A Product Market Fit Show | Startup Podcast for Founders
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?
00:21:46 · Pablo Srugo, Sean McCarthy
[00:21:46] S2: How well did you personally go? Were you doing like ten meetings a day? How much volume? [00:21:51] S0: I probably took five to six meetings a day would be my guess and then obviously, as we got a little bit closer, and as diligence was happening. That ramped as far as some of the more in-depth conversations that we were having, but it was probably five on average a day. [00:22:05] S2: And then the other thing you're telling me is that, you know, sometime after the seed round. You're now mid-2025. By the end of 2025, that's where this crazy product market fit moment happens. In between that time, you actually pause selling in order to rebuild the product. What happened there?
00:22:21 · Sean McCarthy
[00:22:21] S0: Yeah, so that was tough, you know, especially for myself coming from a sales background and wanting to just drive towards revenue. Essentially, we were getting more and more of that pull to service, finance, and procurement, and ops, and CS, and all of these adjacent business units. During this time, concurrently, we're also getting pulled into the mid-market and a little bit of early enterprise conversations. So we're able to pen test what they're looking for, how they're thinking about us and over and over and over again, they articulated they didn't want ten AI vendors. So they didn't want one for every single business unit with all these compliance and regulatory, and things that they would have to go through. And they were really looking for something that was considered more enterprise grade. That multiple people or multiple business units could benefit from, not just the director of operations or something. And candidly, the platform that we had set was just not built for that scale. And so we made the tough decision, I want to say it was like August of '25, to stop selling and just rebuild the platform. And during that time, rebuilt the platform, but also did a retro to understand where we were getting hung up on deployments. And a lot of that was actually getting the context from these companies out of the human heads. And so, we rebuilt the platform to make it an enterprise-grade AI platform. And then we introduced this AI process center, which alleviated the burden of getting all of this in from the human head. And so that was a huge unlock for us.
00:23:52 · Pablo Srugo, Sean McCarthy
[00:23:52] S2: What is that? How does that work? Because that's a huge thing across industries, is like context, right? There's a massive thing right now. So how did you set it up? [00:23:59] S0: So the biggest hindrance we had was, let's say I'm selling to you. You're like, all right, that sounds good. Let's get started, we'd sign the contract wnd we'd say, just send us the SOPs that you have for the process. And that's how we would get started to train the agent. And we would go into months where the customer would just kick the can down the road to not write up an SOP. Because nobody wants to sit there and write an SOP, or they have them but they're old. So what we did is we created an SOP recorder into the platform and so they can go to our platform, click new workflow, hit record, it records the screen, kicks on the audio. Obviously records the audio, and tracks all the metadata from the clicks, and that's how we build out the SOPs. So if it takes the customer eight minutes to record the video, then that's their total time for us to initially give us that workflow or that use case. [00:24:51] S2: But from the customer's perspective, because we've all had this where we're doing a task and we're like, this is an annoying task, I wish I didn't have to do it, I wish AI could do it. That's probably the moment where they're like, oh, record, and then they just do the task they were going to do anyway. And you pull that into an SOP.