Pitch Practice with FlavorCloud, Holly Liu, and Adora Cheung

So the next thing we're going to do is bring up Flavor Cloud, who is going to pitch Holly, who is the investor here, and then go from there. Yep, so I guess we're gonna be sharing. Sorry, so I'm gonna be an angel investor, and I've done some angel investing in the past. So I've only heard a little bit about what you do, and so we're just kind of gonna mock what I would end up doing as an angel investor. So tell me about Flavor Cloud.

Holly: Fabulous to meet you, and I want to tell you all about Flavor Cloud. What we do is we make international purchases on any retailer's website as easy as shopping on Amazon—so cheaper, faster, and completely friction-free. So what retailers would do is use our service in their shopping cart, and they can just instantly ship to 220 plus countries around the world.

So help me understand, because I've never worked at Amazon or places that serve retailers. So if I'm a retailer, like maybe I own like a Shopify store, you guys are… I would go to you to buy my raw materials?

No, we do the shipping logistics and customs and duties calculation for retailers. So that if you purchased from any international website, one of the difficulties that you have is that the shipping cost can be like huge, right? And then the other issue that you can have is that the customs and duties are things that you find later on when you actually get the product. And in addition to that, you have to do additional documentation you didn't expect. And finally, let's say you actually got the product, and now you're not happy with it, and you want to return it. As a consumer, you're pretty much left to your own devices.

And so what we do for retailers is say that, you know, you figure out your marketing strategy to get to, you know, these all ship to all these different countries, and what we'll do is the underlying plumbing to make that happen.

It seems like you're making shipping up. So I own an online store, and I want to ship it to somebody in Wisconsin. I would use you guys?

That's right. So no, not Wisconsin. This is the international shipping, right? So this is cross-border commerce.

Okay, so if I want to Australia, somebody in Australia had bought my shoes that I designed and loved, yeah, then so currently what would I do now? I would just force the consumer, right? I think that's what I would imagine.

So today is that most retailers in the last two years have seen that because of Amazon, and because of, you know, social media like Instagram and Snapchat and all of that, consumers are directly finding these brands, and they're like, okay, I want to go buy this, right? And then the retailer says, I'm not, I don't, I'm not equipped to ship to you because you're located in China or you're located in Sweden or wherever it is, right?

And it used to be that it was 10% of a retailer's business was international. In just the last three years, what has happened is that it has become one-in-three ecommerce purchases are cross-border, right? So if you don't do that, you miss out on 40 to 60% of the international traffic that comes to your website. In the US, it's about 40%; if you go to like China or the EU, it's well over 60% of the traffic that's the internet.

So currently, like how many dollars does that translate to?

That's a trillion dollar business by 2020, serving a billion consumers worldwide.

Okay, so how, I mean right now then I feel like it's DHL that I get international packages from or eventually USPS. Yes, certainly I could get it in three to five days if using DHL, and then like 21 days is like the slow boat. How are you guys set up to be able to compete with those?

Yeah, great question. So what we talked about was the consumer experience of, you know, how hard it is to do international. But what we do is we're a B2B SaaS platform, right? We have a suite of services that you can plug in; there's APIs and plugins for Shopify and merchants.

So what we do for these guys is three things: one, we integrate with a hundred plus carriers around the world, so that's our logistics platform. We have an algorithm that goes across that network of carriers and says what is the cheapest, fastest, most efficient way to move this product from point A to point B, which is across country borders, right? And it takes historical performance for that route and also specific to the product to come up with a recommendation just right off the bat. Because we have these contracts with these carriers and it's a volume-based play across a whole suite of retailers, you're looking at like 80 plus percent savings on shipping. So imagine if you go as a customer today on this website, and you have a shipping cost of $60; if you go with us, you have $10 shipping, and you're like, okay, that increases your conversion rate right off the bat.

The second thing that we do for retailers is we have a customs engine. So let's say you have thousands of SKUs or even millions of SKUs, right? If you're an enterprise retailer, the real nightmare with international is that you have to classify every single product and come up with this weird code, and that defines what the duties are and the paperwork is a massive pain in the ass.

And so what happens is you have to, as a retailer, have a logistics team that understands the inherent details, and that's a huge cost that most retailers don't understand.

How far along are you? Like how are you set?

