Y Combinator Startup Podcast - #105 - Reham Fagiri and Kalam Dennis

Episode Date: December 14, 2018

Reham Fagiri and Kalam Dennis are the founders of AptDeco, where you can buy and sell used furniture. They were in the YC Winter 2014 batch and you can find them at AptDeco.com.The YC podcast is hosted by Craig Cannon.***Topics0:21 - What is AptDeco?1:06 - Why did Reham and Kalam start it?2:51 - Were they considering other ideas?5:06 - How did they prepare to start AptDeco after business school/the corporate world?6:21 - Getting over the fear of starting9:21 - Communicating that they're starting something to friends and family14:21 - Starting a startup after business school17:21 - Helpful learnings from a more traditional business education27:21 - Early models of AptDeco vs today31:51 - AptDeco's customers34:06 - Brands and customer acquisition38:46 - Learning how to do delivery42:06 - Deciding not to warehouse furniture43:51 - Ideas that didn't work and some that worked on the second attempt48:21 - Analytics50:51 - Being a NYC company in YC52:11 - How to make the most of YC

Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinators podcast. Today's episode is with Raham Figuiri and Collum Dennis. They're the founders of App Deco, where you can buy and sell used furniture. They were in the YC-Winter 2014 batch, and you can find them at APT-D-E-C-O.com. All right, here we go. All right, guys. Well, thanks for inviting me to your amazing office. Thank you. Thank you for coming. So what do you guys make? So we are App Deco.

Abdeco is a marketplace for buying and selling furniture based here in New York City. We take care of essentially like the whole process from pickup and delivery to payments and everything in between. Yeah. So basically we kind of took Craigslist and just, you know, said if you get a trusted community of users, if you can make the pickup and delivery easy between two people and the payments between two people, you'd have something useful. And so that's essentially been the premise since we launched. And what made you convince that this could be a fully-fledged product?

Because I've seen all kinds of blog posts about, like, you know, the fragmentation of Craigslist, right? And some have succeeded as products and others haven't. What gave you the impression that this could be a thing? Well, I mean, we started out of our own frustration. Yeah. Just having a really bad experience trying to sell on furniture on Craigslist. But realizing it's a big opportunity was we did. a lot of market research to sort of test if this is something that people would be interested in,

sort of the premise of the solution. So for example, we would go on Craigslist initially and test, hey, with delivery. Like, we'll actually just copy somebody's listing and just add delivery and see how people react to it. And we saw that, like, oh, there's definitely a big opportunity there because people seem to be a lot more responsible when you just add the delivery like word to the listing. could you know that if you hadn't created the original listing? Would you, so you would dupe it twice? Yeah.

You would do one with in one with that. Exactly. Okay. Yes. Yeah. The other thing we, when we did our research, we saw, was the fifth most popular category on Craigslist. Okay.

Furniture. Furniture. Yeah. Furniture was the fifth most popular category. And then when we, we created like an MVP and, um, and when we actually had launched the site, the first day that we had had the Frankenstein of a site in 2004. You know, we, we had a transaction the day that we launched it. And this is with no earthly idea of like really what we were doing.

So, you know, I just think all those signs kind of pointed to it. And then when we applied to YC and ultimately got into YC, I think that's when we were like, you know, shit, this is like risk is real, you know. Yeah. Were you pursuing other potential ideas? Because, yeah, like the market research thing is much more of the business. school approach. And it's a less common approach within YC startups, right? So were there other ideas that you were considering? There wasn't any other ideas. And, you know, I just, Raham and I wanted to work together for a long period of time. Yeah. And, you know, quite frankly,

it wasn't really that scientific. And we, we weren't, I don't think we're the traditional founders in the sense that, you know, we were in like serial entrepreneurs. We, you know, come from very traditional business background. But we were like, you know, we took a lot of version from Airbnb and other companies. We're like, this is, this seems very obvious. Yeah. And that we kind of just took in and ran with it. Yeah, I mean, I think, I think for us, like, our experience, like, we were so frustrated

with what happened to us when we were trying to sell our furniture on Craigslist. And we started kind of, really, frankly, obsessing over, like, this just is really, really bad. that, frankly, I don't think either one of us was ready at the time to start a business, but we stumble upon this idea. When you were ending business school, right? When I was ending business school and Column, it was sort of like happened all at the same time. I was ending, I was finishing business school coming back to the city to start a job at a startup, not start my own company.

And so I was trying to sell my furniture and I just had a really, really bad experience. And Collum at the same time was also trying to sell a piece of soap. sofa and who's also had a bad experience. And so we were just like talking about it and just like, why it is so bad? Airbnb had just taken off. Uber had just taken off. And, you know, everybody's like now doing this sort of quote-unquote sharing economy. So why couldn't you do that with furniture?

And we just kept in talking about it all the time to the extent we're like, hey, like, let's just do this. Yeah. You know, now is the time. We don't need more experience. So that's really kind of how we happen, I would say. How did you psychologically prepare yourself to like, go off that ledge and not have the steady, you know, Goldman paycheck. Because you also from business school, do you have loans and things you need to cover?

Oh, yeah, I still do. Yeah. I'm still paying those loans. Yes. I mean, I don't think anything prepared us for what we got ourselves into. Nothing will prepare you. You know, I think that we were just kind of at the point where, you know, I think when we had kind of gotten to the interview point of YC, and, like, quite frankly, I was still kind of moonlighting. So I was still doing my, I was like doing this in the evening and then doing, uh, working at L'Oreal.

