For 14+ years, we’ve perfected investing in unicorns like Lyft, Wish, Gusto, and Scale at the earliest stages. Now, meet 5 of our current early-stage portfolio companies who pitched at the Outlander Spring Showcase!
From innovations in robotic automations in hospitality, fintech marketplaces for investing in VC funds, no-code productivity and compliance platform for field data, B2B manufacturing marketplaces, consumer health tech for care data tracking, these companies are building the future of everything:
Backbar
SaaS, automation, ecosystem
Backbar is automating the creation of complex beverages like cocktails, mocktails, coffees, superfood juices, and more. We’re solving for increasing cost pressures, labor shortages/turnover, and lacking guest experience by creating an end-to-end beverage platform. We’re going to make a 3-5% margin improvement in an industry where $70 billion is spent every month.
Based in San Diego, CA, co-founder and CEO Rishabh Kewalramani is laser-focused on optimizing hospitality’s highest-margin product, beverages, with the largest innovation in decades through BackBar.
At Eskuad, it’s our mission to help natural resource squads save time and resources by providing access to our platform anywhere and anytime, regardless of internet connectivity. Eskuad’s platform makes it easy to digitize old-school paper forms as well as automate data collection like GPS information, direct upload photos, and automated reporting. Designed for field operators that operate in Natural Resources and Environmental related companies, Eskuad is connecting the disconnected and building the future of field work.
Based in Atlanta, GA, founder and CEO Max Echeverria is committed with simplifying and streamlining field work with no-code productivity and compliance technology through Eskuad.
Made is a B2B marketplace platform that solves points of friction between aerospace and defense manufacturers and US-based suppliers. We focus on cutting down lead times with fast quoting, superior ERP tooling, and a robust marketplace of suppliers building the highest quality goods for the toughest environments.
Based in Boulder, CO, founder and CEO William Allen is obsessed with building a B2B marketplace platform for manufacturers to meet and work with suppliers through Made.
Talli is a modular, configurable platform of software and hardware options designed to take the work out of capturing daily care and health information across the $648B care economy. We started with babies because that’s where the Talli story began. We’ve done $1.1M in revenue in the baby market with 16k MAU and 30M events logged. We grew our revenues by almost 400% from 2021 to 2022 and our SaaS revenue is growing an average of 36% per month since launch. Now, we’re expanding into senior care as well. After making our platform fully configurable in the summer of 2022, we started seeing customers buying our baby product and adapting it for care of their aging parents. Even before releasing a configuration marketed for elder care, we had more than 500 users in our database logging for someone over the age of 60. We’re releasing our Talli Care configuration for senior care and chronic conditions on March 22nd.
Based in Atlanta, GA, founder and CEO Lauren Longo is disrupting consumer health tech with a flexible, a la carte platform of software and hardware options for simple tracking of daily care and health informationthrough Talli.
Velvet makes it easy for institutional investors to discover, evaluate, and invest in private funds. The traditional process is tedious, difficult, and expensive. We’re here to make private funds simple and transparent. We save investors time by listing funds at scale, automating diligence, and simplifying the investment process. Velvet helps you easily discover funds, connect with managers, evaluate track records, and make investments on behalf of clients or yourself. Velvet curates hedge funds, venture capital, private credit, and private equity at scale. Our listing platform makes it easy to find pre-vetted funds based on mandates, categories, fund types, asset exposure, size, returns, and more.
Based in Salt Lake City, UT, co-founder and CEO Andrew Pignanelli is obsessed with building the future of private finance through Velvet.
Watch the replay of the Outlander Spring Showcase to learn more about these game-changing startups! Meet the rest of our portfolio here.
In the last few years, Atlanta has birthed several multi-billion dollar tech companies, including SalesLoft, Calendly, and Rubicon just to name a few. But now, we are sitting at a critical crossroads in terms of our city’s future leaders.
So, I’m reaching out to you—our network of outlanders from Los Angeles, New York, DC, Miami, and across the country—to help us elect a mayor who will have a profound impact on the most diverse startup city in America.
Atlanta needs an ethical, progressive mayor who wants to engage with the startup and venture community, andAndre Dickens has impressed me since day one. That’s why I’m hosting acritical fireside chat with Andre on 11/18 at 11 am ET, so you can see for yourself why he’s the right candidate for the job.
Even if you are not an Atlanta voter, consider this: Elections—like startups —require capital to succeed. But unlike state elections, the benefits of diverse startup hubs like Atlanta extends beyond state and even country lines.
With a donation as small as $1,000 (and as large as $4,300), you can invest in the leadership necessary to build the next Atlanta unicorns and the future of diverse emerging managers and founders alike. Leura and I are maxing out our individual donations to support his campaign, and we are asking our friends and family to join us in supporting the future of Atlanta innovation through a contribution to his campaign, too.
If you are an Atlanta voter and believe our city deserves an ethical, progressive mayor, look no further than Andre Dickens.
At our fireside, we will dive into his plans to advance education, build bridges with the startup and investment community, and provide a safe, efficient, and ethical local government. I believe that for the future of our startup ecosystem and the health and safety of our great city, he is the right person for the job.
5 finalists. 1 virtual stage. $100,000 investment on the line. 🏆
Calling all innovative early-stage tech startups in the United States:
If you’ve got what it takes to outvision, outbrave, outperform, outsmart, and outpitch the competition, start your OutPitch 2.0 application now! The winner of the $100,000 investment from Outlander VC will be chosen from the five finalists who pitch live on December 7, 2021.
Attendees are invited to join us virtually on December 7, 2021 at 5 pm ET to watch the five OutPitch finalists pitch live for a chance to win a $100,000 Outlander VC investment. Spots are limited, so save your seat now!
In celebration of Outlander’s first birthday 🎂, we’re hosting anotherOutlander Demo Day on September 30, 2021, where you can meet five of the game-changing companies and visionary founders we’ve invested in since our September 2020 launch! For your convenience, there are two ways to celebrate with us:
Register now and join us virtually on 9/30 to participate in the live audience Q&A with the presenting companies.
Register now and watch the event recording at your own leisure!
The recording of Outlander Demo Day will be available to all registrants immediately afterward here, so either way, register now! You do not want to miss these pitches.
From innovations in Video Robotic Process Automation (vRPA) and machine learning, consumer health and care data tracking, and SaaS-enabled marketplaces to shop local, build your next startup dream team, or find inclusive transportation, here’s a sneak peek of the magic to come at Outlander Demo Day:
City Shoppe — SaaS-enabled marketplace powered by local small businesses and values-based consumers.
City Shoppe’s SaaS-enabled marketplace is an interconnected platform bridging the gap between local businesses and modern consumers. On the business side, we manage and build SMB’s business behind the scenes, allowing them to just focus on product curation. The consumer side is our one-stop-shop marketplace that exceeds the expectations of the next generation of consumers by enabling them to shop ethically, filter by values, empower local vendors, and change the world. City Shoppe is the future of “Think Local First.”
You may recognize City Shoppe as the winner of OutPitch 2021! Based in Austin, TX, founder and CEO Ash Cintas is laser-focused on creating a SaaS-enabled marketplace that empowers anyone to shop locally from anywhere through City Shoppe.
Huddle — where freelancers invest in startups with their time + startups scale in exchange for equity or cash.
At Huddle, we get that finding talented people to work on your startup is hard. After spending an average of 3-6 months fundraising, founders spend an additional 3-months putting their team together. That’s why we build Huddle: a social marketplace that connects the world’s top startup builders to founders. Founders pitch the Huddle community on what they’re building and need help with (pitch deck, mobile app, new brand, etc). Huddle’s platform matches startups with flexible, super teams that can move fast and be paid in cash and equity, meaning no more wasted time scrolling freelance marketplaces and interviewing expensive agencies.
