E1012: Open Office Hours LIVE! Jason helps founders with their biggest challenges: goal-setting, starting a sales flywheel, converting bounced customers, capitalizing on investor feedback & more!
Hey everybody welcome to office hours on this week in startups and that was pretty good. I'm here at the live studio audience and we're going to answer questions. Students from founders who've got great ideas and who are struggling through major problems you as a founder of have right now where you might face in the future. It's going to be an amazing episode. You'd stick with us this week. In startups is brought to you by Zen Desk. The best customer experiences are built with Zen desk qualifying defying startups conjoined their startup program and get Zen desk products. Free for a full year visit. Zen Desk Dot com slash twists today to get started. Art Linked in business is only as strong as its people and every higher matters go to Lincoln Dot com slash. Twist and get a fifty dollars our credit towards their first job post a welcome back to this week in startups. Keep working on it. We'll get there first up purpose Kenny. Tell me what are you working on. And what's your biggest problem. Sure so thank you for having me. I we are building expedia for group airfare with a twist where we partner with airlines to opt to automate their offline group sales so before that we really get started. We you really want to explain. What group airfare is? It's a product that every airline cells. It's about five percent of their total ticket sales and most of the world's airlines sell it off line meaning that if you're a school a sports team or a tour operator you have to call multiple airlines just to get pricing. The the product is unique in the sense that it allows the user to hold large blocks of space with just a deposit that's refundable and then it allows them to split their payments and pay their final balance thirty days prior to travel and allows for free name changes so over the course of the last year we've been working on recruiting airlines to either test out are white labeled product or integrate directly into our marketplace and our issue is that now we have were pre revenue company and we have multiple airlines that want to do pilots at once so we have a really simple revenue model. We charge six dollars per ticket and a mid size airline would basically do about a million group tickets a year so do each integration is worth about six million dollars in revenue. Okay so your issue is you make a percentage of revenue and you have the the chicken and egg problem. You don't have a flywheel going crack because of the way you've chosen to price this taking six percent said of every six dollars or six dollars per ticket. Yeah Thank you for the education by the way. This is a great way to ask a question. You explain to us. What groups house was? You anticipated that my first question or anybody's would be what percentage of that is you know percentages group sales anyway. Sure it turns out it's five percent which is actually meaningful. So I was like okay. Check box that down and I was trying to figure out what the discount is or why they even do this for and you hit you headed off at the pass. It's not necessarily about the discount. It's about the features and one of the features is the name change. The other is locking in the pricing and the other is the pricing term. And you're able to cancel for free. Oh and has cancellation. Yeah like full fare tickets do. Yeah but you're locking in a lower price for a group at this fair so group airfare affairs typically more expensive more expensive and more expensive because you're blocking out those seats you're blocking out about like say fifty seats at one time so you're taking the fifteen cheapest seats and then you take those and then the price goes up. God then it goes up and then the airline gives you an average got it and then with all the benefits they put a little premium. Now I understand it even more because they do demand based pricing crack the less is available the higher the price demand based pricing. If if you're looking for a group your book fifteen tickets and then the next fifteen people to buck pay the price in the final fifteen people truly take the price so if if we were all in the traveling version of cats the Broadway show the beloved show which is not a bad idea. Hadn't everybody's doing for the next couple of months we do that. The the sixteenth person gets screwed the thirty first person who really get screwed and whoever the last five people are are if they want to be on the same flight or super scoops I get it so I think that what they're there's two things one if you're fabulously wealthy then fund the company yourself if you believe that this is a great opportunity if you're not fabulously wealthy. Try to convince somebody. Who is I give you an angel check? Who maybe isn't in the professional venture community who probably wouldn't fund this until you prove it out some more then there's a third adoption which you may not have considered which is your pricing might be the wrong pricing? Okay and I understand why you came up with the pricing airlines typically pay expedia speedy and those type of people to three dollars a ticket right about that. Yeah and so you decided to double a triple VAT thinking. Hey that'd be great but all those companies actually now make their money from hotels as you know. Twenty percent of hotels thirty percent of hotels and people stay in hotels for three or four nights so they almost book the tickets as a loss leader to get your email and then upsell you on the rental car and the hotel which they get a bigger percentage of I understanding. Yeah having sat through hundreds of travel pitches like this. You're making enterprise software correct and you're doing lead Gen and demand Gen so I would pause for a second and say what if I made a tool for the person responsible for the travel planning and sold that tool to the person on the team who has the book travel. Oh sure and you said to them. Hey if you're booking travel for fifty dollars a month you can use our software to coordinate. What are your main pain points that make them in booking software? Because they do that. Right now in excel document or a Google Doc. Running email thread consuming. There's nobody out there who made enter. WHO MADE SAS software for the people who are booking travel on a regular basis like the coach or the person who runs the team? Sure Zach. Correct that's correct and you consider it. Yeah so in full transparency Our founding team comes from a travel management company. And we did exactly that got so we already have a basically a contract contract management system for the customer and essentially what we've done is we've taken that to the airlines like Delta or Virgin Atlantic and we said we have a contract contract management system. Now we want to into we want to integrate with your back for that though that function with for the people who are the group travelers I how do you charge them. Like a travel agent with ten percent on top. Yeah so essentially. That's what roughly comes out there so all of these things where you take a piece of the action are very hard to get started if you're an outsider. In Silicon Valley has built and sold the company hard to get funded by default but SAS companies are easy to fund an easy to get the flywheel going if you build something of just rudimentary decent Capabilities so the other possibility is that you create the software four four. The agents who book group travel on their side and you make it super easy to solve three or four of their problems in other words and now