August 26, 2020

#95 You Asked. Investors Answered. Now What?

by The Pitch

In the spring, founders desperate for ideas about how to keep their companies afloat called in to get advice from our investors. Several months later, the economy is still far from recovering, so we called the founders back to see if the investors’ advice was working.

Transcript

In the making of the episode you’re about to hear, we recorded a call between a founder and investors, where the founder made this huge pivot because of COVID-19 and now she’s absolutely crushing it. Which was surprising, and impressive. But then the subject of software patents came up and the investor started getting all riled up about the ways in which a patent can hurt a startup. 

I thought patents were supposed to protect a startup. I had no idea. Anyway, the call was super interesting so we decided to turn it into its own special episode on Spotify.

It features investors Sarah Downey and Phil Nadel who are very passionate about patents. The episode is live right now, and it’s available for free only on Spotify. So just search for The Pitch in the Spotify app and hit play on “The Patent Trap.”

Okay, coming up after this: How are the startup founders who called into our show at the beginning of the pandemic, doing now?

[break]

Is it even possible for startups to succeed in a pandemic? This was the question on our minds when COVID-19 started body slamming the economy. And so back in April and May, we let founders call-in and get advice from investors.

Well, here we are now in August. We’re 5-months into this pandemic, and we began wondering about the founders who called in months ago. Are they doing any better now? Or are they worse off?

So producer Max Gibson and I decided to call them back and see how it's been going since last spring.

We learned the good, the bad, the ugly of running a startup the last few months. And what’s great about these callers, is how radically different each of their experiences have been.

Josh: Hey Max. 

Max: Hey Josh. 

Josh: So who’s first?

Max: Okay, so first up we have Ben Snyder. He has a company called Lumineux Chocolate. They make chocolate... 

Josh: Oh, “bean to bar chocolate,” is that what he called it?

Max: Exactly, right. They were like totally relying on in-person tastings. But then they were planning on opening right in March, which obviously, we know what happened there. 

Josh: Yep. So his question for investors was like, “What do I do now?” And Charles was like, “Hey, why don’t you just send your chocolate to people in the mail and do virtual tastings?” Like you could literally put little bars of chocolate in envelopes.

Max: Here is what Charles and Elizabeth said to Ben in that call-in show back in the spring.

Charles: Is it possible to sort of make that sampler experience something that the consumer could try and home at a cost that's not prohibitive to you but that would give them some sense for the product? I know a number of wineries that are doing that right now, too, and it seems to be working out pretty well, it seems to be popular. 

Elizabeth: And frankly speaking, being in California, I wouldn't be able to go in person. You can actually reach a market that you wouldn't have been able to have reached before. 

Josh: Hey, Ben.

Ben: Hey.

Josh: So, uh, did you follow their advice?

Ben: I did. So we were able to do virtual tastings. We started that shortly after that episode aired. We had three tastings within a month, and…

Josh: Tell me about that. When you do a tasting, what is that? 

Ben: Yeah, so they would be able to go on our website, and then they were able to buy a chocolate tasting kit. It was five bucks. And they got a small sampling of all six of our varieties of chocolate, along with a notes sheet. And then we had an Instagram live session, and we would taste the chocolates one at a time with everybody on the Instagram live, so everyone would be able to taste it with us. And the best part was people were able to tell us the flavors that they were getting from the chocolate, what they liked and didn’t like about the chocolate. And it was really a fun time. 

Josh: That's cool. So how's, how's the company been doing? 

Ben: Things have been going really well. Right after that episode aired on The Pitch, it was amazing the support we got from other listeners of the show. In the two weeks after that episode aired, we had over two thousand dollars in sales just from people saying that they heard us on The Pitch. 

Josh: That's awesome. 

Ben: Yeah, so that was great, but since then sales have been going well. We have been growing 50 percent month over month. 

Josh: What are you up to now in sales?

Ben: At this point since the end of March? We're at almost 11,000 in sales.

Josh: How much sales had you done before then? Before you called in?

Ben: One hundred. 

Josh: One hundred dollars?

Ben: Dollars, dollars. 

Josh: I mean that’s incredible. You started a business and got to 11,000 dollars in sales during a pandemic. 

Ben: Yeah. 

Josh: Thanks, Ben. Thanks for giving us the update. 

Ben: Thanks a lot, Josh. It's great to talk to you. 

Josh: Bye. 

Max: Thanks, Ben. Bye.

Max: I mean it’s great to hear things are going so well, you know.