Based in Miami, FL, co-founder and Chief Product Officer Stephanie Golik is obsessed with increasing entrepreneurship and creator ownership via the FinTech, AI, blockchain, and creator economy marketplace that culminates to Huddle.
MedHaul — enabling safe, reliable, and efficient transportation for patients with unique needs.
Access to transportation can mean the difference between chronically ill patients safely managing their health at home or missed treatments and costly unnecessary visits to an emergency room, and MedHaul is here to close that transportation gap. We serve as a conduit between multiple communities—healthcare providers, transportation workers, and underserved populations—creating a unique solution that empowers the entire community to better health. MedHaul’s technology makes it easy for healthcare providers to find and book rides for their most vulnerable patients, regardless of their unique needs. Through our streamlined transportation platform, we help healthcare workers save time, reduce costs, and improve patient satisfaction while closing critical transportation gaps for those who are impacted most.
Based out of Memphis, TN, founder and CEO Erica Plybeah is committed to providing safe, cost-effective, and reliable healthcare transportation for all through MedHaul.
Talli — hardware + software solution for one-touch, mobile, hands-free logging of health and care data.
Our mission at Talli® is to reduce the mental burden of caregiving through easier logging of care and health data. Our flexible IoT platform provides hardware and software options for one-touch, mobile, and hands-free logging across infant care, senior care, and home health markets. Talli is flexible enough to track any type of event and then translate that data into actionable information and the insights you need most.
Based in Atlanta, GA, co-founder Lauren Longo is disrupting the tracking and sharing of health and care data through an IoT logging and health data platform with configurable hardware and softwaresolutions through Talli.
Vidrovr — video analysis platform for indexing and activating video content to create vRPA workflows.
Vidrovr enables users to index live and archival video content, access embedded video data, and use their video data to create Video Robotic Process Automation (vRPA) workflows. Our platform unlocks the untapped potential of a company’s unstructured data within video, audio, and image assets, then translates those data points into actionable business insights. As a result, we leverage video data to modernize industries dependent on physical operations in ways never thought possible! Vidrovr’s AI localizes the complex interactions between people, objects, and events within video data and then creates insights on improving safety, simplifying compliance, and streamline logistics. Simply put: At Vidrvor, we make videos as searchable as the web.
Based in Atlanta, GA and New York, NY, co-founder and CEO Joe Ellis is obsessed with everything machine learning, artificial intelligence, vRPA, and workflow automation—all culminating in Vidrovr.
Click here to meet the rest of our innovative portfolio companies.
Mistake: Emphasizing company potential over people potential
When I began investing over a decade ago, I evaluated deals using a holistic lens: a well-built company with an innovative product made for a good investment. Using this company-centric framework, I invested $1M into 20 companies during my first year that I thought had a good shot at success, but within 12 months all but a few (shoutout to ExpenseCloud, Klout, Ticketmob, and Burstly—all 4 of which I later sold my shares in for $2.7M) were clearly failing.
Frustrated, I began taking inventory of the different factors that could’ve prevented them from succeeding, but their solutions, business models, and market influence all checked out. And yet they were still failing.
At the time, I was meeting with founders and listening to traditional pitches and predictive cash flows, which always painted a really pretty picture of the future if all went well. But over time, I understood that expecting things to go according to plan was unrealistic. The only real predictable factor with startups is that their industries will inevitably shift, and their founders will have to find ways to effectively respond. So if change is as inevitable and uncontrollable as the weather, then what aspect of each startup can we look to for constancy?
I decided that if I wanted to be an adept predictor of startup success, I would have to develop a specialized talent in evaluating the founders themselves.
Operation: Founder Expert
I started observing and analyzing the factors that set successful founders apart from others. What psychologically differentiated them, and how did the stories they told us about themselves differ?
The answers that I found won’t come as any surprise to literature buffs: the most successful founders had shared characteristics rooted in the defining moments of their lives. In other words, they all followed the archetypal hero’s journey. Their personal stories often hinged on a moment (or moments) when they struggled deeply but somehow found a way to persevere or overcome an obstacle they couldn’t control or foresee.
These kinds of stories gave me a glimpse into a founder’s internal GPS, which could be used to predict how they would handle the chaos of a startup’s lifecycle. I began to see that some founders are more wired for adaptability, so I stopped asking for their pitches first and started asking them to tell me about themselves—their stories, their challenges, their fears. The answers they shared in conjunction with the success or lack of success they inevitably experienced provided me with the evidence I needed to build Outlander’s Founder Framework.
Building the Framework
Our Founder Framework is the most important evaluation tool we use when deciding whether or not to invest in a startup, and like the industry we work in, it’s constantly evolving as we learn more about founders and their psychological makeup. Currently, the Framework consists of 38 characteristics divided into four categories: vision, intelligence, character, and execution. Like any good literary hero, outstanding founders need strength in each area.
Vision: Think of a founder’s vision as their map. It might not be extremely detailed, but it gives them a necessary outline for the journey that lies ahead of them. It helps them predict hurdles, and it gives them a compelling way to convince others to join in on the quest. Founders with great vision aren’t as focused on the ways they want to get to their destination; they tend to focus on the fact that they’re dedicated to getting there by any means necessary.
Intelligence: When I refer to intelligence, I’m not talking about how high their IQ is or where they got into college, although those things don’t hurt. What I mean is that they have a great internal compass—meaning knowledge of their venture’s industry, the skills to navigate through complications, and experiential knowledge that led them to create this particular solution. When their ship goes off course (and it will), they have the intelligence to get back on course and to learn from the detour.
Character: A lot of extremely successful founders have been what people might refer to as “a real character,” but when I’m evaluating a founder’s character, I’m actually trying to find out what fuels them. I’m looking for homegrown mental fortitude, something akin to grit and determination. A lot of people say they’re ready to give all of their time and energy to see a venture through, but only a handful of them really mean it.
Execution: A founder’s ability to execute is all about their ability to make choices. Founders with this strength know how to combine their vision, intelligence, and character in order to arrive at the next course of action quickly and deliberately. They must be open to adapting their approach or perhaps even looking for opportunities to experiment.
Founder Framework Applied
At Outlander VC, we believe in the methodology behind our Founder Framework, and we apply it early when determining whether or not we will invest in a company. So what does that look like in a practical sense?
In the vision category, high-scoring founders are often obsessed with their company’s solution and are strong communicators of their aspirations.
In the intelligence category, high-scoring founders often demonstrate creativity, problem-solving, and industry experience.
In the character category, high-scoring founders often exhibit grit, locus of control, and personal conviction.
In the execution category, high-scoring founders are typically decisive, action-oriented, and unafraid to make mistakes (experiment).
Founders must score highly in all four categories or we will not invest no matter how good their idea is. That may sound extreme, but let me ask you:
Without a visionary founder, who will entice investors to give the startup an opportunity?
Without an intelligent leader, how will a company know what the next best move is?
Without strong character, who will keep pushing the team and find ways to renew morale?
And without someone ready to execute, how will the startup progress to new levels?
After 12 years of investing, I know this much: even the greatest ideas are doomed to fail without a well-rounded and dynamic founder to lead the way.
Food production isn’t keeping up with the global demand, as Earth’s middle class is expected to double – with consumption levels alongside it – by 2030. The population’s demand for nutrients has outpaced production since the mid-1990s, with the most acute shortages occurring in developing economies. Drought and erratic weather conditions from global climate changes have accelerated the problem even further, with estimates that it will reduce crop yields 10-20%.
