones initiating the conversation. If they do tell you no, their reasons are often weird or cryptic.
9. People who invested in our round told us yes very quickly. No one who stalled on deciding ever came back with a yes. Investors that were engineers decided particularly quickly. On the other end of the spectrum were VC funds (except the ones that invested in our round, we love you guys!).
10. Deadlines and scarcity helps close investors. One of the biggest benefits of YC Demo Day is you get to simultaneously talk to many different investors who know they could miss out on the deal if they don’t decide quickly. If the process of talking to investors was purely sequential, it seems like they’d all just want to be the last investor you talked to.
After we got funding, we went a little bit nuts with the expenses.
Finally, an enormous thank you to the partners and staff at Y Combinator. It’s impossible to overstate how hard they worked directly on our behalf and how earnest they are about doing the right thing for their companies. The program lets you spend nearly 100% of your time working on the product, and then at the end creates inbound interest from investors for your company. Among the reasons this works is because everyone at Y Combinator puts so much effort into pulling it off.
It’s hard to go through Y Combinator and not feel optimistic about the human race. It’s also hard to not feel like you have a lot of work to do.
So, that’s where we are. Back to work.
We are hiring engineers. Comment on this post on Hacker News.
This post was written by Rohin Dhar. Follow him on Twitter here. Get the latest from Priceonomics on Facebook or Twitter.
e-Literacy in America
We just examined what cities in America have the most Kindles for sale to calculate a ranking of the most “e-literate” cities in America.
A Blog Post About Blog Posts
In which we share some stats about past Priceonomics blog posts. How meta!
The Case Against iPhone Cases
We just studied how much it costs you when you crack your iPhone. Do you really need an iPhone case?
Headphones for Programmers
We did a little “study” on what kind of headphones startup founders like to wear while programming.
How to Make It on Craigslist
Editor’s note: The following guest post was written by Ryan Finlay who blogs at www.recraigslist.com.
The scrap yard’s electromagnetic steel excavator picked up my two steel die cast molds and put them on the scale. 1,240 pounds of steel! That meant $179.80 in my wallet for an hour of work. Not bad considering I picked them up on the free section of Craigslist.
I make my living on Craigslist. It’s the only business I’ve ever started that didn’t fail.
My trusty van and trailer delivering the scrap metal.
Just one year ago…
I was 29 years old, unemployed with four kids and a wife, with no money to my name. Some friends were kind enough to hook me up with occasional construction jobs, but the income wasn’t enough for a family of six to get by in Portland. How did I get to a place in my life where one unexpected bill would mean financial ruin for my family?
I love business, but everything I tried to this point was undermined by my own lack of discipline. I once started a CD repair business where I bought a high end machine that took scratches out of CDs, DVDs and video games. It made me some money, but not enough to keep me going. I started a website that sold mini remote-controlled helicopters but only sold one because no one came to the site. Starting a business has always been easy for me, seeing it through has been the problem.
Finally rock bottom and desperate, on Friday December 3rd 2010, I turned to my friends Chris and Jason. From that meeting, we figured out I had a knack for finding deals on Craigslist and that might be something I could make a living from. Most importantly, we decided I would email them every day with a complete record of what I bought and sold, and how much money I made so that I was accountable to see this project through. I started with $200 (money I earned from Jason) and I agreed to target a weekly profit of $500.
Getting started
I spent about 60 hours that first week on my computer scouring Craigslist and driving around chasing anything I thought I could make a buck on. That first week I bought and sold:
$720 in profit that first week. $12/hr, not too bad. I had actually created a business that was working!
What does an average day look like?
I used to scan Craigslist postings early in the morning, especially when money was tight. I did what I had to do, even if the time wasn’t very productive. Over this past year I’ve stopped fighting the slow times and have learned to relax, especially early in the day. On weekday mornings, I’ve noticed that it’s mainly businesses posting on Craigslist. So I workout, run, swim and spend time with my family. Late in the morning I begin searching the site more intently.
The author, ready to pounce on a deal.