they have their own archaic systems. But if you had a fresh system and there were a couple of airlines who didn't have anything southwest doesn't even have a program where they have deprecated and they don't even want to answer the phone and they just try to push people to not do it. which is probably what's happening here it's true? Is that what's happening. So yes so some of the airlines are basically trying to push you to book in groups of nine and just instant purchase so it is happening. They don't want to do this right right. They would rather you just pay full fare and they WANNA get those lights full and get there so and they know you're going to do it anyway they you. You have no choice. If you're flying team you have no choice So they they're doing this progressing Lee so maybe setting up a system where they could just manage it better on their side or bringing them groups and then charging them again a SAS is price so instead of saying I'm going to take six dollars a ticket which then I don't know they gotta get some business walk. NBA To build out a model. What if this grows? We're GONNA WE'RE GONNA lose our margin because our margins thirty dollars a ticket and we're giving these clowns four dollars and they're gonNA take ten percent of our actual prophets. That's going to be terrible if this thing works. Yeah it's bad for us. That's a bad place to be if you're billing software to say it again in the customer who has to use that software says if if I use this Solution it's bad for me. That's not good. And we exception of drugs because the value proposition is so great for fennel In heroin I like well. I know this is terrible for me but I have no choice. It's just that good kind of true It's funny because it's true so I think making software that actually solves this and then there's even stepping back and thinking. Is there another way to solve this acute the problem for teams and travelers in groups. So I would study what their problems are. And maybe think about enterprise offers a better route than a percentage of the marketplace replace. So can I share with you a little bit about the one customer that we are working with now so we have an airline that we're doing a pilot with now and essentially and they're paying hang nothing. It's an unpaid pilot. Yeah exactly so basically. We have to prove ourselves in order to get up and running the company's poor and doesn't make any money I assume don't uh-huh you're scared to charge them because you were afraid they would say no. That's exactly right. Yeah so damaged in life. Don't be scared sure. Insist like if if you're fearful earful. It's not gonNA work well. As a general strategy in life or business I think he had come out of it guns blazing and you gotTa make pay. 'CAUSE you're providing value if you get nine nose in one person gives you a three hundred thousand dollars to build this out for them because they were going to build it themselves for two million. Yeah well that would be a better option than just getting one person to say. Yes for a free pilot got it. Yeah I mean and also if they say yes to the free pilots have new skin in the game which which mail out a laugh if when that person person quits whoever your rabbi over there is like looking over you and making sure everything goes well they leave and then you're like. Is Anybody in charge of. There's no I'm not inheriting that project. No I don't believe in group. Sales gotta have some skin in the game with a company goes. Oh you know what we're we invested. A we put the first hundred of two hundred and fifty thousand dollars into this project. Even though that person laughed we need to finish. The project was already got the budget for it approved and we want to see the results got too big mistakes I wanna stay in the percentage and the other is doing UNPAID PILOTS WANNA keep hearing more about it so senior updates to updates at launch dot com. And let's get up. Let's give them a big round of applause. Some thank you. You already knows then desks. It's the world's best customer support system we will use it. We love it but what you may not know is that they having entire range of products now and they call them the Zen desk sweet and that includes integrated customer support that lets you track and prioritize. Chai's can solve customer tickets across all channels in just one simple to use dashboard and of course Zen desk guide. It's a knowledge base for your customer. So they can solve their own problems quickly and easily. Plus you get live chat. Yes you don't need a separate company yet live chat and you can engage customers in in real time I prefer John. I hate picking up the phone and of course a call center. 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If you're serious and below you're going to get it for a year for free you got nothing to lose and you get to use the industry standard go to Zen desk dot dot com slash. Twist to get that free first year. That's right a year. Free can't do better than that at Zen desk dot com slash. Twist everybody. Everybody welcome back to this week. In startups next up is lease from bloom bras else. Okay at least tell us what is bloom bras so I found a bloom bras out of frustration. I could not find a sports bra that worked for me and when I started to look at the marketplace I found out that there were so many women who are in the same boat that I was so Seventy percent of women now are decoupled above and that number continues to rise. Most of the brands stop at a D. Cup and so when I started looking at the product they said it's not really an engineering. I'm sorry a design flaw. It's an engineering challenge. So I brought him people from NASA the shipping and packaging industry a woman who does all of the coarser tree work for ballerinas opera singers Oprah etc and. I said I want to create a system. That's GonNa take the weight from the front pulled into the back be completely adjustable comfortable breathable and something that doesn't make you feel like you're wearing a suit of armor so we've been shipping shipping for about a year and a half we've got partnerships now with Rei macy's title nine in Universal Standard that continues to grow and we're building building a community that includes curvy women so again our size range is now the most body inclusive on the market twenty-two Fifty six l L. L. Yes C E F G H I J K L which we can't keep the larger size stop. You telling me that all those letters exist in bras all day more than exists in Bras. Yup Take a moment there. Let them settle it. There's like eight more sizes that you carry carry eight more sizes beyond De. Wow Yeah. I didn't know that. Let me ask you a really dumb question. Is this such thing you said that this was a booming market and it was like doc expanding market potential. So many pundits I live in Pun was not intending that one but it is an expanding market. Is that because because of obesity or because of augmentation so not augment- Augmentation such a small piece of the market so couple of things one is yes. Hormones hormones in our food. Obesity women are girls are developing earlier and then a lot of these women just have never been able to buy a proper size and then you have vanity sizing thing so somebody like. Victoria's secret that they're psychology saying if your measurements let's just say are thirty four C.. And they tell you you're thirty two D so you're GONNA be a lot more product. Okay so there is a phenomenon known as vanity sizing. Yes if you give people the Extra Cup size yes. They feel so encouraged by achieving a D. instead of a C though by more if they are below a certain range yes the kearlier women women that