Fortunately over the last few years there’s been a surge of interest from tech entrepreneurs and venture capital firms in confronting this challenge by leveraging the latest advances in technology. In 2016, the modern farm has moved far beyond merely genetically enhanced seeds; it’s becoming a conglomeration of robots, aerial imaging, and data analysis. There is a new wave of innovation to make farms “smart,” ultimately resulting in substantially increased crop production.
As Pablo Borquez Schwarzbeck (CEO of our portfolio company ProducePay) points out however, while nearly all the attention and capital is flowing toward improving crop yields, that’s just one piece of the bigger puzzle. As yields improve and overall production increases, there remains a massive financial bottleneck holding back the industry’s ability to actually bring more of those crops to market.
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Once a farm has fresh, nutrient-rich produce ready to sell, they get it to market by way of a distributor (a.k.a. a wholesaler), who takes their fresh produce and sells it to retailers like grocery stores and supermarket chains for a commission of 8-12%. It typically takes 45 days from the date a farm ships its produce to when it – and the distributor – actually gets paid, however. And farms, whose expenses are disproportionately weighted to peak harvest season, don’t have the cash flow to wait that long.
Normally, a business owner would negotiate a line of credit with a bank to handle a cash flow problem like this, but banks won’t lend to farmers. In their eyes farms are too high risk because the collateral – the farm’s produce – is perishable, hard to track, and hard to value. To enable farmers to cover short-term expenses, the distributors in the industry – whose wellbeing is tied to the farmers’ shipments – took on the role of making loans to farmers that get repaid a few weeks later once money flows back upstream.
Distributors are in the business of wholesaling produce, however; they don’t want to be banks. Their need to make loans to farms has created a bottleneck holding back their growth: they can only work with as many farms as they can afford to lend money to. So as new technology and farming practices improve yield, the financial bottleneck is only going to become more strained. Distributors can’t bring massive amounts more produce to market because they can’t afford to loan more money. (Imagine if an Uber driver had to loan every rider the money for their ride and not get paid back or earn their cut until 6 weeks later; they wouldn’t be able to offer many rides.)
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We made our first agtech investment a few months ago in Pablo’s company ProducePay, which is pioneering a new model of financing to solve this problem.
He and his team are creating a proprietary tech platform that makes it easy for farms to record data on their produce shipments and for distributors to accept and record market price information according to the daily movement of the fresh produce commodities market. This valuable real-time data enables to ProducePay to responsibly provide growers payment advances the day after the produce leaves the farm — essentially significantly accelerating their cash flow without a cumbersome bank loan process.
Envision you, like Pablo’s family, run a farm in Mexico that partners with a distributor in California to sell your produce on the US market. ProducePay will vet your request then – assuming you meet their criteria as a USDA compliant business – they will set up a cash flow plan for your farm’s unique circumstances. As data comes in on the size, characteristics, and location of each shipment, the company will automatically advance the grower the agreed upon percentage (up to 80%) of that produce’s market value. On average this amounts to $25,000 advanced to the farm every day throughout the harvest season.
The distributor in California isn’t disappointed that a farm they usually lend to is getting financing without them either; it means they now have that more working capital to either invest in their own operations or lend to other farms that don’t yet use ProducePay. The distributor earns far more money by wholesaling a greater volume of produce for 10% of the sale price than they ever did making short term loans.
This win-win-win scenario is rather unique: the incumbents in this industry actually want to be “disrupted” and are ProducePay’s leading referral source for new fresh produce farming clients.
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The Borquez family has been farming in Mexico since Pablo’s great-great-grandfather ran the show. His father grew their farm in Obregon from 30 acres to 3,000 acres over the last 100 years – a journey Pablo saw every facet of as a child growing up helping with the farming and operations. In particular, he recalls the lifestyle of a family business where most of the year is spent preparing for a 2-3 month harvest season in which the entire year’s income is made (and heavily subject to the luck of weather, etc.).
After college, he moved to the US to work on the finance and Grower Relations team of a large produce distributor in Los Angeles. There he realized how frustrating lending to farms like his is from the distributor’s perspective. The distributor’s inventory from farms could only grow in balance with their ability to lend, and it created massive credit risk for the company to do so.
When he started his MBA at Cornell a couple years later, he had decided he wanted to find a solution to the problem. Midway through his degree he settled on the idea for ProducePay and partnered with the development studio Coventure to build out the basic tech platform to test the concept in the field. The first advance ProducePay made – as an MVP in March 2015 – was $100,000 to help get $250,000 of asparagus to market. The test went perfectly: in just 30 days, the farm repaid the principal, plus ProducePay’s fee of 1% produce value ($2,500).
The company has since raised a $1.2M lending facility for its first season (June-July), a $6M one for its second season (September-January), and has surpassed it’s goal of enabling $100M in produce shipments within the first year of operations. The platform has already supported large shipments of asparagus, grapes, mango, and lemon coming into the US, with berries, squash, tomato, and other produce coming soon.
Although ProducePay works with US growers, early success has been focused on distributing Mexican and South American produce into the US market. In addition to being the largest developed market for agricultural products, the US offered the best publicly available data on daily produce imports (the Department of Agriculture monitors the price movements of ~100 produce commodities. That information helps the company offer financial solutions with the most accurate predictive future market price metrics around.
The US market is just the start though. Pablo has seen interest from farms and distributors globally, and the ProducePay model is a particularly powerful solution for developing countries where farmers don’t currently have access to any sophisticated financial infrastructure. Moreover, his team is working to make the ProducePay platform a dynamic marketplace where farms and distributors can more efficiently find and trade fresh produce around the world.
If they can more efficiently facilitate the movement of agricultural products in markets around the world, he thinks, the elimination of financial bottlenecks will drive an increase in the overall supply of fresh produce actually becoming available to the end-users, everyday people.
Growing up in his family’s apartment in the Van Nuys neighborhood of Los Angeles, Bardia Dejban learned at a young age to bounce back from tough times. By the time he turned eighteen, he had survived multiple near-death experiences from which he pulled himself back to full health. Those incidents seared a distinct appreciation for seizing the most of life as a result – he realized more intimately than most that life is precious and time-limited.
His father was an Iranian immigrant who had brought the family over to the States, worked three jobs to provide for them, sent them to college, and eventually built his own successful construction company. The context of his family’s work to stake their own claim in a new country and the medical challenges he overcame made Bardia committed to taking risks of his own and devoting his time to making a mark on the communities around him.
In his case, the medium for building became software. He learned how to build websites in his teens and by age twenty had fallen in love with creating Visual Basic applications for local businesses (along with some full-featured e-commerce sites). By his mid-twenties, he was creating software for some of the largest financial institutions in the United States.
Nowadays, he is building his second company, an “engineering intelligence” platform called Codalytics. It began as a plot to organize information on companies’ tech teams for quick digestion in the way Salesforce organizes the activity of sales teams. Two years ago, running the software development studio Lolay – his first company – he was confronted daily with the challenge of tracking who among his twenty-two engineers was making progress on each project. With a background running engineering teams at Intuit, eHarmony, and IAC, the lack of easily visualized information on his teams’ activity within code repositories was familiar. “Anytime a team of engineers gets past ten people,” he explains, “communication becomes a rapidly increasing challenge.”
Bardia wanted to be able to log into a portal that would seamlessly visualize activity across code repositories, broken down by employee, project, language, and other tags. Fellow engineering managers he knew expressed the same problems and desire. He couldn’t find an existing solution that satisfied his criteria, however, and in July 2013 he made the jump to go build it himself alongside a friend he had worked with as a client.