I make the bulk of my income on appliances and the free section. I shoot for making between $75-$100 profit per item I buy and these are the best sections I’ve found for hitting that goal. When a good deal gets posted, I call immediately (or email if they don’t post a number). 99% of the time whoever contacts the seller first gets first crack at the item. If it’s a smoking deal, I get the address as soon as I can and I’m out the door.
Then I drive the items home, clean them up, take nice pictures of them (outside with no clutter around is best) and immediately re-post them at a price that will sell the item within a day or two. I also will deliver for a small fee and offer to haul away old appliances for free. Then I repeat the process. I rarely, if ever, drop the price on an item unless there is no interest and I’ve been sitting on the item for days.
1,240 lbs steel die cast molds = $179.80
Advice for others
Buy what you know. Of the 600-plus items I’ve purchased, I’ve lost money twice. Once I called some kid about a pile of old baseball cards. I asked him what year they were and he told me they were 4 years older than they actually were. I looked them up and thought I was going to make some money. When I showed up and looked at the cards, I noticed they were newer than he had told me. I didn’t have my tablet computer at the time and couldn’t look them up, so I drove the price down and took a lesser risk. Back at home I immediately found out the cards were worthless. I had paid the kid $100 for the cards, and eventually pestered him into taking the cards back and trading for an SD card and iPod nano. I still lost around $30 but learned a valuable lesson: don’t take risks on items you don’t know.
Know how Craigslist works. Whoever emails/calls first wins. If it’s free, you need to pick up the item almost immediately. Good free items are spoken for within seconds. Depending on the city, there are hundreds of people sitting around trying to snag free items. Same for cars, electronics, computers, and other highly competitive sections. Good pictures are extremely important, as are clear descriptions. General sections are refreshed just under 10 minutes, sub-sections about every 15 minutes.
Value your time. Figure out how much you want to make each day and break your day into sections. Average profit for items I pick up ends up being $60-$70. I aim to pickup 3 items a day. I’m not worried how many I sell each day because everything eventually sells. When I arrive at someone’s house, I’ll ask if they are selling anything else or giving anything else away in case I can boost my profit per trip.
Selling advice. There will always be someone that will buy your item. It might take another hour. It might take another day. It will sell. If you are getting calls on your item then you probably have it priced right. Remember that you don’t need to sell to the first caller. Or the second. What you need is to make the most money possible on your item.
Buying advice. Ask lots of questions on the phone and be very specific. There’s nothing I hate more than showing up at someone’s place only to find out there is some deal-breaking problem I wasn’t told about. Negotiate over the phone/email or plan on paying full price. When I’m not paying close attention, I make mistakes. Profit is in the details.
Here’s what an actual week of work looked like this summer:
A year into the job I was able to find, purchase and sell these items in a 25 hour work week. By focusing on higher profit items and learning the trade over the year, I raised my hourly income from $12/hr to $38/hr.
My perspectives on the job after a year
Finally, I succeeded at sticking with a business. In addition to being able to support my family, this job has a flexible schedule and I really can do it anywhere there is a Craigslist. I can even work when I’m on vacation in places like Hawaii (where I am right now). I also love the thrill of the hunt!
On the flip side, the week before Christmas I only made $150. Income and hours can be inconsistent and you will come into contact with a lot of interesting people on Craigslist. The other time I lost money at this job, a lady passed counterfeit money to my wife for some tools I was selling. I was out on another pickup at the time. So I lost about $170 that day. 1,200 transactions and only two were unpleasant. I generally set sale prices by trial and error, but now I can use the price guide on this site to make pricing more efficient. The job is getting easier.
I started the year with almost nothing and ended with a used van, a new utility trailer, less debt, fully paid bills and money left to take the family to Hawaii. I’m not sure where this whole thing will end up or what it will turn into. What I do know is that someone can make a very decent living buying and selling on Craigslist alone. I achieved this my first week on the job. After trying lots of things and failing, I feel like I finally made it.
Comment on this post on Hacker News.