Um, and that, you know, that's the only job I'd never had. I'd never worked professionally anywhere else. So I'd, you know, so it was, I was very, quite frankly, very happy at L'Oriel. It wasn't like I was, you know, I'd always had like upper mobility and I loved working there. I love what I was doing. I was very happy. Yeah. Um, in that corporate environment and, you know, had a lot of experience and upward trajectory. But, you know, I think that, you know, we just saw this as an opportunity. And then we said, you know, at the end of the day, like if we failed, you know, it's not like we couldn't go back to, you know, corporate America or go somewhere else. And we always were kind of confident in our skills. But, um, but this is super interesting to me because I 100% agree with you. And I think that's true for most people at these super competitive jobs.

They're talented enough to get the job. They could get it again. Yeah. But how you flip that switch to get over. the fear. You know, I think when we got into Y Combin Air, that's what we were just like, okay. Actually, when we got to the interview point, then we were just like, okay, if we're

going to YC, we got to do it. I mean, like, there's no. But you had already quit before, like he had already given his note. Colum had already given his notice before we even got to, we had received the interview request, but we hadn't been to YC yet for the interview. So you didn't know you were in. So we didn't know we were in.

But I had already, I decided not to take the job that I came to New York for and ended up just doing this full time. And Collum was moonlighting and essentially helped financing it. So while, you know, while he was working at L'Oreal and then doing this at night and weekends. But, you know, I think, I mean, I think like we just saw a problem that we became very intimate with and also the solution for. for the problem, we experienced it during the same time. So, you know, when we had this really bad experience, trying to sell our furniture on Craigslist, I moved back to New York and I had my truck. And Colum borrowed my truck for that one day, listed back his listing on Craigs and say, one day only free delivery in New York City. And that same day, someone gave him the full amount and showed up immediately, did not cancel, did not flake, was not sketchy.

And so we're like, wow, like, this is how you do it. You have to offer delivery. You have to take care of everything. You have to make it simple. And so we saw the solution. And that, like, really helped us sort of, fast forwarded our, I guess, our, like, process of deciding whether we should do this or not. Because we had the problem and the solution at the same time. And we're like, okay, we have to do it.

Right. So you have that kind of, like, positive feedback from a market. Yeah. And I guess we just felt it was a good kind of common sense solution as well. Yeah. I think it's found as like we're very, we're probably more practice. than most. Yeah.

And we're probably, you know, we're probably kind of one foot in front of the other type of founders. Yeah. Versus, you know, like, you know, I don't know, like, kind of in the clouds type. We're very, we're very practical. Yeah. Yeah. Yeah. We're very, I think we're very practical in the sense.

And I think that we saw this as a very, seeing it with our own eyes and seeing the opportunity, we thought of it as a very practical kind of solution to something that, you know, everybody has furniture. It's kind of a big problem. So I think a lot of those kind of things were, you know, kind of fit, I think, within our, if I have to think back back about it now, if it within our woodhouse, like, this is something very tangible and something that could be really useful. When you could kind of model it out. Yeah. Oh, this works. Yeah. This works.

Absolutely. And then how did you communicate that to your friends and family from these, like, prestigious jobs and schools and stuff? We're still figuring that out. Yeah. You know, it's funny. Like, for the first time I actually sat down with my father. And, you know, I, I, um, uh, we've been kind of in these conversations with investors recently. So I showed them like our investor deck and I'm just trying to just take him through the investor deck.

And I'm like, you know, and it's such a strange thing to talk about, you know, raising a few million dollars or doing this and that. It just, you know, it's just, you know, it's just like, you know, you're talking. I mean, it's, it's very hard to make it very tangible, you know, for, you know, we're saying we're practical. They're Uber practical, you know. So, um, but I think that they understood it. I think when we, when we first did this back in 2014, I think there's a lot of, um, I wouldn't say just skepticism. I think it was just like worried.

Mm-hmm. Just worried, you know, like, don't give up like that good job and don't, you know, don't, you know, a burden of hand. A burden of hand is definitely, I think, the philosophy that my parents have. I think probably most people probably that generation. And I would guess in Rahmocrat's people, You know, you speak on that as that, you know, they're, you know, if you're having immigrant story, it's like, you know, you're going to, you find a good job at a good company and you'd stay there. And so this is, I think it was just so foreign. Yeah.

They were skeptical and worried, but at the same time, kind of supportive. Yeah. I'm a parent. So I'm from Sudan. I came to the U.S. for college. And so my parents still live in Sudan. And so for them, the golden ticket is to have a job at Goldman.

not start a company and, you know, just work crazy hours. The whole thing has just kind of been crazy for them. So they're like finally, you think, wrapping their heads around it. But, I mean, pretty much almost every phone call I have with my parents is like, so when is this going to be over? Wow. Yeah. It's just, also they don't live here.

So they don't see the impact we're making. You know, like they're, it's a complete different. world, right, for them. So they just don't really understand it. But they're supportive, which is the important part, you know. But there's not a kind of an entrepreneurship narrative in Sudan? Oh, it's huge. My dad has his own business. My entire family, my entire family, yeah. All my family members have their own businesses because the way the economy is structured there is there's no large corporations. I know, I guess there's a couple, but most people are just small business owners. You know, my dad has his own engineering firm, my aunts and uncles,

Most of them have, you know, either like their own medical practice or engineering firms or architecture firms or what have you. So that's the norm. But I guess because probably their business owners that they know is how hard it is to run a business. Like if you have a job that pays well and you don't have to worry about, you know, covering everybody else's salary, why are you doing this to yourself? So that's probably where it comes from. I actually think, you know, in my parents or probably, you know, even working at L'Oreal was like a kind of a, leap for them. You know, they're more like like a good stable government type of job. Where are you from? I'm from California. I'm from the Bay Area. And so I think that, you know,

they're like, over focused on stability, you know. And so where, you know, that's, you know, I was never interested in those, but, you know, particular type of things. And I was always, I was interested in business and wanted to work in a company that was exciting and innovative. And even for them, I think that kind of seemed like kind of like fluff. And so this was a like even another level of like really off the league. It's such a weird generational thing because you would assume that even like being from California at least said like, ah, you go work at HP or something. Yeah.

