A Product Market Fit Show | Startup Podcast for Founders
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.
00:18:09 · Pablo Srugo, Sean McCarthy
[00:18:09] S2: What were some of the things that they started to ask for that kind of expanded your view of things? [00:18:13] S0: So they started to ask for things around billing, as an example, and finance. Where after maybe a claim was filed, they would need to again track that. They want to know, was it approved? Was it denied? Is there a request for more information? Do I need to reach out? If it's a picture maybe that's requested as an example, if it's a damaged package and they didn't supply a picture. And so there was this kind of cross-business unit request starting to come through. And then that was on the back side, and on the front side it was, can you communicate with our customers? So, can you build something that our customers can self-serve this information and we don't have to bother our employees? So, if they want tracking or they want something they can actually just hit the BackOps system and take the action that way instead of it going through a human in a loop on their side. And so, you can think like the customer service is before and then the finance is after. But very quickly making us realize that we would need to expand reach, you know, outside of just kind of that central operations layer. [00:19:11] S2: So by maybe mid-2025, which is like a year into running this company. You raise a $6 million seed. The median seed is like $3 million. So this is twice as big. What's the story there?
00:19:11 · Pablo Srugo, Sean McCarthy
[00:19:11] S2: So by maybe mid-2025, which is like a year into running this company. You raise a $6 million seed. The median seed is like $3 million. So this is twice as big. What's the story there? [00:19:23] S0: Yeah, so we were kind of finding our footing and had got a couple of customers back to back to back. I think we had five or six customers that we had acquired within a two month or so time frame. Selling primarily this Slack-based or reshipping-based kind of platform. And what are the ACVs at that point? ACVs at that time were $20,000, $30,000, $40,000, something like that. Very small, in fact, we had one customer. I think, that was paying like $500 to $700 a month as one of the first customers. [00:19:55] S2: So how do you get a $6 million seed round done?
00:19:55 · Pablo Srugo, Sean McCarthy
[00:19:55] S2: So how do you get a $6 million seed round done? [00:19:57] S0: Yeah, so we had enough where we felt like within our pipeline and what was happening in the market, and the market pull from our customers, that we could go and put together a round. So we did, we put together a fundraise. We had a pretty competitive round. We actually got six or seven term sheets in that round and chose Construct. Construct has a focus in supply chain and really understands the space, the GPs came from Uber and NEA. And I just think they really understand kind of what we were trying to do. And so, I decided to go with them and haven't looked back, but that was a really big unlock for us as well to start to get quality talent. And what we saw was that we did have a high need to hire engineers, didn't quite have the capital to do so, or were trying to be very resource constrained during that time until we really kind of started to see things work. So that was a pivotal time for us. [00:20:44] S2: But I mean, how do you? Just about every founder wants to raise a $6 million seed round and have six or seven term sheets, right? What do you think you did right to get into that position? Because sometimes it's like, oh, dude, we're like growing, you know, we're $2 million ARR, right? Or whatever. It was just crazy fast growth. You had obviously compelling vision, but you were still very early.
00:20:44 · Pablo Srugo, Sean McCarthy
[00:20:44] S2: But I mean, how do you? Just about every founder wants to raise a $6 million seed round and have six or seven term sheets, right? What do you think you did right to get into that position? Because sometimes it's like, oh, dude, we're like growing, you know, we're $2 million ARR, right? Or whatever. It was just crazy fast growth. You had obviously compelling vision, but you were still very early. [00:21:01] S0: Yeah, no, I'm happy to share more and you know, I've tried to guide founders as they've reached out as much as I can as well. First and foremost, started having some of the conversations early just to share high-level what we were doing, never sharing the strict details in. Second, making sure that the story of where this goes was really, really clear and could be conceptualized even if they weren't a domain expert in supply chain. Third, run a really tight process and so stack-rank the VCs that we wanted to talk to and making sure that the ones that we really wanted to target were probably towards the end of that pitching. Because there's always going to be a little bit of kinks in the pitch in the story and then that tightly. And so, I think when we went out we said we were going to close it in a week and a half or two weeks. And that's exactly what we did. [00:21:46] S2: How well did you personally go? Were you doing like ten meetings a day? How much volume?