David Kalt founded Reverb.com, a Chicago-based online
marketplace for musical instruments, after taking an
online stock-trading company public. A huge leap? Not
really. The two businesses are more similar than you’d
This Company Rocks
I PICKED UP GUI TAR IN HIGH SCHOOL, in the suburbs of
Detroit, and really fell in love, but I realized I’d never be
a virtuoso. After college, I went to Chicago, where I got
a job in a recording studio. Working with computers in
that job led me into software.
IN 2000, TWO PARTNERS AND I launched OptionsXpress, an
online trading platform. We took the company public in
2005. Before that, when we sold some shares to a private
equity firm, I felt I needed to treat myself to something.
I bought a guitar, a ’ 63 Fender Stratocaster, for $7,500.
Maybe it was a sign of what I really wanted to be doing.
IN 2009, I BOUGH T THE DOMAIN reverb.com. I wanted to build
a site where musicians could buy new instruments. But
when I called Gibson and Fender, they said, “You’ve got to
have a store.” ( They really believe in the showroom model.)
I decided to shelve that idea and figure out how to buy and
sell instruments. I’d bought my Strat from the Chicago
Music Exchange, which has all these rock-star clients like
Tom Petty and Je; Tweedy. I thought the store was so
cool. I called the owner, and he agreed to sell for $8 million.
I HAD NO EXPERIENCE running a retail store: having a key
and opening up in the morning, dealing with retail sta;,
dealing with customers from behind a counter. I spent
two or three years buying and selling guitars, working in
the repair shop—just learning the business. I realized I
had to build a better marketplace than eBay for musical
instruments. Not a store—a marketplace.
I FUNDED THE LAUNCH of Reverb.com. I thought it would be
In 2015, we raised about $30 million in venture capital.
a $50 million or $100 million business—fun. Nine months
in, I realized this was a bigger opportunity and raised
some family-and-friends money. Rick Nielsen, from
Cheap Trick, invested. So did Brad Paisley and Eric Ries.
THERE ARE SIMILARI TIES between stocks and musical
instruments. When we started OptionsXpress, stock
exchanges were set up primarily for institutional
traders, so we did things to get more people to participate. When we started Reverb.com, musicians were
getting 50¢ on the dollar when they sold something and
paying 100¢ on the dollar when they bought something.
By cutting fees and o;ering more information about
comparable sales, we’ve narrowed that gap—and
gotten millions more instruments on sale.
GOOD S TOCKS RETAIN VALUE over time or go up. So do
most musical instruments. This isn’t buying and selling
doohickeys that lose all their value. New inventory
depreciates 10 or 20 percent after
you buy it, but its value holds after
that. Once it becomes vintage, its
value goes up. It’s this huge market
that gets better with age—there
aren’t many like that.
AROUND TWO YEARS AGO, we
launched a marketplace for music
lessons. It didn’t really work. Music
lessons weren’t in the DNA of our
platform: It’s not built for things
like scheduling, goal setting, or
controlling instructor quality. We’re
launching a subsidiary that sells
used vinyl records. That has more
in common with what we already
do—it’s about discovery, making an
o;er, and customer service.
I STILL OWN the Chicago Music
Exchange, but I brought in a
CEO about a year and a half ago
so I could focus all of my energy
WELL, MOS T OF I T. I play guitar at
least an hour a day.
Number of sellers
market for new and
The highest price
paid for an item
a 1960 cherry
sunburst Les Paul
countries in which
has been bought
INC.500 ; TECH
Photograph by Lyndon French
DAVID KALT Reverb.com ; Three-year growth ;;,;;;.;; 2016 revenue ;;;.; ;;;;;;;