A Product Market Fit Show | Startup Podcast for Founders
00:22:18 · Pablo Srugo, Dane Atkinson
[00:22:18] S1: How many people were on the team more or less back then, like 10, 15? [00:22:22] S0: No, probably like 30 at that time. I’ve taken like 15 chokes. Another benefit of being around the block is you can get a couple people that join in yet again. Actually, we made this adjustment during COVID, which is super fun, because our industry died simultaneously to figure out a big model. The way I actually got the model through was just did it quietly, didn’t make a big deal out of it. Told the board I was thinking this worked and I just went and got a truck and got a space with one of our customers. They gave me their keys and I started driving around. Then we got a lot of other people and a lot of our team actually helped. We used our office as a warehouse, and I think the team mentioned something. We carried like 10,000 gallons of Oatly up into our little office space because we’d run out at night. [00:23:06] S1: You decided to take over all of the supply logistics part of the back-end, let’s say, of running a coffee shop? [00:23:13] S0: Yeah, because again, what we realized that coffee shops needed is that they wanted to be part of a franchise without being part of a franchise. That they needed to have the same support that the manager Dunkin’s has, or the manager at Starbucks has with the fact that they actually care about their customer. To do that, Dunkin’s not running to the deli for milk. They got a truck that comes by and loads them up. Again, the VCs try to protect us. They’re like, oh, just use the 3PL. Do anything to get. Don’t touch the truck.
00:23:13 · Dane Atkinson, Pablo Srugo
[00:23:13] S0: Yeah, because again, what we realized that coffee shops needed is that they wanted to be part of a franchise without being part of a franchise. That they needed to have the same support that the manager Dunkin’s has, or the manager at Starbucks has with the fact that they actually care about their customer. To do that, Dunkin’s not running to the deli for milk. They got a truck that comes by and loads them up. Again, the VCs try to protect us. They’re like, oh, just use the 3PL. Do anything to get. Don’t touch the truck. [00:23:42] S1: Hard assets, no, no, no. [00:23:44] S0: Oh my God, you stay away. It’s going to be really crazy. Then we had to buy companies and all. All things that scare the investor community along the way. One of the things that’s tricky for a founder, and this gets very hard too, because in my last company, I just banged my head on the same wall. Knowing when to push hard and be persevere, and knowing when to switch is a delicate thing for our founders. But in this case, my guidance soul is, I knew when the coffee shop owner was walking to their store and they had a picture of their inventory, and they didn’t have to worry about an invoice stack sitting there, and they didn’t have to worry about doing deli runs, you could see the sparkle, which is my indicator. [00:24:25] S1: Did you validate for yourself the economics and how we might look like at scale? Or did you just put one foot in front of the other and say, this is what it takes to solve the problem, let’s see what happens?
00:24:36 · Dane Atkinson
[00:24:36] S0: I did, but that doesn’t work. The problem with unit mechanics is in small companies, you can make it say anything you want. Our really smart MBA team members very easily drove it to like, you’re going to need two drivers, and you’re going to need a bigger truck. They just took my scrappy napkin map, which is about the limit my brain power to get to. They made it look like there’s no way it’s ever going to work. I’m like, I just called the guy who makes paper in Canada and he’s going to sell it to me for 3 cents a cup, and the coffee shop’s paying 17 cents a cup. We should be able to offer to them for 12 and make a lot of money. Sure, but did you count it for the cash flow unit? It didn’t work. In some miles, it didn’t work. In some miles, it did. A lot of these things, you just have to do it. That’s one of the things that makes founders, I think, amazing. Same saying for the person who’s at coffee shop, there are many friends are told every single coffee shop owner, you’re never going to make it work. Why are you opening a coffee shop? It’s a horrible business. It’s never going to happen. Something in their heart just like, I just want to see if I could make the world better. Same thing here, I was like, I’m pretty sure this could work, so I’m going to take the risk. I’m going to buy a bunch of stuff. We’re going to carry it around the office. I’m going to drive it around at night, see if it does a difference. Having done this a long time, this was – and I also encourage companies now because historically, I think the delta for success was smaller. There was so little technology in the ecosystem that you could make someone’s life iteratively better. Now, the threshold is you have to be an epic solve, particularly a small business. You can’t walk into a small business. I’m going to save you 3% on your business. I don’t care. I don’t have time. What the hell are you doing? If you’re chain stuff that’s obviously different, but at small business levels you’re not, you have to change the outcome to change their lives. This was that for Odeko. We scale so quickly. It was a life-altering moment for our customers.
00:26:28 · Pablo Srugo
[00:26:28] S1: When did you realize that that new model was working? How far did you have to take the trucks, and the warehouse, and all the hard asset side of it?
00:26:36 · Dane Atkinson
[00:26:36] S0: I think I knew it was going to work before anyone else. As everyone always jokes like us founders, me included, are in the rowboat ahead of everyone else’s in the fleet in the most dangerous position. I remember leaving our office and going to a train station, and I built a good relationship with our first core customers and I called up Jeremy from Birch. I’m like, I’ve got a really stupid idea. What if you gave me your keys and I just loaded your store at night with everything at once? He’s like, that would be amazing. It’s like, oh, that is an inflection. I have not [unclear] tomorrow. I’ll give you the keys now. I was like, yeah, sure, let’s do it next. That was the key. I think the way the model worked out with all of a sudden, once we drove around five vendors into one truck, so our efficiencies that we’d had in one of our models of like, yeah, actually the delivery cost goes down one-seventh because you’re just doing it in one drop. Your drop is getting better. Your density is getting better. That worked, and then the buying power thing, we had no estimation for. We had a few phone calls to vendors in the background, but all of a sudden we’re like, oh, we’re buying 100 million stuff. We’re getting it at the scale of a Starbucks. It allows us to have a healthy model and give back to a lot of the shops. It became pretty clear even at those first weeks that it was going to work. This is another thing that’s also really dangerous for founders, and it comes back to that VC cycle. You so desperately want this to work, and it has to work. You’ve told everyone it’s going to work. You told your wife it’s going to work. Your kids know you’re carrying around coffee bags. It’s got to work. That desperation often turns into it not working, but you’re just making it work. You’re just [ unclear ] the shit out of it. You’re convincing one customer, like force of nature. But when something really works, it actually just works. We went from 50 to 10,000 customers in two years. It just works. Same thing as Squarespace. This is a credit to the tech and the infrastructure. We all could have just gone to a beach, and that thing would have just kept on growing, and kept on printing out money. Same thing for SumAll, even though it didn’t make the money, the model worked, people would sign up all day long.
00:28:38 · Dane Atkinson, Pablo Srugo
You could take yourself as a founder out of the equation and see the numbers indicating that there is actually success there, then you really have got it. But it’s very easy to get stuck in a loop that requires very hard to scale components. [00:28:56] S1: On the Odeko side, one of the questions that comes to mind is, what are you doing so differently on the logistics side than others were? Because one of the things I’ve seen over the last few years, 2021 happened, all these, there’s just a lot of money in the system. There’s a lot of plays out there that had this mix of tech plus normal business, traditional business. A lot of times, it was like, look, we’re tech-enabled. We’re going to do it more efficiently. We’re going to do better. It turns out actually the businesses they were trying to replace were doing it quite well. It was just really hard to do it much better than that, and a lot of those models didn’t work. In your case, I assume you’re doing things more efficiently or just better. What is it that that you’ve really innovated on?