Codalytics has not been the overnight success that the press often loves to mischaracterize startups as. In fact it’s still in the gritty days of learning from mistakes and fighting to relaunch with a new, simpler product. Two years after founding, Bardia is leading the relaunch as a solo founder, having lost his co-founder and first hire in early summer. The problem he is targeting is very real, he knows, with a pain point confirmed by nearly every engineering executive he meets; he just designed the wrong initial product to satisfy it.
The problem he and his team ran into was attempting to do everything well but in the process not doing any one thing exceptionally. “At the end of the day, companies big and small who piloted Codalytics really liked the platform” says Bardia, “but they didn’t think it was developed enough yet to pay a $25,000-100,000 yearly Enterprise SaaS subscription.” Running out of money and still having so much work to do in order to meet the pilot companies’ specifications, Bardia’s co-founder and first hire – concerned about the impact of losing stable income on their families – decided to part ways. The venture had seemed to be taking off then had rapidly hit the breaks as answers from the engineering executives came in saying they wouldn’t pay yet. The sudden shift in circumstances really shook Bardia.
That’s when he came across a blog post by Intercom’s Des Traynor that struck a chord. It made a cooking analogy to emphasize a key point: you should never bake cake when all you need is a cupcake…start with a small version to figure out what you like before using that recipe for an entire cake. That comparison, right at that specific time, was an “ah ha” moment for Bardia.
Software startups are inspired by a grand vision for the product they can build and the impact it can make in its market, and that creates a temptation to think ten steps ahead instead of one. However, it should start with smaller, ultra-practical initial steps, maybe by developing the right kind of API. The journey from leveraging platforms like Google Apigee for creating and managing APIs to designing a market strategy takes time. Only careful planning can get a simplified product into the hands of paying customers and provide proof of your concept.
Founders need to start by shipping barebones products that they are a bit embarrassed by and that constitute only a tiny fraction of what their team envisions the product becoming. The fastest way to build out the long term product successfully is to get an initial foothold in the market and learn through firsthand observation what customers’ real needs are.
So Bardia went back to the drawing board and decided that instead of making the Codalytics platform more advanced, he would pick one feature, cut out the rest, and do that one thing really well. The most simple incarnation of the Codalytics vision was its daily summary email providing an engineering manager with basic metrics on their team’s activity across multiple projects. He stripped it out, created a new landing page at Codalytics.com, and began offering it as a standalone product.
Locking major corporations into six-figure SaaS contracts for a comprehensive platform had resulted in 8-12 month sales cycles and extreme pickiness in what they were willing to pay for. But a daily email providing distinct and concrete value for $5 per month (per project)? That is proving to be a tool individual engineering managers will happily subscribe to and just pay for with their company credit cards.
Returning to both companies he had pitched previously as well as with new organizations, Bardia brought Codalytics back to life. The daily digest that customers receive gives an organizational view of their GitHub repositories and contributors to them, sorting each engineer’s total commits, the overall progress (or stalling) of specific projects, and links to compare more detailed analytics. It’s his wedge into the larger opportunity for engineering intelligence technologies.
Bardia is humble and emphasizes how much work there is still to do – he is fighting to hit targets of 100% month-to-month sales growth and 90th percentile net promoter scores. His reboot is making strong headway: new customers (with anywhere from 5 to 1,000 internal technical projects) are signing up, and nearly every one of them is opening the digest email every single day. Codalytics is about to launch an enterprise installed version of their software as well so large companies can use the daily email digest while pulling (and protecting) data from behind their own security walls.
Bardia is very focused on short-term sales and refining the core email product, but he also has a clear step-by-step path in mind for Codalytics’ growth in 2016. Once the email product hits a threshold of subscribers that Bardia has privately set, the next feature in the company’s pipeline is a patented scoring model that leverages Codalytics’ data to rank the output of a company’s engineering talent. It tracks the speed at which every engineer in a company works, the skill they do it at, and the number of revisions their code requires (by them and others). It will show that while one engineer might take a little bit longer to write code, they do it exceptionally better than their peers, who have to revise their work numerous times after the ‘first draft’. This system will give managers concrete data to understand how each member of their team works at a level of detail that hasn’t been readily available until this point. It will also benefit the individual engineers by giving them insight into how they work and where they can improve.
Despite the alternative path to go back into a lucrative tech executive role, Bardia is insistent on building the go-to solution for engineering intelligence and is confident in Codalytics’ growth potential now that it’s back on track: “it feels very different this time around – companies are getting value from the daily email, opening their wallets and asking what’s next in the roadmap.” Long-term, he wants Codalytics to evolve into a platform of developer tools that solve a number of needs through either one integrated product or several standalone ones. And he wants the company’s tools to help not only engineering managers but eventually every software developer on a team as well.
“I still have the same ambitious goal I originally set out with,” he shares, “but now with a concrete plan for making it happen…and not all at once, but one step at a time.”
Investing in seed stage startups can be exhilarating and highly lucrative, but it can also be incredibly risky and time consuming. Identifying the most promising new companies requires a lot of cutting through the weeds – I interact in one way or another with well over 2,000 entrepreneurs a year and take meetings with over 200 of them, all in the process of finding just the 15 I’ll invest in. The reality is startups need money for all kinds of things… most of these expenses are rarely considered by those involved until they actually have to pay for them. Would a novice really be aware of how much Verisure charge for a commercial alarm system? The likelihood of this is low.
When I first began investing, I wasted a lot of time. Tracking down the most promising entrepreneurs was a crapshoot and I didn’t know where to start. But as I developed as an angel investor over the last 8 years however, and now in running Arena Ventures, I’ve recognized the pattern of where my investments come from…where I get the highest ROI on my time.
There are 4 activities you can do as an investor to get to the good deals most quickly: hunting, trapping, farming, and trading.
#1) Hunting
Hunting is outbound work – hustling at events and parties, scouting for products online, reading and reaching out to people. You go anywhere you can to find great people. You don’t have a specific target in mind, you’re simply looking for unique, brilliant founders. When you first start investing this will probably be the majority of your time until you have a reputation, network and better idea of what you want to invest in.
A good example of hunting is Klout: I found the earliest version of Klout in 2009 while scanning Twitter posts and then tracked them down via friends in Boulder who knew Joe Fernandez. I pursued Joe aggressively, and took him out for tacos and drinks where I could spend time getting to know him and ultimately close on a deal.
When new angel investors ask me where they should start, I recommend beginning with the industry they work in and know best – what’s missing in that market or can be done better? If you see opportunities, start asking around and researching online to hunt down tenacious entrepreneurs that are attacking it. Even if the people in your network don’t bring you an immediate result, you’ll be top of mind going forward if they meet an entrepreneur who impresses them. Search online, attend every possible tech event, go to hackathons, attend parties hosted by startups and investors – do everything possible to find unique and interesting founders.
Check out what these startups have to offer, how are they conducting their work? Are they using up-to-date systems and software? Are they making use of managed it companies for their tech needs? Do they have a set plan in place for how they want to grow and expand their startup? All of this can show you how serious they are and what you can get from them.
#2) Trading
After a little time hunting on the startup frontier you can engage in your next deal activity – trading. In this stage you’re working with fellow investors and looking for specific deals that interest you; and offering your own deals up in trade. By now you have a small network, a little reputation, some ideas on what to invest in and a deal or two under your belt.
It’s best to approach other angels and VCs and initiate the trade: share your deals, your ideas, your thoughts. Often times these investors will share deals back with you. It’s usually not a formal “give me X and I’ll give you Y” type of trade; instead it’s a relationship with informal rules of sharing deals with folks you value and respect and they’ll (hopefully) do the same in return. And if not, don’t be afraid to ask “What are you working on? Any great deals I should look at?”