This post was edited by Rohin Dhar. Follow him on Twitter here. Get the latest from Priceonomics on Facebook or Twitter.
The Fixie Bike Index
“Messengers are big fixie aficionados, but more and more fixed-gear bikes are being ridden by nonmessengers, most conspicuously the kind of younger people to whom the term “hipster” applies and who emanate from certain neighborhoods in Brooklyn.”
According to our data, Manhattan is actually more hipster than Brooklyn. Short of surveying the snugness of men’s pants in each borough, it’s not an easy assertion to quantify.
That’s where the Fixie Bike Index comes in. At Priceonomics, in order to build our bicycle price guide, we measure what kind of used bikes people are trying to sell and the quantity sold in any city. By mining our database of 1.3 million bicycle listings, we can tell what are the largest markets for used bicycles, how the prices vary by region, and where people who prize fixed gear bikes live.
Fixies (fixed gear bikes) are considered to be a strong indicator of hipsterness. For those unfamiliar, a fixed gear bike requires riding in a single gear and the only way to stop the bike is to pedal backwards to help skid the bike to a halt. You can’t “coast” on a fixie; when you are biking downhill, your pedals will keep moving so you better keep pedaling too. Because of the minimalism of this fixed gear system, the bikes tend to be aesthetically pleasing but somewhat challenging to ride. This enigmatic combination may be what draws hipsters to the bikes, or not.
In short, fixed gear bikes = hipsters, and New York boroughs that have more fixies per capita should have more hipsters per capita. We sampled our data to see the number of used bikes for sale per capita in each borough with the term “fixie” or “fixed gear” in the product title to create the Fixie Index.
To our surprise, fixies are nearly twice as popular in Manhattan than Brooklyn! Moreover, Manhattan is almost 20x more hipsters than the Bronx, and infinitely more so than Staten Island. One might argue that maybe bikes in general are just more popular in Manhattan than Brooklyn, and that’s why there are more fixies per capita there. In fact, the opposite is true. There are more bikes offered for sale in Brooklyn than Manhattan, but only 8.3% of them are fixies versus 9.5% in Manhattan. Of course, if you drilled down by neighborhood you could get a more nuanced picture, but sweeping generalizations are more fun!
The National Fixie Index - Ranking the Most Hipster Places in America
Next, we apply this methodology on a national scale. Which cities are most hipster based on their affinity for fixed gear bikes?
Before we ran the numbers, we were pretty sure the answer would be Portland. San Franciscans (which we are) take a particular delight in being weird, but not being quite as weird as the people from Portland. This seemed like a great opportunity to point out “hey we like these impractical but cool bikes in San Francisco, but we haven’t taken it too far like those misguided folks out in Portland.”
Unfortunately the data did not comply with our desire to tease the people of Portland. In fact, we were shocked to learn that Southern California is the epicenter of the fixie community and that San Francisco is the fourth most popular area for fixed gear bikes. By the fixie metric, it appears that Portland is about as hipster as khaki pants and a blue button down.
Full rankings of all cities available here. Allentown, PA was least hipster place in America.
Southern California also tends to refer to these bikes as “fixies” while the rest of the country tends to use the less silly term “fixed gear bike” instead. Are Orange County and Manhattan actually bastions of hipsterdom? If not, perhaps it’s time to reevaluate whether fixie-affinity should be part of the hipster stereotype.
The Top Cities for Bicycling in America
Of course, we can look at the Priceonomics bicycle data more broadly to find out where lots of used bicycles are sold. Our central assumption is that cities with large and vibrant secondhand markets should be the ones where many people are bicycling enthusiasts. While this assumption is not perfect, it’s better than most rankings of “bike friendly cities” where the rankings are just made up.
First, we look at raw volume of bicycles offered for sale by city to determine which are the largest markets. Obviously, this is biased toward larger cities where the average citizen may only have a lukewarm interest in biking.
Full list of all cities available here.
