1stdibs.com, Inc. Common Stock 17th Annual Midwest IDEAS Conference

Thank you. He is very interesting. Much more interesting than I am, actually. So who is 1stDibs? 1stDibs is the world's leading curated online marketplace for luxury one-of-a-kind items. Our mission, as the slide says here, is to enrich lives with extraordinary design. We've been doing this for over 25 years. Just to kind of give you a feel for how we do it, what we've done, our average order value is a little bit under $3,000, which is about six times higher than the average order value of other marketplaces that are typically regarded as luxury. We've sold over $3.3 billion worth of product to over 1.2 million customers in the time that we've been an e-commerce platform, which is something that I'll get to in a minute.

But I think probably the best way to give those of you who don't have a feel for kind of where the brand or the brand positioning that we occupy, is to tell you a quick story, one of my favorites, there are many actually, about this company. My background is tech, non-luxury, and actually before 1stDibs, non-consumer as well. So I joined 1stDibs, and I was sitting in my office one day, and I looked down and I saw that I got an email from Diane von Furstenberg, the famous fashion designer, and she asked me to have lunch. So I responded and I said, "I'm sure that this wasn't intended for me." There are a lot of sort of variants of David Rosenblatt, and I get emails for all of them all the time.

She said, "No, I know exactly who you are," and I do in fact. It was intended for you. "Why don't you come over," our office was pretty close by in New York, "and let's have lunch." I did, and I showed up at the appointed time, and when I got there, I asked her, "So why did you want to have lunch with me?" She said she had a line, which I think, again, I've always remembered, and I think captures the customer perception of 1stDibs' uniqueness in a way that's probably better than I could do myself, which is she said, "Other than my own, there are only two websites that I truly love. One is Amazon and the other is 1stDibs.

I've met the guy who's doing Amazon, and I just wanted to meet the guy who's doing 1stDibs." Okay, I'll take being in that company. It is indicative of what we represent to people who truly care and love luxury design. Okay. Our history. Like I mentioned, we're 26 years old. We were founded in the Paris Flea Market in 2000, which is the neighborhood in Paris, the sort of design district, for lack of a better word, in Paris. One could say the whole city is a design district. This is the district that's focused on the type of product that this business was launched to put online. I'm not the founder. The founder, Michael Bruno, moved the company to New York shortly after founding it in Paris.

For its first 10 years, the business was run in a way that was very similar to Craigslist, meaning it was a listings platform. He recruited the best sellers of antique and vintage furniture, mostly in the U.S. Those sellers listed items on the marketplace, but there was no e-commerce. The only way to buy was to call or email the seller and then negotiate a transaction off-platform. In 2011, 1stDibs and Michael raised its initial venture round from Benchmark Capital, the Silicon Valley investors. I had a prior relationship with Benchmark, I lived in New York, and I came in as part of that investment, and I've been here ever since. We've had really three primary strategic thrusts since then, which at the highest level still are relevant and kind of define how we think about who we are. Number one was to transactionalize the marketplace.

Like I mentioned, we had been Craigslist. One way to think about it is we turned Craigslist into eBay. We're now a fully end-to-end, e-commerce, online, pure-play marketplace. The second was, at the time that I joined, despite the fact that the company had been founded in Paris, 95% of our supply and 90% of our demand was U.S. only. The market that we operate in is fundamentally a global marketplace. If you're interested in the best design in the world, you don't care where it happens to sit. Number two was to globalize the business.

Number three was to expand the business from the vintage and antique furniture category, which was the only product that we had on the marketplace, into adjacent categories that could benefit from the brand that we had created as a byproduct of our first-mover status in vintage and luxury design. Today, that still defines again, at the highest level, how we think about who we are. We went public in June of 2021. That was at the peak, unfortunately, of the real estate market. Since then, the market has been on a decline and we declined with it. GMV declined for a number of years. For much of that time, we have been Adjusted EBITDA negative. We have corrected now both of those things. Our first priority was to get to breakeven.

We got to Adjusted EBITDA breakeven in Q4 last year, and at the midpoint of guidance for this quarter, it will have been our fourth quarter in a row of Adjusted EBITDA breakeven. So we are now profitable on that basis. The second priority has been to restore growth. There, too, we are a little bit ahead of schedule. We had planned to get to growth positive, and I will explain why in a few slides. In Q4 of this year, we got there two quarters earlier than planned. In Q2, we grew at 7% with an Adjusted EBITDA margin of 6%. At the midpoint of guidance, again, we will grow in Q3, and that is comping a significant cutback in paid. The comps just get easier after that, beginning in Q4. Again, I will explain that in a couple of slides. What is the definition of the business?

We are, in many respects, a classic example of a two-sided network effect marketplace. The supply side is about 6,000 vetted professional sellers of, as I said, luxury furniture, jewelry, art, and some fashion. The difference here between us and many other marketplaces is twofold on the supply side. One is our sellers are businesses. They are not individuals, so we are not a so-called C2C or consumer-to-consumer marketplace. Our sellers are all professional sellers. The second is they are all vetted. It is very difficult to become a seller on 1stDibs. You have to apply, you have to submit photographs. We check your business records, which fairs and other venues you have sold through. We obviously evaluate the inventory and so on, and you only get on the marketplace if you check out on all of those dimensions.

One of the things that I think is an interesting proof point of the benefit of that is that our combined fraud and return rate is less than 5% across all orders. If you compare that to, say, the average across luxury fashion marketplaces, it is roughly for them, roughly in the 30% zip code. The reason why that is lower, there are a bunch of reasons, but the primary reason is you do not get on the marketplace unless you are really good, and there is less reason to return items from sellers like that. The demand side consists of two types of buyers. 70% of our demand is from consumers, mostly higher net worth, mostly female, mostly older.

The balance, 30% of our demand, comes from professional buyers, interior designers, who are to this market what, for example, ad agencies are to the media market in the sense that they buy for a living, they are high repeat purchasers, they tend to be higher average order value buyers, and most of all, they have a significant and deep appreciation for the quality and the differentiation of our assortment. We, of course, record GMV as GMV, gross merchandise value of all products that we sell. Our revenue model is a combination subscription fees that we charge sellers as well as commissions. On a combined basis, our take rate is about 25%. That is commissions, subscription fees, and we do sell some advertising as well, though that is a relatively small percent of the take rate. Did I just go backwards? I did. Okay. I have mentioned a bunch of these numbers, and I will just call out a few that I think are relevant for understanding the business.

I would say, actually, maybe even the most important one here is the zero. We have $0 of owned inventory, meaning we are completely asset light. We never touch the product. Our sellers are responsible for fulfillment. We do create shipping programs that leverage our scale as an aggregator of many sellers, and we allow our sellers and buyers to benefit from both the kind of economics and the service levels that go with that. But we ourselves are not responsible for the physical fulfillment of these items. I mentioned our average order value, which is $2,850. Our median order value is $1,500, meaning not everything we sell is incredibly expensive by the standards of this marketplace.

We have $10 billion of stock value, meaning the face value of all the product on the marketplace is $10 billion, versus the $365 million that we are selling each year. Why the difference? I think part of it is just inherently there is a longer sales cycle in this market than there is when you are selling commoditized products like batteries and so on. On the other hand, we feel like there is substantial headroom to improve the so-called conversion rate, the percentage of visitors that convert into buyers as well, even without growing that $10 billion of stock value. So while there is a significant opportunity to expand the amount of supply that is on the marketplace, we are not dependent on that in order to be able to sustain our GMV growth. Okay. I mentioned that at the inception of the company and for over a decade, we were all furniture all the time.