Even now after 7 years of investing I spend a great deal of time sharing my deals and convincing people to invest in the first rounds of companies like Wish.com (contextlogic back then), AngelList, Quizup, Klout, Livefyre, Plated, Laurel & Wolf, Honk and many more. But as much as I’ve helped others, I’ve also benefited greatly from investors trading and sharing with me. When Zimride pivoted to be Lyft years ago I asked (maybe “begged” is a better word) Raj Kapoor to get me into the deal; luckily Tim Chang and the Mayfield guys are awesome dudes, approved the “trade” and got me into the deal (and now just this year we worked together again on the Fitmob / Classpass deal successfully!).
#3) Trapping
While hunting & trading are outbound activities, trapping is largely inbound (i.e. people coming to you) and you have a clear idea of who or what you’re looking for. You set “bait” that will attract your targets and then you let great founders come to you. Here are a few examples:
Ideas: Share your theses or ideas for companies that should exist. Use Twitter, Medium or your blog to share your ideas and attract the right people.
Events: Host an event for “early stage mobile founders” or “healthtech” and let them come to you.
Hackathons: Host, sponsor or judge at hackathons targeted at specific verticals.
A great example of trapping is Postmates. In 2011 Jeremy Gocke of Fliptu sent me this message:
A month earlier I had invited Jeremy over to one of my happy hours and I told him I believed an “Uber for deliveries” should exist and it would be huge. His email led me to Bastian and I ended up investing two months later. I follow this tactic often – sharing ideas I want to exist – and then waiting for founders or investors to come to me. In fact just a couple weeks ago we invested in Mytable – for two years I’ve been telling people I’m looking for an “Airbnb for Meals” startup and I’ve looked at over 30 now! But this year I finally had the right team pitch me and we closed the deal.
So go out there and set some bait. Spread your ideas, host targeted events and get great founders to come to you.
#4) Farming
Farming is largely an inbound activity (deals coming to you) but you don’t have a specific target or type of startup in mind. Instead you invest months and years helping other people; being a great investor to your founders; helping local universities, mentoring at accelerators, and being a valuable part of the community. You make an ongoing commitment to invest time and energy supporting the top people and programs in your city or industry and eventually the deals start coming to you. When that happens, make the most out of the opportunity. Also, remember to not make the costly mistake of not insuring the most important people for your startup with key person insurance (keypersoninsurance.com) because you don’t want to suffer any economic loss after putting so much effort into them.
Farming takes the most work, and the payoff is often years in the future; but it will eventually become one of your best sources for deals and set you apart from less experienced investors. Once you have a solid reputation, a trusted network and years of great deals, many founders and fellow investors will be the ones coming to you and sending you deals. That is what fortunately brought me the ability to be an early check into both StyleSeat (thanks Devin Poolman and Steve Jang) and Wish.com, which is now rumored to be a $3B+ “unicorn” (thanks Brian Wong!).
The best angels and venture capitalists are savvy at the full combination of hunting, trading, trapping, and farming, but it’s important for new investors to remember that being an aggressive hunter at the start is key. You have to build your early reputation and first-hand experience in order to enable you to get the most value out of the other three over time.
At Arena, we have been active investors in mobile-first marketplace startups – the sphere of startups using mobile apps to connect consumers with services they need at the press of a button. These marketplaces partner with a network of partners/contractors on the supply side to respond in real-time to customer demand for a given product or service in their city.
Laundry and dry cleaning is one of the most active spaces within the so-called “on-demand economy,” with (Arena portfolio company) Rinse as a major player in the market. The San Francisco-based company operates, however, on a unique model from competitors: they are available 7 days a week but have created a route-based model where they typically collect clothes from customers on a regular basis on the same two days each week between 8PM and 10 PM (either Sun / Wed; Mon / Thu; or Tue / Fri).
While other laundry startups prioritize speed, rushing through the cleaning process to get clothes back to customers within 24 hours, Rinse found that what consumers care about most is a) the quality of cleaning and b) having a service integrated into their life that picks-up and drops-off on a consistent cycle.
With a vision to eventually handle all aspects of clothing care, from dry cleaning to shining shoes, they are staking a claim as the highest quality cleaning service and integrating themselves into the weekly routine of loyal customers (who range from young professionals to busy families).
Founded in 2013, Rinse has built a strong initial foothold in San Francisco, and in March they took the jump to launch in their second city: Los Angeles. For any geographically-tied startup, the expansion to a new city is a critical point in scaling the company’s operations. It is high-risk to take the lessons and infrastructure you have only just figured out in your first city and immediately try to apply those to another one. I talked with Rinse’s CEO Ajay Prakash and Los Angeles GM Lonny Olinick to understand how they’re approaching the LA launch and what other entrepreneurs should consider when deciding whether or not they are ready to launch their second city.
Prove your model first.
For Rinse, the decision to add another city was not based on hitting a certain market share in one city first; it was about getting to the point where they felt like they had figured out how to scale the company’s operations while maintaining incredibly high customer satisfaction and retention.
Ajay and his team had to experiment extensively in the early days of Rinse to find product-market fit, including determining the right pick-up window and fleet logistics plus how to collaborate most effectively with local cleaning partners and with the Valets who are the face of their business.
“We realized that the acute pain point that Uber solves when you need a taxi, where on-demand is the right answer, doesn’t exist in clothing care. The pain point is chronic – you always have dirty clothes – and the way to remove friction is through a predictable schedule and consistently high quality service.”
Because of Rinse’s quality-first approach, they were very focused on growing in a controlled manner so they could maintain their standards for customer experience as they scaled. As well as using a questionnaire to help get the views and opinions of their loyal client base, they also found that the key to scaling a business like theirs, they say, is in managing the operational complexity, which starts with having solid processes and technology in place. The relevant technological practices are something that all businesses must have in place in order to help drive their company forward, as well as being able to keep up with the ever-changing digital world. Implementing sip trunk providers, communication systems, and the relevant internet protocols is something that they may want to think about doing first and they can expand from there. If done, this should greatly benefit their business. With the motto “slower is better, better is faster” they kept their focus on getting their core business model right in SF and on learning how to scale it in one city first. Although they were always focused on adding new customers, their key performance indicators centered on customer satisfaction, customer retention, unit economics, and partner satisfaction.
Rather than quickly hiring a large group of 1099-category freelancers to act as drivers on their routes, Rinse invested from the start in hiring their Valets as W2 part-time employees with a more thorough hiring and training process. “Our Valets are the frontlines of our customer experience, so we were very focused on hiring employees who would be great at customer service rather than simply looking for anyone who had a car,” explains Ajay. There are legal guidelines dictating the distinction between 1099 and W2 workers, and one of the key problems Rinse saw with 1099 networks like Uber’s is that the business isn’t allowed to provide much oversight or extensively train them. Because of Rinse’s priorities, they have invested significant time in training Valets from Day One and have built a system where the best Valets can take on mentorship roles for others or move into full-time roles on the Operations or Customer Experience teams.
By early 2015, Rinse was operating at full force in San Francisco and started eyeing its first step into another market.
When is the right time to launch in another city?
Ajay says Rinse started discussing expansion once growth in San Francisco took off and the team had proven it was able to confidently manage operations as it continued to scale quickly. They had grown rapidly since launching full service in September 2013 and had several thousand recurring customers (who were using Rinse on average twice or more per month), and had an ever growing team of Operations Associates and Valets making sure the nightly pickups and deliveries were seamless.
