Threadless is a community-centered T-shirt design site started in 2000 by Jack Nickell and Jacob DeHart. It’s called “Threadless” because it started as a thread on the Dreamlist message board. Dreamlist was a place where designers could exchange information, and in November 2000, Nickell hosted a T-shirt design contest and let fellow designers pick the winner. The contest was such a hit that Nickell and DeHart decided to move it off the Dreamlist message board for the purpose of creating a Web site where future contests could be hosted.
Threadless was run as a hobby for most of 2001 through 2003, until Nickell and DeHart quit their jobs to start a Web consultancy firm and focus more intently on Threadless. The income they earned from Threadless quickly overshadowed what they were earning from the consultancy business, so in January 2004, they started focusing on Threadless full time. The way Threadless works is that designers submit T-shirt designs to Threadless, and members of the community score them on a scale of 0 to 5. The Threadless staff then picks the 5 to 10 best designs, and the shirts are printed and offered for sale. The designers who are chosen receive a cash prize and store credit. Threadless makes money from the T-shirt sales.
Threadless grew quickly. In 2005, it sold over one million T-shirts—all designed by the Threadless community.
Nickell and DeHart were experiencing difficulties managing the growth. The firm’s back-end operations were the main problem. Orders weren’t going out on time, the Threadless Web site was down intermittently, and some months the company would max out the amount it could process through its merchant account and would have to stop taking orders. Worst of all, in 2005, T-shirts that were ordered in anticipation of Christmas weren’t delivered until the following January.
Rather than collapsing under the weight of these problems, Nickell and DeHart took bold action. They sold a minority interest in Threadless to Insight Partners, a venture capital firm. They could have hired a consulting firm with operational expertise, but wanted a partner that would have a long-term interest in Threadless’s success.
Insight Partners turned out to be an ideal choice. At that time, Insight had a program called Insight Onsight, where it would send personnel to evaluate its portfolio companies’
operations. Insight sent personnel to evaluate Threadless’s back-end operations and make recommendations.
It moved Threadless’s Web site to a new host, which was better equipped to help Threadless scale its Web site traffic and sales. It also helped Threadless improve the functioning of its warehouse and fulfillment operations. Threadless’s problems were smoothed out and it moved forward. It hasn’t experienced significant technical or order fulfillment glitches since.
Today, Threadless is receiving about 1,500 T-shirt designs per week, and its staff picks the top 10 T-shirts to sell. Each designer selected receives $2,000 in cash, a $500 gift certificate, and an additional $500 for each reprint. The success of Threadless’s business model and growth strategy has led to several spin-offs, which advertise themselves as the “Threadless” of their industry.

Questions for Critical Thinking
1. Do you think Threadless would exist today if Nickell and DeHart hadn’t taken decisive action in 2005 and brought Insight Partners into the company as a strategic investor? Why or why not?
2. Why do you think Nickell and DeHart wanted a strategic investor to help Threadless work through its operational problems rather than hire a consulting firm? Hiring a consulting firm wouldn’t have required Threadless to surrender any equity.
3. Name at least two companies that are using crowdsourcing business models, similar to the model that Threadless pioneered in the early 2000s. How are the business models and the companies behind them performing?