This Week in Startups - E1058: Slice CEO & Founder Ilir Sela helps local pizzerias compete with chains by digitizing orders & small fees, shares insights on raising $40M+ Series C during pandemic, “reverse franchise model”, viral GrubHub invoice, helping front-line workers & local pizzerias with Pizza vs. Pandemic

Episode Date: May 12, 2020

0:36 Jason shares thoughts on his portfolio activity, getting back to work, leadership & more 4:20 Jason intros Slice Founder Ilir Sela 7:14 How has Slice been helping local pizzerias and front-line workers during the pandemic? https://sliceouthunger.org/pandemicpizza 9:12 What are the economics of an average privately-owned local pizzeria? How are the majority fairing during COVID-19? 13:24 What is Ilir building at Slice? What is their "reverse-franchise model" that helps local pizzerias compete with Dominos & other large chains? 15:32 What is the user-experience on Slice? 18:49 Who is Slice's average customer & how are their pizzerias handling the virus in 3 segments 29:10 Raising a $40M+ Series C during COVID pandemic & leaning on long-term relationships 32:49 Viral GrubHub invoice response - valid or overblown? Unit economics of delivery apps & how Slice's fees compare to GrubHub, DoorDash, UberEats & more 40:12 Huge delivery fees creating the need for two different menus (with higher prices on third-party platforms), how Dominos digitizing their order volume created maximum efficiency & allowed them to keep the same prices for over a decade 45:28 What is Ilir planning on doing with Slice's excess office space, how will the pandemic effect in-person work going forward? 50:10 Which groups of employees perform better under isolation? How is Slice helping employees deal with working remotely? How is New York responding to the crisis, and what will reopening look like (hybrid offices)? 1:06:53 Do business leaders have a responsibility to go through the testing process to understand how to help employees get tested efficiently?

This Week in Startups is brought to you by Clavio helps brands build relationships across any distance, delivering email marketing moments your customers will appreciate, remember, and share in good times and bad. Visit clavio.com slash twist today to start your free trial. That's K-L-A-V-I-O-com slash twist and Dell for entrepreneurs. up your hardware today and save up to 43% by going to Dell.com slash twist. Hey, everybody, welcome to this weekend. Startups. We're in the middle of the global coronavirus pandemic. We're taping this a little bit before its release date on May 12th,

and hoping that you and everybody you love are safe and sound. And it's very interesting as an angel investor to look at our portfolio here at launch. the name of our investment company launched at CO is the website. And when we look across our portfolio, it is feast or famine, and it is scary at times and inspiring at others. It's something to take in and something that is quite notable when you're an investor in these companies to watch everybody's fate flip on a dime in an instance from companies that are used by people

when they're looking for something to do spike in usage, trials, subscriptions, and to have record months and then to watch other companies who work just as hard have revenue go to literally zero to furlowing all their employees.

It's shocking. It's disheartening. And it's, my days feel sometimes like I'm working in a hospice and then other times like I'm still an investor. and obviously it's not life and death like we're dealing with.

But right after life comes livelihood and there is an ongoing debate about when we go back and people's livelihoods, people's freedom to do so to make their own decisions. I'm feeling optimistic because all the numbers that we see are going down and it feels like you can control the pandemic. if you take certain steps. I hope you are all wearing masks if you are going out. I hope you're socially distancing, and I'm hoping you're using a lot of common sense

when it comes to not putting yourself or the people around you at risk. I also hope that the country comes together and people can respect both sides of the debate, which is not happening now, to be totally honest. We've got a lot of fear out there, and a lot of people are struggling. A lot of people have been hit by it personally,

So I understand this emotions are high. I understand people disagree. And it's frustrating because we don't have leadership across the board that really seems to be taking decisive action. My gosh, where are the tests? Where are the masks? This is all taking too long. I think it's a really interesting moment in time to look at how the media reacts to stuff, how Twitter reacts to stuff, and just reminding everybody that people are fallible.

I mean, gosh, almighty. People have really bad hot takes, people who are responsible for deploying contingencies seem to be not taking it as seriously as they should. And it often feels like we're on our own. It's not a great feeling. I mean, part of being part of society and electing these people is that you would think that they would have a really great way of working together and solving these problems.

But one thing that is inspiring is bottom up. It's bottom up. It's people saying, you know what? I'm going to do something. It's scary. It's paralyzing. It's confusing. It's confounding.

But I'm going to get out of bed every day during this. And instead of curling up in a ball and binge watching, you know, the 17th series on Netflix or Disney, watching the Mandalorian for the fourth time, which is literally started in our household, the fourth time around for the Mandalorian. The girls love it. Some people are choosing to get out of bed and do something about it. and try to make an impact. And I've known of my guest on today's program for a little while, but I said, you know,

maybe we should try to do something here. And we ran a couple of versions of our angel dot university course. It's a course where we teach people how to angel invests because, hey, listen, it's something I know how to do pretty well. And I like teaching people how to do it because it helps the economy, right? So I said, hey, let me just do some virtual classes for Angel University. If I can get another 100 or 200 angel investors out there, maybe the, companies that need to raise funding, maybe they can find an angel. And boy, were we surprised.

We had 150 people at the first virtual class and 250 at the second. And that really inspired me. Wow, virtual, with everybody stuck at home, virtual has now, everybody understands how to do it. We're previously only 5, 10, 20 percent of people kind of believed in virtual. Now 100 percent of people are forced to believe in it and forced to get a green screen and a microphone and a headset that works, put an Ethernet cable in their computer. And we asked people to donate, at least 100 bucks to come to the class. And sure enough, we raised $30,000 or $40,000. So I looked for some places to maybe splash that cash around,

do a little splashy cashy on the Twitter. And we started giving money out to just individual businesses, $500 at a time if they were struggling or people who were trying to, a friend of mine who was working at an ICU, we sent lunch there. And I saw the founder and CEO of the Slice, or just Slice, I think is how they say it. It's SliceLife.com if you want to check it out. And his name is Iller Sella.

Welcome to the program, Illa. Thank you so much, Jason. Thank you for having me. And you and I, I guess, we were following each other on Twitter for years. We have been. I'm a big fan. And a lot of my inspiration and a lot of the lessons I've gotten over the years have come from your platform, believe it or not. Oh, wow.

That literally hits me deep in my heart. And it's literally the, that's what fills my batteries. fills my buckets is when I meet a founder who maybe listen to the podcast. You're an immigrant family came here when you're 10 years old to Staten Island. That's right. The only place we in Bay Ridge, Brooklyn, were able to look down upon and make fun of because you were the only people further from Manhattan than us. Literally.

And Bay Ridge. Yeah. But we got love for Staten Island. Well, that's right. And Bay Ridge was our first step towards, you know, something greater in the future. Right. You got across the Arizona Bridge. You paid your nine bucks.

Got to. That's right. Although if you lived in Staten Island, you got a discount. They gave you a discount on the bridge because they knew you were stuck there. We still have that going today, so big discount. Still got the big discount. And you were running the slice and you were doing something great. You too said, hey, you're a pizza delivery service.

