A Product Market Fit Show | Startup Podcast for Founders
00:21:23 · Pablo Srugo, Alex Back
[00:21:23] S1: Did you or your co-founder ever regret? I'm just trying to think about you're doing, let's say half a million dollars or so. You said 750k. Half of that is cost. There's maybe a few $100,000 of gross and then you got whatever other expenses. Then you net it all out and you look at what's left in your pockets and you're like, I could have just sold couches for my old depo, I would've made more or whatever. Did you guys ever think that way? [00:21:44] S0: A hundred percent, because right before we started Apt2B, I had a little side hook of business. I had four roll up warehouses at an extra space storage facility. I would just bring in containers of one type of couch and I would pop them on Craigslist and deliver them myself every weekend, just me. I made a lot of money and then here I am waiting for the money to come in. My wife and I, we had some savings from our wedding and stuff. We just kept pulling into our savings for the first two years. Yeah, those thoughts creep in a lot. It's like, okay. Also what drives you I think is the opportunity. We had all these big opportunities in the beginning. A few years in, we were on Shark Tank and my partner pitched for an hour to the sharks. We were this close to being huge so many times so that those types – [00:22:39] S1: You pitched for an hour, but did you get on the final?
00:22:39 · Pablo Srugo, Alex Back
[00:22:39] S1: You pitched for an hour, but did you get on the final? [00:22:42] S0: No, we didn't get on the show because there wasn't any real drama. They really liked it obviously. It was something they seriously considered. I'm very superstitious. It was the first pitch of the new season that they were doing whatever season it was. They're drinking their coffee. Everybody ready? All right, who's first? I mean, are they going to make a deal on the first one? I don't know. I would say probably never. Yeah, my partner did amazing. We got him prepped and he pitched this idea and it really wasn't much at the time. It was just a lot of opportunity in online furniture and we have an angle. We're already successful. This is something worth investing in. They liked it but ultimately did not make a deal. High percentage of the pitches we never see, because a lot of them are just like, good businesses that they liked but there's no drama or something, a hook.
00:23:37 · Pablo Srugo, Alex Back
[00:23:37] S1: How steady was the business? Obviously you're selling. One of the challenges with furniture is somebody buys a couch, they probably don't come back frankly for a view. I mean, maybe if they got a new place, they buy a few things all at once, but oftentimes they'll buy something and they won't come back for many years. It's certainly not SaaS. There's no recurring element to it. How did that translate, especially at the beginning? At some point you get to scale and things take care of themselves. You understand what seasonality looks like, but what was that like the first few years? Did you have some quarters that just things seemed to come to a halt and you're just wondering if the whole operation makes any sense? [00:24:10] S0: I don't remember in the very early days too well, but what I will say is our volume and revenue was very consistent, very, very consistent. This was probably due to a few reasons. We just stuck to a lot of formulas that worked for us. We did a lot of experimentation. When we found something that worked from an advertising perspective and at some point, obviously, yes, we started really advertising, but things worked. We stuck to them and tried to find the formulaic approach. [00:24:44] S1: What was repeatable from the advertising because Groupon didn't work? Costco obviously did, but it was like you can only do so much of it. What was the thing that just was always running?
00:24:54 · Alex Back
[00:24:54] S0: Costco was a through line for us for a long time. We can depend on that revenue. Early on we started advertising, I remember first doing Facebook ads when they just came out and doing a lot of things like that. When we found something that worked, we would work it really hard. When we started doing Google advertising and saw something that was successful, we would just stick to it and really try to establish the baseline. The other thing about furniture is we really were aware of when people are buying furniture. I wouldn't call it seasonality in the traditional sense. People buy toys. 90% of the toys that are bought are bought in the month of December. It's nothing like that. It's very consistent. It's like the wave is like this throughout the year. The market is driven by holidays and major sales events. You have like President's Day, Memorial Day, July 4th, Labor Day, Black Friday. Those are the big five. Then you have all these other ones like Martin Luther King weekend. It's just like the car and mattress business and furniture runs along the same cycles. During those times, if we showed up with a good promotion and we put our advertising focus on those time periods, we are able to achieve consistency because there's something like almost every six to eight weeks in the furniture space that we can hang our hat on from a marketing perspective. That really contributed a lot to our consistency. There are just this promotion. Inherent promotional calendar that we followed in the furniture industry was very helpful.
00:26:35 · Pablo Srugo, Alex Back
[00:26:35] S1: Do you remember any specific promotions you ran that worked especially well to the point where you're like, whoa, we just struck a nerve with that one? [00:26:44] S0: Yeah, no, I just think we realized early on the power of being promotional. That's not the answer to the question that you're looking for, but a lot of new brands are like, how promotional should we be? We have a premium brand here, should we even be on promotion? Our thing was once we saw that promotions worked, we're like, no. We learned that early on with coupon. We got all these people to buy furniture that weren't even interested in furniture. Same thing at Costco. They were coming in there for diapers. It's really the promotion that gets people over the hump when buying furniture and its incredibly competitive landscape. We knew that, that worked for us. I think our first Black Friday sale where we gave 30% off and saw just that number, the percent off how much people are saving. That's what people are focused on in our industry. They want to know how much they're saving, so much more interested in that than how much they're actually spending. They just want to feel like they're getting a good deal. We basically realized there was a direct correlation between how much discount percentage we give and how much people buy. As simple as that sounds, it's not always that linear. We then figured out a way to price our products in a way that we could. Give 15% off and 20% off, and we're driven by the promotional discount percentage that would drive the business and we worked backwards from there.
00:28:13 · Pablo Srugo
[00:28:13] S1: That makes a lot of sense. Maybe let's fast forward a little bit. You're growing this business. I mean, things are generally speaking, going pretty well. At some point, you get acquired. Walk us through how that happened. Where did this acquire come from and just how long did that process take?