they don't they don't really want that. Wow I'm learning so much now well thank you and so people have been ignored. Yes hormones are kicking in augmentation is minor but people are bigger generally speaking so bras need to be bigger and more supportive. Got It and there's always room. One of the great great things about this D to see movement is that the direct to consumer movement is consumers love incremental continuous improvement. And they won't shut up about it so I have this eight sleep bed and I tell them my friends about added Tesla Owners would shut up about it and so if you actually make direct and both of those are direct to consumer products or on the web whether it's a test or the sleep an invest renewsleep but none Tesla If you make something that is that much better and consumers find out about it. They'll spread it for you so you just have to be really focused the product which it seems you are. What is your biggest challenge today? So our biggest challenges we've got two one is actually sizing. So that's specifically to that market market A lot of these women have never bought a Bra online. Or lets US define sizing sign not sizing of the cup size. We're talking about the market. No sizing of the Cup size dotted okay. So we lose so we're getting right now between one hundred thousand three hundred thousand unpaid to our website each month but no your seo but no paid and But they drop off so so we're not getting the conversion okay. Yeah but it's an extremely high bounce rate and then the second one tied directly to that is returns got it oh so people go by the Bra and return it because it's not the right size and can you reuse that Bra or no. After they do it it depends on what condition it gets. Okay these leaser very specific tactical questions which is good because I deal with tactical questions all day long literally. My entire life is talking to founder understood tactical questions sometimes we move to strategy and sometimes move up to the mission of the company but you got the mission it's pretty good and on a strategy basis seems inge pretty solid direct to consumer. But let's get tactics if people are bouncing off your site do you A. B. Test your website. And so who's in charge of that. And how many experiments did they run in the last thirty days. So that's a great question so we are just starting. Ab Test now. We tested a lot of different concepts. Remember my question. Is there somebody in the company in charge of it. Okay great and then how many tests did you do in the last thirty. We have probably I mean I would say gotta got it. We've had about eight thousand people that have in the last right. You know what I mean by. Ab Testing you have one web page. Go to four thousand. The sage goes to the other four thousand. You as you have software to do that said you know okay this season which is fine a lot of times we meet companies who have not started this part of the journey. And what you're gonNA find as CEO's of product centric CEO is that you have to take that passion you have for product and then translated into a passion in for Marketing and growth tactics and all the tool set there and every time you level yourself up with those tools. You're going to answer your own questions but as a founder. You're kind of like I'm just going to hand that off to somebody. It turns out for you. I would give yourself zero credit starting from right after we finish our conversation conversation so from now on when you look in the mirror and you wake up every day I want you to give yourself zero credit for the product you created. I want you to be disciplined about that. Because as founder you can get like like really excited like Oh you know invested in Newburgh. I'm a genius right but that's over. That was ten years ago. Let's forget about the fact that you made a great product. Start judging yourself on your ability to run a D. T. C. Company at the highest most professional level. That's why you give yourself credit for in order to do that you have to master. Ab testing of your homepage. And that means learning about why people bounce what sources they're coming from and just had yourself run AB tests you're going the need to learn how to build those pages yourself and set them up and look at the metrics and you know what it's not that hard building a world class product and being brave enough to start a company. Those two things are much harder than learn those techniques. Now you can buy it. You can have people teach you if you really want to ramp up fast find consultant for a hundred bucks an hour and have them set the first three or four tests up with you and then you take them over. That's a great way to maybe hire two of them in parallel have one person doing one set of tasks for you have have another one doing another set of tests. And that's what I like to do. I'll use these consultants from time to time to just level up my own knowledge. And that's what you're going to need to going on that journey of leveling up your knowledge as the CEO. Because I can tell you the. CEO of the companies that are working. That's what they give themselves credit for. Okay I got the product it's amazing great table stakes. That's what you're supposed to do now. All that growth stuff you gotta learn yourself. How many tests can you run? How can you changed the creative copy writing what the offer is one thing as you know? Probably I think it's the company all birds that makes quarter sizes of shoes so I'm sure you've been inspired in part by that okay so most people don't know about that anybody here ever buy a pair Aubert's who's bought all birds one in two three four great and when you bought them did you By Chauhan's did you order. Did you wind up with two different size feet or the the same size for you to have the same as did you. Did they ship you multiple shoes. You're atoms yeah. Oh it's Adams that does has it. Okay sorry Adams you're right EJECTA posted. Has Anybody ordered Adams. There's some hipster shoes anyway. What they do their their concept is they send you three versions of the shoes? So I'm nine and a half they'll send me nine and a quarter nine and a half and nine point seven five and for each foot. I try each one on and then send back the others. So that's a really interesting concept that you might want to go with send three bras or bras and send back whichever one on the first order and and then lock them in. We tried that and it. Some of them came back in pretty bad shape. That's that's the only reason just was it was a lot of being at this. Stage of the company is a lot of work managing the return. So I mean it's it could be a differentiator if returns are a big one way to deal with it. The other one is to send maybe a three. If people want to order they order their first bra and you send them or they you get their mailing address in their email and your consultation online with them and then when you do the consultation you send them three like fitting bras or some sort of measurement kit to actually actually the measurement that might be another opportunity so we were investors in a company. Called Bench made modern. What they did was they would make a three d? Cad Drawing of Your Customized Sofa which was you know fifty six inches or fifty four inches and they would send you this print out a fifty inch couch on it on paper in a tube. You've fifty inch fifty one inch to inch all the way to sixty inches and you tape it to your floor and you black. You know what you know if we were you know like got married. And this was our living room. He'd be like Oh here. We are like what do you think honey. Do you WanNa make fifty two or fifty six. You've