We'll get into the details of how you started the whole thing and how it works at a moment. But just tell everybody broad strokes what you decided to do during the pandemic. and why? Yeah, and we came together with an amazing organization, Slice Not Hunger, another organization called Pizza to the Polls, which is an organization that we've partnered with in the past to raise capital and then deploy it by placing orders for pizza and delivering those two long voting lines in order to promote democracy and voting. And taking some of that historical performance.

and knowledge, we had a quick phone call on March 18th, I believe it was the exact date, and we decided to launch this initiative called Pizza vs. Pandemic with the idea that not only would we be able to feed the frontline workers with pizza and other food items from local pizzerias, but more importantly and even as importantly, support small businesses with sales volume. At the end of the day, and I come from a family of small business owners, and I come from a family of small business owners, pizzerie owners, I know for a fact that regardless of what we're capable of doing,

driving demand and driving sales is the best way that we can help. And so knowing that this initiative would impact both sides, we quickly spun it up and within three hours had it live and already raised, I believe in the first hour about $10,000, a result of the team at GGV Capital, which is one of our investors, and I'm sure we'll talk about that, stepping up, going on Twitter, publishing that they would match donations, and off to the races we went.

It's been amazing and incredible initiative, super proud of it. It's fantastic. You know, it's the classic win-win. We see these small businesses suffering, and I think that's a topic we should get into here, because people don't understand what a difference the incremental $500 order can make for the day, for the week, for the month, for a small business. Take me through the economics of a pizzeria, your parents' pizzeria, or a typical storefront

pizzeria. How much they make a year? What's their profit like? How many employees? And then, you know, where are they at now, given what's happening? Are they above water? Is their business increased or decreased? You heard my little preamble here about how I'm seeing some of our businesses literally double

revenue month over a month during the coronavirus. pandemic, and then I'm seeing other ones go to zero. What's happening to the pizzerias out there on the street? Of course, and I'll start with your first question. The economics of a small business pizza restaurant, on average, total sales, top line, about $450,000 a year. Thousand bucks a day, thousand bucks a day plus. Thousand bucks a day plus. Overwhelming majority of that is offline transactions predominantly coming through the phone. And for the small business owners, in terms of employees, it's predominantly owner-operated, usually a small family, or they have one or two employees. These

are micro-businesses, not even small businesses. And that is the average profile of sort of the normal profile of a slice partner restaurant. And yeah, a $500 order, you're talking about making up half of their volume for an actual day. It goes a long way. What's a pie cost today at a pizzer area in Brooklyn? What's a pie economics? It varies geographically, but on average, you're looking at about a $13 to $14 price point for a large cheese pizza. And when you look at these small businesses, they may have one or two employees, but essentially the person running that business is essentially buying a job for themselves, like an okay-paying job, right? They're making what, 50, 60, 70 grand a year for two or three

members of their family. Is that how it actually nets out at the end of the day? Totally. Their margins are around 20% if it's owner-operated. It's 20% on the total sales. And yeah, and it has to be owner-operated because to your point, absolutely they're buying a job for themselves. and if they're fortunate sort of the what we call anchor shops, the top tier locations, are obviously doing much better than that in some cases to 300,000 a year for themselves. But in those cases, they obviously have a broader and a more robust operation. It's not the normal. All right.

When we get back from this quick break, I want you to tell me the story of how you started the slice and also the story about how you came here as a 10-year-old. And then when we get to that third segment, I want to talk about democracy and capitalism in relation to the pandemic. So we're going to do this in two parts. One, I want to know your story. But after that, I want to know what democracy, capitalism, and freedom in America means to you as an immigrant. We'll get back on this week. We can start it. In uncertain time, supporting your community and growing relationships with your customers is a strategy that will be appreciated, remembered, and it'll be shared. In good times and bad, open and empathetic

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All right, I-L-R-E-L-R-E-L-A. He's pretty active, I-L-I-R-S-E-L-A. He's the CEO and founder of Slice, which you can find at Slice Life where you can search for Slice in the App Store. Am I correct that you've created essentially a marketplace for pizzerias that are not dominoes? That is one part of our business.

The way I describe our model and described it from day one is that we are building a reverse franchise model for small business segments that are highly fragmented. In essence, bringing economies of scale on one side and passing that value back to the consumer in order to create a digital ecosystem for small business owners. So creating the operating system that Domino's has created for franchisees, we're bringing that to the small business segment. Because that small business, with the 20% margin on 450K,

a world-class app cost half a million dollars to make and probably a half million dollars a year to maintain at best practices easily. And then you've got two or three platforms that you've got to maintain it for. So maintaining a world-class app is at least a dozen people across two operating systems, at least a million dollars a year. Am I ballpark correct? That's the issue here? Absolutely.

That's one of the issues. The other issue is why do these apps and why does digital matter? You have a lot of SaaS companies that solve this problem in terms of the tools. So the analogy I use is, you know, going fishing. I can give anyone a fishing rod. The question is if they've never been fishing before, they're asked to compete with Domino's and Papa Johns in our case in our market. It's impossible for a small business operator who's focused on the day-to-day aspects

of their business to also compete with Domino's in terms of digital and marketing and CRM and data. And so we do that all for the small business. So we allow them to focus on what they do best. And we call this notion really small businesses being in business for them. not by themselves. We are an extension of these small businesses. What is the consumer experience on the front end? Have you standardized the pizza? So if I order a pizza, I'm obscured if I'm getting it from Bay Ridge Pizza or Gino's in Bay Ridge. My two favorite places in order, I like the slice of

Genos. I like the square at Bay Ridge Pizza, the Bay Ridge Pizza and then chicken parm. It's a bit of a toss-up. I could go either way. But what I do is to J-Cal special. I'm going to do half chicken parm, half eggplant parm. I don't know if you've had that. I have. You have. Delicious. It's kind of the royale, if you will, of heroes. I mean, it's up there. And for people who listen to this podcast, it's probably the best tip you're going to get in 2020 is just go half-eggland, half chicken farm,

tell the guy behind the county, you want the J-Cal special, he'll know what you're talking about. Do you obscure the pizzeria and the brand and then just have a standard experience? So in a way, pizzeria has become like a flat operating system for you and the consumers have one experience, or do I get to pick my pizzeria,

get to pick my slices, et cetera. What's the experience for consumers, your vision there? We definitely have standardized the user experience when it comes to digital. So you've got a pizza builder for all the locations. And we want to thrive and kind of strive for a consistent experience, whether it's when you place the order on the front end and even how we close sort of the loop on the delivery side. However, with that said, we do not want to homogenize the category.

We don't want to standardize, you know, the product. We actually want to champion authenticity, and we call the micro brands. We want to highlight them and we want to tell their stories. So it's somewhat of a fusion between a franchise model that has a very homogenous standardized experience. But in our case, you really get a lot of authenticity and quality, and you allow the operator and the maker to really become a creator. And so we champion that authenticity. So I would pick my pizzeria in this case. But the builder, if I want to do half anchovy like my dad likes, which basically everybody else hates,

and then the other half pepperoni or, you know, whatever, mushroom, that standard interface, so you're not slowing down the user is standardized across all pizzerias. Exactly. And also the user experience is somewhat unique. Just exactly how you said you've got a couple of local favorites that you know about. That is the normal consumer experience around the U.S. And you're talking about, you know, 93% of Americans have pizza once a month. It's not so much a discovery platform where they don't know where to order.