It’s very pleasing to this author that San Francisco comes in first in this ranking and beats Portland handily. However, the above analysis does not control for population and the Bay Area is much larger than the Portland metropolitan area. Instead, to build the official Priceonomics Rankings of Top Cities for Bicycling, we adjust for population to build an index of how many bikes per capita are for sale in each city (the Bike Index).
Full rankings of all cities available here.
And the winner of the Top City in America for Bicycling is Boulder, Colorado! With its bike friendly road infrastructure, population of college students and nearby mountains, Boulder comes in first for the win. Rounding out the rest of the top four are a trio of Oregon Cities: Bend, Portland, and Eugene. Other observations:
- Oregon, California and Colorado cities dominate the top of the rankings
- College towns like Boulder, Madison, San Luis Obispo, Ann Arbor and Austin have large used bicycle markets
- Really big cities like New York, Chicago, DC and LA aren’t actually very popular with bicycles on a size-adjusted basis
- New Orleans, Baltimore and Houston are the three worst cities for bicycling in a America :-(
Predicting Why Some Cities are Popular for Bicycling
So far, our data has shown there are tremendous differences in cities across America in terms of the size of the bicycle markets. But why? What causes some cities to have large markets for bicycles and others practically non existing ones. Is it something about the layout of the cities, the people in the cities, the government, or the culture?
At first we were convinced that 100% of the variance in bike market size could be explained by the population density of a city. If you live an a densely populated area like San Francisco, bicycling is an efficient way to get around the city. If you live in Los Angeles, getting on a bicycle can’t really get you anywhere. To our surprise, population density has a nearly zero correlation with our bicycle index. If anything, it very weakly suggests the more densely populated the city, the less prevalence of biking.
Cities like Cleveland, Las Vegas and Detroit are are just as dense as Portland, yet their bicycle markets are nearly non existent. What gives?
Next we looked at Education as a predictor of bike market size. We examined the percentage of the population with a college education and how that correlated with the size of the bike market. Education does have a significant positive effect on the size of the bike market. However, it only explains a small amount of the variation we see in bike market size and it’s hard to disentangle what’s really at play here since education usually goes hand in hand with income, age, and the decision where to live.
Looking at the cities with very small bicycle markets, some stood out as being cities that the media frequently sites as being in decline (Detroit, New Orleans, etc). Are cities either busy biking or busy dying? Possibly, but it’s hard to tell.
Growing, well-educated cities tend to have more developed bicycle markets, but our data was unable to completely explain what drives a city to take up biking. Perhaps a liberal arts major would suggest the answer is “culture” or “government policies” and we might be inclined to agree.
The People of Portland are not Actually Bike Snobs
Our final analysis was to examine the median prices of a used bike in each city. Surely, the people of Portland are all riding carbon fiber cruisers or classic italian touring bikes or something imprudently expensive. Freakonomics went so far as accuse Portland of “bike inflation” which is a serious allegation from an economist.
Freakonomics was wrong. The people of Portland just ride regular ole bikes that don’t cost more than any other place in America. In fact Salt Lake City, UT and Asheville, NC lead the charge as being the most expensive used bike markets in America.
Full rankings of all cities available here.
Are these cities more expensive because people buy expensive bikes here or just because prices of comparable bikes are inflated? That’s a topic for another post.
In Conclusion
Despite our best efforts to paint Portland as a bunch of hipster bike snobs, the data simply does not support such a conclusion. The people of Portland just seem to really like bicycles, but not ones that are particularly expensive or difficult to pedal up hills. The same goes for the denizens of Brooklyn, who aren’t the fixie-fanatics they’re made out to be. It seems that American cities that are growing and highly educated tend to have thriving bicycle communities. Perhaps it is because these cities fill its inhabitants with a sense of adventure and optimism to try alternative forms of transportation. Or perhaps in these cities, parking is a pain in the ass.
Comment on this post on Hacker News.
This post was written by Rohin Dhar. Follow him on Twitter here. Get the latest from Priceonomics on Facebook or Twitter.
Credit to Paul Graham for coming up with the idea of the Fixie Index.
