This Week in Startups - E1015: Open Office Hours LIVE! Jason helps founders with their biggest challenges: gaining interest from investors, scaling while bootstrapping in a niche market, automating operations tasks, acquiring national customers & focusing on customers in the cannabis compliance space @ WSGR

Episode Date: January 3, 2020

0:47 Jason intros Open Office Hours 2:15 Trevor from Moovin (on-demand software to rent professional furniture) asks Jason to share some hacks on how to gain interest from investors 18:31 Jelica from Saddle Shoppe (e-commerce luxury equestrian clothing/gear) asks Jason best practices on scaling while bootstrapping in a niche market 34:49 Antonio from Youcanevent (event services marketplace) asks Jason what and how to automate operations tasks 44:44 Ossie from PICKL (B2B product/consumer data platform) asks Jason about acquiring national customers outside of California 55:57 Jontae from NatureTrak (compliance platform connecting Cannabis companies and banks) asks Jason about staying focused on different customers in a two-sided marketplace

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Take as little as 20 minutes to save up to 41% on life insurance premiums compared to other providers at health IQ.com slash twist. This format that we've started is called open office hours. The concept is very simple. Bring us your most pressing issue. the thing that's the hardest for you. And let's just brainstorm, workshop, possible solutions to whatever the problem is.

It's very easy to get busy as a founder and do the easy stuff. And then avoid the difficult stuff. What I'd like everybody to do during this session is to just be really candid about what's not working. What are you scared about? What keeps you up at night? Because we have a culture of everybody who wants to be crushing it and everything's up and to the right.

Having invested in over 200 companies now, I can tell you that is almost never the case. And by the way, in life, it's almost never the case. When I see people sell their companies, and a week later, they call me on the phone crying and say, why did I do that? And I'm like, because you wanted to be rich? And so it was an incredible outcome for you.

And I was like, oh, I shouldn't have sold it. I'm like, just enjoy your plane and keep moving. Take your plane somewhere. So the existential crisis, the search for meaning, finding purpose, all that stuff is great, not my expertise. My expertise is in growing businesses. So, and how investors think, because I've been on both sides of the table. Our first guest today is Trevor. Oh, have a seat, Trevor.

And Trevor has a company called Movin. Movin. M-O-O-V-I-N, with an apostrophe. No apostrophe. No apostrophe. Just moving. Okay. Which is on-demand software to rent professional furniture collections. And I'm thinking about that one line, which was written by us, not you. Sounds pretty simple. My first question to you is, who is renting professional furniture collections? Is this for staging homes? Is this for people who have a home and are scared of buying furniture? Who's this for? Yeah, so it's actually for a couple different types of customers, but first and foremost, it's for somebody who is moving around more often in their life and they want to change things up more often, and they don't want to go through the hassle factor of having to figure this out themselves. And on top of that, they don't want to have to figure out how do I get really great

design. So the one thing that's I would say missing from that description is that all of our designs really, we try to aim to be magazine worthy. So think like architectural digest, something that looks really great like that. And that's just not generally something that a consumer can achieve on their own. That's where we commence. We do not only the rental part, but also the design part, too. So your interior decorators, who instead of just telling you, here's what you should buy and go buy it, or some interior directors actually go buy it for you and then put a little markup on it, you're saying, and we have it in inventory, and we own it, and you can rent it from us for a number of years. Correct. Or a number of months. Or a number of months.

Now, the thing that's confusing to me, isn't a large part of the cost of furnishing a house moving all that stuff in? That's 20% of the cost? Yep. 15 in our experience, 15%. But essentially, we're combining that service, the movement of it, along with the actual rental of the asset itself. So essentially, the value to you as the consumer, and it could be a homeowner, it could be somebody that's renting an apartment. It could be a couple different types of use cases. But essentially, the value to you is you press a few buttons and it's just done.

You don't have to figure out and become the project manager and sort of suss out each step of the process yourself. Got it. And what are the unit economics on this business? If you had a living room and that furniture, this is design of furniture, so I'll say it's a big living room and a couple of sofas and it costs, I don't know, $10 or $20,000 to furnish if it's high-end, if it's high-end, if it's high-end. Okay, so that wouldn't be high-end, that would be medium. Yep. But we make that medium and look really great. Got it.

Okay. So now I've got it much more. achieving high-end results with an affordable price. Correct. So it's $5,000, or let's say $4,000 in furniture to do that room. What do you charge them per year? So our break-even tends to be about 12 months. Yeah, so my original question was not break-even.