Like that's not. Yeah. You know. Didn't your dad work in the government or? He did. Yeah. He did. He did.

And so and my mom worked for like the railroad. Okay. Southern Pacific. So I think, you know. Super stable. Yeah. Very. Exactly.

Super stable. Yeah. So. Even a company like Lorell or. or Goldman Sachs that that Goldman Sachs still has a process where they like, oh, I think their bottom 10% every year or something like that. Really? Right. You know, so and Laurel is an extremely lean, you know, company or corporation.

So it's, it's not a company where you can like hide around and skate by. You can't coast. You can't coast, you know. And so that's never been the type of thing that I was interested in anyway. Okay. You know. And did you go to business school as well? I didn't.

You did not. I went to undergrad at Clark, Atlanta. Okay. Which is historically by college in Atlanta, Georgia. and I recruited for L'Oreal right out of undergrad, and I was there for like 13 years. No kidding. Yeah.

Okay. And now how do you get in, were you getting into startups in business school? Like, how did this happen amongst your friends? Because I know that that's been a pretty big shift from like, you know, 15 years ago, if you went to HBS, it was like private equity or like consulting, right? But now it seems like more people are going to like the Googles and the Facebook type companies, right? So when you were in school, was that coming? up or? Yes. Yes, it was definitely coming up sort of, there was definitely a shift where

more, I went to Wharton and there were more, my class, there were more people talking about tech versus going into banking and finance. So like the market had crashed a few years before and, you know, a lot of people are just sort of exhausted from the financial industry and they were looking for something else. It was actually interesting. When I started business school, I mean, I knew I was always going to do something. Actually, one of my essays was about building a social enterprise, but I didn't know what kind of social enterprise. I always thought it would be connected to Sudan or connected to Africa in a way.

But I always knew that I was going to start something at some point, but I didn't think straight out of business school, I'm ready. I needed more experience, and that's why I wanted to join a startup. So when I was at business school, I saw the school. I saw this shift where a lot of people were asking me questions, people who came from finance about tech, because I'm an engineer. And everybody wanted to like, okay, well, you know, tell me more about tech. And like, you know, how do you be a product manager? How do you do this?

I'm like, wait a minute. All these people are asking me that tech. And I'm trying to get out of, you know, tech. Something is wrong there. And so, you know, I really started digging deeper. But I did definitely do a lot of startup sort of business plan competitions when I was in business school. Okay. Talk to a lot of people who started their own businesses and just sort of realize all these people are I mean, I feel like I'm smarter than as smart as them.

They can do it. I should be able to do it. And that really helped me. And I think that was, you know, I think we were very, I was very fortunate to for Rahma to kind of work on this work on that deco kind of at that time because she was being immersed to kind of the startup world where I think I was quite frankly like very moved on it. When I think about kind of where we are now. And I think about pre-YC versus post-YC, you know, and just the, just the tech environment, particularly in the Bay Area. For sure.

You know, we're like, man, I was light years away from that particular world. And if it wasn't for Y Combinator kind of giving us like a significant immersion into kind of the startup world, I don't think that, you know, I don't think we wouldn't have, we would have had the progress that we have like definitely not because there's there's so many things that you know I think when we started as we said listen we have a lot of business experience yeah we work at great companies we've worked we've worked at great companies we can just apply that knowledge and and and start this company and this is the furthest thing from the truth I mean we you know just what it takes to get from zero to 10 you know is a totally different zero

to 100 is a totally different skill set than than what we had acquired during our professional years what were the the outstanding learning from a classical business education. Because I think there's like this common trope that like business school is a waste of time and even like business education in a lot of the startup culture, right? And so people fall back on, you know,

whether it's like PG's essays or kind of like lean startup things. But I'd be willing to bet that there were super valuable courses that you guys took. And so if you were talking to other startup founders, what would you pressure them to learn? I mean, one of the things that I always think and I always joke up the team about is financial modeling.

And just being able, you know, I've become pretty crazy with, it's not even financial model, but just modeling. How do you model? How do you build projections? How do you think about business scenarios? And, you know, sort of as you think about your next big project, like, how do you map that out? That was purely from business school. I think that's like probably the biggest thing that I still use every day here.

Yeah. I think for me, just analytical structure. So when you're how, how to structure looking at numbers in a way that makes sense, you know, I mean, that's all I did at L'Oreal. I did in my whole, my whole entire professional career. And so, you know, at first, yeah. It was not as applicable. Like, so, you know, when you first, you first have a beginning start off on the ground, you just got to like just do shit and throw it and see what sticks and then do more of it. And then listen, you can analyze it like later down the line.

But like at first it's just like you just got to do a whole bunch of stuff not in a scalable, manageable, manageable way. Well, you're doing the deliveries on your own too. Yeah, yeah. We were doing deliveries. We're going to people's homes buying furniture. Like we're doing all kind of crazy stuff, you know, and you know, at the instruction of the YC partners.