It's just that they order usually from four to six different places. Yeah. And so we want to bring those places together on one dashboard so that when you order and reorder, it's just super simple for the user, for the consumer. Yeah. And, you know, those 7% are those car police, you know, and they'll be back. I mean, this was the funny thing. when we made the donation

and you started shipping the stuff, I got, you know, like, literally, the goddamn car police show up on Twitter. Well, you know what? You have to send just carbs. Why can you? And I'm like, all right. If a frontline worker wants to grab a slice

and pound two slices and get back to work, this is not the time for being precious and having a Caesar salad. I mean, give me a break. These carb police are too much. Did you get that too? I would say, we always get it.

And what I would say is two things. we are not about pizza, breakfast, lunch, and dinner, right? We don't push it in that aspect. America has a pizza culture. Usually it's a once a week ritual, whether it's family pizza night or pizza Fridays at the office. So I think for us, it's about making that experience magical. I would say in a second to that, or at least parallel to that, we really need to understand pizza's position in the ecosystem.

Our average customer is very underserved, lower income, average household income is $48,000 a year, highly fragmented in terms of geographies. Pizza is how many households feed their family on a budget. I mean, think about it, $13, $8 slices. Exactly. Your dad pounds three. Mom has one or two.

I'm just talking about a nuclear family here. And the kids have a slice or two each. You can get by it. We had a family of five. We get two slices. You got a couple of slices left over for tomorrow for breakfast. Exactly. And so, look, a lot of families don't have the benefit to be able to be so picky or choose carbs over non-carbs.

And I'll be honest, pizza is actually a very solid product. Yes, it has carbs, but it also has protein and fat. It's just a classic. Yeah, I mean, people got to get over their preciousness. Like, literally, I'm really sick and tired of, like, the, the, elites in this country. And listen, I'm a libertarian and I'm super liberal, but the liberal elites in this country in the coastal cities, just lording over poor people and every aspect of their life is just pathetic and just so clueless, it's unbelievable. Like to literally jump in a stream where

people are donating pizza and give everybody a lecture about the amount of carbs they're eating is just ridiculous. Because I know half those people are pounding carbs secretly when nobody else's looking. Without a doubt, I think empathy is so critical, to be honest, having empathy. Leading with that is just so important, at least for me and my values. Yeah. And you're dealing with a group of people who are just trying to get by. And so that is my other question here. When we look at the pandemic, what's happening to the average pizzerie? What are you seeing in your data? Are they 70% of where they were? 120% is it feast or famine? What's happening? happening out there on the streets? We see three segments. We have a small fraction of our network

is composed of predominantly pizza restaurants. They're more sit-down restaurants that happen to serve pizza for whom delivery and takeout was secondary to their revenue. We see a lot of them closing down at least temporarily. So for anyone who's attempting to make a huge shift to be predominantly pick up in delivery and use that as a way to subsidize their operation during this pandemic, they've had a lot of trouble doing that. And again, many have already temporarily closed. And that's because the rent is just so damn high for those folks. If they've got 50 seats, 60 seats sit down, they're looking at a whatever, $5,000 a month rent bill as opposed to a storefront that's got a $1,500 one, which has six seats.

I think rent is one. The second thing is that they are having to lean in on third-party delivery aggregators and the economics just don't work. We can get into that at some point. Yeah, we should for sure. So the combination of things. You got the sit-downs or shutting down. So they're shutting down temporarily.

Then you have the ones that have done incredibly well and the owner has a lot of disposable income. And they're just like, you know what? I can't risk it. I'm going to close down temporarily for at least a month or six weeks. And they're fine with it. Okay, that's a privileged person who's the business has gone well and they can afford to just pay the rent for a month or two and just not take the risk of putting people on the front line. Exactly. Small segment.

And then the largest segment is we're fortunate to have, you know, local businesses that have done pickup and delivery as a primary component of their business for decades. And to do that in a first party way, meaning they have their own delivery drivers and they control the economics. they are actually thriving. I mean thriving. 200% double, double the amount of business, triple? For a lot of cases, in some cases triple, in some cases, 5x. Wow. Are people being generous on the tipping now that this is occurring?

It's been incredible to witness that. Very generous. Tipping has really skyrocketed on the slice platform. And the most fascinating one is where people usually don't tip for pickup. pickup tipping is now super common behavior on a on a on a platform and it's and it's you know accelerating so very generous you know of all of our users but really speaks to the for the values of of the average American when people use the slice app and you're a partner restaurant does that mean you send the order to them and then they send out their own driver or you

send the order to them and send a driver how does that work or both Both. We've got the capabilities to do both today. That wasn't the case historically. Usually, because the pizza industry is predominantly a pickup and delivery market, most small business pizza restaurants have their own drivers. They prefer it that way. They want to control the experience. And the economics work really well. It's the one category where product market fit isn't really that strong with DoorDash or an Uber Eats. with that said, yeah, with that said, we do have a logistics platform where we have opened it up to third-party logistics providers to connect them with the local businesses that don't do their own delivery. What's that? Like a postmates or something? Does somebody have an API? Uber have an API? The initial launch partner is DoorDash Drive.

Got it. So DoorDash will interface with you, but you're obviously open. Because isn't Uber Eats going to do this too? And I guess Lyft is now suddenly put themselves in the game with the Amazon partnership. What's happening? What's the underground? Yeah, there's a number of them. I think there's also really great local players. Like in New York, you have Relay. What's Relay?

Relay is a white-label logistics provider in the New York market. Wow. So anybody who wants to plug in an Uber-like experience can just drag and drop a relay into it? Exactly. Exactly. You chose not to build your own driver network? Why not? Too much work to do? We just don't feel that the product market fit is that strong in this market. We also feel that the economics of that are somewhat challenging for us relative to some other companies that have already scale that platform. And so we take the position as where we are the negotiator on behalf of our network.

So we've negotiated a really favorable rate for our small business partners and then bring that in to our ecosystem. in a similar way that McDonald's negotiated with DoorDash for their franchisees. Got it. We get back from this quick break. I want to talk about DoorDash, Uber Eats, Scrubh, and the Postmates, and how expensive those delivery fees are. And then how does that match with slices and the fact that you have lower income folks

who maybe can't afford those delivery fees and what your thoughts are on this really challenging issue that, hey, you know, putting $20, $30 on top of a $40 or $50 order is just a little bit too much for certain segments of society to participate in this when we get back on this week's startup. Have you been itching to upgrade your workstation? I bet you have. Well, Dell for Entrepreneurs wants to help you level up your tech hardware. It was created to support founders by providing resources and tools that help startups grow and

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All right, Hilar Sella is with us. He is the CEO and founder of Slice. And you guys raised a little money. We're announcing it here today. Why don't you tell everybody what you've raised in your series C? Yeah, super excited to announce that we have raised our series C round. Then this one's led by KKR growth.

I'm super excited to have them on board and the resources that they're going to bring forward. Again, thrilled for everyone involved and most importantly for our customers. How many pizzerias your parents have at the peak? My parents? You said your parents have pizzeria or you had pizza? We used to.

