Reham Fagiri and Kalam Dennis at Startup School SV 2016

Welcome back! So, uh, it was an amazing morning. Um, and one of the questions I get asked a lot is, how can we fund both, uh, 10-minute meal kits and quantum computers at the same time? Uh, our secret is that we have a simple focus, which is that we fund great founders. And that's why I'm excited to bring out the founders of App-deco, Raham and Column. They went through Y Combinator, uh, the Winter 2014 batch about two and a half years ago, and they never, you know, got a lot of hype or, or, you know, investors dumping mountains of money on them.

But what they did do is month after month, they kept iterating, they stayed scrappy, and, uh, and they're building a great business in a difficult market, where a lot of other companies who did raise a lot of money burned through that money and went out of business. But meanwhile, they built an actual profitable business, like the kind where every month they have more money in the bank account than they did the month before. So I'm excited to, uh, bring out the founders of App-deco. Thank you!

Good afternoon, everybody! How are you doing? Wow, awesome! A lot of energy! My name is Column, this is my co-founder Raham. Uh, hi everyone! As PB mentioned, we are the founders of Apartment Deco. Apartment Deco is a marketplace for buying and selling furniture. And you may have not heard of us before because we are currently operating in New York City and Washington, DC.

Shout out! We have a team of 50 employees. We're going to be expanding to Philadelphia, Baltimore, and Boston in the next few months. And as PB mentioned, one thing we are really proud of is that we are profitable, uh, and that is something that we want to talk with you guys about today. We have kind of summed things up in a concept. Thank you! [Applause]

This concept of building a real business, an idea, which means that it's a business that's profitable, it makes money, and that can surprisingly get lost, uh, in this Silicon Valley VC world. We launched this company in the winter of 2014, and we've had a lot of ups and downs, a lot of roller coasters, in order to get to this point. What we want to do is share some real actual stories of the trials and tribulations and what it took for us to be able to get here. We're really excited to do that with you guys today.

So, first things first, let's get from zero to one. Many of you, I'm assuming, are probably looking to start a company, and the idea of getting from no customers to getting that first customer is not so easy. That's me. Before starting Apartment Deco, I worked for L'Oreal. I was a vice president of marketing, I had a large number of employees, and I was very familiar and comfortable with taking a large business and keeping that growing and keeping that sustainable. Same for me. I also came from a corporate background. I worked at Goldman Sachs for six years before leaving and going to business school. I was an engineer, ran a team of engineers before leaving Goldman. So, we both have this in common where we know how to get something not from zero to one, but from maybe, you know, a thousand to two thousand, not from zero to one.

So that's what was great about YC, right? So this was a completely different beast, and a completely different animal. And I honestly thought that, you know, I can apply these practices, and that was not true. So when I got to YC, we had to take a lot. You know what YC was, by the way? Before? Yeah, put me on blast right there! But yeah, it's true, a little ashamed to admit that now. But when we started App Deco, it was a concept, and I didn't even know what YC was. We are really grateful for having the opportunity to work with them because, uh, it is what catapulted us and helped us to get from that zero to one.

So, the way that this works is, uh, we would sit down with our partner that we worked with, who was Kevin Hale, and I never forget this one of the first meetings we had. Uh, he's sitting down and he's looking at our website, he's looking at our catalog, and he's kind of looking through the listings on our website. And he asked, how are you guys getting the listings today? And we say, well, we email people on Craigslist and we say, hey, you should list on Apartment Deco because we take care of delivery, we do X, Y, and Z. By "we," it was like me mostly trolling Craigslist, like emailing people, very, very hacky.

Yeah, yeah. And so he's like, okay, so out of 100 people that you email, how many actually list? Maybe 10. And so he's like, well, what about the other 90? Well, we don't know about the other 90. And so he's like, you need to list it for them. And I remember looking at Raham and I'm like, like, unbeknownst to them, like without their permission at all. So he's like, yeah, he's like, listen, you're doing them a favor, and you list for them. And if it sells, I mean, they're getting what they want; they sell their item.

We're like, okay, all right. So there we go! We start listing our items, listing Craigslist items on our site, unbeknownst to the sellers, and boom! We start getting transactions immediately. And so we're like, yes! And so, you know, we're high-fiving, and then we're like, oh, like we haven't had a buyer. How are we actually going to get this item from this person that doesn't even know that it's on our website, a piece of furniture?