put aside table there and you actually tape it to the floor and it actually worked. Yeah so there might be a creative solution there now. What was your second problem? We had another challenge drinks for returns and exchanges which tags this might be a pricing issue. I'm assuming you charge twenty four or thirty four dollars for this bra eighty eighty. I don't know the last default of Rob Two hundred forty a natural guy. Just let our price point is somewhere between a athletes in a lululemon right. It's athletic Ross. Eighty perfect so at eighty dollars cost twenty dollars to make or something like that so you you have. You might just need a little more margin to absorb the stuff where you might need to sell them in three packs or something to absorb this kind of an issue so might be a pricing issue. uh-huh and this is where you're going to find out really quickly if you actually do have product market fit because if people aren't willing to pay extra for them you know that you might have a problem like the Tommy John Underwear not cheap. They're not competing on price. But they are competing on the quality of the fabrics. The feel al and I like every year or two I try a different type of underwear and just go back Tommy. John's every time it's interesting Tommy. John's like twelve at a time. And then I take the other twelve and I just throw them away twelve new ones in every whatever eighteen months. Yeah it's interesting. When we do pop ups we sell out like we just said one a couple of weeks ago in New York sold out in two hours but it's translating that onto online sales show? If that's the case you might be in a clicks and bricks kind of situation. Relation was the term people used to use for this. You Might WanNa find somebody who doesn't carry bras currently and do a BRA party and just use is that it might also another interesting idea if everybody's buying up all the instagram ads on facebook ads and twitter ads and it's not a good place to buy anymore. Maybe you do MLM because that has a bad connotation but an ambassador program where you find your most passionate customers you say. Have you ever considered being an ambassador. We'll pay you two hundred dollars a month or whatever one hundred dollars a month plus give you a for free and all we want you to do is do abroad party and you might be people you can empower to be to start this whole company off as a from the ground up and if there's there's that much margin and abroad if you say to them listen the browser eighty dollars and if you sell them we'll give you thirty dollars. ABROA- yeah we're doing right now we're giving them Eight We give them the BRA at a very very discounted costs and then we're giving them eight percent up until they hit a certain number and then it jumps support percent for the affiliates yet brand new ambassadors using a third party for that. Or you know just there's A. There's an APP that does it for us. I Yeah I mean this a bunch of different websites that do that kind of stuff. The ambassador programs in the early days or quite effectively. Because then you build the space of really passionate users how many Bras Rossi sold today about twenty three hundred great. So you're really in an interesting position you you have a database of couple of hundred people who loved the product. Well a couple of you probably have a database database of hundreds of people of which dozens might be super passionate about. Do you know who those dozens are. Do you have a formal tactical way of operationally identifying them so the answer is kind of we're still too small and the market is too vast to really. There's there's gold gold nuggets in there so our big consumer markets curvy women obviously and then new moms women who have gone through breast cancer and then women who are older so as they've gone through kind of their menopause journey they're not stopping being active. They're coming back and they're the ones that are buying repeat but they're not on facebook as booking instagram. They see an article that's written in the Pittsburgh be and and that's where they find us. Yeah so there's so many tactical things there. It's great yeah and I think you should really take some great pride and joy in the fact that you got to hear and now you're faced the next next set of complex problems. Yeah which the fun part about these problems. They're they're very tactical right and the way to solve these is tasked stuff and to talk to people who have done it before. And that's my hope for you. It's one of the reasons the accelerator that we run has been very effective. Live is once people go through the accelerator. We have a slack channel or second stints with two or three hundred founders in it and one of the rooms this is about DC ones about growth hacking. You no one's about fundraising etcetera and they can help each other and share notes because even although it might not be a sim might not be the exact playbook it might rhyme a little bit and there's all kinds of different offline techniques that you're experimenting with that a very powerful you're not going to solve the mall instantly. I think you have to get comfortable with maybe between three and ten times trying to address address these problems to actually solve them. Yeah now that's the hard part of this journey is you're like okay. We're going to solve the landing pages and have to solve paid and we have to solve influence. Josh and fundraise and fundraise off feels like really Difficult the good news is if you can find just one thing that works even a modest level level that you can control lean into it so find something in there if you know. It's you know boomers and you know whatever forty to seventy years old. Then that works. Those people do exist somewhere online and knowing that ideal customer and just leaning into it I'll give an example We had a company that applied to the accelerator called Panty prop which then rebrand as Ruby Ano- and they make Swimsuits and underwear aware for when you have your period that don't leak. And that don't require tamp that can be used with pad and they wound up getting incredible. Seo So for some reason about swimming when you're on your period and had to deal with that without Tampa and they just knew the MOMS of teens teens were. This was a very important problem to solve. Yes and when you have that. ICP be ideal customer profile like that. Yeah that can be very freeing when when crystal new and she was just Spoke at one of our events scale when crystal figured out that her ideal L. customer profile was the mom whose daughter was just having a period or had recently started having period that really became the North Star of the company Eh and then they made a kit for your first menstrual cycle and they started doing events around that I can't and kind of celebrating womanhood and that process and boy did they figure it out so for you. If it's people who have menopause or post childbirth and the Bresser larger for whatever reason of because of the hormones and breast feeding lean into one get the dial in an ideal customer profile by six or seven of them and that maybe isn't price sensitive. Yes yes. Like boomers are not price sensitive. And that's why they've been our our most successful market but it is market that it's not as easy as writing in a facebook ad. This has been amazing. We went double overtime. Which means super promising as a company you should apply to our accelerator? Let's give it up for release from ause. Well done nicely all right. Welcome back to this week in startups live all right well done promise or pronounce. Aw Pranav knows that's right. Pronounce got got it. All right these are