A Product Market Fit Show | Startup Podcast for Founders
00:13:00 · Dane Atkinson
[00:13:00] S0: It’s interesting because we had the same thing in Shopify. Not we, but as part of that environment. They had found that much like we had five modules, when you had a customer make $25 off their website or something like that, then they would really feel fine paying the fee and going forward. Same thing for SumAll, we found out [unclear], five different businesses that we hit a critical value that they would even pay for it because it just hit that space. I think it’s very, very hard if you’re trying to make a trial based off time to know where that psychological point is. In 30 days, in a lot of ways, someone would get all excited. I’m going to sell scarves online. They would work on it for three or four days, and then life would get in the way. Then a month later, they get an email being like, hey, your website’s up for payment. They’re like, oh, I’m going to go back to it in three months when I get a better break. But that first seven days, you’re like, oh, is it working? I can see it. I can visualize it. Actually, your mental attitude was the investment I’m making versus the time I’ve spent is high. Vastly, I can pay now because I can extrapolate a future. Customers who did pay obviously would end up feeling the commitment and that payment as a reinforcement of their energy, and usually more energy in a gift to be more successful. It became 14 days, and 20 days, and 30 days. There’s definitely customers who would continue to invest in that period. But a lot of people just got and they’re like, this is going to always be here mentality and wouldn’t convert. Statistically, and again, this is a while ago and a lot of things have changed in the world, but a couple companies that I help advise now set a similar pattern. You actually will see a spike in decline. It’s a long tail, too. A lot of those customers that wouldn’t buy in 30 days would buy in three months because they come back and be like, oh, I want to do it. Exactly what that threshold is, it’s difficult. Even as an operator, as a business, one of the things that makes a shorter trial really helpful is when you’re trying to test what is driving conversion. If you think your cycle time is 30 days, your iterations are also in 30 days. Let’s promote -- in myday, we launched a WordPress importer. Sounds insane now, but you would move your WordPress content into Squarespace. Did that work?
00:14:58 · Dane Atkinson, Pablo Srugo
Because you couldn’t tell for 30 days because people would just wait out the trial. You’re like, oh, we have to wait to see if that one would work before we introduce a new feature. Having a short trial window and you could just try things and try [unclear]. [00:15:12] S1: It’s a tighter feedback loop, and it makes sense. You’re almost like leveraging momentum. When somebody signs up, that’s when their peak interest. Make it frictionless for them to get some value. Once they get some value, then get them to pay. Then like you said, now they’ve committed so they’re going to deploy more time into it and you get the positive flywheel spinning. [00:15:31] S0: That’s gyms, right? It’s the whole thing. Building habits takes energy, and you have to think about where you want to catch in that cycle. Different businesses obviously have different cycle times, but I would say most of those folks out there in the early stage, especially as you want that iterations to be tight, don’t get long trials If you can avoid it. Try to make that as quickly as you can, because also you’ll also see if you actually have something you’ll pay for it. [00:15:54] S1: Let’s jump now to Odeko, your current startup. In a sense, you stayed in this SMB world. I get that existing theme. You’re going from data analytics to coffee shops. Bridge that gap for me. How do you end up there?
00:16:10 · Dane Atkinson
[00:16:10] S0: Actually, I took back. We sold SumAll, and then we took part of the tech stack team. We had this great partnership with Square and Toast, and those folks, and we started out as geeks. Could we use that data that had usually been invisible inside the industry of brick and mortar because they have less technology, surprisingly, than a lot of other sellers or categories and do something productive with it? We built this, and here’s a great idea. Failed product market fit. We built a predictive model. It used to be called machine learning loops. Now, it’s called AI because it’s sexier. But it was very effective at understanding the future sales that we go to a coffee shop, [unclear] being the early customers of ours, and say like, we know what you’ll sell in a week. We can reshape your ordering behavior, and your staffing, and everything else to utilize that forecast. They loved the idea. They used it. It saved them waste. It made their business better, but it was a fraction of the problem. As we sat there with our customers, the vendors wouldn’t deliver after we put the order in for them to deliver. Or they would come in the middle of business, or they would have reconciliation problems and tons of invoices, or they would steal money. We were shocked because we were tracking the data, how systematic a lot of the industry had to be like, oh, these property bags are $18, and then two months, they’re $23. Who’s checking the invoice? It went to $23 and it was obviously intentional because it happened to all of our customers. It seemed that would be useful in of itself, but the real problem was that they needed infrastructure. Having had the experience of getting excited about software was able to break the VC pressure loop. It wasn’t easy. It was super duper hard, because again as a founder, you come to this thing often with either an idea that you’re fascinated by and you think the idea is it, or you’ve made a promise to your investors that you’re going to deliver on the solution. We had sold some of our most amazing investors on the idea that we were going to bring AI to an ancient industry and make them more efficient. Those would be a pure SaaS, gross margins in the 80 percentile. Everyone loves it.
00:18:19 · Pablo Srugo
[00:18:19] S1: Just for background here, you raised a $6 million pre-seed, I assume, at idea stage, just giving your background, and that was kind of the pitch you delivered.
00:18:26 · Dane Atkinson
[00:18:26] S0: Totally. We were very lucky. The quality of folks, and then they bet on my gray hair, the eighth kind and a lot of machine that I am. That was the vision, and we’d gotten some really good test data that that was having an impact. But it was having an impact that the customers didn’t care about. An evolution I’ve had along this journey was it is much easier to think of a customer, at least for me. Obviously, there’s lots of different ways you go about product. I have a friend who only can do things on spreadsheets and that’s how they figure out the product market fit. For me, if you pick the customer you care about, it makes it easier to look at the problem that you’re solving is successful or not successful without that ownership. When you come into the startup and you’re like, my idea is I’m going to make hats red, you’re screwed. My idea is like, people are getting wet. I need to solve it. You’ll find a way to expand to what actually works. I love the idea and I’ve owned coffee shops. Those people are such amazing humans try to make their neighborhoods better. They’re basically the founders that you guys deal with on a much smaller scale there. They’re trying to make a better world and no one’s helping them. When we were sitting in a coffee shop in a birch down in Spruce Street, and a vendor walked in with a giant new boat and disrupted everything, or we’re sitting at a coffee shop of Joe’s and the barista is like, I got to go. I love talking about the AI, but we’re out of milk. The milk guy didn’t show up and I’m going to run to the deli. I’ll be back in 20. We keep on talking. It’s like, okay, this clearly is a bigger problem than the hat we’re trying to invent for you. You need a raincoat and an umbrella. You need the whole thing.
00:19:57 · Pablo Srugo, Dane Atkinson
[00:19:57] S1: Was that by design that you’re in these coffee shops, by the way? Were you just there watching or you happened to be there on something else and you saw these things happen? [00:20:04] S0: Again, there’s a lot of different methodologies out there. For me, and this is something that I’ve done through all the companies, Squarespace included. We had customers that we were friends with and we answered tickets. I answered thousands of tickets. There are tens of thousands tickets from his time there. You want to stay very close? I have a rule that I have to have coffee and a coffee shop every day and I’m going to talk to a customer every day. Even now, [unclear]. [00:20:31] S1: Every day, wow. [00:20:31] S0: Every day. This industry’s super easy. It’s not as hard. [00:20:31] S1: It’s true, but it’s still I would have thought every week, you know what I mean, like you sell, but no, every day, okay.