Sure. What is the, what do you charge them? I'm trying to get, what do they pay? Sure. So on that example, they're probably around, probably somewhere around 300 bucks a month. Got it. So after some number of months, they would have owned this. themselves.

True, except that we're buying from in many cases, places that they otherwise couldn't buy. Got it. So there's some arbitrage going on there. So they might have to pay eight or six. Yep. So, okay. And who is your ideal customer? So we actually started with one type of customer.

Which was? That was home staging. Got it. And we got the sort of entree to that. Most of because we figured out that the unit economics were 4x better than our original idea, which was for the consumer market. So, you know, again, cash is king at times zero. And you know, okay, I would rather have, you know, four times the money than, you know,

one X, right? Yeah. So essentially, that's a great business to start with. If you want to use like an Uber example, it's Uber black. Yeah. But we decided that the same model could be applied to the consumer market, which is much larger. And that's kind of where we're trying to go next.

Great. What's your biggest challenge? Fundraising. And so essentially the- I'm shocked. Yeah, exactly. No one else here has that problem. It really is the problem of, like, and I'm sure it's pretty familiar to, you know, any of your other companies and stuff like that.

But how do you kind of get people's interest that you don't know? You're trying to get introductions to. You're trying to kind of cross the chasm and get on the radar, get them excited about what you're doing. But so is everybody else. Yeah. So there's a couple of hacks for this. The number one way to get their attention is with a chart that goes up and to the right and an amazing business. Do you have that?

Yes. Great. How many investors did you send an email with your chart to? probably about in the 70ish range perfect of those 70

did you have a tracking pixel on it and do you know how many of them opened it how many of the 70 opened it probably about half so 35 actually a little more than that I mean yeah so let's pick 40 there's a number 70 you emailed 40 opened it good yep of those 40 how many replied

about half Yeah, 20 replies. Of those 20 replies, how many were not interested? How many wanted to take a meeting? Actually, my numbers were a little bit of fun of them. We've had a total of maybe about 30, now that's not true, but 20 meetings. Great. A lot of them just, you know, right out of an email like, hey, you know, this isn't for me, that sort of thing.

Got it. So to give you an idea of what it's like to be an investor in 2019, going into 2020, it is, impossible to sort through the number of companies now, not only for an individual investor, a partner at a firm or an angel or a seed fund, it's impossible for a fund, even a medium or large fund, to sort through all the deal flow today. There are too many companies. So then we're in a situation where you have to play the numbers game on one side and the long game on the other. The numbers game means if you got 20 meetings, you need to have 40 or 60, probably to get a term sheet. And then in terms of the numbers game, your numbers just might be

too small for them to really get excited about. And so that's the thing that I, you can solve the first part pretty easily. Just keep adding, you know, emails to the top of the funnel and following up with people who don't, who don't reply. And there's a trick there. When you reply to, if you, if you're going to send a second email, put some information about the growth that occurred since the last one because this will show that you're not going away. I'm not going to stop emailing you and I'm not going to stop growing this business. There is nothing better than a headstrong, persistent entrepreneur who is dogged, resilient, and has grit. Because we know as investors that if you're dogged and you have that grit and you're resilient, that you would be a great steward of the capital

we give you on behalf of RLPs, which in some cases include endowments and people curing cancer, sir, we want to see you really take that seriously. And we live in a world where a lot of founders are not taking this work very seriously. I'll be candid. And it's not just the founders. There's a lot of investors not taking the work seriously. As a matter of fact, I have investors who are like, why do you do so much? Tone it down, like making us look bad to our LPs.

You're working too hard. So in that follow-up email, if you grew revenue in the 20 days since they last contacted you, by 15% in just 20 days because you unlocked a new feature and you put a little movie or animated GIF in the email and the chart. Hey, here's the growth since the last time I emailed you. We'd love to stay in touch, get a quick coffee. You've got to be persistent like that. What's the revenue for 2019 going to be, Bwapar?

This year, call it $40,000. Okay. And last three months of the year? Let's call it. 14. Great. So you're making about five grand a month. Yeah. And it's been it's admittedly been a little lumpy. We've had months as great as you know 27K and we've had months where we're like you know sub a thousand dollars. So the way of an investor would evaluate your company is, it's a perfect company to just wait and see. Because most of us are going to look at it and go it's like a service based business. They have you inventory of this stuff, the furniture. So it's like capital intensive. They got a bunch of of inventory, they rent it. Where's the technology here? Where's the massive sea change in how consumers behave? I think you can answer those. We have built some of that technology and essentially that's what powers the service itself. So essentially the user experience on this is

that you can go on your phone, press a few buttons and the rest of this just sort of happens in the background. And as I said that... Yeah. In 2019, that's probably not considered like impressive technology. It's not like it's augmented reality or machine learning or something. So building a website or an app that let your red furniture is not inspiring on a technological level. So if it's not inspiring on a technology level, how could it be inspiring to investors? The margin. Right. Repeat customers and growth rate.