And then you figure out how to take those kind of crazy zany ideas and to make them into kind of scalable practical models of things that are repeatable in a scalable way. So, but after that, once after you do that, you know, you have to know how to view your analytics, set up, you know, a strong foundation to really be able to look and say, did this work? Did that not work? How do I continue to repeat this? The other things too is that I think is that people don't talk about enough is just just the establishing a business culture, how to team management, people management. It's huge, yeah.

And that's a huge pitfall for startups is that they don't know how to manage people. They have a lot, you know, they implode because, you know, because they don't know how to deal with conflict. Shitty culture. Yeah, they don't know how to talk to one another. They don't know how to, you know, manage dynamics if there's conflict amongst one another. And so I think that's probably one of the biggest things that people don't talk about enough is just, you know, conflict management and people management is something that I think that we've been able to deal with. firing, firing. All those things are things that we've had experience with that are very tangible and very relatable to start a role.

And like even creating structure, I would say. So, you know, early on, sure, you're a tiny team. Maybe you're like three or four people. And people sort of dismiss the idea, oh, we don't really need structure. We can just talk to each other all the time. But having regular checkpoints, like weekly meetings and, you know, those type of things actually make a big difference or big difference. or even, you know, team meetings where everyone comes together and talk about sort of whatever's happening next week or what have you.

People dismiss that. And these are the things that come from business school or come from sort of our traditional work experience. These are things that we've done every day when we were there, right? And so we've been able to distill that from an early, early, early on in sort of our business. And I think it really helped help sort of calm things down to some extent. because it's crazy being in a startup anyway. So if you can create a bit of sense of stability,

it goes a long way for the rest of the team. Yeah. How would you structure that, say, a founder approached you? And like, this is how you should structure your check-ins or whatever it might be. What's a framework you use? We meet with our direct reports once a week. and more if we needy, but once a week to just to talk through just what or the kind of the strategic projects that they're working on.

We just have our project list sheet that's public for everyone to see. So we have a project list sheet in Google sheets, simple, stupid. And we have all of our strategic projects that people are working on. We touch on those projects and we have kind of tentative due dates. Sometimes you'll finish ahead. Sometimes it'll still take longer. It's more than you expected. And we have those.

We also have daily stand-up meetings where we just have a quick kind of touch-based in regards to what we're working on to keep the team kind of engaged and collaborative. And then we have a one-one one time a week team KPI meeting where we review the overarching numbers for the company. So that could be unit sales, dollar sales, refunds, returns, positive and negative yield reviews, you know, all those things. We have five once a week. And when it comes to conflict, well, actually just dealing with conflict, not conflict avoidance. Like, how do you do? Is that through the one-on-ones? Yeah.

Mm-hmm. That's through the one-on-ones. And we've also done, we do performance reviews, even at our stage. So we've been doing them for the last three. We've been around for almost five years, but we've been doing them for probably three. This is our third or fourth time. It's very simple. Like, we didn't use a software.

anything we just created some questions on type form which are what you know how how do you rate this person's ability to deal with difficult situations or you know there are problem solving skills or team management skills or responsiveness things like that like I think there were like 10 or 15 questions is it quantitative yeah so it's a scale one to five okay and it's 360 so so Everybody reviews everyone. 50 people? No, no. So this is our, the HQ team.

So 10, 10 people. 10 review time. Yeah, exactly. And it doesn't take long. Yeah. And then we review it. And then even column and I, ours are public. So the whole team gets to see.

Because we have to hold ourselves accountable as well. So we find, you know, transparency is very important. So we share with them. Now, are there reviews anonymous? Yes. Okay. Very important. Yeah, that's tricky.

Yes. Yeah, it's tricky. And so we compile the feedback. You know, of course, like when you're writing written feedback, there's sometimes you can tell who's who. But as the managers, we compile the feedback and try to anonymize it as much as possible. But the form itself is definitely anonymous as well. But, you know, I think the one thing that, you know, that just a kind of harp on that, again, that can't be, I think it's important to stress is just, you know, we're not afraid to. to, in a very, you know, and obviously, you know, in a way that's developmental, I'm not afraid to tell people when they're not meeting a particular expectation or falling below, but to be able to do it in a way that's very constructive.

And I know that's just, I know that's from working in corporate America where you have to be politically correct and you have to know how to kind of structure feedback in a way that, you know, in a way that is, that works for a company of that scale. And I see a lot of founders struggle with that. I see a lot of them struggle with that. And they'll just let something fester on and on because they don't know, because they're not, they haven't had kind of a professional training in conflict management. Oh, for sure. Yeah.

I mean, have you guys had to let people go at this point? Yeah. Yes. Yeah. So what do you think founders get wrong in that department? And I think we've fallen victim. They wait too long. Yeah.

They are not transparent in terms of, of like maybe they'll fire them at without really giving them the opportunity to course correct yeah so though they'll they'll they'll as a manager they'll bottle in like I'm so tired with this person doing XYZ and they'll just hold it in for six months and then they're just like you know fuck it you're like explode and this person was like hey I didn't even know I was doing something wrong yeah you know so I think those are kind of things that you know I think those are some things that people definitely kind of the missed-ups what do you what do you think yeah I mean I think those are like definitely into two and we all

always, if it's performance related, because sometimes you're firing because, quote, unquote, you're downsizing or like maybe the role no longer is needed. And that's very different. And even like if you're changing direction, engaging that person earlier on in the conversation. And so they understand like, hey, and we've actually had to do that. Hey, like this is where the company is headed. It looks like we don't need this role anymore. Why don't we put plan together to see if there's something else you can do.