So it's yes, you have to physically move it, right? So we're sitting in the communal area. That's not us, but that was what we were doing, right? But you know, you get what I'm saying, like hardly thinking. Yeah. So we're there and we're like, how the hell are we gonna get this item? So I'm like, you know what? Let's email them and say, hey, I'm the founder of AB Deco, we listed your item, and we sold it for you on our site. Remember, this is Craigslist where nine out of ten of the emails people get are spam and people trying to, you know, get money wired to Nigeria.

So, yeah, all right. So we send these nicely drafted letterhead type emails, and we got no responses back. And so we're like, now we have not one sale, we have transactions that have come in, and we're like, wow, how the hell are we going to fulfill these orders? And so we're sitting there, and my face is in my hands, and I'm like, you know what? Let's just get cash and just pick it up and buy it ourselves. And that's exactly what we did!

So we have this bag of cash, and we're going around New York City. Accounting nightmare! And we walk in, we meet the seller, and we're like, here's your 500 for your couch; someone will be here on Tuesday to pick it up. And the response was just shock and delight from these sellers, and they just couldn't believe that we were just going to leave this 500 and come back later and pick it up. And we said, oh, by the way, you know, what if you're selling other items? You should actually list on this side, Apartment Deco.

This hack is what got our business off the ground and got us from zero to one. This, by the way, this is a shotgun approach. We tried a lot of different things, and a lot of things did not work, but this was the first thing that really catapulted the business and allowed us to get significant listings and to get the business to where it needed to be. Another thing was that we were able to get insights into our customers that we never would have had before.

So, remember, we're going to every seller's home, paying them in cash, going all over New York City all day long. So we're getting to know these, uh, customers on a very intimate level: where they live, their economic status. Many times, they were making room for a baby, and it would be all these things that we never would have known unless we figure it out and had a scrappy way in order to understand these customers.

Lessons, takeaways, so this is our hack story, right? We, this was something that we did that was a little bit out of the ordinary for us and that made us uncomfortable. But I think that that's the exact key takeaway is that when you're starting a business, first of all, let's just scrap the advertising on Facebook and advertising on Twitter or wherever, and you really need to find all those scrappy free ways in order to see if your product is something that customers are responding to.

Because this is also about customers, and, you know, really learn what this product needs to look like exactly. So it's also the other thing, too, is really just having the ability to humble yourself. For us, this was, again, just coming from our backgrounds, was really just quite frankly very uncomfortable. And you know, we're in the streets passing out flyers and running around town with a bag of cash. It just seems so ghetto at the time.

But that was me, by the way, he did not pass out flyers on the streets that was mostly me. Again, yeah, that's true. Yeah! Wow! [Applause] But you know, these are the things that we did that really helped to get us from that zero to one.

To talk to you guys about was the idea of, um, don't get married to a certain path. So, some of you, or maybe most of you are thinking of starting a business, working on a business, have an idea that it's, you know, that you're thinking of working on, and you might have this vision of what it needs to look like. Just don't focus on what this grand vision is because you never know what it's actually going to end up looking like.

So when we first started the company, our idea was, hey, we are just going to be a platform, we are not going to touch this furniture, we are going to be the facilitator. We want to be like an Airbnb or an Uber. Touching furniture was not part of our equation. So we built our platform with the idea that we'll plug into third-party moving companies around New York City. We worked with a lot of different companies, and we would plug into their excess capacity. So whatever they had enough space, they would plug in, and we would use them to fulfill our orders.

It worked for probably like 1.5 seconds, and quickly after that, we realized that, you know, they wanted their prices to continue to go up, and we needed to maintain our prices low. The other thing is we were just not a priority for them at all.

Um, so our quality of service continued to go down, and, um, we had to make some quick changes. Actually, there was like one Saturday where the moving company was like, listen, we're too busy, you already scheduled all these, uh, jobs, you're just gonna cancel them last minute. And so we scrambled, posted an ad on Craigslist again for a different section this time, and looked for two guys to hire, got us a van, and we went and did the deliveries ourselves.

It was phenomenal! So we actually had maybe three or four different customers call us that day for the first time ever, just because they felt like this was the most amazing moving experience they had ever had. And it was supposed to have been a light bulb moment because it's the first time that customers just wanted to give us feedback and comment on the incredible experience that they were getting.

So just take a step back. So we've been doing deliveries for eight, nine months; we had never had one call from customers saying, oh, I love the delivery, never ever. And then in one day, we had three to four. So I was like, you know what? Let's just get a van, and let's just do it ourselves. And I was like, no, no, overhead! Remember, we need to be like Uber, we want to be a platform; we don't want to touch anything ourselves, no physical products.