So I think you just need to understand what they're looking for. If a business isn't a hardcore tech, it better have hardcore consumer love and a hardcore consumer acquisition process. So I think you can win on that as well. So you're going to have to figure out what it is you can win on and what you're never going to win on. Sure. You're never going to win on the technology of this. Airbnb didn't win on technology. I mean, you could literally rebuild Airbnb right now with Shopify and a square space site and, you know, Zapier and a couple of other tools.

Right. You'll be up and running. Like literally, anybody in this room has qualified this weekend to recreate Airbnb's website. Little to be done. I mean, I'm sure there might be some sophisticated stuff on the margins, but generally 95% complete. So what is there a business while managing that marketplace? And your business is really about acquiring those customers and delighting them and making sure you have a great margin. And it just doesn't feel like a tech startup.

So you're going to have to prove it with numbers. Okay. So I guess the chicken and egg problem I'm having is how do you get those numbers to go up into the right when you have to still buy inventory, which requires the capital? Yeah, this is probably you're what's called an asset-heavy marketplace as opposed to an asset. a light one, I would call 10 furniture creators and say, we have an affluent clientele who owns multiple homes and they like to try a new furniture. And they might actually like to try to buy. We'll handle letting them rent it. And then they might want to buy it at the end. Would you be interested in doing that and collaborating with us at a discount? That's the only thing I can think of.

The other thing people do is you could sell people on the service and have them put down six months down and that would help you with cash flow and cash flow and if they own a home most of the is your target is your ideal customer profile such that they own the home more that they're renters so it's more renters than owners we've worked with property managers to kind of unlock that model just as a cheaper way to do customer acquisition but in that case they're all wanting to say hey if I were to send you all these customers can you fulfill it so we've done the presale part we have actually a big deal lined up already to do that with a property manager with 3,000 units. But again, you have to promise them on that, hey, you know, if we, you know, go and send

these customers here, you're like, you know, we don't want to look at either that you guys can't actually fulfill the deal. Yeah, this just might be one of those businesses where you need to have a pile of cash to inventory this stuff. And then it makes it very difficult. That's why most people are intrigued more by asset light type situation. So if you could do the arbitrage on that, that might be a better way to do it. It is to try to figure out, hey, we're going to, we're not going to inventory anything, but we're going to go to our local community, find all the great furniture. And then instead of being the owner of the furniture, really the service of getting stuff in and out of your house, cleaning it, maintaining it,

and taking it back is the service. Because when you talk to your customers, what is their pain point exactly? Is it money? No, it's actually, I would say it's the flexibility, it's the key value, right? They don't want to be bogged down with something that they then have to move at great expense, or that when they go to their next place, it doesn't work very well. And especially in small footprint, type of real estate, you know, like a San Francisco or any other major city like that, you know, if you're off a few inches on the size of certain items, it really screws up a room. And on top of that, they have to end up becoming the project manager for all that. They're either scouring Craigslist, or going to furniture stores, they're, you know, spending all this money and it's just,

it's not a very good user experience. It might be that the business you've built is not the business that's going to win. So I'd encourage you, if you don't think that this is going to work, which might be why you're not getting investor love is they're just like, I don't believe this business model because I'm looking at it going, can this work? I'm an optimist. I don't see it maybe the way you do. So it might be that this is not the right model. And so you are free at the earliest stages of your company to completely change your business model. If you were starting over today, is there another business model that would work better in your mind? Or is this the greatest business model you can think of? I certainly love the margins. We're doing 54% margins as we are right now.

if I looked at it and said if we had the additional capital, we actually have customers to fulfill at this moment. So I'd say there are a lot of indicators that say it's a great business. It's not the only way to skin that cat. I looked at saying, hey, what if we owned none of the inventory? Kind of like what you're suggesting. There's certainly a play to be made there. It's just that your margins go down. I wonder if you could get terms from those people who have the furniture.

Because if you told them, like, hey, can I pay you half up front for the furniture? And then, you know, whatever, a monthly payment. for or a quarterly payment for two years. Maybe you could then use them to, because they want to move inventory. And their costs, they're marking everything up 50% as well, right? Right. Awesome.

Well, good luck with it. Keep us updated at Updates. At launch.com. A big round of bless for Trevor. Thanks. Hey, everybody. We're back with our Zap of the week from Zapier. You know Zapier.

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