Leah Solivan of Fuel Capital joins Nick on a special Crisis Coverage installment to discuss Building TaskRabbit in a Recession; COVID Effects on the Independent/Gig Economy; and Key Factors for Early-Stage Marketplace Success. In this episode, we cover:
- Background — path to venture?
- How is the current climate affecting your investing?
- Differing viewpoints on how much runway to plan for w/ a new capital raise… are you suggesting founders raise for more than 18-months or does the standard runway guidance hold?
- This crisis has had a pretty profound impact on the sharing economy/the gig economy/the independent economy. As someone with experience working in this space, what are your observations?
- Key lessons learned from building TaskRabbit in 2008/2009 during a recession?
- What will be the big opportunities post-covid, given the changes to consumer behavior?
- What are the main 3-5 things your looking for in a consumer marketplace business at the seed stage?
- Are there GMV levels that you’re looking for?
- How about take rate?
- Best advice on investing in marketplace businesses that you’ve come across and incorporated into your approach?
- I’ve seen a number of consumer marketplace business that start w/ an auction-style format where vendors bid for consumer business, like thumbtack… then they flip to more of an affiliate/referral model where the consumer enters the specs for their job, those leads are sent to vendors and the vendors reach out individually w/ proposals. Why have we seen this shift?
- Does the transaction interface/format between vendors and customers influence your interest as an investor?
- You’ve said that you think investor’s should stand in a founder’s corner, not their kitchen. What do you mean by that?
- How involved do you get w/ founders, and how has that changed as the portfolio continues to grow?
- Advice for founders that are approaching an exit process w/ strategics?
- I know you pride yourself on your efficiency… do you have any efficiency hacks or tips for investors young in their career?
Transcribed with AI:
welcome to the podcast about investing in startups, where existing investors can learn how to get the best deal possible. And those that have never before invested in startups can learn the keys to success from the venture experts. Your host is Nick Moran. And this is the full ratchet.
Nick Moran 0:23
We have Leah Solivan joins us today from San Francisco. Leah is general partner at fuel capital, an early stage investment firm dedicated to giving outsiders the inside edge through unrelenting commitment, authenticity and hustle. Prior to joining fuel, Leah founded TaskRabbit, which was acquired by IKEA in 2017. Lea, it’s a great pleasure. Welcome to the show.
Unknown Speaker 0:42
Thanks for having me. I’m excited to be here.
Nick Moran 0:45
You have a very interesting background. I don’t know how you’re going to cover it briefly. But can you give us kind of the the brief, brief path to venture?
Speaker 1 0:52
Yeah, absolutely. So I I’ll take you kind of way back, I was a math computer science major in college. After college, I got a job as a programmer at a small startup that was acquired by IBM back in the Boston area, which is where I’m from. I spent eight years as a software engineer at IBM. And then in 2008, I had the idea for what became TaskRabbit. It was cold and snowy one night in the Boston area where I was living at the time, I was out of dog food. And I was thinking there’s got to be an easy way to get this dog food. And so that’s how I came up with the idea for TaskRabbit. I ended up quitting my job about four months later at IBM got the first version of TaskRabbit built in the Boston area, kind of snowballed from there and ended up running the company for nearly a decade, raised about 50 million in venture, open 40 markets across the US Open international markets as well. And then eventually, we sold the company to IKEA, back in 2017. And that’s just about the time I decided to join feuille full time and focus on venture investing. And I think the thing that really helped me make the leap from entrepreneurship into investing was just my passion and my love around technology, and new technologies emerging. And you know, even back in 2008, really, the inspiration for TaskRabbit was all about the new technologies coming out between mobile, so social technology. And I just love digging into sort of technologies that are staying ahead of the curve. After running a company for a decade, I realized that I had put my head down in one business in one technology for a very long time. And I wanted to find a career path where I could dig into a lot of different technologies over time, and so venture has been a great way to do that. I’m constantly learning every single day from the entrepreneurs I meet. And it’s been a lot of fun kind of supporting this next generation of entrepreneurs build their businesses.
Speaker 2 3:01
Good for you. So did you code the first MVP of TaskRabbit? I
Unknown Speaker 3:05
did? Yeah. Did
Nick Moran 3:06
Speaker 1 3:07
Yeah. We threw away all that code pretty quickly. I at least got a MVP off the ground and launch. Yes, in the Boston area. I’m
Nick Moran 3:18
curious, how do you think building a company over the past decade? Do you think that’s going to be similar, you know, over the coming decade? Or do you think it’s going to be very different the process of you know, going from idea to MVP to proof of concept to product, market fit, etc.