Josh: Yeah. I love that so many listeners ordered his chocolate. That's amazing. I guess I'm not the only person who heard that and was just like, “Damn, I could go for some bean to bar chocolate right now.” 

Max: You are a hungry host, you know.

Josh: [laughs] Alright, next caller.

Max: Next up, we have Laura Alotaibi. Venues N More is her business. 

Josh: Birthday parties and stuff for people. Right?

Max: Yes. Yeah. And then obviously events stopped happening. 

Josh: Right. No more events. Sounds familiar.

Max: Yeah.

Josh: And the investors were like, yeah, “Can the clown join a Zoom call and scare all the children that way?” That kind of thing.

Max: You know, they actually suggested that. 

Josh: Like the one thing I remember from that call-in was their just relentless optimism during like the most horrific time for businesses. 

Max: This is Elizabeth and Charles again.

Elizabeth: It's funny, as you were describing this very seemingly bleak situation. I was actually thinking “this is so exciting.” You actually have a lot of amazing opportunities ahead of you.

Charles: Like even when things return to normal, if you can crack this digital piece, I wouldn't be surprised if it ends up becoming a chunk of your business even once things snap back to normal. 

Josh: Laura, so I'm curious to hear, like, how - did you follow their advice and how did it work out?

Laura: I was very excited. And then once I heard, you know, the optimism, I definitely jumped on board. The first thing I did is I reached out to my most active vendors online that I knew were pivoting. I said, “Look, let's try it out. Let's post these online listings.” And I had a lot of optimism. And so we have like a princess that can Zoom with you and read a book to you for a birthday party, which is kind of cool. 

Josh: Yeah. 

Laura: And we have a DJ that can do like a trivia night with you and your friends, or he can do a dance party via Zoom. 

Josh: So you just took that relentless optimism and just passed it on. 

Laura: Yes, that's what happened. 

Josh: How many of those virtual events did you do in total? 

Laura: You know, to be honest. We only had three bookings through the site. 

Josh: Ah.

Laura: Yeah. And I thought that there would be more interest. But I still think it's... it's still a new idea for people to...

Josh: I mean, like, it sounds like it was advice that you got amped about in the room and were like pretty on board with. But like, it didn't actually pan out. 

Laura: You know, I don't think so, because I think that people can jump on Zoom and celebrate, right? And so they're not thinking about, “How do I differentiate that Zoom call.” 

Josh: Yeah.

Laura: And so even friends will come to me like, “Oh, I'm celebrating a 50th birthday party, but it's gonna be via Zoom, what can I do?” And I was like, “You know hire this DJ and have a dance party.” I mean that would be amazing. But, you know, people don't think about it, right?

Josh: How do you dance with someone virtually? 

Max: Josh, I've seen it done. Believe me. 

Josh: Does it work?

Max: It works. It works, yeah

Laura: It's fun.

Josh: Wait, wait, you’ve experienced this Max. You've done a virtual dance party?

Max: I have experienced this. Yeah. Clubs have been hosting them and they kind of like cycle through whoever is being highlighted at the moment. So like some people get featured as like the dancer. It kinda incentivizes you to keep moving, you know.

Josh: It's like when you get featured on the Jumbotron at the baseball game.

Max: Exactly. Yeah.

Josh: Okay. That actually does sound fun. So you're saying, like you just think you were too early, but like, you think virtual events, like, are gonna be a thing in the event world, like you think eventually, like people are going to get tired of regular Zoom calls, and they’re gonna wanna spice things up.

Laura: Yeah. 

Josh: How's your business doing right now, though?

Laura: So, you know, it's, it's kind of in the same situation that it was in March. Bookings are almost non-existent now. I can't really control what's going on outside, but I can control Venues N More. Just really staying optimistic, stay focused on the goals. I’m going to keep focusing on the online events and really waiting for the event industry to open up, because I think 2021 is gonna, it’s gonna be the year. 

Josh: All right. Well, thank you so much for checking in and letting us know the update. 

Laura: All right, thank you.

Josh: Bye. 

Laura: Bye.

Max: Bye. 

Josh: Oof, that’s tough. If only I had a dollar for every optimistic comment from a founder. 

Max: Yeah, gosh. 

Josh: I’d be loaded. 

Max: So next up, we have Chris Murphy. Chris is the owner of Brewella’s. 

Josh: Brewella’s. 

Max: Yes, yeah, the coffee shop in Cleveland. 

Josh: Not our normal fare on this show, but...