If there isn't, then, you know, start looking for something else. And we're giving them that opportunity and being that transparent. Actually was really, really, it's very hard conversation to have. Sure. But it's an important conversation because these are, you know, like people that we really care about. We want them to also be successful. But in terms of firing in terms of performance, we always talk about also, by the time you're fired, you should know that you're kind of getting fired. You know, it's coming.

because we've had plenty of conversations about performance, about expectations, but you're not meeting expectations. If it's a shock, that means as a manager you're doing something wrong. Yeah. If they're surprised, that means you're doing something wrong. And when it came to modeling out your product in the early days, in the beginning, did you ever have negative margins? Yes. Yeah. Yeah.

Yeah. Yeah. I mean, we also did not really. we've had to learn what our margins, like how do you actually compute your margins and what goes in all the different, you know, the nuance of the transaction. It took us time to learn that. So, I mean, even like our fees were just so low. We were charging, I think it was like 10 to 15 percent transaction fee versus now it's like 19 to 29 percent. Yeah.

And that's because we were not really thinking about margin at all at the time, which is, I think, like, a lot of the issues. choose startups. Or we just, you know, we thought we knew the cost, but then you don't, you once you get into it, you realize there's another cost here or cost there. And so, you know, the model is just kind of the foundation and structure, but for sure it's going to change as once you really get into it. That's why I think YC is so good just about like, you just got to do it. Just do it because you're, there's so many things that, I mean, I don't care how many amazing

models you have, how much experience you have. When you do it for the first time, there's going to be some things that you're going to uncover that you weren't expecting. And you've got to be able to modify and change for that. I think also like early on, you can't, like you have to be optimizing just yet for margins. But, you know, it doesn't mean that you offer your product for free because you still don't know what goes into it. Like what are the different variables? But once you've established that, hey, like this is actually a product that works and people want it and they come back, then you need to like dig into the data and figure out exactly.

what it takes to make a transaction, how much it costs to get a customer, all those things, and then adjust your fees and prices accordingly. Yeah. Yeah. Yeah, because I was wondering you had mentioned in another podcast about partnering up with another delivery provider early on, right? So I assume this is, you guys are doing it in the very beginning, right? Because you're like, we're going to test if this is a product that anyone gives a shit

about. And then you're like, okay, getting this like going in the direction of product market fit. but how do you even figure it out that pricing? Like are, did you just guess that people weren't going to be price sensitive and add an extra 10% on? So when we work with the moving company, we just negotiated the lowest price we could negotiate. Yeah.

And then it definitely did not work out because, you know, they ended up canceling a lot of our jobs because they get more expensive jobs. And our customers were getting upset. So then we brought it in house and we were just, We kept it at the same price initially. And definitely at that point was negative margins. Then we actually ran AB testing in terms of pricing to understand price sensitivity. And that helped us determine what is the, really the threshold for what people are willing to pay versus it's kind of like a formula.

You can sell more products and lower delivery fees and maybe your fees will cover the difference. Or you sell less products. higher delivery fees, right? And so, like, we finally understand what is the right mix to make it work. And do you think that sweet spot is the same across cities? No, I don't think it would be the same. But we'll have to wait and see, yeah, TBD. Yeah, TBD. But New York is, I think, I think in New York, because people don't have cars, it's much harder, right? And so people are probably willing to pay, I would venture to guess a bit more for delivery than in other cities.

And maybe in other cities, people are willing to pick up things on their own more frequently. I mean, when I lived here, very few. I mean, like, I could count on one hand my friends who had cars, let alone a truck. And you know what you do. Anyone, any friend who has a car, you're always like, oh, this is a friend. Like, when you're going to the Hamptons, take me with you. Or if you're going to IKEA, please let me know. Right.

So, yeah, those friends are always very, become very important. And as you guys have aged now, have you gone upmarket or like, who are your average customers at this point? So the average customer, the seller and the buyer side are different. So we got kind of two different customer bases. So the seller is a little bit older. So let's say they're like 30 to 55 and, you know, maybe they're, you know, stereotypically they're like married. Maybe they're like making room for a baby. They have higher disposable income.

And, you know, for people listening who are kind of in the New York area, let's just say they're like the upper west side couple, if you know, if you can imagine that. And the buyer is Williamsburg 25 to mid-30s. Like first or second job. First or second job. And so, you know, they. are aspirational. So maybe they were buying IKEA, but Aft Echo's an outlet for them to now kind of get West Elm

or Restoration Hardware or Crane Barrel and get these really, really design within reach. These really kind of nice brands from these higher-end people and a higher-end customer base. And so we kind of have these two kind of parties that were kind of matching together, I think, quite nicely. Yeah. And then in terms of your question about upmarking,

We are, do, we're starting to see a shift where people are, like, sell, there are more sellers who are becoming buyers, for example, which is for us as a great indicator that we're also changing the way people shop used, which is important for us. So, you know, if you have a higher disposable income, you probably, you can go, you can afford to go just buy the restitution hardware piece again, but you're willing to come back to Abdeco and shop for us. for the same restriction hardware piece at 50% off because you're, you know, so like for us that's like a very big indicator. We're definitely sort of raising, widening the age gap, I think, for like the buyer side. And the seller side is much easier because any buyer who buys through us ends up selling through us anyway when the time is right.

But seeing that shift for the seller side for them to become buyer is really big for us. Interesting. And what percentage of the sales, are driven by like big brands. Like how much of this stuff is like, you know, design within reach, restoration hardware type stuff as a percentage on your site? Yeah, so around 65, 70% are the top seven brands here.