Speaker 1 3:37
I mean, I think that we’re at an interesting inflection point right now in history. You know, 2001 was an inflection point. 2008 was an inflection point. And now we sit here in 2020. At another one. I think anytime we see the market cycle, like this, it is an opportunity to kind of restart. And I think for entrepreneurs, that means, you know, finding new innovations, new ways to innovate a consumer that is actually open to innovation and open to changing behavior. But those are the positives with that comes sort of the the downside of how hard it is to raise capital, how much you do have to bootstrap in the beginning, how capital efficient and Agile and Lean you have to run your your operation. And so I think, you know, some of the best companies end up being born out of those tough times 2001 2008 And today, so as an investor, I’m very excited about it. You know, and I see entrepreneurs starting now, things that they they may not be able to six months ago, and so I think that’s very exciting. Good.
Nick Moran 4:48
Well, I want to talk more about that. But maybe we should start out with the thesis. It’s at fuel, you know, stage and sectors and types of businesses that you guys look to partner with. Great
Speaker 1 4:59
Yes. So fuel is a $75 million fund, we focused on early stage seed investing. We’re pretty category agnostic. So we just really focus on stage we’ll look at a wide range of things, we tend to hone in on kind of three core areas, which are consumer, b2b SaaS, businesses, and then some dev tools and infrastructure companies as well. We like to get involved when a company is raising like two to $3 million, we’ll write in a million dollar check. We can lead deals, but we don’t have to, we like to participate alongside a syndicate as well. And really, our philosophy is just to find founders that are purpose built for the particular opportunity they’re going after. And what we mean by that is finding founders that have that really compelling founding story that has led them to that moment to have to build that particular company and that particular product, because it particularly at the early stages, in a climate like this as well, it is so so difficult to get a company off the ground. And so founders and entrepreneurs just have to bust through walls to make things happen. And I think being really passionate about what you’re building, and having a founding story that matches you as a human being is so so important. And so that’s what we really look for. Our motto is we stand in our founders corner, not in their kitchen, which I think kind of actually really resonated with me that something Chris had come up with before I joined. And I think all too often investors think that the value that they can add is, is much greater than what they can actually add. Just to be honest, I’ve been there. And so you know, I think for us, it’s about adding value, where the founders believe they could use support and where they see we can add the value. And, you know, we we do a lot in marketing, we do a lot in communications and branding. We do a lot in fundraising to help our founders, but we’re really founder led by the types of interactions that we have, and we don’t take board seats, we don’t have, you know, formal monthly check ins with our portfolio. But we like to just build relationships over time that we feel like, are very meaningful and, you know, integrated to their needs.
Nick Moran 7:25
Awesome. I’ve got one to send your way. And I know we actually share a portfolio company, the wonderful draft that they started, right? Yes, but I want to hear more how, you know, the pandemic and the crisis is affecting things of fuel, and maybe your your approach to investing?
Speaker 1 7:43
Yeah, you know, um, I think for us at fuel. Two months ago, when this all hit it, we kind of went into triage mode. And we looked at the portfolio. And we talked to the majority of companies, we talked to the founders, just try to get a sense of where they’re at, where their cash flow is, what is their runway, what is their burn, sort of, like? What are the vital signs, right of these companies, kind of like your triaging, you know, in a in a hospital environment. And what we’re telling our founders is, you know, have two to three years of runway of cash in the bank, if you can’t do that, can you get to profitability, if you can’t do that you need to raise money, then it’s going to be really tough. You know, we have done some bridge rounds, for companies that we really believe, are going to be able to grow sustainably, through this time through this recession that we’re hitting. But I think, you know, the number one thing is like, as a CEO, don’t run out of cash. And so find, you know, figuring out ways that companies can extend their runways two to three years run more sustainably is like one key thing. You know, the other thing is just around looking at projections, I think it’s it. It’s hard. It’s difficult as a founder to look at your business and say, okay, overnight, everything that I thought I knew about my company, and that I was projecting forward has to change. Yep. And so, you know, cutting revenue in half, it’s easy to say, but like, really understanding where your customer is going to be over this crisis, and then coming out of this crisis, and then in the next year in two years is going to be very different than where you thought they were going to be six months ago. And so just helping founders work through that as well. So a lot of triage within the portfolio. Um, we are still doing external investing as well. We’re actually in the middle of closing a deal right now. very timely, in the health space and virus detection, actually. And this is a deal that kind of came in the very, I think, the very beginning of sort of the shelter in place, and you know, it came in through another co investor that’s involved in the deal, but we’re actually They stepped up, and we’re leading it. So we’re really excited about I mean, I think this is a great example of partnering with a founder who, you know, is building like, right in the midst of chaos, and we believe has a solution that will help bring people out of that. Um, so still a lot of sourcing a lot of calls with entrepreneurs. But again, like, for me, as an investor, I see this as a time. That is an opportunity to really innovate. And I think the key is, is, as a founder, you’ve just really, you’ve really got to have that passion and that purpose to be able to operate through this tough time.