Max: No, indeed not. 

Josh: And he was like, I can't open up my coffee and crepe shop. Should I sell on DoorDash or Uber Eats and...

Max: Exactly. 

Josh: The investors were like, “Do whatever you can to survive, man.” 

Max: I know they were very serious. It was a little startling. 

Josh: It was sobering. I remember. Do you want to play us any of that sobering tape?

Max: Yeah, I do. Here it is. This is Sarah and Phil.

Phil: You know, when I hear about your business I’m just afraid of what the restaurant business is going to be like, even post covid. Right? So first, I think there's going to be a trend where people are going to continue to be afraid to go into restaurants for some time. And I think small restaurants are going to have a really tough time making it. 

Sarah: If I were you, I would research hard what it would take to get on Uber Eats, DoorDash or one of these platforms. And I think that's really what it is, is like survive until things get back to normal. Unfortunately, nobody knows how or when. But like, you know, if you need to convert more to delivery for now, even if it's not a great business model, if it keeps you alive until you can do your thing again, like do what you need to do. 

Josh: Chris, that was probably the most sobering advice anyone received on that call-in.

Chris: Yeah. 

Josh: What did you think of that? 

Chris: I was like, OK, so this is a little different than I'm sure like the conversations usually go. There was a minute where I was like remembering, you know, who I was talking to and how much, you know, what kind of companies they usually work with and, but to be completely honest, there was a sense after where it was like this, like, oh, well, it's going to be like really hard and like, good luck. And it was like, yeah, I know it's gonna be really hard, but I actually feel like I have some ideas that might make it work. And the big word I took away from that thing was like how to survive basically through it. 

Josh: So when did you open back up? 

Chris: I was off for about a month. We had the shop completely closed. And then from that point on, I opened up in very, very small steps. 

Josh: Uh-huh.

Chris: So we took all the tables out, so there was no seating. There was just an in lane and an out lane. So then we opened the coffee bar back up, just to kind of get a sense of how to get people in and out. And what I kind of took away from that, and noticed actually after, was customers weren't really scared to come back in. People did come in asking when we would put tables back in there, people were asking when we were gonna add food back, if we're gonna have our full menu. I had to be very patient and like slow compared to the people that were coming into the shop for a good amount of people. 

Josh: Oh wow.

Chris: And then a big thing for us here, though, was it was very difficult to mandate masks. Our county hadn't done it. Our state hadn't done it. It was basically on us, on the businesses in the city to start mandating this mask policy. So that was kind of like a frustration for me that I was the one again having to like, supply all of this.

Josh: So the advice you got from the investors to strongly consider delivery services like Uber, Uber Eats and DoorDash, even though that's going to take a significant chunk of your margin… Did you follow the investors advice?

Chris: So I, I didn’t think it was the answer to how we were gonna long term survive. Whereas a bigger restaurant, which might have, you know, 15 to 20 employees, a full kitchen, things like that, yes, I think that that’s much easier to pivot into this delivery method. But for us and for a cafe, I mean coffee doesn’t really travel well. A lot of the reason of a cafe is like you think of the conversations you have and seeing people. And then the crepes themselves, like part of the, part of the beauty of them was people love watching them be made. People love that they get it right away. So it’s, it was kind of, it went against everything that I kind of had built up in my head of why this business had worked in the first place. 

Josh: So your business is like, like, is it back to normal levels? Like, are you doing as much in sales as you were in….?

Chris: Oh, no.

Josh: No?

Chris: No.

Josh: Are you at like 25 percent of where you were as far sales? 

Chris: Yeah, I would say probably about 25 percent.

Josh: Okay.

Chris: If not a little bit less. But it is working. I'm definitely staying afloat. But on a positive note, we have been somewhat busy in the sense of we are only doing to go orders. I did, eventually I started putting the crepes out again, but I did a very limited menu. I started testing this idea of call ahead orders. So we’re about 50 percent call ahead and 50 percent in shop orders. 

Josh: Oh, wow. You're making it.

Chris: I'm making it. I'm trying. 

Josh: Chris, this has been a pleasure.

Chris: All right. Thank you, guys. And I'll talk to you soon, hopefully. Bye.

Josh: Bye.

Max: Bye.

Josh: Alright, who’s next?

Max: Yeah, so next we have Daniel Melendez. He has the business in Mexico City. And he had this big pivot to help waiters that were out of work find jobs with delivery platforms.

Josh: Yes, yep, and I remember like the investors were super psyched about his pivot. Like they thought it could be better than his original business. 