Oh. So huge. Ikea, West Elm, CB2, crane barrel, room and board. In New York, ABC carpet at home. Yeah, in New York City, ABC carpet and home. So, you know, for us, like that was a design with a range. That, that, you know, that, that, this whole kind of understanding of brands was a big aha moment for us. Yeah.

You know, from an acquisition perspective, from a merchant, you know, site merchandising perspective, that, you know, that these are the things that the levers that drive acquisition and drive how we should be presenting and speaking to the site because, you know, these are things that kind of speak to. It's the easiest way to derive quality is, is through brand. Right. Well, and I would also imagine that's like a ton of organic search. Like people are looking for restoration hardware couch. Exactly. And like that's exactly. Yeah.

Okay. Exactly. And how else are you guys acquiring customers at this point? So we acquire customers through Facebook, Instagram, Google. Our original channel, we kind of did this backwards. Our first channel that we were able to figure out was actually out of home subway advertising here in New York City. which is totally backwards. And so, you know, definitely not the traditional, I think, advertising with first startups.

But I think, you know, my experience at L'Oreal with kind of out of home or TV advertising, all those things, I think it kind of lend ourselves to kind of go there. And then we have to figure out the digital part after. So it actually kind of, I think, speaks to kind of, I think, quite frankly, our shortcomings from a acquisition perspective, the things that we have to kind of learn as we went along. But now we've had the time to kind of really figure these things out. But yeah, so now we have a really diverse group. But the majority of our customers now there are through referral.

Probably 45, 50 percent of our customers are through word of mouth, friends and family type stuff. And so which is, you know, something we're very excited about. That's amazing. Yeah. How do you track a subway ad? Did you have a unique URL? Like, I can't imagine people remember that. Coupons.

Coupons. We also ask people how they've heard about us, like at checkout or during listing. Okay. Yeah. It wasn't the coupon because no one used it. No, nobody used to coupon. It was just, the how you heard. I mean, when we launched in 2014, we did it, I mean, our, I mean, our traffic tripled after we did it.

You get to see it because it was the only channel. This is the only channel. It was like serious. Like this. Very. And then we'd ask, you know, when people were either listing a piece of furniture or buying a piece of furniture, like Rahm mentioned, how do you hear about us? And, I mean, it was very. extremely obvious.

And it also, this is like a shout-off our average, sorry, subway advertising, but it also had a nice halo effect for our other channels as well. So that's like a validator.

Yeah. It was like, all this comfort, like people, I've always assumed that we're much larger than we actually are because of subway advertising,

no doubt. Did you do that with the YC money? Like, how much did you have in the bank when you spent all that on Subway advertising? It was a risk. Not a lot.

It was a risk. Yeah. Yeah. It's definitely less than 500K. Yeah. Yeah. Yeah, that's a big chunk. Yeah, exactly.

It was a huge risk. 50K for just one, you know, one, one, one month advertising. One month of how many cars? One, or there's 6,000 subway cars in New York City, and we were in one and six. One and six. One and six. With one ad in those subway ads. So now.

Oh, you can't even like A.B. And the ad, you can't print a bunch of random ones. No. Oh. One. And, and, you know, at the time, I was very confident in it. I was like, I was very confident. I was like, I was very confident.

I was not. That's crazy. We were, I, we hired, um, we hired a guy that I, a, a creative executive L'Oreal that he used to work with and had a great rapport with. And we hired him and we still work with him. We still work with him on like consulting basis. Yeah. Yeah.

We just kind of put our, put our heads together and no baby testing did it. We come up with the concept and then he, he makes it look amazing. Yeah. We were literally, um, I kind of bursting at the seams from the response because we didn't have, We didn't have the, you know, back in kind of, we didn't have the delivery operation to support kind of, kind of the growth that we had at that time. But that's what I also wanted to ask you about because that delivery operation seems daunting for a lot of people. So did you hire someone with experience in that? Or you just like wing it?

We definitely winged it. Yeah. So that was quite a lesson learned. And I think we probably could have benefited from hiring someone with experience earlier on, I would say. Yeah. But we, yeah, we didn't know what we were doing. Frankly, we didn't know what we were doing. We were just, you know, it was like 2014, 15.

We were bursting at the seams. We just needed to fulfill orders and we were just renting vans. We were not thinking about our margins. We were not thinking about how much it costing to do any of that. We ended up leasing long-term leases, I think, what, eight or nine vans at the time. It was definitely premature because our business is cyclical. or seasonal, excuse me. So we didn't really think about what happens during the low season

and then all these vans were just parked in the parking lot. But we've learned a ton since then. And we now have our head operations who actually comes from furniture manufacturing supply chain. She's done a lot of this type of operation. So she's helped us a lot to get things in order. And at the same time, I think that, I mean, it's from like a tech stacker, From an intellectual property standpoint, you know, what we've built on the operation side. So the way that our model works is so we don't, we don't warehouse anything.

So we only, we pick it up and deliver it in the same day. Same day. So we're doing hundreds of pickups and deliveries across three states. And so, you know, the scheduling of these two people across, you know, across, you know, all these variables is very complex. And I think that that required some kind of, you know, a little bit of outside of the box thinking in order to be able to do that. So, you know, what we've built is really unique. And I imagine that building it from scratch and not having any preconceived notions in regards to how delivery and logistics works in some ways was helpful because it allowed us to kind of imagine something that I think is really different than what in. anybody's doing.