orange and blue shoes in front of me. which are the Knicks colors? So you're trolling me. Great Way to start this out of terrible mixer and we'll always be. Yeah thanks for that all right next guest joking. It's brutal all right. So you have a company called GLIMP- G. L. Y. P. H.. And you make these. Are they slippers shoes. Slides really really call these. What are the kids? Call these there. WHOA I lo- I right? I knew that so. You have a company that makes loafers. That's right that's correct all right right. So it's a direct to consumer loafer. That's right why should I buy your loafers. And not whatever comes up. First on Amazon Amazon. I wouldn't buy what comes first on Amazon whatever's got the highest reno atmosphere. How that album works? A little suspect will suspect. Yeah okay so whichever. One has the highest rating on there. What what why are yours better? So so. Cliffs are made with digital knitting technology in our goal from a design. Standpoint has been the only pair of shoes somebody needs to own their most versatile bear shoes so for guys specifically a Lotta guys we find like where them to wedding with the suit. They'll wear them on the beach and and I kind of everything in between so if you like to travel light that could be one reason you a fan of these frazier said Yes us your fan of the loafers. Yes you said digital knitting. That's what you said digital knitting. That's right nobody here knows what that means. What does that mean I know a digital means and I know what knitting is what is digital knitting? mean no so. It means that the upper of the shoes designed with computer and constructed with factory factory automation. And so this technology to do this kind of thing that's been around for a while but in the last few years it's kind a lot better and so these automated knitting machines have become come much more precise than they were in the past and they become a lot quicker. Why is that important? It's important because you can make products like this so maybe five or ten years ago go you can make these. How how we're loafers made previously if it wasn't done with digital knitting technology will so usually you you'd make a low for out of a different material? So this is a blend of recyclable fiber fiber traditionally loafers or made with leather. So you can use a different material. Is it more expensive or less expensive. It depends on the loafer. We sell them for one hundred twenty five dollars talking more about your cost so if I were to buy a leather or a pleasure or vinyl or digital knitting knitting technology those are all different technologies. Is it more expensive for you to make it this way or is it cheaper or the same. It depends on Michou so if you get into the equivalent. Yeah yes if you find a way just as note for everybody says we're all entrepreneurs it depends the worst answer ever. You're the expert Bert. So when I ask you a question like where any investor plant a flag and have a position and it depends. We know it depends. What we're looking for is for you to to me saying is a coffee shop nearby and people are like it depends and it's like well? What does it depend on? How far do you want to what what what Clive I have coffee do you want? Just be like. There's three coffee shops within ten blocks of here the most expensive hip one is the cheapest enclosed this. This is why and the middle of Road starbucks is two blocks away in Z.. That's like crisp. And it's one of the things we train people in our accelerator is to answer questions since that. Keep the dialogue going and don't frustrate the investors who are trying to invest in your company. So let's try it again. Is it cheaper for you digital threading already make a leather loffer for you as the producer of these rights. I I think it's comparable to you know maybe I could Cole Haan lauffer. So what does depend on is the quality of leather. That's being used so most leather out there. Pretty cheap doesn't last very long is comparable to that cost if you you you know if you have a bunch of really high end shoes then that weather might be more more expensive. Let me show you how to answer that question. Great question for a comparable lifespan. The comparable life span of equality. Leather is going to be about thirty dollars to make that loffer for us our loafers that are made with digital threading will last twice as long as even the highest quality leather and costs the same and some cases for the most premium leather which is about fifty dollars. There's a loafer we can do it for forty percent last. So it's a great question so just like you're. You're doing the sorting and normalization of all the variables for me to I understand so basically it costs you what to make one hundred twenty dollars shoe ballpark. Ten Twenty Twenty five twenty five and do you own on that machine. Is that a big expensive machine. Make these in China or Taiwan or something. We work with manufacturing partners in China. I think in the long run you can do it yourself. But the machines Sheen's themselves are very expensive. What do they cost and who makes them? There's two companies that make these machines so they're Shimazaki and stole Install okay let's try it so she she must accused. Japanese stole is German but the people that are great at operating these machines in the engineers on them are primarily Asia in southern genes are about one hundred hundred thousand dollars so they're expensive in two thousand dollars by the way it's not prohibitively expensive for us right now. It's not for you not for you like we're venture capital. It'll kind of like show to see how we one hundred thousand dollars to have a backup spare and the reason I ask you that question. I'm going to give you a little background. That was a probing question that I don't care the answer to. I actually don't care that much what I wanted to know was do you know who makes them. and Are you like so obsessed with this that you could tell me the names of how much they cost. It's a probing question that question wasn't about. The shoe is about you and you passed it with flying colors. So congratulations nations. Did everybody feel his credibility. Go up when he answered that. And that's what investors are doing. They ask you a question which is why you have to be great at answering questions You're not yet fifty fifty but we'll work on it. Okay tell me your biggest challenge our biggest challenges around goal setting deceive you. Some context on the ground in China for eight months came back so that a presale really. Just you know selling backpack people. Try them on buying them to that. That gone to five hundred startups. Sold out another small batch. Now we're doing a few thousand dollars in revenue per day. We just launched again last week but so the question for us is like really like what our goal should be in order to raise institutional seed round and like we Kinda have this thing where we're selling them online. We're using social media channels. We're doing some paid some organic and there's kind of this thing where we can sell them profitably at one amount but we can also if we want up dispense and crank things we can sort of break even or lose more but will grow more quickly and so it's really hard for us to know like what our goal is to raise that reineck. What should we what we should be doing? We've kind of taken in. You know a a few hundred k now off some great angel investors but we'd love to really scale the company up. I think we need institutional money to do that. I just WANNA know how to get their great great question. Okay so wrong unpack it a little bit for the audience and you can tell me if I'm wrong you've gone