Max: Yeah. 

Josh: We’ll take a short break here. And when we come back, we’ll call Daniel.

[break]

Josh: Who's next? 

Max: Great, so next we're going to talk with Daniel Melendez. He's the founder of Uno Punto Cinco. 

Josh: Uno Punto Cinco. 

Max: They're based in Mexico City. If you remember, their business was really complicated. Even the investors were confused by it in the original call. But here’s what you need to know: It's that they were working with a bunch of restaurants, specifically the waiters and waitresses in those restaurants. 

Josh: Like, this is the pivot he was pitching to the investors was like, I can help all these people get work at the Mexican equivalent of DoorDash. 

Max: Right. 

Josh: And the investors were like, “That's awesome. Go do that.” 

Max: Yes, exactly. Here’s what Elizabeth said. 

Elizabeth: Right now. Your mission is to help waiters and waitresses. This very much aligns with that. You have the supply. You can make money. It makes perfect sense and I agree the delivery opportunity is there. I would just go and do that. 

Josh: Daniel. 

Daniel: Hi, how are you, Josh? How are you, Max?

Josh: Hey, I’m good. How are, how are things there with the pandemic?

Daniel: So Mexico, as the city has already opened like for four weeks now. But people are afraid. People are afraid because, uh, the pandemic is still going on. And the hospitalization is almost at its full capacity. So most of the waiters whom we work with say, uh, “I need to choose between being healthy or having food on my table.” Because our priority in Mexico for most of the people is not, not their wellness or is not keeping their self healthy, but keeping their self eating. So, so it's pretty different. 

Josh: Jeez. Well, let's talk about the business. When you called in, you spoke with Elizabeth and Charles. Did you take their advice? Like they were obviously very excited about your new idea and not so excited about your old business. 

Daniel: Well, I took their advice, but it didn't bring a lot of revenue to the table. In about three months, we made about two thousand dollars from that model.

Josh: How many people right now are using that marketplace platform to get work through these delivery services?

Daniel: Between 50 to 100 per week, something like that 

Josh: And you just take like a percentage of each transaction is that how it works?

Daniel: Since the end of May, we decide to give it for free because we were not making enough revenue in order to change our lives or the life of Uno Punto Cinco. And probably for a waiter that we charge 50 dollars off of his first salaries means a lot. So we decided to stop charging, and we decided to do it for free. 

Josh: Yeah. You did make two thousand dollars from it, but now you're not making anything.

Daniel: Yeah, that's the point. We have tried several things and nothing replaced the revenue that we have. I have three months invested from my personal savings in order to keep the company alive. So yeah, right now we are... myself, I'm in an economic struggle. So that's why we’re right now, we're where we are.

Josh: So what’s the plan, what are you going to do? 

Daniel: Well, right now my biggest angel investor is very insistent. He has a Colombian delivery platform. He's insisting that I should take a job with him and help him to bring my waiters to this new delivery app. He told me, “Come and work with me in my startup, invest for myself a little bit in Uno Punto Cinco and see what happens in a few months." 

Josh: Wait, so you’re saying you might take a job with someone else, and put your own business on hold? 

Daniel: I haven't decided yet, but I think that I will do. I get a job, and after 6 to 12 months, we will figure out how, how or what we’re going to do with Uno Punto Cinco 

Josh: What does it feel like being at this crossroads where you have to go back and work for somebody else in order to keep your company afloat? Does it feel like you've failed in some way?

Daniel: Actually, if I shut down right now Uno Punto Cinco, this Monday, I have a job and a job that pays me much more better than 95 percent of the Mexicans. So, yeah I feel sad. But I also think that I'm thankful for, with life, with myself, because these opportunities doesn't happen. I think that, well in Mexico, doesn't happen that often. 

Josh: Yeah. Thanks, Daniel.

Daniel: Thank you very much for your time, and for your questions. 

Josh: I hope everything goes well and that, whatever you choose, that it works out. 

Daniel: Bye, thank you.

Max: Bye

Josh: Wow. I wasn’t expecting that. 

Max: What weren’t you expecting?

Josh: I mean, I don’t know. It seemed like what he was starting had the potential to really take off, but the fact that he made it free, that’s interesting. Like it sounds like he was like these people really need the help, so we’re just gonna make it free. 

Max: Yeah. I mean, it sounded just like a nice thing to do. Like it wasn't making the business enough money for it to make a difference in whether or not they could continue operating. So he was like, well, I guess it's providing these waiters a good service, so I’ll keep it going. 

