A Product Market Fit Show | Startup Podcast for Founders
00:05:51 · Pablo Srugo, Mark
[00:05:51] S0: What even led you, this is when it was already kind of a side hustle and this was your growth hack, let's say, but how did you come up with the idea of helping people store stuff for the summer? [00:06:02] S1: Yeah, I think my mentality in general is obstacle, solution, obstacle, solution. In this case, the seed was planted when I had moved out of our family home as a 17-year-old with my brother and we moved into a tiny condo in Liberty Village. Really only started working on the idea much later in 2016, built a website with a team overseas that was super inexpensive, launched with that website, and some tweaks thereof. It was a personal experience that drove it. The ultimate application of what it was, the beachhead market was a lot different. It was just a good moment in time to revisit the business and push it out. We did that and saw that really early success, and shortly after that big push, we raised the 500k seed round a day before I was supposed to start full-time on June 1st and rescinded our offers with two weeks' notice technically, but in advance of starting, and I've never looked back. [00:07:01] S0: I'm curious. We will jump into that in a second but you talk about this obstacle, solution, obstacle, solution, which I think is a pretty common frame of mind amongst founders. That's what makes them builders. Was this your first business, or was this the first one that worked? I'm curious if you had a bunch of other attempts prior to that.
00:07:01 · Pablo Srugo, Mark
[00:07:01] S0: I'm curious. We will jump into that in a second but you talk about this obstacle, solution, obstacle, solution, which I think is a pretty common frame of mind amongst founders. That's what makes them builders. Was this your first business, or was this the first one that worked? I'm curious if you had a bunch of other attempts prior to that. [00:07:19] S1: I had an e-commerce brand that was a watch company. I had built a prototype, kickstarted it, built another model, kickstarted it. Always aiming, as a broke student, use as little as possible upfront to then build into something great. That's where Kickstarter was awesome for product-based businesses. A $300 prototype ended up garnering a 250k-a-year business for me that helped me pay my way through school, and build a small stock portfolio that would help me pay for some of my living expenses with dividends. That was the business before. It wasn't a smashing success. I probably should have raised money for that business because, at the time, Facebook ads were even cheaper. This was like 2014, 2015. Then on top of that, a competitor was just starting out called MVMT, which ended up getting sold to Movado for $100 million a handful of years later. That was the first brush with business, of starting something from scratch as a product-based business based online. This was a service-based business based online so a lot of the marketing knowledge was helpful, but running a service business, totally different than a product business.
00:07:19 · Mark, Pablo Srugo
[00:07:19] S1: I had an e-commerce brand that was a watch company. I had built a prototype, kickstarted it, built another model, kickstarted it. Always aiming, as a broke student, use as little as possible upfront to then build into something great. That's where Kickstarter was awesome for product-based businesses. A $300 prototype ended up garnering a 250k-a-year business for me that helped me pay my way through school, and build a small stock portfolio that would help me pay for some of my living expenses with dividends. That was the business before. It wasn't a smashing success. I probably should have raised money for that business because, at the time, Facebook ads were even cheaper. This was like 2014, 2015. Then on top of that, a competitor was just starting out called MVMT, which ended up getting sold to Movado for $100 million a handful of years later. That was the first brush with business, of starting something from scratch as a product-based business based online. This was a service-based business based online so a lot of the marketing knowledge was helpful, but running a service business, totally different than a product business. [00:08:32] S0: How did that early fundraising go? Was that from VCs, angels? Did you already have kind of a network at that point?
00:08:32 · Pablo Srugo, Mark
[00:08:32] S0: How did that early fundraising go? Was that from VCs, angels? Did you already have kind of a network at that point? [00:08:38] S1: No, no network whatsoever actually. A lot of this was just a stroke of luck. I ran into an angel investor named Michael Hyatt at a startup career expo where we were advertising our business for student ambassadors. It was an engineering thing. Selfishly, we wanted to get the brand more exposure and have them book storage with us, but then the byproduct was that we might also find some really good early talent. We kind of got both in the end. That's actually where I met Heindrik for the first time, my co-founder and our CTO. Michael ended up saying, "Hey, this is a really cool business." Gave us a small convertible note, eventually just abolished that agreement, put it into a full-blown 500k seed round a few weeks later just because the success was so quick. He asked a question, "How much of the money is left," after we'd grown to the 20k a month. We're like, "Substantially all of it." In fact, we've grown it now to 30k or 35k based on the fact that we weren't really spending much. Everything that we did at the time, by the way, was fully outsourced to a file storage company. They would pick up, store, and return the stuff for us. All we were is a marketing company and a customer support company, and everything else was totally outsourced.
00:09:50 · Pablo Srugo
[00:09:50] S0: By the way, I think there is a story there in the sense that you have to be ready for when it comes. I think a lot of these early rounds, these first few hundred thousand dollars that are from angels are less methodical, like a series A or a series B will be, and a lot of serendipity, but it's 80%, 90% of the business and the people, that's got to be legit so that when you meet a Michael Hyatt, there's something to be impressed about.
00:10:14 · Mark, Pablo Srugo
[00:10:14] S1: Yeah, there was preparation there, right? We were already in market, we were already advertising, we were at a startup career expo. All these things sort of culminated to create these subconscious snaps fires that were helpful in the end, I think. Look, the business was supposed to be asset-light. We became very asset-heavy and we now have tens of millions of dollars invested in physical infrastructure. We had this partner that was supposed to be great. On April 28th, our busiest day of the student storage season of our first year, they called us up at 9:37 AM. Our first appointment was to start in 23 minutes, and they said that, "Our guys are refusing to work. You're completely on your own today." This was problematic because Heindrik was already just entering an exam at 9:00 AM and I was supposed to go into my final exam at 11:00 AM. We would not overlap. This was hugely problematic, and again, this was like getting slapped in the face as a founder. The option was, cancel all these orders and tell them to figure something else out, or do the unthinkable and just figure out a way to spin up logistics that 15 trucks were going to do for us with a small team of two. [00:11:23] S0: To be clear, what you have to do at this point is go to a bunch of different places and pick up a bunch of different furniture and store it.