through an accelerator great You sold a couple of thousand pairs of these in one or two runs of shoes news. You did it Guerilla style. Maybe you tested some page. You did it in person you do whatever it took. You made a little bit of money. So you've sold. How many pairs total total? We've sold about prior at five hundred fifty K.. Where some we doesn't fifty K.? Before we last week okay. Since last week we've done around twenty K.. In Revenue Eh. Okay total number of shoes sold than is thousand. Two Thousand Pairs. Yeah less than I probably like eight hundred okay. So you're still in. The product market fit bit phase. So you're still trying to figure out what consumers think of these. Do they want them. And you're just starting the GO-TO market phase. So that's a little bit early for Venture Capitalist Venture Capitalists today are looking for indeed AC- companies. I would say a minimum minimum of five million dollars in sales. Let me say that again. Five million dollars in sales is what a venture capital firm would wanNA have to invest venture capital capital firms are now doing typically five and ten million dollar investments for a series for twenty percent of the company in order to have a twenty percent of five million dollars. That's twenty five million post money valuation right. The country's gotTa be twenty five million in order to be worth twenty five million you'd need to have about five million ars in revenue five or ten times five million would be twenty five to fifty million right. So that's how people will value the company that's the goal to get VC's and I'm talking about outlined benchmark or sequoia craft ventures in recent Horowitz Kleiner Perkins light speed. They tend to invest in my experience when there's more more traction in these type of companies once in a while if they know the founder they've worked with them before maybe they would do it pre-funding so you're talking about seed funds so we're talking about a homebrew homebrew or a Cape or capital or cowboy ventures repair ventures. Now how do they make their decisions. They would look at this. Yes I think and we would look at this the same way What's the union economics on this? WHO's the founder? Do they have some unique unique insight with this product and what are the customers customers. Think of it and that last part I think is super important. One of the reasons Adidas Company can break out is because the consumers are so passionate about it and the product market fit is so extraordinary that repeat sales and refer a friend Metrics off the charts. So I think birds or oil oil birds at what is it Adam or atomic atoms. Some of these things had very passionate user user bases so I think having passionate user base really matters here people who ordered many times many different versions of it and then the economic works wchs are important. You're also in a very crowded space. I think is that right. I think that's right. Yeah and I think people are a little spooked right now because of what happened to all birds words and they got copied by Amazon basics and stuff like that so I think people fear Amazon. You need to have an answer for that. And so I I would look at building this as a sustainable business with great margins I would not try to have growth at all costs. Because it's it's a little bit out of your hands The venture capital communities current view of data see products in highly competitive space. Like shoes. Because you're not early you're late right. You're couple years after all birds and other options in shoes so I think you've got a challenging situation. Which is why I would figure out how to make this unit economics work? How much does it cost you to acquire a customer paid marketing channels? Today are paid Caq. Jack Paid CAC is twenty seven dollars and then about half of our sales to date have been been free so referrals or people finding out about it. Great Tell me about the referral program. How does it work? We don't have a referral program so just people telling each other got word of mouth is what you refer to okay word of mouth means. There's no compensation referral means. Things are some compensation for the people doing the referring so that might be something to turn on some sort of referral program. If you refer you get ten dollars off you get ten dollars for for our friend anybody here ever tweet or share socially a dropbox give five gay. Get Five GIG or Uber. Give twenty-five get twenty five. Everybody ever do that. I have okay. Good half the people in the room. And that's all you need. So that's great. That's a great opportunity. Turn that on so now since you said. These costs one hundred twenty and it's twenty seven dollars. They're one twenty-five yet mcgann. twenty-five Caq is twenty-seven customer acquisition costs twenty seven dollars. You told us a ratings cost twenty or thirty to make and ship Yup. Yeah in that range okay. Let's run it up to thirty the bigger of the two numbers round the CAC up to thirty. That means every time you acquire customer online you get sixty sixty five dollars in profit and if some percent have returns five percent or ten percent of whip the breakage winds up being thank you might be clearing fifty dollars per order who's also shipping people's houses tariffs. There's other cost cake then. I think when they another ten in yeah you make forty dollars of the one hundred twenty five. Yep I think that's fair forty dollars would then let us the cactus twenty seven every time you get a customer and get their money take that money and spend it on the next customer correct the trend I think so in the the Caq you have is something you can kind of control in so the more dollars that you're spending per day the higher you're GonNa get more revenue you're going to rent so I think to your original question is what you should do. Here is I think you should run a profitable business And get passionate users and then be able to sell that in twenty twenty two investors. This is profitable already we can just keep acquiring customers if you give us more money. That's not going to office space or me giving myself a raise or paying back some loan I took. It's is just strictly going into paying for more online advertising. And I've proven it over these twelve months these three months so three to six months. It's of ten percent growth month over month in paid advertising resulting in growth profitably. I think it's a no brainer that you close a seed round. But you don't have that you have spike. Yeah we just selling out. We'd have these really small batches. We don't have any money and we started the company so we take our money by more shoes a four month lag from when you place an order to on the shoes was sitting in a warehouse in the United States. we've got the done at three in because of five hundred. I think now we've got enough cash to have consistent been Tory. Yeah so I think that. You're on on the cusp. I would not go for growth at all. Costs that is unnecessary. Because I think the investment community after we work. We're now moving into a post growth era and moving into a profitability era. The public markets want profitability. The private markets wanted to growth and now how growth at all costs I would say and now we're GONNA move into a new era which is growth is we want growth. That's reasonable and strong growth and strong prophets as opposed to. Don't worry about the prophet to raise prices later. Let's raise prices when we get to one hundred million customers right. That may have worked for Uber. Uber or Airbnb to like raise prices. Later I don't recommend it for you in twenty twenty because remember you're operating in a system known as the the world and in that world there are sub systems in the subsystems are the public markets in the private markets and investors investors. Right now our feeling very cautious about growth at all costs so under no circumstances would I tau any of our companies to go for growth at all costs and I'm on the board of a lot of companies with this does come. It's a really pressing question. So I think you're you're thinking the right way that doesn't mean you can't have growth goals. It's just that the goal the five acting revenue. year-over-year is no longer. I think really interesting to people if you can do three times year-over-year sustainably so five or six times. A year over year growth unsustainably not attractive to investors. I believe today three times euro. Three axing year. We're over year sustainably for. That's really helpful. I appreciate a well done. Let's give Pranav Pranav yet. PRANAV Broncos a big round of applause and thank you these are amazing. How did you know nine and a half? 