So we, um, as co-founders, all know we had different opinions. And so we met in the middle. So then the next idea was why don't we get man-in-a-van type of folks, so people who own their own trucks but they don't work for a moving company? It sounded great, like, hey, we're cracking this! This is awesome!

So that did not work at all, because that's what we ended up with, and I wish I was kidding, but I'm not. This is a real truck that delivered our furniture in New York City. Uh, this is actually a photo that a customer sent us. She loved our product and she loved what we're doing. She was like, you guys, this is just not a true representation of your brand. Like, we saw the siding, and we just thought it'd be a little more polished, and you know, our neighbors are getting scared.

Yeah, anyway, so, um, quality was again not there, um, brand recognition and focusing on that was not there. So, you know, we were fighting this idea of like, hey, we need to do this platform; we need to be, you know, we wouldn't want to touch furniture, and we were really, really fighting this and married to this idea for so long. But, you know, months before that, we already knew that customers wanted us to deliver ourselves because we saw it happen, and it worked really, really well.

So finally, we landed on having our own trucks, having our own delivery folks, and that's when everything changed! That's me and our head of logistics. We, um, this is actually our first truck. I was very, very excited that we got it right! Yeah! So, um, this was instrumental for our business. We were able to reduce costs, actually control pricing for our customers, make it a revenue stream, and also it absolutely changed our dynamic of our business.

So, before we had our own delivery trucks, word of mouth probably, uh, probably accounted for around 10% of our business. After we changed to the other model, what that when you already worked months ahead of months before, it accounted for around 60 to 70% of our business. Delivery was this delightful experience that everyone before hated. Nobody wants moving, nobody, everybody hates moving, nobody wants to deal with it.

And then we were just offering such a delightful experience that people loved it and told everyone about it. That was sort of like our, you know, what do you call it, the X Factor for our business. Um, so we were really, really fighting that for so long. And you know, this is really one of the key things that we wanted to talk to you about.

But now, so this was a good idea, it worked, but that doesn't mean that it doesn't come without its own hiccups. We recently, our truck completely exploded! One of our trucks completely exploded! True story! So, yeah, so we actually have this thing where we like, listen, delivery guys, if there's an issue, you email us. Only if something crazy happens is when you call.

And they still, like, they're like, listen, hey, uh, I left a tool in a customer's apartment. They'll call us for that. So usually it's like the boy who cried wolf type of thing. So they're calling, like, what do you want? And they're like, the vehicle exploded! We didn't believe it because what does that even mean? Yeah!

So this is video, and we actually saw it exploding! Um, so, you know, again, it was a great idea, but it doesn't come... when it's obviously challenges, despite having a vehicle that exploded! Literally, this still was one of the best decisions that we could have made, definitely. Yeah!

So, besides that, and showing that insurance is important, what are the key takeaways? Insurance is definitely very important! Um, really, don't be married to this one idea. Let your customers dictate what your business should be versus what you think it needs to be. Embrace change.

You know, I started with all ever evolving, so you really should be embracing that idea and, and learning from your customers. So, become default alive. There is an amazing essay by Paul Graham, um, asking if you are default alive or default dead, and I would really encourage all of you guys to read it if you haven't.

But basically, the long and short of it is, what is default alive? It's essentially do you have enough money in the bank based on your current expenses to where you will not run out of money if you never have to raise another dollar again? So it means, like, are you going fast enough in order to get past your threshold of static or expenses, hopefully, their static, but they're going up.

So back in 2014, 2015, we were growing really fast, but our expenses were growing fast too. And we were burning a lot of money and not growing fast enough in order to be default alive. Well, more like we, you know, we just wanted, it was sort of the environment where you just don't worry about your bottom line; only focus on growth, growth for top, top line growth, right?

So we were saying to ourselves, um, if we can grow fast, like listen, lots of companies are raising, we'll just grow fast, we'll grow the top line numbers, we'll raise money, we'll continue to grow fast. The bottom line, that's really a secondary component. We hit all our goals that we set for that year, but we could not raise, and we had around three to four months of money left in order to, before we were gonna default die, basically.

And so this was a really, you know, we talk about startups being a roller coaster, and this was, you know, the part where we had a really difficult decision to make. And that decision was, can App Deco stand on its own two feet without having the crutch of VC funding? So that means that we have to take a look in the mirror. We're actually building a real business. Building a real business!