There’s a popular phrase coined by Y Combinator’s Paul Graham that new startups – especially marketplaces – need to “do things that don’t scale” in order to build their early traction. It’s a truth memorialized in tales like the Uber founders driving black cars themselves and the Airbnb founders filling inventory by duplicating Craigslist posts, and Rinse has stories of its own. But according to Ajay, “you’re ready to launch in another city when you can take care of your customers without having to ‘cheat’ like that anymore.”
When the team had reached that point themselves, they decided to start building a customer base elsewhere – both for customer growth and to prove the Rinse model could work outside of tech-forward San Francisco. “San Francisco is a unique city for startups because there are so many early adopters here who will try a new service and be extra forgiving knowing that the company is still figuring things out,” he said, explaining it was important to confirm their service would work well in other locations without that. So at a Board meeting in early 2015, Rinse decided to accelerate its timeline for expansion.
Ajay and his team considered several cities but settled on Los Angeles because of its proximity to the SF headquarters – if needed, anyone on the team could fly down to handle an issue within two hours. LA also boasts a large tech startup ecosystem on the Westside and Downtown, with tech employees who could act as their early adopters promoting Rinse to other friends.
Launching in Los Angeles.
Rinse sent one of its team members, Eliot Chang, to LA in March to start laying the groundwork for the launch, and then hired Lonny as its full-time GM in May so Eliot could return to oversee San Francisco operations. As Ajay describes, it’s important when you launch a new city to hire someone who has a local’s understanding: “it’s hard to quantify, but there’s a lot of value in local knowledge and pre-existing relationships” (from traffic patterns to the culture of different neighborhoods).
Rinse organized its initial LA rollout into four stages: an alpha test with locals they knew, an early beta test with friends-of-friends and some early adopters, a partnership-based “Friends of Rinse” campaign, and then finally a shift into outbound marketing to the public.
The first stage included solely people the Rinse team actually knew: investors, friends, and other contacts who would be understanding of any mistakes and would take the time to give them thorough feedback. While the LA operation would benefit from extensive lessons learned and infrastructure built up north, it was still a start-up operation building a presence in a new city from scratch. Rinse wanted to make the inevitable early mistakes in a safe environment and give its first Valets on-the-job training to learn the ropes.
Like in SF, they devoted extra time toward hiring the best qualified Valets, because those initial hires would not only be the face of Rinse to LA customers, but they would also be in charge of training the waves of Valets hired after them. “Customer service starts and ends with our Valets,” explains Lonny, “so we have a multi-step process for hiring that includes interviews, reference checks, and riding alongside them on test shifts.” All the early valets came to Lonny through referrals, encompassing a wide mix of demographics from college students to actors looking to make extra income in the evenings.
Once initial operations were in place and Rinse had successfully served a few dozen early customers, the team moved into Stage Two. That meant expanding to a wider network of friends-of-friends and some of the early adopters who had proactively waitlisted themselves online for the LA launch. Rinse included more zip codes in its coverage of LA (all still west of the 405) and determined the most efficient pickup/drop-off routes in its coverage areas.
After quickly proving that they could maintain high standards of quality and service as the additional demand developed over the second stage, Rinse shifted into Stage Three, where they accelerated customer acquisition among tech-minded residents who would be most receptive. For several weeks, Rinse reached out to other tech companies around the “Silicon Beach” ecosystem in Santa Monica, Venice, and Culver City to have them share custom referral codes (including $20 credit) with their employees. While not a core part of Rinse’s normal marketing strategy, it proved to be an effective tactic for acquiring initial users by the bucket instead of one-by-one. (Pro tip: according to Lonny, taking time to customize the landing page for each company’s referral link resulted in considerably higher conversion rate.)
Rinse is now in Stage Four, starting to publicly promote themselves to everyday Los Angelenos. By refusing to sacrifice on quality over the first five months in town (they closely monitor their Net Promoter Score and LA Yelp reviews), they have already generated substantial word-of-mouth leads from new customers. On the outbound marketing side, Facebook is their primary marketing channel and has proven to be an effective “billboard” to help build awareness early on. They are also starting to reach out to popular LA fashion bloggers to get in front of an audience that particularly values how their clothing is handled, and recently launched a Gilt City offer to attract fashion-forward shoppers in town. Lonny says the team is also considering a traditional advertising campaign using the exterior of public buses that run through their target neighborhoods, something that has been effective for Rinse in San Francisco.
Expanding to multiple cities of operation is a big step for any startup. There are countless stories of teams raising their first large rounds of venture capital and then expanding too quickly, only to have to withdraw from some of those locations a few months later. Rinse offers a valuable lesson in finding the balance between aggressive growth and refusing to sacrifice the customer experience or operational stability that allows that growth to keep accelerating.
Michael Schneider started exploring the idea of an “on-demand customer service” app just 60 days ago. Two months in, he has already raised a pre-seed funding round, made his first two hires, helped over 500 customers in 5 countries, and fields inbound inquiries daily from prospective new investors. A startup on this level has achieved so much in a short space of time, and as this progresses even further, the software will advance as well as how it will operate, with an updated business banking account, cloud-based software, etc. being used in a dynamic way.
As the fifth company Michael has started since high school, Service is the culmination of the lessons he’s learned about rapid experimentation and execution. While leaving his prior company, Mobile Roadie, and exploring ideas for his next venture, he committed to test different concepts and see which clicked with consumers.
The spark for Service itself came on a flight in April from Los Angeles to Miami. Michael witnessed a fellow passenger buy a Gogo wifi pass, only to find out that power outlets on the plane weren’t working. With a dying laptop, Michael watched the passenger waste over 20 minutes navigating American’s website to fill out a complaint form, and then do the same on Gogo’s. In an era when you can get a car, food, and dry cleaning on demand with the press of a button, he found it inefficient that consumers still have to waste hours of their time on hold and dealing with customer service issues themselves.
Four weeks later, with the concept still bouncing around his head, he decided to jump in and gauge the potential for an app-based service that seamlessly handles customer service situations on behalf of users.
Do people want what you’re selling?
“The single most important thing is to determine right away if what you’re going to put out into the world is valuable,” says Michael, “Everything is secondary to that. You should know within the first week whether or not what you want to build will have some value.”
It takes a long time to build and refine a product, and many startups dive straight into months of development only to discover upon launch that there was no demand for their product in the first place. Entrepreneurs need to find consumers in their target customer base and immediately test (with concrete results) whether they can provide a substantially better solution to a big pain point those people face.
All Michael needed to launch Service was a logo (to seem like a credible business), a Twitter account (to conduct outreach), and an online form (to field submissions). With a background in digital strategy, he recognized that he’d need to build immediate trust with consumers online in order for them to share the personal information (account log-ins, social security numbers, etc.) that Service needs to act on their behalf. He didn’t want a ‘startup-y’ name that sounds weird to normal people, and it would be clear to anyone viewing the company’s Twitter profile that Service was brand new, so he invested a lot in ensuring the brand looked credible. He paid out of pocket for the best designer he knew to create the logo and he found a way to get the “@service” Twitter handle.
To get started, he built a Squarespace page on the domain www.getservice.io in one hour (buying service.com costs $2MM), with nothing but the logo at the top and a form asking people to submit their email and customer service complaint. Then he took to Twitter searching customer service-related hashtags and mentions of major brands (like airlines and cell phone carriers) and began tweeting at people who were complaining about bad service.
Over that first day, however, he didn’t convert a single person to submit their complaint to the site. Dismayed, he went to sleep that night telling his wife that maybe there wasn’t a big opportunity after all. Then early the next morning he got his first bite. A woman in Chicago named Wendy had an issue with Expedia. He followed up to get her flight information, then called Expedia’s customer service line, and after that, Delta and then Frontier, to negotiate for a refund that Wendy deserved. One hour later, the airlines agreed and refunded her over $400.