Yeah. And that's, and that's why, um, you know, our, our model is, you know,

it's one that's as compared to other kind of furniture consignment models is a lot more white weight and a lot, um, has the ability to kind of scale because we don't have these type of cost because we're able to imagine something really interesting from a delivery sample. Yeah. So you, there's no like kind of open source routing software that you're using.

You just kind of rolled your on. You look for it. You look for it. Yeah. We definitely looked. But no, we ended up building everything ourselves. Okay. And so are you a CS engineer?

Electrical. Electron engineer. So how are you vetting these engineers in the early days? I mean, in the early days, our team was still very small. But I mean, I did a lot of software development at Goldman. So when I was at Goldman in the beginning, that's what I was doing. Then I moved to product management. And I ran a team of engineers.

So I knew how to do that part. Yeah. Yeah. Yeah. Yeah. Yeah. And then what about the choice to actually not warehouse? Was that obvious from the beginning?

That was always the plan for the game. We never considered warehousing. Never considered it. It was, warehousing was not the obvious solution for us because we always thought that you're going to be capped by the space of it. Exactly. You know. It's kind of like, like if you use the Airbnb, it's,

example, like building hotels versus making everybody's apartment a hotel. Yeah. And so, you know, we always, not that we knew that, like we didn't think about it like that time, but our model essentially is you can make every person's home a warehouse, pretty much. And so, but from the beginning, we, you know, we were essentially trying to solve the Craigslist issue, which is you go to somebody's house and you pick it up from them and you pay them in cash. And then so why don't you just do that by paying them online.

and then somebody else picks it up for you. Yeah. And so the warehousing part was never a point of consideration. It was not a point, yeah. And now it's not. But now for other reasons we realize, you know, it's just cost prohibitive. You can't, you can't, in our opinion, build a business model, a sustainable business model by having, by warehousing everything. Because you're always going to be capped by the space.

The cost to cover it, someone is going to have to pay for it. and ultimately to either be the buyer, the sell on the platform, who was already relatively price sensitive, it's a million reasons why, in our opinion, it doesn't work. And there's been a lot of startups that have come and gone that have tried to do it that way and weren't successful. Were there other ideas that you thought might work and then just absolutely failed that you've tried out? For App Deco itself?

Yeah. Well, like, features. Oh, yeah. Plenty. What did we try? Man, there's so many. I'm blanking right now. The road of any startup is lined with a gazillion failures.

So we actually did, so, you know, simple things that intuitively would actually should work, offering photograph for graphing for customers. Yeah. Nobody wants to do that. So funny. So, yeah, if you took the Airbnb advice and you're like, this was a huge growth thing for Airbnb. Yes. This is obviously going to work for us.

Nope. Doesn't work. It did not work. Offering cleaning services and all that type of stuff. Nope. Did not work. People don't care. People don't care.

But they don't want to pay for it. I mean, yeah, but they don't want to pay for it. It's also severely discounted. So if you go to the same company to do the cleaning, they'll pay you, they'll charge you double. We negotiated very good deals and people were not buying them. So we couldn't even keep the deals because we, you know, promise a certain number of cleaning jobs. So, you know, stuff like that.

There's a ton of this stuff. Stuff that you think should work did not. People were not budgeting. You know, another interesting thing, too, is that, you know, there are things that you think they would work and they don't work and then you do them again and then they do work. That's true. So, for example, you know, we were mentioning the acquisition channels and now we're doing Facebook and Instagram advertising.

Today it is one of our biggest channel advertising channels. And we hired a agency to manage our campaigns before. And they were not successful when we had hired this agency to do it. Well, we tried, we had, yeah, they were not since when we had the agency do it. And so then a year later, so we weren't doing any advertising on it at all. A year later, we dust it off and we're like, let's just like look through this and see. if there's something to be learned from what happened when we tried to do these,

we used to use these acquisition channels. And then we saw one campaign, that, oh, that campaign did really well. All the, it's 15 campaigns there. See, one that did really well. Let's just turn back on that campaign. Let's just see what happens. And then we turn it back on.

It continues to do well. And then that just kind of spurred us really, understanding our digital advertising channels. That was really the birth of it. Yeah. And toward now, it's, it's our one of our, it's our most profitable best channel. And, you know, it's something that it took us, quite frankly, three, four years to kind of really figure out how to do it. You know, and so you're, sometimes I'm like kicking myself, like, how I wish I know when I know now.

And, you know, but it takes, I think a difficult thing with startups is, you know, it just, it takes some time to, it takes time to figure things out. You know, some things you get to figure out quicker, faster, some things, you know, you really got to, you know, have some patience. And one of our models now is, you know, particularly from a marketing perspective, is I just probably do a few things really, really exhaustively well than just try to do a whole bunch of things to where I can't really understand the nuance and the detail of it to understand if it works or not. Yeah. I think that's kind of a big shift that's really paid off. But it's also so hard with algorithms anyway to figure out what you're doing well. Yeah. But do you know what was it about that particular campaign?

Was it the audience? Was it the content? It was a content. It was an ad that was testimonial. And, you know, when I look back, actually, on those campaigns, I'm a little embarrassed by, I'm not to be honest with you. But this one was kind of testimonials. So I just spoke, had just like quotes from customers, if I'm remembering correctly. And that did really well.

