Venture Europe: Entrepreneurship | Technology | Venture Capital | Eu/Acc
00:03:07 · Chaz Englander
[00:03:07] S1: So I think that really started where it just baffled us, think that, you know, so Fat Llama, for those that don't know, was a marketplace or is a marketplace that allows people to rent out their items to other people nearby in a way that they're fully insured. So that's anything from DJ equipment, musical instruments, cameras, drones, gardening equipment, sports equipment, whatever. Right? So, you know, there's items that you have that you're not necessarily using every day that, you know, kind of just sit there, but you don't want to sell it. It really didn't make sense to us that there was just so much of this stuff, like, that just kind of hangs around. And so we kind of set out very mission driven to solve that problem, and that's kind of what we did. And we knew that it was layered, right? So like, another interesting problem kind of within the overall problem space is like, how do you even build a product where you can ensure the lenders in that scenario, right? If I'm lending out a £10,000 camera or $10,000 camera to someone who lives down the road, how do you build a product to make sure that that person borrowing the item is going to be a genuine borrower? It's very different to Airbnb, right? Because Airbnb, you can't steal a house. I mean, you can try, but you can't really steal a house. These things, you know, these are just high value items that you can steal and sell in most cases pretty quickly by the nature of what they are as items as well, right? And we just wanted to solve that problem.
00:04:53 · Calin Fabri
[00:04:53] S0: And marketplaces are just notoriously hard to build, like you have the chicken and the egg problem. And also usually you just have to be very niche so the match rate is kind of high. So let's say on the supply is someone like to your point they are DJs but they can't afford to buy the set. And on the other hand, there's like people that actually have that stuff. Like did you go very niche onto, let's say, a product segment or a customer segment? How did you solve the cold start problem?
00:05:26 · Chaz Englander
[00:05:26] S1: Well, first of all, unlike our subsequent two businesses, that business took probably two, two point five years to see any real product market fit, basically for the reasons that you described, right? We had this issue where either items were high value and low use case frequency or they were low value and high use case frequency, right? And the issue with those two ends of the spectrum in a marketplace is you're really only making money on your second, third, fourth, fifth, sixth and so on transaction. You're not really going to make money on that first transaction. That was really difficult to do. We the way that we kind of growth hacked that was we built the supply side first, right? So we really focused on anything that we could to get items listed in a certain location in a certain category. And then once we had them, we knew that we only had that lender active for a certain period of time. So it was so important that we would get them a rental. For the first rentals, this was just like us buying the stuff. And then it was like, we would get an inquiry on, like, our listing, and we would, like, route that to, like, another lender with a real item and so on and so on. So it's definitely... We'd like to start with, it was like a bit of brute force. You know? And and... But eventually, of the flywheel started to get going. But yes, we ended up having to focus really category by category, particularly where the overall unit economics made sense. So for example, where there was high use case frequency with high value, these were really good early adopters because they were things, people like musicians and creatives like photographers and so on. They were great because they were using these high value items on a regular basis. The unit economics, both from a retention perspective and the average order value tended to make sense in those categories.
00:07:19 · Calin Fabri
[00:07:19] S0: And also walk me through, so in an entrepreneur's life, you kind of found the company, you go like through the first one year or two years hopefully find product market fit or iterate long enough to find product market fit, then you kind of scale and then you kind of exit. Take me to that room just before you guys sold to Higlo. As an entrepreneur, like, what was the discussion about? Like, did you guys say, like, we don't believe that we can scale this further? Did you get just bored? You know? Like, hey. Let's do something else. Do you remember the moment?
00:07:55 · Chaz Englander, Calin Fabri
[00:07:55] S1: Yeah. And two really different stories in some respect. Right? Because our second business was, like, much faster. The numbers were so much bigger by way of kind of exit value and like how much money everyone was going to make and so on. Were just like vastly different. I think with that business, we realized that it wasn't going to be a five or a ten year journey. This was like a fifteen and a twenty year journey that really was not going to be sped up in a venture backed scenario. And that's quite an important detail, right? We realized that money was only going to speed that type of business up so quick. And it was really at that point that we knew and we could sit down and say, Hey, look, we found a we've got an acquirer here. You know, they're interested in taking this for ten, fifteen years, you know, the price feels fair and right. Does that make sense for ourselves and our shareholders? And did in that moment of time. But it's tough, right? I think like, you know, as entrepreneurs, you got to make big bold decisions quickly and live with kind of no regret. But I think in hindsight, it was that particular decision was a great decision for really everyone at the table. [00:09:16] S0: And how long did it take until you kind of sold Fat Lama to Higlo and then for the idea which model ML to form?
00:09:16 · Calin Fabri, Chaz Englander
[00:09:16] S0: And how long did it take until you kind of sold Fat Lama to Higlo and then for the idea which model ML to form? [00:09:27] S1: So, just between Fat Lama, we built a business called Fancy that ended up getting sold to Go Path. That was like super lucky, you know, at the end of the day, it was being run by Arnes, my brother. It was a lost mile grocery delivery business four months pre COVID, right? I think if you could have started any business at any moment in time, you would have started like that business at that moment in that location. Right? Unlike Fat Lama, we launched that business, you know, four weeks of writing code and boom, straight line up, like instant product market fit, instant pull, referrals got going. It's just like business was just absolutely flying. Then COVID hit, and it was like literally throwing fuel on the fire. This thing went straight line up, live in 15 cities over a four or five month period. Even looking back on that, this is a vertically integrated business, right? So there's three apps here. There's a consumer app, there's the ride app, there's the warehouse app. You're buying the goods, you're holding the goods in a warehouse. To scale that business as quickly as we did operationally, even looking back on it was like mind bending. We were out raising $100,000,000 round and then subsequently ended up selling it to GoPath after they raised $1,000,000,000 led by SoftBank.