OfferUp Inc., a smartphone app to connect buyers and sellers of secondhand goods, is revealing details about its business for the first time, amid discussions with investors about new funding for the four-year-old company.
Chief Executive Nick Huzar said OfferUp has arranged $2.9 billion in transactions so far this year, the estimated value of goods users reported selling through the app.
That’s small compared with established sites such as eBay Inc., which said users sold items valued at roughly $60 billion in the first nine months of this year. OfferUp’s total is also likely dwarfed by Craigslist, the dominant player in local classifieds that does not disclose financial data.
But investors believe OfferUp could grow into a challenger to those larger sites. Andreessen Horowitz, Coatue Management, Tiger Global Management, T. Rowe Price and others have poured $90 into OfferUp, valuing it at around $800 million in its most recent funding round in March, people familiar with the matter told The Wall Street Journal last month.
In recent weeks, OfferUp has discussed raising additional funds, according to people familiar with the matter. Mr. Huzar wanted investors to value the company at around $2.5 billion, but offered to lower that value when investors balked, the people said. It is unclear whether OfferUp is moving forward with the new funding round.
“We are always having conversations with investors,” Mr. Huzar said in a statement. “What you are suggesting is not reflective of those conversations.”
The pushback from investors reflects wider concerns about highly valued startups. Companies including local-services website Thumbtack Inc., used-car seller Beepi Inc. and e-commerce startup Jet.com Inc. have all scaled back their ambitious valuation expectations during recent attempts at fundraising.
OfferUp’s current valuation of $800 million is impressive for a company with no revenue. Mr. Huzar said the site could eventually make money by enabling payments over the app, but said he has not yet committed to a business plan and is concentrating on making the service easier for buyers and sellers.
“Our focus is to remove as much friction as we can from the buying and selling process,” he said.
Jeff Jordan, the partner at Andreessen Horowitz who led the firm’s investment in OfferUp, said he has discussed potential business models with Mr. Huzar but is not pressing the company to make money. He compared OfferUp to image-sharing site Pinterest Inc., another company where he invested, which raised hundreds of millions of dollars in capital before it began selling advertising.
OfferUp was founded in 2011 by Mr. Huzar and Arean van Veelen, two new fathers who wanted a place to buy used goods from trusted online sellers. Unlike Craigslist, the site verifies the identities of its sellers. It also lets them easily upload photos and descriptions of their items-for-sale using a mobile app.
OfferUp is the latest in a long line of upstarts that have tried to displace Craigslist, the 20-year-old online classifieds site that remains a top destination for local commerce, despite few changes over the years. Craigslist charges for job listings, apartment-rental offerings and automobile ads in certain cities, but generally doesn’t profit from most of the transactions it helps facilitate.
Rival classifieds sites have succeeded outside the U.S., including China’s 58.com, Latin America’s OLX, and Russian’s Avito, which sold a controlling stake last month to South African media giant Naspers .
Some analysts think there is room for a challenger. “Craigslist hasn’t kept up when it comes to offering a mobile-first experience,” said Abid Chaudhry, senior analyst at research firm BIA/Kelsey.
OfferUp is also racing against two venture-backed rivals focused on smartphone users in North America. VarageSale, based in Toronto, has raised $34 million from investors including Sequoia Capital. LetGo has raised $100 million from Naspers.