We used to. How many did you have? Two or three? We had one in before I was born in Manhattan. It was called Charlestown. Paroleez pizza. And then most recently, my uncle had one in Brooklyn called John Anthony's in the early 2000s. Oh, wow.

Today I've got 34 family members that own pizza restaurants, though. Wow. And I assume they're all part of the Slice Network. Nobody resents the fact that you've built this ginormous slim pizza operator. They're all in, I take it. Yeah, they're all in. And it's been amazing because they've really influenced our business model. and they're our biggest critic, rightfully so.

So it just kind of keeps us really, really balanced. Yeah, that's going to keep you honest, right? When you got Thanksgiving or July 4th and you got 34 pizza owners in your family, they're going to tell you if the fees are too damn high or if the software is broken. So speaking, and so just a point of order here, did you start that fundraising before the coronavirus? And did you think, I'm assuming you did because that's a big round. Usually they usually take six, they usually take six months to kind of get going. was there a fear or a renegotiation that occurred when coronavirus happened, either up or down

because you're a countercyclical company here, like you're going to do better in the crisis. So how did that all go down? Yeah, it's a relationship. Really, I built with Jake, who's the partner there over the last four years. We really started having more meaningful conversations, I would say in January and February of this year. And to be super transparent, I reached out to him. when the early signs of the pandemic kind of came into play.

And I told them that we wanted to be a little bit more, you know, cautious but also opportunistic and be able to be in a great position to support our small business customers. Yeah. And yeah, we ended up getting a term sheet about four weeks ago. And so that was right dead in the middle of the pandemic. And in terms of- I think that's also like the day the stock market crashed. I think that was the literal worst day of the stock market that week.

It was. It was. Literally on that day. That's got to be a surreal experience when CNBC is saying we've never seen anything like this in the history of the stock market, except for the great depression. And here we are with a term sheet. Yeah, I think, look, two things. One, I think it speaks to the long-term vision of that team and our team as well. And then I think too, for any founder here, the importance of building long-term relationships,

these things don't happen overnight. But yeah, I mean, to their credit, they really stood by the term sheet. There was no renegotiating. There was no retrading. And it was just an incredible process. Kudos to the entire team at KKR. And obviously our team stepped up and was able to get it done. So let's go through the economic.

of your competition with the other delivery services. There's been a pretty charged debate here about these companies. And having been an investor at Uber, and still a shareholder in that company, there has long been, the press has long attacked these companies for two things. One, or three things. One, not being profitable.

So they get attacked by the press for not being profitable. Not that the press matters, but it is a microcosm of kind of this debate manifested. There's been a long-term attack that these companies were losing money, which is true. They were investing to try to reach scale. Number two, that they were not paying people enough, the drivers, et cetera. And you yourself said these are incredibly challenging businesses and you opted to not be in them, the delivery side. And then three, that the fees are too high.

And when you look at these three, when you look at these three, points that are made over and over again as the criticisms of these business, one of them needs to go up in order to solve the other two. You have to take fees in order to pay the drivers more and make it more sustainable so that these services don't go away. As a microcosm of that, there was a tweet that went viral. Let's pull it up here. This is a anecdotal one specific moment in time. One owner, shy piece of boss shared this nightmarish grubhubb invoice. 46 prepared orders for $1,000. The commission of $206.

Seems reasonable 20% commission. The delivery commission, which I assume would be what got paid to delivery people of another 10% or so or 9%, $94,99. Processing fees of $38, which I think are the credit card fees of about 3% or 4%. That makes sense. And then there were two really weird numbers. Promotions for $231. I don't know what that means, but it's 23% or so. seven order adjustment. I'm guessing those are people who wanted a refund of some type,

which is $131, we have a 12% there. Commission of $9, delivery commission of $4, which doesn't make sense. Processing fee $149, those are all de minimis in terms of the total, plus $20 for a promotion. 46 orders in March, $376 paid, which is 36% or so of the overall $1,042. Can you tell us, and then we'll get into what you're doing in the bigger picture, but just unpack this grubb statement. Does this make any logical sense to you? What is going on here? Yeah, look, I've seen the statement. I think the number one takeaway for me is, and we're somewhat sophisticated, I would like to believe, sophisticated business minds that are trying to unpack the statement and it's difficult to understand. Imagine,

micro business owner who's having to make sense of this. I think the reality here is that the economics of a third-party delivery platform as a primary partner to small businesses, meaning they are solving for online ordering and logistics and all those things at the core. It just doesn't make sense. So I think what you're seeing is, you know, a a lead-gen business, or at least was originally created as a lead-gen business, what those economics look like when you apply it as a core component to a small business. In terms of the individual line items, like, I think they're smart and how they're breaking it down because they want to be transparent to the small business.

But I think it's giving you visibility into just how expensive it is. Do you think it's representative of reality, or do you think there's like 30% of that It's like one-time things that wouldn't normally occur. Oh, no, it's representative of reality. I think there's two things that are happening here. One is that the micro-business owner is very unsophisticated, and it's very easy for me as a micro-business owner to opt into some programs that are designed to, in essence, cannibalize my business.

Right. You know, that's just the way it is. So that looked like it was 65% or so of the money, went to only 35% of the money got to the business owner. In your case, what percentage of the money from Slice makes it to the business owner if they on a hundred, for every, if a thousand dollars in orders came in today, what would the Slice microbusiness expect to get? What would the DoorDash, postmates, et cetera, expect to get? You must have done this analysis, I'm sure. Yeah, we've got a unique business model and I think it's pretty public, so I'll share it here. We charge a flat fee per order.

So it's a flat fee on a per order basis. The reason why we do that, it's $2.25 per order. And then there's a processing fee of 2.9%. Which you don't make any money off that. That's just passing along the credit card fee, right? Correct. So they would have to pay that anyway. So $2.25, if it's $100 order, it's 2%.

And if it's a $20, it's 10%. But it's... The average order value on slice is about $32. So it's about 6% on average. That same water running through Doorday. which I think is still the biggest, correct? DoorDash is the market leader today, yes. And then Uber's second, Postmates third?

I believe Grubhub is second, Uber's third. Got it. So if we were to look at those three, what would their take rates be? Yours is around 7%. Take out the credit card fee. Nobody pays that. But what would the take rate wind up being? I think, again, our model is very different.

But when you look at third party players, aggregators, their pricing models are pretty comparable. they're all somewhere between 20 and 30% per order. And so on a $1,000 total sales, you're looking at $300 total sort of accumulated back to these businesses. I think the issue then becomes, the issue really is that all of these programs and all of these platforms have then advertising models

on top of the core model. What does that mean? That means you can pay further, you can pay more to be at the top of the, rankings so that you can get more exposed. Like Yelp does, feature listings, etc. Correct. Or Google listings. So then you're paying them even more. So in your model, if the average order side was 30, a thousand orders, you'd be like 60 or 70 bucks in fees. I'm assuming you charge me the consumer another five bucks for the delivery or something or 10 bucks.

No, we don't charge the consumer. Right now we've got a consumer fee of 95 cents. But usually, usually it's either zero or 95 cents. And I guess pizza is a unique thing because It's high frequency, low cost, and that's why you chose this model. Exactly. Look, our goal is to create economies of scale on the small business side and pass that back to the consumer in the form of value. Free delivery, no consumer costs. We want to get to the point where there's no consumer fee at all.

