A Product Market Fit Show | Startup Podcast for Founders
00:29:27 · Rafael Broshi
[00:29:27] S0: And it's like, when I ask people, I want to. I'm asking them about their idea or people want to consult with me and say, well, I don't, I don't want to launch. I don't want to tell people what I'm doing and I said, look, if you were in a coffee shop and you heard someone talking about an idea, that they're actually executing on. A startup three years, three months ahead of you, that they're actually building something and when you hear it, you understand that's exactly the product you want to build. Would you be happy about it saying, oh my God, I can learn some stuff, or will you be completely bummed about it? That someone beat you to it? He said, of course, I'll be bummed. I said, so why don't you want to tell about your idea, right? Put it everywhere. No one's going to want to do it. So I think that's what happened. So what we saw were either larger companies from past generation, OK. Salesforce, or that was Zendesk and Ada, and other companies like that. That either had older chatbots going into the AI era, or we saw those kind of solopreneurs. The kind of people that did chat with PDF when ChatGPT started, and you heard stories of people making $5 million in two months with PDF. Before ChatGPT killed that and just added the option to add a PDF. So same thing, you know, you saw small companies like that building those fast chatbots, doing a quick buck. But then we said, OK, there is no way they're going to be able to compete long term with the VC backed startup. It's just not going to happen and then you saw in the same time that we did that, there were the larger companies in stealth mode in the US, right? The Sierras, the Decagons, et cetera. But that's what we saw in the beginning. What we're seeing now is the second part of what you said, the area is not that crowded. There aren't a lot of players out there that can deploy on prem with a company in a regulated space, to have the kind of capability that they would require with the same level of compliance and security. And being able to meet their SLA and data requirements. There aren't a lot, OK. We're seeing the same players over and over again. It's not seventeen players, it's not. OK, you can count them on one hand and also the horizontal players, we don't see them that often as well, right? So when you verticalize yourself, or it doesn't matter what you do, right?
00:31:44 · Rafael Broshi, Pablo Srugo
But when you pick a specific kind of box to play in, we feel that at this space, we don't see many. Now, if we're going to go down and we started before going to financial services. When we built the product in 2023, we started selling to e-commerce and in e-commerce. Obviously we saw more players, but smaller players as well. But again, same few names popped up and I know you have the competition is for losers by Peter Thiel, et cetera. And again, who am I to say something different? But I'll say I don't think competition is what kills startups at our stages, right? It's competition makes you do stupid things like copy other players or go toward the second different direction. Say, oh, those guys succeed there. Let's go there. Oh, they're doing this. So it must be good. But no, those guys are exactly like you. They have no idea what they're doing. Everyone in the space has no idea what they're doing at this stage. So competition makes you do stupid things, not because it forces you, but just because it's part of our nature. [00:32:45] S2: I mean, I find it's almost guaranteed that you're either going to have to fight status quo and people just not wanting to change or move. Because they don't really have a burning need, or you're going to have to find competitive vendors. The odds of you being in a place where everybody wants to buy and you're the only one selling. I mean, you know, if you're there, that's awesome. But, I just don't know how you could manufacture that situation.
00:32:45 · Pablo Srugo, Rafael Broshi
[00:32:45] S2: I mean, I find it's almost guaranteed that you're either going to have to fight status quo and people just not wanting to change or move. Because they don't really have a burning need, or you're going to have to find competitive vendors. The odds of you being in a place where everybody wants to buy and you're the only one selling. I mean, you know, if you're there, that's awesome. But, I just don't know how you could manufacture that situation. [00:33:11] S0: Me too. If you're going for an area where there's a gaping demand right now and the demand is growing by 100x a year. There's going to be competition there. There was competition in the dot com era. There's competition now, there's going to be competition in the future and if you look at the dot com era versus now, information flow is so different than it was, right? You can't compare what you're seeing now in terms of competition, but you also cannot compare the level of exposure you can get as a startup as well, right? I can reach any company I want anywhere in the world pretty easily. I'm not saying I'll be able to sell to them, but everything is much easier now. So it's like everything works together, more competition, more market opens up, the market grows faster. But I agree, it's all the same. It's like human nature. The easiest thing is to build something that is so complicated and so amazing that you don't have to talk to any potential customer ever and just keep building it, right? That's what everyone would want. That's like the dream but unfortunately, that's.
00:33:11 · Rafael Broshi, Pablo Srugo
[00:33:11] S0: Me too. If you're going for an area where there's a gaping demand right now and the demand is growing by 100x a year. There's going to be competition there. There was competition in the dot com era. There's competition now, there's going to be competition in the future and if you look at the dot com era versus now, information flow is so different than it was, right? You can't compare what you're seeing now in terms of competition, but you also cannot compare the level of exposure you can get as a startup as well, right? I can reach any company I want anywhere in the world pretty easily. I'm not saying I'll be able to sell to them, but everything is much easier now. So it's like everything works together, more competition, more market opens up, the market grows faster. But I agree, it's all the same. It's like human nature. The easiest thing is to build something that is so complicated and so amazing that you don't have to talk to any potential customer ever and just keep building it, right? That's what everyone would want. That's like the dream but unfortunately, that's. [00:34:22] S2: Not life, yeah, not really. [00:34:23] S0: Yeah. [00:34:24] S2: What I'm curious, just on the fundraising side. How much had you raised by 2023? [00:34:29] S0: That was seven million dollars. [00:34:31] S2: Normally you raise, you do the crypto thing, and then you're probably running out of money. You need to raise again. What was your kind of situation?
00:34:31 · Pablo Srugo, Rafael Broshi
[00:34:31] S2: Normally you raise, you do the crypto thing, and then you're probably running out of money. You need to raise again. What was your kind of situation? [00:34:37] S0: Yeah, so when we decided to pivot, we had $2 million left. Fired almost everyone. We're left with one, two engineers. Built the product for a year and a half. We didn't hire anyone for a year. Then we got to a point that we're almost cash flow positive. We burned $10,000, $20,000 a month. [00:34:54] S2: This was when? Now, '20, late '24-ish. [00:34:57] S0: That was, yeah, end of 2024. Investors told us things were picking up and we had our first six figure contract. A few hundred thousand dollars and when you're four or five people team, and eating noodles all day. You don't burn a lot of money. It's possible to build a product without burning a lot of money. But then you get to a point where you say, OK, either I'm continuing like this bootstrapped. It's going to be slow and the market is exploding, or we're going to raise more. So then we raised an additional $7 million and then we started ramping up and then we simply, we raised the $30 million.
00:34:57 · Rafael Broshi, Pablo Srugo
[00:34:57] S0: That was, yeah, end of 2024. Investors told us things were picking up and we had our first six figure contract. A few hundred thousand dollars and when you're four or five people team, and eating noodles all day. You don't burn a lot of money. It's possible to build a product without burning a lot of money. But then you get to a point where you say, OK, either I'm continuing like this bootstrapped. It's going to be slow and the market is exploding, or we're going to raise more. So then we raised an additional $7 million and then we started ramping up and then we simply, we raised the $30 million. [00:35:30] S2: Did you find that that was any harder? One thing I do find with competition is, if you have a lot of competition, it might not affect the business. Your business might be growing really fast, but it does tend to affect fundraising, or at least I've seen it affect more fundraising. Because it's just such an easy. Frankly VCs are like finding reasons to say no because you need so many, you got to just filter quickly and so competition is an easy one, too competitive, too competitive. Did you find that was the case? Did you find it was a little bit harder to fundraise? At some point your numbers are so big, it just doesn't matter anymore. Clearly you're winning, but in that seed stage, you know.