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He quickly selects the skills needed rights of description and adds additional screening questions my favorite and he sets the daily budget and his off on his way to finding a great candidate. All within a few minutes here is your call to action with Lincoln jobs. You pay what you want and the I fifty is on them. That's right a fifty coming to you right now at Lincoln Dot com slash twist. You will get fifty dollars five zero a great offer love when they give a cash offer. That's Lincoln Dot com slash twist to get fifty dollars off your first job post terms and conditions of course apply. Because they're giving you a fifty all right. Let's get back this amazing episode. Everybody wanted this week in. Start up We're talking getting crisp by like right next up on. The show is Mark Doc. And he's from a company called recapped a company which recaps failing startups. Now no no okay. What does recapped do doc great question so we found out that terrible word for finance? After we started the company recap means this is a total shit show. How do we fix it? We just take everybody on the CAP table. Able we destroy any equity they have and then give it to the next people so we don't do that so we are the first project management platform built specifically typically for businesses to us with their clients. You're the first project management software for companies to us with their clients so as opposed to using Asana UH in my organization which we do love I would use. I can't use Asana with our clients. Have you ever tried inviting twelve all different stakeholders in there. Actually haven't now okay. So that multi-player multi mode multiplayer yes project management was single player. Went to multi not player your multi organization specifically around closing complex deals managing pilots and then on boarding those customers got it so oh who would be your ideal customer. Tell me about your ideal customer profile. The creek questions so we actually have two right. Now that we're experimenting with one is startups of any size you now if they have a complicated sales process or implementation where there's a lot of checklists lot of moving parts and deals fall apart that's the ideal one the second one that we're having good luck now with closing are the fortune five hundred enterprise companies have twelve month sales cycles lot again. A lot of moving parts a lot of complexity everything falls apart at a certain face. Okay so I'm at an enterprise software company and I need to sell into a big the company and its a three to six months south psycho. And there's a bunch of things that have to be done in order to close that sal you make some checklists for us to on both sides hides work on the implementation scope of work etc.. So if I'm just doing this internally I can use whatever task manager I have whatever plug in for slack or Asana UH perfect but if I wanted to have my client. Let's say the client was Goldman Sachs for software and there have a compliance department they have technical. Api Department they have it you can invite their it department. You can invite all of their people and stakeholders into the checkpoints and say beazer your action items in order to get the deal closed. Exactly Okay Hatch. Come up with that idea. I wonder I needed myself. So what so as a VP of sales leading couple sales teams. And I spend years before that in what company it's called Academy it's it's like the pre version of lambda school got it so you would have enterprise partnerships partnerships. It's interesting she had an itch scratched. It I'm great. How many is the product launch recapped launch? Yes so we came out of private Beta couple months back and have decent money customers a dozen two two thousand or three three dozen three dozen customers of those customers. How many are paying you? All of them okay. Now now you got my interest on top of the head. Yeah so we did an Alpha launch earlier last year and about twelve hundred one time payments so we have a couple of hundred monthly active users. Got It perfect great. You're testing so just you know what's going through the mind of an investor. I'm like I don't understand if this product is really necessary or not the sounds like maybe it's too niche but then you sort of the results were so good you know you. You could fake a half dozen customers my two fraternity brothers others my cousin. The person the two companies I worked for before I convinced them to buy the software on their corporate cards. And you can kind of fake it. I'm not saying that. Other accelerators editors do this kind of stuff and they've other company courage kind of like faking south but I do see that little bit of faking and I'm like where did you source these first five or six companies first and then eventually And then I just cut them off the past and I'm like did you work at that company before because those you make the best customers or is it a friend of yours. Who's doing you a favor? Verlander new solid. Because that's really good. If you can sell into your network secretary give them permission to admit it than they admit it. And I'm like okay. Well this is a complete fraud. I'd say that on my mind line not outlined so I usually think let's talk about the sixth seventh and eighth customers so for you. Thirty six can't be faked. What's your biggest challenge today? Yeah so actually. It's your point so really when we're talking to customers and this is kind of two fold because his customers and investors so there's really two it's one we get on a call and someone's like Oh my God. This is a huge problem for me. Never solution out there all by the spot and makes up about thirty percent of the people we've talked to the other seventy percents whether they're investors are customers are like the need educating so how do we balance or how do we find those early adopters and when we were also talking. VC's even even though we have revenue we have traction where sometimes told that we're too early even if they invest in pre revenue companies. Okay so if you ever break makeup with somebody like in a romantic relationship once or twice okay in the hours days or weeks before months before making that decision would you say that it was anxiety producing or no big deal. Okay so now you know what it's like to be an investor it's incredibly anxiety producing to tell somebody who's sharing their hopes and dreams that you spent an hour with and maybe our mutual friend introduced thus and now I have to tell you. Oh my God. Thank you so much for sharing your wife's work. No I mean it is hard. So that's why I always say not