Nick Moran 10:37
Yeah, it’s interesting, you know, been seeing a lot of conversations on Twitter, Kate Clark was talking a few weeks ago about how some founders are using this crisis as an excuse to give up. Because, you know, my assumption would be, maybe they don’t have that purpose in the startup that they found it.
Speaker 1 10:55
You know, and my take on that is like, not every company should keep going right now, right? Like, not every founder should keep going. And I see it less as founders making excuses. And I see it more as founders, just looking at the reality of the situation. If you’re brave enough to look at your situation and say, like, one, maybe I’m not cut out for this, that’s okay, too. Like, maybe I don’t have the cash and the runway and the capital to make it through this. Okay, that’s tough. But I think it’s good to realize that or sooner rather than later. And then three, you know, looking at your product and your offering and saying, you know, what, what I was building just isn’t as applicable anymore, just doesn’t apply, the consumers change is changing is going to be in a totally different place than where I thought. And guess what, maybe I’m not interested in following that new consumer. I think that’s all okay. Um, so I, my take might be slightly different. I don’t fault founders, for quote, unquote, giving up. You know, during this time, I think, you know, having a healthy dose of reality, and being really honest with yourself, as a founder has a person and your investors, I think that’s the most important thing you can do.
Nick Moran 12:09
Great. Yeah. You mentioned runway before. So I imagine when you’re putting together a new deal, are you suggesting, you know, longer than 18 months? Because there’s a lot of differing view viewpoints? I mean, there’s a Twitter discussion yesterday, there’s probably 25 investors that are suggesting more than 18 months, you know, 24 plus. And then, you know, Hunter walk and Charles Hudson, were both very vocal, nope, no changes in runway, still 1218 months, they should be be able to execute with that amount of runway. And so they’re not suggesting any change. So you know, where do you guys fall?
Speaker 1 12:45
I mean, I can tell you what I saw happen in 2008. And that was a very tough time to raise money. I ended up trying to raise money in September of 2008, giving a very tiny angel round down in March of 2009 $150,000. And then finally, getting a full seed round on in October of 2009, was really about 18 months later, of me bootstrapping maxing out credit cards to get that first capital in. So I think it depends, I mean, if you’re a first time founder with no network, and you’re trying to break through, like, I was, like, take as much money as you can get in, it’s not going to be easy. Um, you know, we then operated with that million dollars of capital. I mean, we could have operated on that for years. So the way I was running the company, because I was so used to bootstrapping. So I kind of think that’s the key. I mean, we’re going into a phase right now, that is going to be more bootstrap focused, it’s going to be more lean. I do think two years plus of runway Absolutely. is critical to have in the bank. If you don’t have that, does that mean all bets are off? No. But it’s going to be difficult, it’s going to be hard. And maybe there will be some exceptions to that rule, don’t want to run out of fuel. You do not want to run out of fuel.
Nick Moran 14:15
So, you know, this crisis has had a pretty profound impact on the sharing economy, gig economy, independent economy, as someone with real hands on experience working in that space, you know, what have been your observations.
Speaker 1 14:30
So it’s an incredibly exciting time, actually, to think about where this independent economy is going. And I kind of prefer that term independent economy because I think what we’re seeing happen now is the evolution of this future work in 2008. We started to see more freelance workers come into play with TaskRabbit. We saw you know, these errands and small jobs and tasks. We have Airbnb, we have Lyft we have Uber, all of those companies all Have these companies started around the same time, it’s now a decade later. And what we’re seeing is that, you know, the sharing economy, in fact, is not a trend. It was always here to stay, as, as we believed as founders of these companies. But I think what we’re seeing now is this is kind of phase two, this is the next evolution, these independent workers are really at the front lines, and are so critical to making our communities work. They’re essential workers, they’re out there, they’re independent. And they’re, they’re really tying together the communities with their needs in the services that aren’t being met, in other ways. So clearly, it’s critical, this whole workforce, I think, some, you know, innovations and evolutions we’ll start to see is really the focus on that independent worker. So as an example, we invested in a company called dumpling, which on the surface looks like just, you know, grocery delivery, you know, concierge grocery delivery, kind of like Instacart. But the focus from the very beginning, and we did this investment, you know, late last year, is 100%, on the shoppers on the supply base, on understanding what tools need to be built out to make those people successful, to make them their own entrepreneurs to build out their own book of business, and really put the power in their hands. And I think now we’re starting to see how important that is. Because these independent workers are so critical to all of our needs. And we’ll start to see a shift, I think, in marketplace dynamics, where there is more of a focus on supply, empowering more supply side tools, and platforms and dynamics, to make those people more successful.
