A Product Market Fit Show | Startup Podcast for Founders
00:12:00 · Pablo Srugo, Sean McCarthy
[00:12:00] S2: Of the eighty-five, was it, yeah, all eighty-five of this problem? Or was it, there's twenty that have the problem, but they really have the problem? Do you know what I mean? It's just an intensity thing or it's just a breadth thing? [00:12:11] S0: It’s a breadth thing. I mean, if you look at it, you can kind of assume it's a scale problem. If you ship one hundred packages, you can assume approximately eight percent might have. Five percent to eight percent will have some sort of issue. Again, lost, stolen, damaged, not the right thing, delay and that perpetuates with scale, right? So then if you ship one thousand packages, right? Or ten thousand, and that number just continues. And so what you have to look at is, what is the non-controllable for all of these customers? And it's the carriers. They're all using UPS, FedEx, DHL, OnTrac, and, you know, these things are built to not necessarily to save packages, right? They're built for speed, right? You're trying to put something into a box that is going to be the closest length, width, depth that could fit that package, not a bunch of padding and so it's kind of built against the system to begin with. But it's really reliant on the carriers, which all of them are using the same carriers, and they don't have much of an option there. [00:13:05] S2: But so of the eighty-five, most of them you found had this retention problem with labor.
00:13:05 · Pablo Srugo, Sean McCarthy
[00:13:05] S2: But so of the eighty-five, most of them you found had this retention problem with labor. [00:13:10] S0: Correct, almost all of them. There was certainly a handful of folks that have had people there for many, many years with no employee churn and even then, we would sell an efficiency play to them and basically say, hey, the majority of these that are coming in, you don't have to do anymore and they were still excited about that. So it didn't necessarily have to be correlated to churn, but it was more efficiency driven than anything across both of the realms. [00:13:34] S2: When did you decide to leave Amazon and go all in on this? [00:13:38] S0: So, July 2024, is when I quit Amazon and had probably started this fact finding journey maybe in February or March. So, it was three or four months of making sure and looking at what's happening in the market. You know, when I looked, there was a lot on the freight side, but there wasn't a lot on the warehousing side. I thought it was an underserved market, and I also thought that having some domain expertise was helpful. And we'll talk about this, but we still use that today. Again, just making sure that when we're going and talking, I'm using specific examples to cite, like, are you having this exact problem and is it causing this exact pain point for you so that they could relate? And so after July 2024, left, raised venture within weeks. Actually, of quitting and then we were kind of off to the races. [00:14:27] S2: This is your first startup? [00:14:28] S0: It is, yeah.
00:14:28 · Sean McCarthy, Pablo Srugo
[00:14:28] S0: It is, yeah. [00:14:29] S2: How did you raise so fast? How did you structure that? [00:14:32] S0: So I didn’t really know the venture game. I didn’t know that the warm intros were quite a thing. So I was just emailing VCs and it did work. You know, for the initial check that we got in actually was from 10VC, and very quickly, Gradient had reached out to us maybe like a week after that. So I think once you're in kind of the ecosystem, you're in, and then they ended up leading our pre-seed. But to answer your question, I mean, it was literally just me sending a bunch of emails with a quick background of what we were building and I feel lucky because I understand. Now I understand that that's a long shot and maybe probably the hardest way to get in. [00:15:05] S2: You know, first time founder, non-YC, still early, kind of pre-product. It's, you know, obviously AI is making it so that there's more pull and there's more interest in funding companies. But that's not an easy place to be in and it sounds like you fundraised relatively easily. I have to guess, like besides, you know, you and the team. The fact that you had talked to these eighty-five people and were from this space, and really understood the nuances of the pain point, must've been a huge reason for why they saw like a bet worth making.
00:15:05 · Pablo Srugo, Sean McCarthy
[00:15:05] S2: You know, first time founder, non-YC, still early, kind of pre-product. It's, you know, obviously AI is making it so that there's more pull and there's more interest in funding companies. But that's not an easy place to be in and it sounds like you fundraised relatively easily. I have to guess, like besides, you know, you and the team. The fact that you had talked to these eighty-five people and were from this space, and really understood the nuances of the pain point, must've been a huge reason for why they saw like a bet worth making. [00:15:35] S0: Yeah, I think that that was super important in understanding more specifically how the technology would help these folks. I had kept a spreadsheet of all of the people that I talked to, what pain points that we talked about, and certainly there was things that it wasn't just a perfect fit throughout. This river of gold, there were different things. But you could use what's coming from the agentic side and even RPA to say like, oh yeah, this could probably be solved fairly reasonably. And it was that coupled with the fact that they actually talked to customers, they asked for referrals. One of them went to the customer's warehouse and spent time. I didn't even know they were going to show up. This just showed up at this customer's warehouse and spent time with this customer. But I do think that it was kind of the combination of all of those factors and the cards are a little stacked against me, to your point and I wasn't in SF. I was in LA, and not quite in the ecosystem.
00:15:35 · Sean McCarthy, Pablo Srugo
[00:15:35] S0: Yeah, I think that that was super important in understanding more specifically how the technology would help these folks. I had kept a spreadsheet of all of the people that I talked to, what pain points that we talked about, and certainly there was things that it wasn't just a perfect fit throughout. This river of gold, there were different things. But you could use what's coming from the agentic side and even RPA to say like, oh yeah, this could probably be solved fairly reasonably. And it was that coupled with the fact that they actually talked to customers, they asked for referrals. One of them went to the customer's warehouse and spent time. I didn't even know they were going to show up. This just showed up at this customer's warehouse and spent time with this customer. But I do think that it was kind of the combination of all of those factors and the cards are a little stacked against me, to your point and I wasn't in SF. I was in LA, and not quite in the ecosystem. [00:16:28] S2: So tell me, what was the first version of the product? What exactly did it do?
00:16:33 · Sean McCarthy
[00:16:33] S0: So essentially, the first version of the product was actually built into Slack, and so what we found was the majority of these 3PLs used Slack to communicate with their customers. If you're not familiar, very quickly, a 3PL, if Pablo and Sean, we're going to go get our warehouse together, we're going to go start to find e-commerce brands that don't want to store their own inventory and they'll just pay us a fee to have it, picked and packed. And also if the customer wants to return it, we'll manage it for them and we'll just charge them a fee to do so. And so the majority would have thirty or forty brands that they fulfilled for and then communicate with them on Slack. And that's part of what I noticed at Amazon is these guys are just communicating with forty different threads of these customers asking for different order numbers, or tracking IDs, or unique identifiers, and asking very quick things. I just need a status on this, or this was shipped with FedEx. It's been stagnant. Can you reship it with UPS? But very basic, and again, eighty, eighty-five percent, or you can call eight out of ten of the requests could fall into two or three buckets. And so what the first product was is we built into where they could tag our bot on Slack, and give it a command to then go execute. So it could be like, go reship package one, two, three, four, five, or file a claim with ABC carrier and so that's where we started. It was very basic and that's really kind of all it did. But quickly, the customers started to ask for things that are way outside of what we had built. Certainly were on the roadmap, but way outside of, you know, our comfort zone and something simple like reshipping a package.