So we actually started with a vertically integrated marketplace in 2014. What does that mean? We enabled through our marketplace small and medium-sized businesses to sell to consumers worldwide. I started that because, as an end consumer, I had problems purchasing from these international websites. So we created that, and initially, it was three markets: US, UK, India. And then we started experimenting with this, and we figured out with 300 plus brands that we scaled to 100 plus countries worldwide, and we found that this anywhere-to-anywhere logistics infrastructure that we had built became the one that they were most interested in.

And we started getting requests for brands that didn't want to be in the marketplace but still wanted to use our technology, so then what we did was we took the backend and said we're gonna create this SaaS infrastructure and make it such that, you know, you can simply plug and play. So you don't need to worry about any of these other aspects of, so much.

You have about 300 brands on your site using that to our own marketplace. It sits on top of our infrastructure, and last year we made the pivot to the SaaS platform that was in the summer, and then before the holidays, we started onboarding customers to our Shopify plugin, and we have a dozen customers for the shoe.

Quick questions: like how much shipping volume have you done through your platform?

So we did about a hundred KGMB through our shipping platform for the external customers, 6% commission. So basically on order value. Okay, so that's been our revenue outside of the marketplace, and we have a pipeline of customers. It's been really great the feedback that we've gotten, so we're looking at 10x in the next four months.

Okay, and sorry, I lied. It's actually three questions total: many competitors, yes. And so it's… you think you guys are the ones that are gonna…?

So the competitors—this is kind of a greenfield space because cross-border commerce has grown in the last two years, and we've seen the trends happen. Two years, the biggest competition is a company called Pitney Bowes. They have a solution called Waterfree; it's a 2.5 billion dinosaur company, but it's also dinosaur technology. It is geared towards—it’s something that customers hate, and it's geared towards a market by market kind of implementation, which is very prohibitive for the smaller companies.

And your other question was about, so basically, what makes us better in this sense? And why we are best equipped is I actually spent 10 years in supply chain logistics working with carriers like UPS, DHL—you know, all the guys that you mentioned. I built customs integration solutions, but I also built route optimization solutions, but more so from the other side of it. So I inherently understand the problems, and then with my co-founder at Microsoft, I built enterprise solutions.

It's our very last question, which I usually ask: how much are you looking to raise and at what valuation?

So we've raised 1.2 million in two rounds, seed rounds so far. My second round is halfway through, and I'm raising another million for the next nine months, and that valuation should be ten million right now, valuation cap pre.

I'll get back to you. Thank you! Can you send me the deck?

Yes! Oh yeah, Dad, very nice meeting you. Thank you!

What's up, boys?

Okay, and we're snuff. How are you?

I'm Holly, you founder of Clever Flavor Cloud. Sorry, Flavor Cloud. Tell me a little bit about Flavor Cloud.

It’s Stripe for international shipping. So online merchants in under five minutes can just plug it into their online checkout flow, and voilà! Every they can do international shipping and deal with customs and everything.

I mean, you handle the payments and…

Yeah, just payments.

No, we don’t do the payments. We just—so how it works is the merchant will send us through our API the customer’s address, and then we automatically, real-time, determine the best route and the best price to ship it to them.

How big of a problem is this right now?

So right now, what—one, if you want to do international shipping as a US merchant, typically what you do is you hire really expensive consultants who spend weeks, if not many months, many, many months charging now really. Right now, trying to figure out all the different combinations for first-mile, last mile, customs. Customs is worse for all these types of countries, and even when they finish with that, it’s—you know, typically there are still issues. Packages still get lost; everything still gets stuck in customs. And so it's just one big hassle, and that's if you can even afford it. So I think the problem is any merchant in the US who wants to sell goods to anyone in the world will be using us very soon.

That's a pretty big market.

So where are you guys?

So big… I can’t say it.

So how far along are you guys?

So we launched in 2014, and the reason why we started working on this is because we launched as a marketplace for all sorts of brands and retailers who were selling through us. And when we realized while they were selling goods through us, which was great and it was going well, their major problem was international shipping. And so we decided we would solve that problem for them, and then as a result, we just decided to work on that problem itself because it was big enough.

So I’m gonna ask the elephant in the room: what about Amazon? Why couldn't they set this up?