Speaker 2 16:51
Did you build the supply side first, at TaskRabbit?
Speaker 1 16:55
We did we we kind of always had this philosophy. Now. It’s completely, you know, sort of exacerbated today. And it has really shed a light on its importance. But it was always our philosophy that without the supply side being successful, you know, the whole marketplace isn’t successful. You know, for instance, we always let our suppliers set their own hourly rates, set and pick clients they wanted to work for pick the jobs they wanted to do, we never just assigned, you know, tasks. So that was an important philosophy that we always followed. But it wasn’t the norm. I think now that becomes the norm, and continues to evolve even further.
Nick Moran 17:35
Was that like a gut instinct for you guys to focus on that side of the market? Or was that, you know, based on some research and some market knowledge that you had acquired, you know, in the early days? Yeah,
Speaker 1 17:48
a little bit of both, I would say, I mean, I always had a strong belief that what we were building was changing the future of work, right. And to change the future of work, it really you have to focus on the people that are working. And so I always wanted to do more TaskRabbit. With that, I always felt like there was so much more room and opportunity in the platform to build out more tools to really focus on the supply side. But in running a marketplace business, particularly a first generation service marketplace, like we built, you know, there’s always supply and demand dynamics and just kind of getting the company to scale. So it was sort of a an early instinct and philosophy from the beginning. It certainly was validated as we continue to scale. But I never felt like we had enough time to really build out that full vision, the way I can see sort of these phase two companies like dumpling being able to tackle it today. Interesting.
Nick Moran 18:46
Well, I want to talk more about marketplaces and dive in there. But before we do, you know, can we get your sense for what opportunities might arise? You know, post COVID Given these, you know, major changes to consumer consumer behavior and routines in everything that’s come about amidst the you know, shelter in place and quarantines.
Speaker 1 19:09
Yeah, I mean, I just think there’s huge opportunities for innovation in areas that, you know, have been a little bit more nascent. You know, one thing as when I joined the zoom, I was telling you, I have a six year old and three year old, both doing online learning both on Zoom calls right now with their teachers. And it’s like, the whole online learning system, particularly for elementary education, like it just there hasn’t been a lot of investment that’s gone into it a lot of innovation that’s gone into it. I mean, my daughter who’s in kindergarten uses like six to eight different apps every day. And so there’s certainly an opportunity and online learning Distance Learning remote education, I think, you know, it’s we’ll never learn the same way again, after having gone through this expense. rands with her children will always wonder what they’re doing in school. I mean, I was so used to kind of dropping her off and her having her school day and me not really knowing what went on. And now it’s like, I’m involved in every single assignment and activity. Um, you know, there’s just kind of a difference there, I think and expectations that are being set for consumers. And for parents, frankly, I’m just like, we’ll never sort of learn the way the same way again, I don’t think will ever work the same way, again, all of the remote work that’s happening, and all of the, you know, conferences that we’re having on zoom on a daily basis. Um, you know, remote work has never been pressure tested the way it is today. And I think, you know, we have a baseline functionality that sort of works. But the innovations that are going to come out of this time to just really improve our interactions for working remotely and are collaborations, I think that’s a huge area for innovation and opportunity. Other opportunities in digital health, of course, telemedicine, new innovations around healthy environments, biomedicine. I mean, there’s so much, and I have to say, you know, at fuel, we’ve been sort of hesitant to focus on things like Ed Tech, or health tech, for a couple of reasons, you know, in edtech, the multiples we see at exit, you know, weren’t really as high as some other areas in consumer and in SAS and infrastructure. And so it tended not to be a focus area, I think we’ll see those multiples those valuations, you know, those exits change. Um, you know, for digital health, we felt like, this isn’t really an area, we have expertise. And we don’t really have anyone on the team that has invested in digital health that has run a digital health company, like how can we help? How can we add value there? And now we realize it’s like, as human beings, right, like, we all have this, this value to add and this experience to give, particularly as a consumer, and so that’s an area that we’ve started digging into more as well.