And therefore, and no marked up food items because that's the other thing that happens is in order for Chi Pizza Boss to make their economics work, they have to raise their price of pizza at the $20 or $25. And that's what the consumer absorbs. How often is that happening? I've heard this story that there's two different menus now. And I don't look at the prices on the menu at this point in my life, but I was obsessed with the prices on the menu back in the day.

I'd be trying to find the general sows place that was $4 versus five versus six. It mattered to me. And I always did pick up on the way home because I couldn't afford the delivery fee. And the tip would have eaten into my ability to pay my rent in my 20s. So I always always always just walk my dog home from work and pick it up on the way. eating in the park with him at the dog park. So what is the difference? Are we seeing that across the board?

What percentage of restaurants and what's the difference typically? If you were going to put a pizza on and it's typically $14, are people putting their pizzas on for $24? And then everybody on the consumer site just is not aware of the fact that they could have picked it up for 14? Yeah, I think a lot of consumers are becoming aware. But absolutely, it's common practice now for small businesses to mark up their items on third-party platform. And that goes counter to what's needed for small businesses to thrive. I'll go on a little bit of a rant here.

Rant away. On what's important. I'm going to frame this argument within the pizza segment. When you look at a small business pizza restaurant and you look at who it's competing with long tail, it's competing with Domino's and Papa Johns and Pizza Hut. Domino's has completely revolutionized their business by digitizing their volume. 70% of Domino's orders are digital orders. What that does is it allows the Domino's franchisee to really operate incredibly efficiently.

They don't have to have people answering the phone. There's no mistakes being made. It's all a well-oiled machine. What that does is it allows Domino's to then pass that back to the consumer in the form of value. Domino's has not raised their prices in 12 years. Same prices, 12 years. It's ridiculously cheap. We ordered Domino's this weekend.

The girls had a craving, and I'm not a fan of it, but they are. And it's absurdly cheap. It's, and it's, and go back to what I said earlier, which is the average customer is underserved, lower income, critical. When you look at small business pizza restaurants, I fundamentally believe that they need to do the same thing. They need to be predominantly digital. They need to make sure that they're very efficient in the way they operate.

and then we need to drive those economies of scale back to the customer in the form of value. Well, what a lot of small businesses have done is they've partnered with a Grubhub and a DoorDash and an Uber Eats, and that's fine if you want to generate incremental demand. But if you want to be at the core, a digital first business, unsustainable. And so what they're doing is raising their prices. Well, as they raise their prices on Grubhubhub, more people go to Domino's to order that more valuable product. Wow. And so you get this vicious cycle.

Yeah, circling the drain. Yeah. I mean, it's going to literally suck those businesses underwater because eventually people will realize I can, I can feed my family for 30 bucks in the Domino's app. And now I'm at $47 or $52 in this DoorDash thing. Exactly. Exactly. And that's just a bridge too far. Exactly.

And so for us, it's not just about maintaining lower costs for the small business. We've gotten into pizza boxes and menus. And so we're actually aggregating buying power and driving the cost down on the supply side as well. Oh, that's interesting. Yeah. So I thought there was like two interesting things there. The digital orders don't have as many returns because the person can see and there's no phone mistakes. And then picking up the phone takes probably five, six, seven minutes.

So you need to have a phone operator there as opposed to the ticket just getting printed. Exactly. Not only that, the phone channel, which is still the largest channel for small businesses, goes unanswered 22% of the time. In my unanswered, I mean it's either busy, I put you on hold and you hung up, or I just never answered. And when 70% of phone calls are orders, that means 15% of every small business sales volume just gets dumped on a daily basis.

Yeah, they try another number. Yeah, they'll order Chinese or something or try the next piece for you. Correct. Yeah, that's brutal. And so explain to me the box thing. You're ordering a billion boxes so you can give them the boxes for free or instead of them paying $1.50 a box, they can get down to $0.25 cents a box. What do those boxes cost? Yeah.

So boxes and printed menus, cups, napkins, or non-perishable items. We've made a lot of progress on this front where we have negotiated prices with some of the large. distributors in return to bring our network of 13,000 locations to their door. And so a bundle of boxes, which is 50 pizza boxes, usually will cost $22 or $24 for 50 boxes. Correct. We've lowered that cost down, in some cases, depends on geography, down to $16 or $15. Wow. So it's significant.

Significant, yeah. What are you going to do with all that office space? What does that go for now in the flat eye? Is that $50 a square foot a year? It's more than that. Wow. I think it's interesting. We share our space here with a few other startup.

Seatkeek is in our building as well. Oh, I love Seek. I would say in this area, it's probably somewhere between $60 and $80 per square foot. So you're brighting out now. When I tell you, I paid 18, you're just like, wow, the 90s were amazing. Literally that part of town, you couldn't sell the office space. That's right. I had maybe 20,000 square feet for Silicon Island and reporter back.

in the day. We moved from 19th Street to 37th and 8th, where the $99, famous $99 slice place was on the corner. And the dough was so thin that you could basically see through the slice if you held it up to the sun. If it was, if you got the sun right, you could see through it. And that was, yes, $16 or $17 square foot. And literally, the schmatsu business was there. So three or four floors in our building, I would get in and I'd be a giant because it was all these little old ladies working, making dresses in the actual garment district. They were still making dresses, which I don't know if they still make garment. Do they still make dresses in the garment district?

They do. They do. I mean, you would literally get run down. These guys would be running with four, you know, racks of dresses. And they would just, you could get killed. I mean, the cabs were less dangerous at that point in time than those luggage, those clothing racks. That's right. So what do you think?

Are people going to come back to this office? I mean, it's pretty lonely there, it looks like. Well, I think it's going to be a hybrid, in my opinion. I think there is a lot of value in businesses, obviously, being co-located. There's also a lot of value in being flexible and having the ability to be very distributed. Fortunately, we kind of landed on that. We've got a global team of about 700 people across five offices. And our technology was already in a position that allowed us.

to be very distributed and remote. But I think it'll, look, I think if companies can find a way to be super, you know, great and like thrive and be able to execute really, really well in a distributed environment, then there's no reason to have a co-located office. But my hypothesis is that performance will dictate behavior. And so I still believe that the greatest performing companies will have to have some sort of co-located facilities, whether it's a different way of doing it or a centralized way of doing it, the more historical way. But I think performance will dictate behavior. That's just the

way it is. So if I'm understanding performance dictates behavior, we get past this pandemic, people feel comfortable getting on the subway, which by the way, I think this entire, I'm no doctor here, obviously, but when you look, I said it the first day I saw in New York breaking out. I was like, well, JFK, Newark, you're getting all these international, and then you have the subway. And having, you know, taking the subway with a 75-minute commute before the Fordham, you know, when you're on the subway, 20, 30 stops, and 20 or 30 people are getting on and off every stop, and it's dark and it's cold. Like, what do you think is going to happen? You literally could not have a better transmission device than the subway for coronavirus.

Totally. It's so obvious of why it broke out there and why it's not breaking out another place. And then people are like, oh, well, why aren't other places with subways? It's like, do you know how many people ride the New York subway? It's millions of people a day. And they're getting on and off at such velocity. Then in terms of the capacity of the subway, then you look at the bar here, it's a fraction of the number of people who take the barred here on a percentage basis. Most people here are driving, biking, walking, scootering to work. Same thing with Los Angeles.