Because, you know what, they have shipping locations all around the world. They're just going to Australia—

Well, oh, okay. So, I mean, Amazon's a great way to distribute your product, but I think every merchant—some, a lot of merchants actually don't work through Amazon, but I think every brand for sure wants to still have their own site. And actually, when you— for Amazon, it doesn’t actually cater to all international customers. And so, in fact, if they use us, we have a bigger distribution than them, yeah, because we cater to everybody in the world.

It's a good point.

I mean, if you're in Antarctica, have you shipped?

So what other competitors are out there outside of it? I mean, it was not like— I can see why retailers may not want to go over here, but there's got to be somebody else that's cracking this, right?

Yeah, I mean, so there are a few other startups that are taking a crack at it, but what we do well is we aggregate everything. So most of the other startups are taking a very fragmented approach so they can only ship to one country, or, you know, they're trying to build up something that—

You worried that they're going to do what you're gonna do, and like what makes you guys kind of…

So I have ten years of experience in logistics, working at UPS and other various places, and so what I know very deeply is I know the people doing the delivery, the company's doing delivery. I know how to talk to them, and we've developed many algorithms to put this all together.

So how much are you looking to raise, and at what valuation?

I am looking to raise a million dollars, and our valuation is ten million dollars.

What are you looking to use with that money?

So right now our team is very, very small, and so we need to expand our engineering team and we're looking for people to help on the operation side.

Okay, well, how about this? Why don't you go ahead and send me the deck? I'll take a look at it. Are there any references that you can give me as well?

Yeah, we have customers. We work with over 300 brands already, so you can talk to them.

What do you think? How interested are you in this?

Well, so I'll be honest, I've never invested in a shipping logistics type of company, so I don't really have as much of a background on it, but what's very interesting is this could be a very big business, and I could get a piece of that.

So usually I’m looking for something that can give me greater than 10x returns. My check sizes usually range from 100k to 250k, so I'll want a certain percentage of the company as a result of that, and I want to be able to keep pro-rata rights as I go further.

Okay, so definitely up for discussion. Our round is half-filled, and we expect to close in about two weeks. So I'll show you the deck, and hopefully we can chat further very, very soon. Thank you very much!

[Applause]

I'm taking that check.

Yeah, I think my biggest one feel, AK, is probably just shortening the explanations of what you do. I can see you have a huge, huge vision for this, which is great, but I think just being a little bit more succinctly—your one-liner. I forgot what it was!

You said Stripe for logistics, and I'm lucky enough to know what Stripe is, but you know even—if it didn’t, sometimes a 4B doesn’t totally work. I should have asked you—I said, I said Stripe for international shipping, and I assumed you’re a tech investor, so it did take me—it did take me. That’s one of the things—I have a problem in the sense that I've said, depending on, you know, whether they know it, I said Flex Support for B2C e-commerce, but that only works with some folks.

And I hate to say, “Ober” for like, you know, international shipping. You could just say you were an API! I mean, stuff with the Stripe analogy, there is any easy, like five-minute—six, five minutes to putting a checkout flow. Easy, and you're doing a ton of work in the back, but no one else sees it.

Yeah, yeah. I also—I was a little tripped up on like, I kind of knew you were selling to retailers, but like for me, I just personally couldn't figure out what it was. That's why I spent a ton of time just like, okay, what is this thing? And that's mainly where just more than the bulk of it. And then once I could figure out that, they obviously had a ton of questions afterward too.

Yeah, and this is a reminder for everyone. Actually, you asked the question which I was hoping you wouldn't ask the question, but a lot of people actually go to meetings with two investors and don’t ask for money.

Like you just end with it without asking, and even if it's awkward, just ask it with confidence. And I mean, the worst they'll say is no, but you'll take all these meetings anyway, and a lot of people will say no, so don't worry about that, Bart.

And I will say this: a lot of times, what happens—and I didn’t probably mock it to you. Well, it is usually the first question I ask is like, "How can I help?" is usually what I ask that person. And then it's true, the entrepreneur has to guide it to, "I'm asking for money. This is what I'm looking for."

And I think what Door did on the founder side—definitely ask what the investor is interested in. This might not even be their domain; you might not even want them. It could be like a bad investor. What is their check size? What are their expectations? How fast can they move? Do they need to talk to somebody else?

But overall, you did really well. She's raising money. Are there any investors in this audience?

Yeah, that sounds really cool.

There we go, two to three over there.

Okay, all right, cool. All right, thank you so much!

Thank you! Thank you so much!