Everyone that has a bad experience with Customer service or any issues should reach out to @service! They help! Thanks again!(: – Wendy Walle (@whendii13) May 20, 2015
It was just one case, but her public praise for Service on Twitter motivated him to journey on. For several more days, around the clock he reached out to hundreds of people on Twitter – all the while testing different ways to pitch Service. He personally handled the cases of everyone who submitted their issue to the website. Six days in, he had 20 submissions and had solved over $1,000 worth of problems for 12 people, the majority of whom also promoted Service publicly on Twitter afterward.
Michael felt he was on to something. There’s still a lot of work to be done in building Service’s tech platform and scaling its operations, but at a foundational level he had validated that his model for Service could provide meaningful value to consumers. And with multiple people having proactively offered to pay him in response, he felt confident that there was a feasible business model.
“Twitter is the best market research tool a startup founder can have,” claims Michael as he talks about the ease of hunting the platform for targets. “Almost any B2C startup can easily find a group of potential customers on Twitter, tweet at them, and gauge the value of their pitch based on the response. Plus for B2B startups you have the ability to directly tweet at VPs and CEOs.”
Early testing with a barebones version of the envisioned product – a “minimum viable product” (MVP) – is critical to better product development and gives both the entrepreneur and potential investors important feedback on the viability of a business idea. Knowing that people really want what a startup is creating also strengthens the team’s motivation, according to Michael, because they can see the tangible impact they’re making among customers.
Building initial traction
Once the basic premise is proven and the entrepreneur decides to charge forward, everything becomes a priority simultaneously. There’s immediately an enormous amount of work that needs to be done to keep testing the product, creating a team, raising money, and putting out the many inevitable fires.
As fires go, Michael recalls that Service attracted a troll by the end of his first week: the site didn’t have Terms Of Service or Privacy Policy legal agreements pledging to protect customers’ personal information, and so someone who came across it began aggressively warning people on Twitter that @Service was a scam. Beyond Service’s lack of legal agreements, the whistleblower was also writing that Service was based in India because – although it’s popular within the tech community as a reference to “input / output” – the Top-Level Domain (TLD) “.io” is technically the TLD for the Indian Ocean. Michael scrambled to add a standard privacy policy to the site, and had to reassure customers that Service was indeed a credible, US-based operation.
He also received a perfectly timed email from a UPenn student named Tiffany whose class he had once spoken to. She was disappointed with her summer internship at another tech company and wanted advice on what to do. Michael told her about Service and his need for more hands on deck, and within two days she joined him handling Service issues from his kitchen table around the clock.
For 3 weeks, Michael and Tiffany worked from Michael’s house handling customer service issues while refining their process and outlining how Service would ultimately work. They used Zendesk as their temporary software solution to track all customer service cases and had to learn how to represent customers effectively without impersonating them.
“For whatever reason, we had a lot of early traction from Twitter users in the UK,” says Michael, “it accounted for half of our submitted cases.” When dealing with UK companies, Michael and Tiffany found they legally had to get the customer themself to authorize them as their representative.
They also quickly discovered how different the culture of customer service can be across industries and countries: “while dealing with companies in the US and UK is a familiar process, dealing with companies in countries like Brazil is quite different…managers aren’t expected to care that someone had a bad experience or think it fair to reimburse them.”
Starting Week 2, Service also began running $20-30 per day in paid ads on Twitter tracking the #badservice hashtag to expand their reach. Sticking with Twitter as their only outbound marketing channel has proven extremely cost efficient. “Twitter has given us an endless supply of cases to solve, plus it’s enabled us to quickly build legitimacy,” says Michael, noting that new visitors to their Twitter profile now see all of Service’s Twitter conversations, showing off the company’s positive track record.
Creating a company
Entering Week 3, Michael shifted to focus on raising initial capital to provide them with runway and enable them to hire a couple additional people. With his background as a serial entrepreneur and with Service’s initial traction, he raised over $500,000 in just three days. Investors this early, he notes, are investing based on the qualities of the founder rather than the metrics, and his rapid execution over the previous couple weeks helped him stand out as an entrepreneur who moves fast.
Even following the fundraise, he is still spending a lot of his time personally handling customer service cases and insists on keeping all the early customer service agents he hires in-house. “I think outsourcing before you truly understand the service you’re providing is a really bad idea,” he explains, “the worst thing you can do is outsource your core value proposition before you really understand the ins and outs of it.”
Service only moved into office space 5 weeks after launch once the third team member joined and candidates were being interviewed for other openings. He’s adding several more customer service agents to handle the increasing demand, using LinkedIn to identify highly-qualified candidates at other companies.
He says his biggest fear right now is suddenly getting mainstream press coverage or having a celebrity tweet about them and sending too much traffic. “We need to ensure everyone has a great experience using us…we can’t be slow to respond,” he explains, “The day consumers need Service for Service, we’re dead.”
While difficult, Michael says launching Service as a scrappy startup and having to handle customer service calls himself has been really gratifying. At end of day, he can measure who he helped and how much it meant to them – yesterday the team received a delivery of flowers and beef jerky from someone they helped – and it’s a straightforward enough concept that even people outside the tech community immediately understand it. “It’s the first company where my mom gets what I’m doing.” he remarks, “That’s really cool.”
Corey Brundage is dressed in his uniform of dark jeans, purple HONK t-shirt and grey HONK hoodie, sipping coffee from a “Baltimore Towing Company” mug. We’re sitting on the couch in the lobby of his company’s new Los Angeles office - home to a team of 50 with enough space to handle their expected doubling in headcount over the year ahead.
Founded only eighteen months ago, HONK is one of the fastest growing technology companies in LA and already competing head-to-head with the dominant player in its industry: the American Automotive Association, better known as AAA. HONK’s mobile app provides on-demand towing and roadside assistance services at the press of a button: open the app, tap the type of issue (accident, dead battery, out of gas, etc.), and a tow truck is dispatched in minutes for a fraction of the typical cost.
Most of us don’t think much about towing services, we just pony up for the annual AAA membership alongside our car insurance because it seems like that’s what everyone does, and we hope we never need to use it. We legally have to have insurance and therefore look into auto owners insurance reviews, hoping to find the best rates. But, we don’t legally have to pay for the AAA and how many times has our membership actually come in useful? Since its founding in 1902, AAA has built a near-monopoly over the roadside assistance market in the US, collecting lucrative membership fees that mostly go unused by the members. Still touting a call center, manual dispatching of trucks, and physical storefronts (with paper maps and human travel/insurance agents), it has barely changed in decades.
By contrast, HONK is rebuilding the roadside assistance experience from the ground up for a new generation of consumers who are used to their smartphones instantly matching them with anything they need. Most of HONK’s primary users are in their 20’s and 30’s (versus the 57-year-old average age of AAA members) and HONK’s technology connects them with towing services directly through a straightforward mobile app. Instead of requiring annual membership, the company charges for help solely when users need it. It has response times twice as fast as the industry standard nationwide and provides much lower pricing as a result of being a tech company without the overhead of competing bureaucracies.
With 35,000 tow trucks in its active network, HONK is already on pace to surpass AAA’s 40,000. When you look at the the benefits to towing companies, it’s no surprise why they have been so quick to adopt it either. AAA pays them roughly $23 per incident on average, and sometimes as low as $13 for basic roadside assistance like unlocking doors or delivering gas. By comparison, HONK pays towing services twice as much, gives them full transparency into how much customers are paying on the other end, and leverages technology to keep the process efficient for both sides.