yet and I try to founders. The candidate reasons why that makes me the Unicorn of investors because most investors do not like to be honest honest about this because it could hurt people's feelings hurt people's feelings and you're like listen I don't want to date you. You're just really annoying. You know imagine saying that to somebody like I can't stay in this this relationship you're very annoying. Is that person going to come back and date you if you made a mistake. And what are they. You know it's so. Investors are not honest with their feedback. And so I would. Whatever they're telling you I would write it down? And then I would do probing questions to try to figure out what the actual reason is so they they say not enough revenue not enough customers. You say totally get it. That's awesome if there was a certain number. I'm not going to hold you to this. But if there was a certain number of of customers or revenue that would be a great time for me to re engage with your firm. What would that number be? And if they say fifty thousand dollars a month okay they probably are being honest if they say yeah. I have to give that some dawn talk to my partners. Or there's like any paws and the paws is not followed by a number. Then that reason was probably not the actual reason was probably. They don't like you. They don't like the idea. They don't have any money left in their fund. I would just not take it personally. I would just move on very quickly because it is a numbers game and you only have to get one you need only have one person say yes for everything to go right for you. She can't take it personal most. VC's Meet in person with a hundred or two hundred people to make one investment that means ninety nine hundred ninety. Nine people are getting bad news so you seem like a very logical driven person to me and for you. It must be short-circuiting to get no so I treated very much like tails process. which for me? It's the same thing right. Every knows one closer to yes frank but for us it's really just like when we see them. Invest in companies. Is that have nothing more than slide. Okay I guess that's in the dark place now. You're in the really dark place. So jealousy anger frustration to the dark side. They will lead. This is the road to darkness earns. I literally had this happen. All the time and it typically correlates with the most driven founders. I just saw X.. Company raise one hundred million dollars for less than a fraction of what we've just done. How on Earth did that happen? I'm going to go raise one hundred million dollars for my company and it's like I have to sit down and say okay. You don't know what happened on the other side of that relationship. They could have been in a fraternity together or worked at Goldman Sachs together and they are gist simpatico and they WANNA do big projects together or that could be a first time investor. WHO's about to lose one hundred million dollars making the biggest mistake of their life and that was the stupidest bet you could ever make? But you're sitting there going. Why can't I get somebody to make that kind of investment? I E imagine you were running a co working space that launch. Watch before we work and then you watch we work raise a billion dollars and then two billion dollars and ten billion dollars you would be bouncing off the were you like. I know I looked at that building. I I know what they paid. The broker told me what they're paying. Doesn't everybody understand that they're losing money on on that office. Every customer they get they lose one hundred dollars a month and that person just invested in their company. They're going to lose all their money. You're right so I had this happen all the time. And there are weird things that happen in this world all the time and you have partial information. Your job is to ignore the out wires and focus on the normal companies. VC's invest today in SAS companies. That have low churn that that have land and expand and VC's tend to engage when they have to three or four million dollars in annual. Run rate are you anywhere near those numbers I everything except for the revenue great. So you're not in the VC car yet and when VC's do jump the fence and give a fabulous amount of money to somebody somebody. It tends to be somebody they worked with before. Who took the company public? Did you take a company public or salad. And where did you work with before you do any of your current investors. Are they friends friends of yours. Who Knew you before the angels will be correct so now you proven it because there's somebody who doesn't have rich friends who can't get the angels was like? I have more traction attraction than that guy and he got angels to do it and he doesn't know that those angels are people who trust you from your previous relationships right. So that's what's happening in the world and so so if that's what's happening in the world you have to look at the average not the outliers. So if in their portfolio two or three things they invested in pre revenue. That's fine they're probably know that person previously and had success with them. Don't take don't take it too personal because you're looking at it with logic and it has to do with relationships and also people make mistakes like Masayoshi Sun looked like the guy in the room. which by the way I know he is is one of the smartest guys in the room and now he looks like a fool? I can assure you. Masayoshi Sun is the furthest thing from a fool and closer to brilliant and amongst the investors of all time. He just happens to have made a mistake or two here which can happen. So what are the things you can control You can control getting those meetings being gracious and trying to figure out ignoring what people tell you. The reason reason they're not investing and just trying to get when you re engage with them. It is a numbers game. Your job is to figure out why they said no press them a couple times to figure out what what what could have resulted in A. Yes if they're willing to give it to you if they're not dunk on them later. When you actually have revenue and then and there's a series of investors who liked to take make investments in companies with under a million in revenue kind of my bread and butter today is finding companies that have three to fifty thousand dollars in revenue and getting them to come to the accelerate and solving this very acute problem? which is how do you get people to make a decision here? Because there's too many companies to deal with. I'll give you a handful of examples. Fit Bot had three thousand dollars a month and revenue when they came there are a million dollars a month and revenue now two years later lead. IQ had two or three hundred dollars a month in revenue. I can't say what they're making exactly because they haven't been public public about it but it's millions of dollars and so people will make the decision as your credibility goes up so oil you can do is focus on getting your credibility and a delight. Your customers just delight your customers. I introduced Uber. twenty-one investors in a room half the size of this three people said yes including including me one thousand nine hundred no the defining company of the last ten years is Uber that's the highest valuation doubled the nearest competitor. The most important company last cycle accompany before that was facebook the company before that was Google Company before that was Microsoft or apple or both so most investors miss so for for you to try to put any logic into it is a fool's errand makes sense okay. You should apply to the accelerator great job. Let's hear it one more time for mark. Awesome Prizes Been Great.