A Product Market Fit Show | Startup Podcast for Founders
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?
00:33:00 · Dane Atkinson
[00:33:00] S0: Yes, and be there. Show that we care. If we won one of our first customers, we screwed up and didn’t put the order in for pastry. I went and cleaned out all the other bakeries, and then brought the pastry. Luckily, having to run into the owners, walking in with all the replacement pastries and like, okay, they really wanted to work. Those customers, I have them still as friends from the last five companies, and the friends I made here are really valuable and I hope to have going on. Then you have the customers right afterwards, which is like, just see if the solution sells itself, and it actually doesn’t auto sell. The way that I thought it would [unclear] could be like, it’s amazing. I’m going to get rid of everything. I’m just going to move on to this. I’m going to save money everywhere. No. Are you sure this works? Really? It would steal stuff. Something’s going to happen. There’s going to be a technology service fee for two grand that I get billed like six months later. They’re like, there’s got to be a gotcha. The customers would move over two vendors and watch us, and then they’d move over three vendors and watch us, and four vendors and watch us. They had a different behavior than I expected, but it still had that impact. It ended up selling itself. The thing that we thought would sell to was the technology on its own. Nope. You gave me an amazing portal, like don’t have to go through 300 invoices. Have it all consolidated here. No way you’re spending your money. But when you go and you’re like Oatly [ph] is cheaper, oh yeah, cool. Then when they’re using the technology, like, oh, it’s super easy and it works out great. I love the portal. Can you add this button to make the- they love it afterwards.
00:34:30 · Pablo Srugo, Dane Atkinson
[00:34:30] S1: Why do you think that is? [00:34:31] S0: It’s unrealistic to expect someone who’s holding the whole world together with their own time and energy to figure out the returns, and if you’re telling the truth. So many people pitch small business, it’s absurd. They literally get piles of emails, and mails, and everything today being like, I’ll save you this, and you do that, and everyone thinks it’s all lies. I still have small businesses, and I think all those spams are lies. But when someone says, I can get rid of this bill from the IRS, okay. If you actually can, okay, I can make your Oatly cheaper, because it’s an instant return. No, there’s no long-term calculations, no inference that a large enterprise can actually spend the time to figure out small businesses can’t. I’m always encouraging when you develop your model to try to find out how it is. Replace them of existing cost or something very provable so the business doesn’t feel like they’re exposed in the risk, and that you’ve taken that on yourself.