Nobody takes a subway in Los Angeles. Pretty obvious why this is why New York got hit so hard. Yeah, without a doubt. And look, that's not to say that New York is no longer going to be sort of a hub for some of these locations. And, you know, we're still exploring opportunities to figure out what we do with this space. We may come back to it. We may make a change. But, you know, I still think what will happen long term is startups that will perform incredibly well will dictate behavior.

And I think the startups that will perform really well will be the ones that have some sort of collocated The thing that's going to be interesting is, and I'm curious what your experience has been moving into a wartime CEO position, which I assume is the first time you've had to be like a wartime CEO and dealt with a crisis. You're going to find out which groups perform the same, better or worse, like you're saying, performance leads. I think it's a really interesting point. Performance will dictate. I wonder which groups work better at home. I would assume developers, and customer support do better at home because they can concentrate more, there's less distraction, and they're less exhausted from, I don't know what the average community is, but I'm going to say

two hours, two and a half hours total per day. Without that, people should be under less stress and fresher when they show up to their computer at work because they're showing up in a three-minute walk. Am I right? What do you see? I completely agree. I think there's going to be some functions that'll work incredibly well remotely distributed. I think engineering product, customer service, that's a really good point. And then I think sales organizations like sales teams that thrive from energy and sort of feeding off of each other. The boiler room. Yeah, exactly.

They're going to need to be more together. In terms of what we're seeing, we're kind of seeing consistent performance across the board. I think where we need to do a better job and I think other companies are probably facing a similar sort of dilemma, which is when do you turn it off? Like, when does work, like, where does a line between work and personal life cross? Yeah. How do you prevent, you know, burnout? Because that commute is a very clear line of delineation between like personal life and, and professional life, if that makes sense. No, I think it makes a lot of sense. I know my drive home and literally my drive i'm 20 miles from the office i live in mid peninsula here and then come to the office

at the insoma it used to take 25 30 minutes was my way to listen to an audio book make a phone call um you know etc or just listen to the news or some you know dire straits whatever and that was my decompression time i i actually looked forward to that 25 minutes now it's down to 16 to 20 minutes and it's almost too short by the time i put a podcast on i'm already here But, yeah, it is now my life is blurring, and I don't know what day of the week it is. I don't know what time of day it is. And this is definitely creating some duress. How are you dealing with the mental health of your team?

Do you have any tips for fellow founders here? I have some, and I'll share mine after you share you. We're led by an amazing people leader in Jacqueline, who recently joined us as our chief people officer. A couple of things that we've done. I think one is just to be very open and transparent in terms of communication. So we've moved up our, what usually would be either once every two weeks or once a month, company Pulse. We use a company called Butterfly, a platform called Butterfly that helps us do that. What does that into a week?

What does that mean? What does that mean? People rate how happy they are? Exactly. It's a feedback loop. They rate how happy they are across multiple different categories that you can then adjust the topic on week to week or month. to month. Yeah, we have an investment in a company 15-5 that does something similar.

Yeah. What did you see over these, you know, 10 weeks or so? What we're seeing is, I mean, the first one was just how parents, for example, so a customer service person that usually works in an office to service consumers or restaurant partners now has to work from home, but in the home they have kids, family, etc. How do you maintain a customer service experience without the distraction? You don't. Something as tactical as that.

And then on the flip side, you start seeing sort of the parts of the business or the leaders in the business that are self-starters, that are self-aware, and you start seeing the ones that really have a lot of dependency on their peers. So you just kind of, it's a view into the pulse of the business, as we call it. And I think just having those data points are important. How every company deals with it, I think it should be unique to the business and their core values. But I think the most important part is being aware of it and having the data points. It's interesting.

So some people in a crisis you found they're just inherently motivated and their performance goes up. Other people, they're impacted by the people around them so much that being home and isolated, they're just energy players who feed off other people's energies and maybe they just don't have the wherewithal to self-started or it's not a criticism. It's just different way energy is manifested. Totally. Totally. Different profile. Yeah. That's fascinating. And any any need to just give people time off because of the mental health crushingness of this? I'm hearing across my portfolio that people are cracking. Like, and these are not just in the companies that are furlowing over everybody or laying everybody off. Those companies seem to, in a way, it's so cut and dry

that like, hey, you're just going to go get an unemployment and the business is turned off. It's almost like so clean that people can be at peace with it. Whereas the companies that have, okay, we just got to work harder and figure this out, like that's almost more duress. And people are cracking out there. I wish I can say we've got the solution to this, but we don't because we don't. We are in a position where our business has really accelerated. Small business partners need us the most during these times. Consumers who are looking for, you know, ordering pizza for their family are depending on us at this time. Safely.

So it's just been, for us, it's just been, you know, we've all been at 100% seven days a week for months, what it feels like. And, yeah, I think we are risking a little bit of that. burnout in some pockets of the business and we're trying to solve for that. But it's a fine balance between that and being there for those that need us most and those that put their lives on the line in terms of our business partners, pizzeria partners and delivery drivers and so on and so forth. It's tough. Yeah. It's, it's, I think this, this is what I'm hearing from people. Like, people are like, oh, take up a hobby during this. I'm like, take up a hobby. I'm at 140, at 140, 150% of my already, you know, I think pretty brisk work schedule.

You're working, I'm assuming seven days a week like me, no time to learn guitar. How are you dealing with your own burnout? You feel more motivated now? You feel scared? How do you feel personally? I'm curious as a leader. I feel great. The way my mind works, I mean, I don't have an off button.

I never do. Right or wrong. That's just I love what we do. I feed off of it. It gives me a purpose in my everyday life outside of my personal life. And so I'm feeling great. I'm feeling really energized. But I also need to put myself sort of in the back burner and focus on our team, our

exec team, our leadership team. And then just making sure that I'm also being a little bit self-aware and empathetic to the fact that not everyone is, you know, not everyone. one has the same profile as I do. We're all individuals. We're all authentic and unique. And so for me, finding that balance has been the most challenging part, but on a personal sort of front, I feed off of this. For me, it's about stepping up. And this is a moment of time for us to change the world. Yeah, I think this is one of the unique things about entrepreneurs, at least the good ones, the great ones, is that when the challenge comes, they look at it as

just that a challenge to be overcome. It's a chance for them to put to work, you know, those skills that in, you know, in an average market, you know, some days you might not phone it in, but you might not feel a sense of urgency. And it's sort of like playoff time or the finals, right? If you just take a basketball analogy, you know, the great players, you just see their scoring go up 20 percent. You see the rebounds go up. You see their minutes played. Everything just goes up for those performers. And yeah, I feel it as well. You know, I feel like this is playoff. time. This is like the most important time for me as well. But boy, you know, it is hard to watch as a partner when somebody has to lay off the entire team, when somebody has to cut, you know,

six-figure jobs. That's the thing that's getting me that I am getting into it with people on Twitter the last couple of days who are being very precious from behind their keyboards about, you know, everybody has to stay home forever. And we're going to shelter in place until there's a And it's like, did you listen to them when they said 18 to 10 years for a cure? Like, that's not happening. There is no cure in sight. And there will be more suicides and, you know, overdoses than coronavirus deaths if we were to take shelter in place forever. And your job is to file from behind a keyboard.

