A Product Market Fit Show | Startup Podcast for Founders
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.
00:11:23 · Pablo Srugo, Mark
[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. [00:11:29] S1: Yeah. Aggressive. I think on that day, we had about 84 appointments, and at the time, most trucks were doing 8 to 10 a day themselves. Okay? We now have to do 10 times the normal volume that 10 trucks would've done in one truck, and this is the end of the month. If you've ever tried to move yourself and get a U-Haul at the end of the month, unless you book it two weeks in advance, you're fucked. We had to send Heindrik an hour out of the city to get the only U-Haul left. I remember writing my exam in like 10 or 15 minutes, getting out, starting to move people's stuff down, and then see Heindrik roll up on St. George Street in the tiniest U-Haul you've ever seen. It was the 10-foot box truck. I'm like, "Oh my God," but beggars can't be choosers. In this case, we had to do way more runs back to their warehouse to drop off the product. Then I ended up using my dorm on campus as a staging ground as well, which was filled with these green totes. We worked until 4:00 AM that night and then we did it again. [00:12:32] S0: From when to when? Like noon to 4:00 AM ish? Something like that?
00:12:32 · Pablo Srugo, Mark
[00:12:32] S0: From when to when? Like noon to 4:00 AM ish? Something like that? [00:12:35] S1: Yeah, it was like 11:30 AM until 4:00 AM, and then we did it again the next day and the next day. Then we said, holy shit. If we're going to do this business, we have to do it full-time. We had just started negotiating terms with Michael, and we said, okay, let's close this round, and let's quit our jobs and let's do this full time because I think we have a real business here. [00:12:53] S0: That's an amazing story. It's very prototypical of the founder DNA, right? When you boil it down, I like to think about some of the best founders are insanely focused, and they just have one goal in mind, whatever that goal is. I think here, it's like, make the thing work. <laugh> I say insanely because the thing that happens is actually insane. Two people driving around for, whatever, 16 hours or so, moving boxes. It's just insane, but at the end of the day, it was either that or you return everybody's money, which was unacceptable, so you did it.
00:13:27 · Mark, Pablo Srugo
[00:13:27] S1: Well, the reputational hit, we would never have recovered, ever. We have this mantra that like every single stop, every single customer needs to be successful. It was that maniacal focus, one of our company values right now is sweat the small stuff. Every single customer mattered, but of course, we had to compromise, right? You're constrained and everyone had these time slots and we said, to hell with the time slots, we're going come to you and we tell you we're ready, and we're going to now bundle all these customers together. If you're at 110 St. George, be ready at this time. In fact, if you can bring your stuff down for us, that would also be very much appreciated. We just communicated to all these customers and said, we're going to be here and make it work. We're sorry. Like we're inundated with a crazy amount of work. We're apologetic. And you know, students to their credit are a special breed of consumer where they just wanna get it done and the service might be choppy, but as long as like the outcome is what they wanted, they're gonna be okay. And so we were very fortunate to start in a pretty like, you know, soft , uh, consumer environment and then move into more high demanding kind of , uh, quote unquote adults that are very discerning with what they pay for and what they get in return. [00:14:33] S0: What was the alternative? What were students doing before Second Closet with their stuff?