Josh: Yeah, I love that. Like I keep hearing about, like, little tiny stories like that about people making decisions that favor others over their own self interests. I dunno, for all the bad we see in humanity these days, it's good to be reminded of the good. 

Max: And I’m sure those like waiters really appreciate it.

Josh: I’d imagine so.

Alright so there’s one other call you have to hear. I was totally surprised by it… twice. First of all, this was a business that was barely off the ground back in the spring, and now the founder, Shannon, is crushing it so hard, investors are calling her, to try to give her money.

But I was really shocked at our investors response to a question that Shannon had. Investors Sarah Downey and Phil Nadel were on the call with Shannon when she asked if she should file for patents. Sarah and Phil did not mince words. 

Sarah: F*ck patents.

Phil: That's what I was going to say.

Sarah: Yo.

Phil: I pretty much said that.

Sarah: Yeah, sponsored by the Anti-Patent Association of America, Phil and Sarah.

Josh: (Laughs)

Sarah: Get out of here. 

They got a little worked up, and they dropped some serious knowledge about how getting a patent could really mess up a startup. We turned that call into its own episode. It’s available only on Spotify, right now. So crack open the spotify app and search for The Pitch. The episode is called “The Patent Trap.”

The Pitch is hosted by me, Josh Muccio. Produced by Max Gibson, Muna Danish, Heather Rogers, and Chris Neary. We are edited by Sara Sarasohn.

Original music in today’s episode from Emma Munger, Breakmaster Cylinder, The Muse Maker and SoWylie. We are mixed by Enoch Kim. 

Thank you so much for listening. We’ll be back with a new episode in three weeks. See you then.

Okay, one last call. Just because. This is Dan Brown, founder of Up-Rite Storage Racks. He was the one who called in because he was worried about manufacturing in China, because of all that’s going on there. Political tensions, you know, manufacturing issues, all that. But I wanted to play you a scene from his call, because Dan, as it turns out, is a man of many talents.

And in case you were wondering, Dan decided to manufacture his gizmos in Vietnam.

Dan: Hello, can anyone hear me?

Josh: Hey. Whoa. I can hear you loud and clear, Dan. 

Dan: Hi. 

Josh: So you're, you're recording on your end?

Dan: I am. Yeah. I got, I got, I got my fancy garage band program going, so, you know. 

Josh: Very nice. Were you an artist or musician in a past life? 

Dan: I am currently a musician as much as you can call it that. 

Josh: Yeah. What do you play? 

Dan: I play guitar, man. I, I write. I like writing songs. It's my, it's my thing. 

Josh: Uh-huh. Do you, do you have anything you wanna play for us? 

Dan: Oh man. Umm, you mean like on my guitar you want me to play something for you? 

Josh: Uhhh. Can you just pick it up and play like I'm so curious?

Dan: Yeah. Yeah. Give me a second. 

Josh: I mean, it's not every day we talk to a startup founder slash musician. 

Dan: Really putting me on the spot here, Josh. I mean... I wasn’t, I wasn’t.. I feel like the guy at the party who's, like, “I don’t know how to play guitar.” Then he picks it up. You know, and starts singing. Alright let’s see.

Dan: (SINGING)… I can see… 

Josh: Holy shit.

Dan: (SINGING) See the storm clouds… are gathering … looks like rain. (SINGING STOPS)

Dan: Yeah, so that one is called “Daylight.” 

Josh: You crushed it. 

Dan: Thanks. 

Josh: That’s like soothing my anxious soul. Is that your own original song? 

Dan: Yeah. Yeah, I've got it recorded. My brother and I have been playing music since we were like 16. And so we, like, are adults now with families and businesses and stuff. But we just, I just, there's nothing like playing at a bar and getting free drinks. You know what I mean. So we still uhh, we still band it out, bro. It's what we do. 

Josh: That's awesome. That's… You nailed it. That was, that was awesome.

Dan: Don't play, don't, don't play that. Don't, don't do that. That was, don't play that in the podcast. 

You know Dan that only makes me want to play it more. Actually I’ll let Dan and his bandmates close us out. They’re on SoundCloud at WilburDown.

[Play “Daylight” by Dan Brown]

It’s time for leaving come the sunrise 

I do my fighting in daylight

I’ve found my demons, I’m off to meet them

What’s done in darkness will be brought to light 

The winds a blowin, the sky’s a changin

I’ll do my praying before I sleep tonight