Corey grew up outside Washington DC in the Dulles tech corridor during the Dot Com boom of the late nineties. His older brother was the one who stood out as the computer wiz of the family though, minting himself a young multi-millionaire after joining America Online (AOL) as one of the earliest employees. Corey would tinker with the hand-me-down computer parts his brother gave him, developing an intense drive to learn software programming on his own.
At fifteen, he built a MUD (multi-user dimension) game online that gained a following among the small community of other internet enthusiasts. There were so few websites at the time that it was primarily found by browsing the Internet Yellow Pages book of websites at Barnes & Noble. As the game grew, Corey was soon spending his time after school learning about churn rates and how to scale the site’s infrastructure instead of hanging around with other teenagers at the mall.
He also stumbled into the darker side of the internet, ingraining himself in online hacker forums and forming his own group of hackers dubbed “the Internet Destruction Division” that embraced the challenge of breaking into high-security government databases. In the process, he developed a friendly rivalry with another young hacker using the alias “dob” who turned out to be a fellow student at his very high school - a boy in his English class named Sean Parker. The two challenged each other’s autodidactism and technical chops at every turn - from the hacks they led to the sites they built to the offers they would receive when skipping school to scope out IT job fairs.
Before even finishing high school, Corey became a full-time software engineer at a local tech company, and in the years that followed, he moved between a variety of engineering roles around the country. He eventually became too frustrated with building products for other people who he felt had either designed them or brought them to market poorly, however, and transitioned to product management and product marketing instead - focusing on the iterative process of finding “product-market fit”.
In 2012, he set out on his own again in Los Angeles, sporting the multicolored hair of a punk rocker. He co-founded two startups - the first a social network and the second a platform for hourly workers to easily trade shifts - both of which ultimately closed shop. Through them, however, he gained a sharp understanding of techniques to rapidly test product ideas in a chaotic startup environment - a skill he would leverage again soon after.
In December 2013, Corey got a call from his fiancée Celine. Her car’s battery had died and she was stuck in a parking garage, so Corey ordered an UberX and rode over to help. Unable to figure out the car’s set-up under the hood, however, they searched for roadside service brands and local tow companies to help, repeatedly reading bad reviews and getting expensive quotes or long wait times.
Over the week that followed, Corey kept thinking of the dichotomy between his Uber ride and the hassle he and Celine went through to get towing: “it kept running through my head - if you can get a taxi with the press of a button, shouldn’t you also be able to press a button for help when you need it most?” he explains.
Corey started investigating the opportunity. Rather than seeking out market research, focus groups, or even tow truck companies, he instead started experimenting with people’s behaviors online. He created a series of Google AdWords campaigns and landing pages to test user acquisition across the country. He used AdWords to specifically target distressed motorists on their cell phones at their moment of need, and through the landing pages he would show them different versions of potential products (with various features, prices, etc.) to determine what drivers had the most interest in. Even before there was specific product in mind, it became clear to Corey there was a market opportunity; the data showed that drivers disliked their experiences with roadside assistance and were eager for a better option.
That January, he put everything else aside and made the prototyping of an on-demand towing platform his full-time focus. Working around the clock, he built a basic version of the app, bought several tablets to install it on, and went around LA trying to sell tow truck operators on the benefits. “I put on a blazer and was walking into these towing garages with a bunch of guys working in denim and t-shirts,” he recalls, “it was bad - they were like ‘who the hell is this guy?’”
Nonetheless, he signed up nine trucks to pilot HONK in Los Angeles. The first few weeks proved there was strong interest from drivers but he ran into several issues. “It seemed like every time a request came in from a driver, the trucks were on the opposite side of the city,” he recalls, “Or the trucks would occasionally vanish from the map entirely.”
Visiting the tow truck operators who were participating, he quickly found part of the problem: “the drivers would shove the tablets under their seats or unplug them and let them die, because they were often paid hourly with no commission…my service was making them do more work for the same pay.” He dug further into the supply side of the marketplace to understand their perspective - visiting local towing companies, hearing their genuine pride in being the first responders, and listening to their complaints about the way they get paid by intermediary companies. Corey says that when several revealed how little those companies pay them, “it really clicked how inefficient the way things are done in this industry is and how disenfranchised the providers of these services have become.”
He redesigned the technology to better benefit the owners and operators of the towing companies, expanded the scope of operations, and in April 2014 started more serious marketing efforts to attract motorists. That’s when he took his initial traction to investors so he could finance the hiring of an initial team; his seed round was six times oversubscribed within just seventy-two hours.
Scaling a company this quickly can present major challenges. When HONK started eighteen months ago, it was just one man in his home office in Hermosa Beach.
As a marketplace, HONK has had to scale the supply and demand sides evenly to avoid either user base having a poor experience. As the app took off among drivers, the HONK team was forced to aggressively build relationships with towing companies around every part of the country from Brooklyn to rural Montana.
“Hiring an exceptional team enabled us to scale our operations quickly while maintaining a high level of service,” Corey notes. Rob Snodgrass, the Sr. Director of People & Culture, adds “we’re fortunate to have a ‘growth centric’ culture, and are obsessed with finding great folks who share our experiment-driven philosophy and will raise the bar further.” HONK is attracting talent not just from the tech community, but from those in their industry eager to break the traditional mold: Corey says in the last couple months his interviews with job candidates included one with a former CEO of AAA who reached out on their own.
Rob includes the tow truck drivers using HONK among the talent who have enabled the company to grow as quickly as it has too. “The response from towing companies we work with has been exceptional and validating. Most really love HONK and are excited for change.”
Unlike other on-demand marketplaces that use everyday people as their workforce (drivers, couriers, etc.), tow drivers in HONK’s network are all highly trained professionals. After all, as Corey points out, “how many everyday people have a tow truck laying around?” That element has allowed smoother growth by ensuring a quality customer experience and avoiding the regulatory battles other marketplace startups have run into. It’s also pushed the company to invest in building genuine, long-term relationships with the towing services.
While it is still a behemoth in relative size to HONK, AAA has certainly taken notice in response. Last December, VentureBeat revealed that AAA staff had been requesting and canceling services via the HONK app - a move mimicking the tricks Uber and Lyft infamously waged on one another. The tech news site also quoted a cease-and-desist letter that AAA’s legal department - apparently missing the irony - sent HONK demanding they stop claiming AAA had lost touch with Millennials.
Despite competitive interference and the pressure just to keep pace with the first year’s growth, HONK has nonetheless managed to bring its actual times of arrival (not merely ETAs) to well under 30 minutes across the board - urban, suburban, and rural areas of the United States. In roadside assistance, those response times fundamentally matter too.
Corey recalls a case in Massachusetts during one of this past winter’s storms where a woman was stuck in the snow at night off a quiet road. She had contacted AAA, but they informed her that it would be a 3 hour ETA due to the weather. As the night wore on, she searched for alternatives on her phone and stumbled across HONK; she downloaded the app and requested help. Less than 30 minutes later a truck dispatched by a HONK partner arrived to pull her car out and get her out of the cold. (Amusingly, it was a AAA-branded truck.)
While confident in the team’s ability to tackle them, Corey emphasizes that the challenges, and corresponding excitement, of rapidly scaling the company are just beginning however. HONK has several major partnerships in the works and is already preparing to roll out new products and expand to international markets.
Asked how he sees the startup evolving as they take these next steps, he doesn’t mince his words. “We are hyper focused on dominating the towing and roadside market,” says Corey. “But this is just the first step towards our longer term vision of on-demand automotive services. In the future, HONK will be the fastest way to take care of all of your car’s needs - whenever they arise and wherever you are.”