You have a massive six-figure salary and benefits. And your position on this does not take into account the people you, you know, for these, keyboard jockeys that we're lucky enough to be for a keyboard jockey to tell the small business owner, just ride it out. Just ride it out means kids are not going to school. Your employees are permanently laid off and get ready. If you look at the opioid crisis in Staten Island, which got particularly hit hard, it's going to be no joke when people start killing themselves.

And everybody's like, oh, you're being alarmist, whatever. Just look at the statistics. Like, we have, you know, a suicide rate that's gone up consistently. And you know what? Like one out of five men who killed themselves is because they lost their jobs. I did the research this weekend. It really goes, I mean, couldn't agree more. I think it goes back to the underserved.

It goes back to empathy and understanding how lower income families live and what they depend on in order to survive. And there's a lot of stress. I mean, I crossed this bridge on a daily basis of the Verrazano Bridge, and all you need to do is Google Verrazano Bridge, and you'll see the suicide rates related to that bridge on a daily basis of what it feels like. It's just incredibly sad, and I think really important that we, as a community, especially being more privileged, that we find ways to help. And that's really what's top of mind for me. And again, going back to the original question, this is not a time to, you know, to sit back. It's, this is go time.

Yeah. And what's the climate like in New York? I mean, every day I watch Cuomo. It's basically how I get my bearing. What a leader. I mean, to start with data, I saw today 220 deaths, which is absolutely gut-wrenching. But you guys peaked at 900 people dying a day. And I remember when it was.

was 900, I just said to myself, my God, please don't go to 9,000. And now to see 200 a day, I just felt like, okay, you can attack this and get down to 20 a day. It can be done. For sure. Things are getting really much better. And one of the things and one of the qualities of New York is that when times are tough, New York finds a way and has a way to really come together and work its way through the biggest challenges. And we did it in, at the, 9-11 and this is really very similar to that in a lot of ways. New York steps up when when times are difficult and I think you're seeing the early signs of of that effort and I foresee that becoming better with whatever every single day. I think the risk here is as weather becomes

nicer for people to remain disciplined and not get too ahead of ourselves and start sort of breaking some of those rules. I saw the people out in Central Park and I thought, wow, there really are spacing out. And then I saw some other parks, you know, that might have been smaller parks, harder to distance and people were not distancing. And then I saw like some of those groups of people are not living together. Like that's four households. That's three households. And those people are not wearing masks and they're not distancing.

I just can't. But I did see the police were handing out masks, which is great. But then I also saw the police were arresting and tackling. people for not wearing masks. And that just seems incredibly stupid to be arresting people and finding them and creating tension in an already tense situation when simply handing somebody a mask and saying, I would hate to give you a fine, but here's a free mask. And you can avoid getting a $500 ticket simply by putting this on. And here's an extra one for you to give to somebody else who forgot their mask. Yeah, I think media has a really good way of isolating images to very specific cases.

I think New York should be really proud with what they've been able to accomplish and will accomplish in the coming weeks. In general, as you either drive around or look around what you're seeing in some of those unique cases, which I think are important to highlight just to show the risk, that isn't the common behavior in New York. And again, New York should be really proud. I think when they go back on this, I think the subway is going to be the big issue. I think what they need to do is, I don't know if you remember,

you weren't alive during the gas shortage, I don't think, in 77 or 78, but I kind of remember because I was seven years old. They basically took license plates, and they said if your license plate is an odd number, you can get gas on these days. If the first number, the even days, you can go this number. I think what they need to do is some sort of system like that for the subway and then tell employers, listen, you can have this many employees come to work. You know, maybe it's last name. You know, if your last name is A through M and you can go at this time, if your name is N through Z. You can go at this time or these days and then just spread it out so that the start times at work would fluctuate between 6 a.m. and 12 p.m., let's say. And therefore,

the commutes would fluctuate on the way back from 3 to 8 p.m. And it's 7 days a week and just let people know, like, listen, when the subway hits this amount of capacity, we're just not going to let people on. There's going to be a queue to get on the subway. And you're going to need to make some adjustments here. How do you think about, we'll wrap with this, how do you think about coming back to work for your company? Because this to me is the one I'm struggling with. We're going to be able to come back to work. And then I might have some employees who are scared to come back to work. And then I have to be the one who says you have to come back to work. How does this work? How do I wind up having to take this responsibility? And then what is a business

owner going to do, say you come back to work or you lose your job? Yeah, no, it's a really challenging proposition. We have already announced that we'll be fully distributed and remote until at least June 1st. Most likely we'll extend that. And then we're having early conversations about what it would look like to come back. And some of the conversations centered around exactly what you just said, which is certain functions being in the office, certain days, smaller groups coming in for certain things. initiatives, but phasing our way into it versus making it mandatory that, okay, on this date,

everyone has to come back. And again, we're a little bit fortunate because of our history and just the way we've grown in a distributed way over the last 10 years. We have that luxury. I recognize that a lot of companies don't, but I would say, you know, that's the position we're taking that it's going to be a phased approach. And we'll see how that goes. iterate from there. We have to be very flexible. Yeah, you may have to even change the physical

setup of your office, right? I see you've got the open floor plan. You might just need to, the desks in between might need to be struck or pull a chair out and space everybody out even more. For sure. Temperatures at the door. That seems like a no-brainer. And then testing. Have you, have your research testing yet? I got tested on Friday two weeks before the taping of this. So by the time this comes out, I'll have my result. I did the IgG test, that lab corpse in Burling game for those people who are wondering you can get testing now in California. Have you gotten tested yourself and have you looked into it for your teams? I have not.

I have really, you know, isolated myself on Staten Island other than today coming into the office. I have not been tested and we are exploring options there to figure out if that's, you know, something that we're able to do without putting those that really need to be tested at risk. Yeah. I think these lancing tests where you can just launch the tip of your finger, and people getting their temperature checked at the door is going to become the standard, especially in a place like New York where it was acute.

And that's going to be another kind of thing like it. Okay, welcome back to work. Now we have to give you a pinprick and draw your blood at the door. And, I mean, it's kind of dystopian and crazy, right? Like, this is all so surreal to imagine not forcing. I mean, hopefully everybody will opt into this. But in order to come back to work, you've got to get tested. I'm getting tested also this week, by the way, at Stanford.

I'm doing both tests. And my plan is to get, because I want to know what this costs, how it works. Am I putting people at risk to even go get tested? Right? Like going and get a test. What if you're going to the testing location and there's 20 people there who are coughing and hacking who are symptomatic? Maybe I'm introducing people to risk by getting tested.

When I went, there was one other person. They were asymptomatic, which means nothing in this case. But I socially distanced from them and I waited for them to come in and out of the lab. And we didn't come within 10 feet of each other, obviously. But yes, I think you should go get tested. See if you can find out if you can get tested, right? Just go to your primary care doctor and say, what test can I take? Let me take all three.