So we cut our marketing to zero dollars. We weren't spending a dollar on marketing. We had to cut costs in various areas. Um, we, uh, we also had to, um, uh, cut our marketing costs, um, actually just generally looked at our unit economics. So we looked at our revenue, looked at our expenses, made sure that we were profitable from delivery. We made sure that our unit, um, customer acquisition cost were, I mean, at that point, there were zero, but they were profitable as well, right?

So this was a really tough decision, and we had to raise prices on customers as well in areas where we were offering something at a price that was just not feasible and not realistic. And so that is, if you have to make these decisions and say, is this something that people are willing to pay for? We made those decisions, and for us at that time, it was a very difficult moment and a very nerve-wracking moment. But it was the best thing that we could have ever done because it allowed for us to be able to grow a business in a healthy way, continue to grow, and also become truly profitable.

More money in and more money going out, um, and this is the reason why we're profitable today. And it puts us in a position to have much more negotiating power if we decide to ever decide to raise again.

So what are, what would you say the key takeaways are? Uh, don’t die! Yeah, uh, that's one! Um, really understand your bottom line. Uh, that is one thing that we pour over constantly, looking at literally every expense. And this is really, it's really easy to get away from as you are building a business, and it's actually sad to kind of say that, but you'd be surprised that not manage that with tooth and nail very meticulously. I actually look at our expenses every month.

Like I pull our data from our bank account and look at every single line item because we would never want to go back to that situation again. And we look at that for future months as well. And then the last thing is just unit economics. So how much does delivery cost? How much are you charging for it? The per the what you're charging as a commission for your business, or however you monetize, does it support the things that you need in order to be able to grow it?

And particularly for an online offline business, this is something that's needed, right? Because you're actually physically moving products, so there's a lot of expenditure that goes with that. So the last thing that we wanted to talk to you about, guys, about is ignoring the noise. So, you know, we had to slide right before with all the headlines about, you know, is this a bubble?

Or, you know, it's easy to fundraise; it's not easy to fundraise. There are all these chatter out there. Um, but we had to really learn, especially what we just told you about being default alive and what we had to do for our business. We had to learn to really completely ignore the noise because we had, we need to focus on our business.

So we put on our headphones and completely ignored everything! Um, that literally, that's what we had to do! And you know, there's like the investor noise, there's competitors, there's just all kinds of noise! It's not just what people are saying in the press. So we had this one competitor, um, that had raised 20 times the amount of money that, uh, they had, you know, they were growing so fast, and they were all over the news! They were, oh my gosh, everything, everywhere we went!

So, what about them? What about them? Hundreds of employees and hundreds of employees exactly. So it was just, um, you know, and we consumed so much of our energy thinking about what's their next move? How could this impact us? And it really distracted us. It distracted us for some time from focusing on the things that really matter, which are what we've already discussed is what your customers want, building a real business, and making sure that you're, uh, continue to build that word-of-mouth.

So ultimately, they ended up folding. So all that time and energy that we expensed worrying about what they should, what they were doing and how this would impact us didn't really matter. And you know, ultimately for us, this was a big learning and something that we really want to emphasize because there's just so much noise out there!

When you're building a business, you really need to focus on the things that you can control yourself. Um, you are essentially the deaf, you are in control of your own destiny, not the VC funding in that climate or your competitors or anything of that nature. If you're building anything worthwhile, you're going to have competitors; it's going to happen, whether they're there now or whether they're going to be there tomorrow.

But who decides, um, who's going to last? Customers! Mostly customers and building something that people want, so listen to them! Absolutely! Yeah! I mean, like, just block your brain! Like, once you get to profitability, you're really in control of everything. And this is why we're very excited about the next chapter for App Deco!

Um, so this is, we're still very early on in our journey. Um, we've, you know, we're only at two years and a half in. Um, these are some of the lessons that we've learned along the way. We've heard them many times through, you know, YC and all the YC chats where we've sort of had to also learn them the hard way, and we hope that you guys can take some of these lessons and apply them to, you know, whatever you're working in, a business, or part of a company, or what have you.

These are lessons that you can definitely take on for the future. My father has a saying, um, my father has this saying, if you know better, you do better. And we knew better, but we weren't doing better. And I hope that, you know, what you take from that is seeing some of the things, the pitfalls that we've had in order for you guys to grow successful companies in order to do the next great thing. So we appreciate your time! Thank you, guys, so much! Uh, and have a great day! Thank you! [Applause]