A Product Market Fit Show | Startup Podcast for Founders
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?
00:29:40 · Dane Atkinson
[00:29:40] S0: It’s actually a lot of different wins. We had a better model. Most of the industry is focused horizontally. We are focused vertically. They’re trying to service any food space with their delivery or their tech. We were very focused on one, which allowed for insane SKU concentration, simplicity of application that it fit them. Two, we were all geeks. Our drive wrap, we built from scratch, our warehouse tools from scratch. It means there is 99.5% delivery success rate, which in industry it sits in the 80s. Our tech made that work better. We also are not hassles as much as – that seems like a simple thing, but it’s actually a big thing. We’ve been able to combine operators have been building those small distributors of meaningful church for 20 years, and then, no, as you said, how to make it work? Making good money and running it, joined our family. We got people from Amazon and Pepsi who had done this at great scale. We have folks from Squarespace and [unclear] and other places who if they all listen to each other, and that’s not an easy thing and it’s something that we always did work on, but that combination of different skill sets allows you to not assume that the old businesses were idiots because they’re absolutely not. I can tell you how many idiotic things I’ve done. I filled trucks with milk, then it blown up on the highway. They’re like, you can’t do that. Milk weighs a lot. You can split your deliveries. There are so many things that you just need to experience for. We bought a business in Denver and customers are coming up at the door knocking on. I’m like, why are the customers at the door? It’s scary. Because they’re doing a craft beer, I’m like, oh, we need our marketplace to handle pickup at the warehouse. That’s a crazy idea to New York. That would be like, what are you doing? But the rest of the world has, so getting those feedback loops where everyone’s sharing, oh wow, the driver should be able to get rewarded and metrics for hitting things, and throw orders at each other and have fun. All those different pieces together make for actually a more effective solution for the customer and for us. We didn’t invent new Adam, or Graphene, or something. We just got a lot of different thinking, a better model, and then better tech at it.
00:31:46 · Pablo Srugo, Dane Atkinson
[00:31:46] S1: Walk me through landing the first 10, 20 customers, because one of the things that I’m thinking about is, you mentioned this before, these days you don’t want to go in and sell something that make you 3% better or 10% better. The flip side is when you sell those things, the barrier to try it out is pretty low. Sure, the value might not be that high, but it’s like, yeah, whatever, I’ll try it. In your case, you’re going in and being like, let me handle all your operations. <laugh> Forget about your distributors, forget about all your stuff. I’m going to take over. If it works, that sounds great, but that’s a big risk. How do you get those first few customers to jump all in with you? Or how did you structure it back then to maybe lower that barrier? [00:32:22] S0: I think there’s a split in that world. You need some customers that you are friends with, confidants with and can express things. You then need some customers who don’t know you at all, who you can sell without your personal input to see how they actually react. Those first set of customers are stupidly important. I heard one other podcasts, a founder saying that they just paid them money to use a product. We do very much the same. We have at every company. We’ve given advisor shares out for every company I’ve ever been for those first customers to be engaged. I literally walk their dogs and spend <crosstalk>. [00:32:59] S1: No way. Is that real?