This way, you as a CEO, and I think all CEOs and founders out there who are dealing with this, go get tested is my advice. Go lean on your doctor and say, listen, I need to understand this process and get tested because that will also stress unless, and they'll tell you if the tests are available for asymptomatic people. Obviously, it doesn't seem like there's enough people who are symptomatic to use all the tests right now, so you might as well go start getting your teams tested. I think that's great feedback.

And I'm going to take you up on the advice for sure. I think it's important that we know. Well, I mean, leaders eat last and they have to like, we have to be on the front line. So I think every leader out here, if you go get tested, then at least you can say your team, here's what it's like. And it was a blood draw. It was one vial. It was a blood draw, like just getting your blood tested.

It wasn't a pin prick for me. But I did, I do have a friend who went to a party in Los Angeles on Friday night. It was just like six friends who got together. and the person had the pinprick tests and to get into the party, they did the IGG tests for everybody and everybody. And I was like, wow, that's additionally dystopian and crazy. Imagine having a party where you have to get blood tested on the way into the party. And people, they said it took 10 minutes, so people just lined up, took their test after they got the result came into, I don't want to say a party. It was like a dinner party kind of situation, but while the world's

going to get weird. You think you're going to be on a plane in 2020? You think you get on a plane in 2020? I don't think so, and that's the fascinating stuff. We had a travel budget that was pretty robust, and it's interesting how many things got done without the travel. So that's a lesson for myself and probably a lot of founders and CEOs, which is really being very disciplined with our cost. And I think forcing ourselves to leverage technology like Zoom, like Google Hangouts and others, to be able to get a lot of things done. I imagine I would have had to come in person for this podcast. That was actually my position. My position. position was I don't want anybody, if people don't want to take the time to come to the studio,

just when they're ready, when they're in, you know, you were going to be in San Francisco. At some point, of course, we'll just wait till you're in San Francisco. And now what I found is I didn't think I could do a good interview like this without it. And now I'm finding my team is really dialed in, you know, shout out, sir Charles, shout out, Master Nick. They really dialed in this, you know, making sure you had a proper headset. I'm assuming they got you on Ethernet. I'm assuming they did two or three tests with you to make sure this would be buttoned up.

Zancaster other tools really really tight for doing this kind of stuff. And what I've learned is the chance at getting a great guest in a timely fashion makes up for what I lose in the in person. Like I could probably get 10% more out of you and get 10% more honesty out of you. And I actually still believe in person. That connection we have, me looking in your eyes, I can get 10% more out of you, make a 20% better interview. But to get you at this time to have this real discussion,

with you being sequestered in New York, you know, and sipped in New York shelter-in-placed, it's kind of worth it, right? I kind of get the fact that you're dealing with this and you're on the front line. So it is a mixed bag. And then I thought with our accelerator, you know, my rule to everybody was the test of coming to San Francisco for an interview for the accelerator, whether it's Y Combinators or Launch Accelerator, and the test of being able to spend 12 weeks here, maybe suffer, you have a family and you're coming out here every week, which I had people do, come from New York, do the overnight, red eye back 12 times or maybe you don't have two weeks

away from your family to really come out here and meet all the investors out here. That was a test. And I felt that test was important. And I think it is. But now I have no choice. So we invested in seven companies, $100,000 each $700,000 and launched Accelerator Class 18. And I've never met them in person. Unbelievable. But I think it speaks to the hybrid. It's really the hybrid model that'll work across the board, whether it's for investing, whether it's for podcasts, and even how companies operate.

I think it's all about flexibility and optionality. That's the most important takeaway for me, at least. I'm on a thread with, you know, I got some friends who are, you know, at the top of the industry, obviously people know that. You know, run a podcast for 10 years. You've been in the industry for 30 now. You know, I got an elite set of friends

and I was talking to an elite set of friends, like we all are. I'm sure you got this founder's thread in your I message. And it's basically like, and you probably got your boys. You grew up within a thread. And you kind of like everybody's living in those threads right now. That's kind of like how we live. And some very significant people are saying, why am I here? If 100% of the world has embraced remote, well, then remote is no longer this

weird thing for kooky, you know, esoteric companies and Matt Mollingwood made it work and he's an introvert and, yeah, and Vision made it work, but, you know, those are kind of like really interesting companies, but would they be bigger companies if they were in person? And, you know, there was this kind of doubt about remote. If 100% of people participate in remote and you don't have the straggler effect, well, then remote is the new standard. Correct. And that changes everything. And I literally was on, and I don't want to trigger my staff here, but I was looking at homes in other states this weekend. And I was like, holy cow, I could have the best house in Austin for less than I'm paying for my house here. I could have the best house in Austin

and a great house in Miami and not deal with, you know, the arduousness of San Francisco. And if it's all going to go remote anyway, does it even mean? matter anymore. That's what I'm thinking. It's a great question. I think it'll level the plainfield between some of these large cities and costly cities and more up-and-coming cities. But I do think unless it's mandated, unless it's a law that you have to be remote, I do think performance will dictate the future behavior. And for those companies that figure out how to come together and really outperform, then for every one of those companies,

there's going to be 10 others who are going to want to do the same thing. See, this is a really interesting insight. I think what's going to happen is, you will see a group of people say, you know what, not worth it. I'm going to go fully remote. So if 10% of companies right now,

I'm talking about like, you know, let's call it companies that are over $5 million in revenue, like significant companies. Always startups under $5 million in revenue are going to be distributed. But if the $5 million plus companies, in revenue. Let's say it goes from 10% being remote to 40%. Okay, that just took the pressure off of San Francisco and New York rents, San Francisco, New York office space. So then what happens?

New York becomes like when I came up in New York, when I went to the city in 87, 88, 89, where you could park on the street in Tribeca and people were renting, this is going to blow your mind, storefronts in Tribeca that are now like, you know, where Nobu is and, you know, some of the, you know, Odeon are. We were renting storefronts. for $7, $8, $9 a square foot a year. $1,000 square feet, $800,000. I had a $1,500 square foot loft looking out on the Hudson in the Sarat-Lehigh building

for $9 square foot per year. I paid like $1,200 a month all in for $1,500 square foot, 60 feet looking out on the Hudson. Incredible. I was making $60,000 a year at the time, $50,000 a year at the time. time. And so, you know, it was a big portion of my at-home pay, but you could, and DJ Spooky

lived in the building and a bunch of cool artists lived in the building. We had to, you know, we had illegal electricity taken from the light fixtures in the hallways. It was like, that was New York in the 90s, 80s and 90s. That's why it was cool as fuck is because it wasn't run by the rich people and the, and these Russian oligarchs buying up, you know, $20, $30 million apartments to hide their money. Yeah, look, I think what you're going to see is sort of a cycle. Everything is a cycle, right? So you're going to see people kind of moving back out, being more distributed. And

then the moment that happens, everyone's going to come right back in. And so this is this is the world right here. And right now we're seeing sort of the spread. And, and, you know, I think that's fine. I think a lot of people just kind of fight change. And in reality, if you embrace it and just adjust and again, remain very flexible. You'll be. be fine. All right. Listen, continued success. Congratulations on the raise. Thank you for announcing it here on this week in startups. And I look forward to getting a slice with you when I'm in New York. Likewise. Stay safe. All right. We'll talk soon. Cheers. Bye. Bye. I will see you all next time on this week

startups.