And the other ones were really off-based when I think about them now in terms of their performance and the things we were thrown. But you have to have them stick. But then we start doing things that focus on brands and doing things like that. We start really looking at our kind of internal numbers. Yeah. Internal search terms. And once you start becoming really understanding your digital channels, understanding your search volume, your landing pages, your click-through rates. And if you understand those things, say whether it's for your website, you can just kind of

flip it on its head through your advertising and acquisition channels, but it took us some time to really kind of understand that type of detail. Yeah. So what kind of analytics are you running on your site now? In terms of like tracking. Yeah. Yeah. Yeah. So we we track everything from like clicks to even usability. We record videos like in the background. We track all our data, customer data, all of that. And we have visualization. tools that we use to visualize it and be able to manipulate it. And they've been, it's been incredible. Like since we've invested, we invested in like one platform specifically.

And that has completely like transformed the way we do things. Because before we were running SQL queries, right? And so like that takes time. So not everybody, actually at some point, everybody in our team knew how to do SQL. But, but it takes time because you pull it and then you have to manipulate it. You have to analyze it and then being able to just use a tool, it's a bit expensive. It made a big, big difference. Hmm.

Yeah. Is there a reason why you're not mentioning it? No, I don't know. I don't want to, like, advertise it, I guess. Why not? No free shoutouts. Yeah. Why not?

It's tough. Let's just say it. We use this tools called Looker. Okay. Yeah. And it's, yeah. I mean, that was super helpful. Mm-hmm.

Damn. It was great. It was a big change. I mean, I think that that kind of opened, I think, kind of opened our, open to up to more analytics in other ways. Yeah. It made it as a couple of an analytical company. Kind of brought us home to our experience,

our professional experience before starting App Deco, to be quite honest with you. At least for me. At least for me, I mean, I think we were just able to dig into a lot of detail that it was hard to catch when if you were just manipulating Excel documents before.

So, you know, like getting to, like, doing nuances of brands by category and the time it takes to sell and who are these people and who are the people are dropping off and why and what did they have in their card? And you visualize it all together. So, like, you have these crazy dashboards that can be super detailed.

Then you can actually look at this data and able to make some sort of look at trends and make some conclusions and actually able to use it for marketing purposes or for updating the product or operations. Even the operations, we've become a lot smarter even from our economic's perspective because we're able to. to look at all the nuance that goes into making a transaction. So, oh, okay, this is the revenue, but here's all the costs associated with it. And, like, you can see that all together. It makes a big difference. Especially for product people. Now, did you guys do the New York City back and forth during YC?

Yes. You did? Every week. Okay. Well, yes, it definitely was worth it. So we didn't know that this is what we were supposed to do. So we had, like, rented out our apartments here. We're subletted our apartments, and we went to Mountain View.

And I think, I can't remember it was like PG. It was PG. He's like, what are you, first day? He's like, what are you guys doing here? You need to be in New York. And so, and so we're like, okay. And so we started flying back and forth every week for the three months. Yeah, it was pretty.

We would fly on Tuesday morning and then out Wednesday. Yeah, out Wednesday. Dude. Every week. After demo day, we like. we crashed for like two, three days. Like, we were just like, yeah. After then one day, we were finished.

But it was, it was definitely very valid. Because, you know, during YC, they kept in talking about, talk to your customers, talk to your customers. And we're like, what does that mean? Like, what does it mean to talk to our customers? Literally. You do a customer service. Like, no, it's not customer service.

You need to somehow figure our way to get in front of your customers. Yeah. And I mean, still, it was exhausting when it's the best advice we could have ever got. What else was helpful? Yeah. just kind of like wrapping up. I'm curious. We're about to start another batch.

If you could give some advice to people about to go into the batch, what would you tell them? I would say, um, um, all the suggestions and all the ideas, no matter how crazy or off-based or not-scalable or hard that they may seem,

you just do it at 100%. and do it in an exhaustive way. That's what I would say. And I think the one thing, I think that that was, I think the key for us really getting a lot out of YC is that every week, our partners were Paul Bukai, Kevin Hale, those are our main partners at the time. And, you know, they would have, you know,

so you would sit in the team in the group, the group office hours with all the other companies. You will see that you'll learn that you guys are all in the same boat, all have the same problems and to some level or extent. And, you know, and then they would give you this feedback or ideas. And then by that following week,

you know, we were very diligent about having some legitimate, um, responses to everything that they had said we should do. And, um, we just really took that to heart. So we just like,

We, like, just ate it all up. You know, we really, like, dove in 100%, and we were not above anything. And I think that that was really to our benefit. What would you say? Yeah, I think, like, we took our learnings from corporate in that way. And so, you know, we had our one-on-ones with the partners, and we created structure. So, like, made sure we set up the meetings every week because it's up to you. You don't have to set up meetings with them every week.

So we made sure we had, like, really. reoccurring meetings for the duration of the program. And we had goals or, you know, like, here's our agenda. Here's what we have questions with. And here's what we're looking to get done. Yeah. And they would have suggestions. And then the next week we'd be like, well, here's the list of things we got done.

And here's, but, you know, we held ourselves accountable and made those meetings become, to some extent, like, the reason we're to hold us accountable for them. Managed up. Exactly. Managed up to some extent. Yeah. And, you know, and. And like the advisor would give sometimes it's very specific. Like you should try, you know, I think there was one like you need to have a blog for SEO.

But sometimes it's just like, you need to talk to your customers. And it's like, well, okay. What does that mean? And trying to like figure that and distill it is also a big part of part of that as well. Awesome. Well, if people want to try out app.com, what do they do? Go to appdeco.com. A pt, d-e-c-o.com.

Thanks, guys. Thank you. Thank you so much. All right. Thanks for listening. So as always, you can find the transcript and video at blog. combinator.com. And if you have a second, it would be awesome to give us a rating and review wherever you find your podcast.

See you next time.