Nick Moran 22:06
Awesome. So So let’s jump into marketplaces for a bit. Maybe just to start out, you know, what are some of the main things you’re looking for, in a consumer marketplace business at the seed stage, like, you know, three to five major things that that you want to see in a business that cause you to get really interested?
Speaker 1 22:28
Yeah, I think for marketplace business, there are some core foundational pieces. And I wrote this article probably a couple of years ago now about the anatomy of a marketplace, and how every marketplace has this sort of core anatomy. And then every marketplace. Business also builds on top of that in different ways. And so they’re, they’re all very different. Every marketplace is very unique, the dynamics are unique. But there are core fundamentals things like Do you have a quality supply base? And for that supply base, you know, how do you actually onboard them? How do you background check them? How do you make sure that they’re high quality? How do you provide consistent and constant feedback after their onboarding and in the marketplace and operating? And doing some sort of exchange with your customers? So are you monitoring the quality throughout and continuously? Ensuring that the standards of quality and the bar is really high? So there’s a lot I think, on the supply side? There, there’s also core pieces around matching. So in any marketplace, business matching is the big question, how do you match supply and demand? What are the core fundamental, fundamental aspects that make matches really good, because if you’re not matching in the right way, then both sides will have bad experiences, and they won’t come back. So you really have to understand how to match. And, you know, for us at TaskRabbit, that meant matching around time and location and category and price. But for every marketplace business, that’s going to be very different is how do you match business model wise? You know, I really look for strong business models that include take rates that are profitable, that makes sense. And so you know, sort of minimum average we see is around 20%, upwards of 30%. Sometimes when I see take rates that are down in the teens are down to 10%. That worries me, I worry it Can you can you actually build a business on that 10% margin, because these businesses are so complicated. So that’s something I always I always look for as well. Um, let’s see beyond that, I mean, at the earliest stages, you’re probably not seeing a lot of revenue, sometimes in a marketplace business and that’s okay. I think Mark Go places, they’re very hard to get started. And you really have to get the network effects going on both sides before they really start to scale, and they start to produce a lot of revenue. So I’m more interested as an investor and seeing a marketplace that really understands its customer on both sides, both the supply and the demand is making strong matches. So things like NPS scores, user reviews are very high, the quality is very high, the take rate, and the margins make a lot of sense. And if I can see that, and then understand a path, to get to scale, understand a path to get that flywheel going, then that gives me a lot of comfort that it’s going to be a marketplace that is sustainably built.
Nick Moran 25:46
You know, two scenarios I often see are businesses that are sort of a precursor to a marketplace. So maybe it’s like a workflow tool in SAS, that gets both sides of the equation working together with maybe gen two, you know, of the launch transitioning into a marketplace. I also see situations on the consumer side where it might be a platform or a community first, right? They’re really trying to build the use and engagement and a thriving sort of large base of people interacting before a marketplace is is launched. How do you view that? And, you know, do you look at opportunities and consider those for investment before? You know, the marketplace out of the businesses is turned on?
Speaker 1 26:35
I mean, that’s a great question. It’s kind of the question of building community versus building a marketplace, those are two very different things. I think my main question is, is not every community does evolve and transform into a marketplace. And you have to ensure that you really do have two sides that are necessary for each other to exist and to survive. And so I think sometimes when you’re building communities, you can have communities that are more, you know, similar, you know, similar consumers, similar mindsets, similar needs, but you also need sort of that opposing view that opposing side to build out the full marketplace. You know, on the other hand, if you do have that, if you do have, you know, a community and you see that different sort of sides are emerging that supply and demand is emerging, I think that is a great way to start a marketplace sort of grassroots. I will say, though, that, in my experience, having built TaskRabbit, I think my most important lesson I learned is that people have to have great experiences in the marketplace to start. And to do that you really do have to curate a lot in the beginning. And so, you know, for a community to build up from a groundswell and turn into a marketplace, I think is riskier than actually saying, like, here are two sides that I’m going to put together. And I’m going to curate, and I’m going to match and I’m going to make sure I have an amazing experience. And then I’m going to build up the community around them from there. Like, that’s just the playbook I ran. And I sort of much prefer that because I kind of understand the steps to make that happen. But that’s not to say you know that there’s some interesting communities that have been built that can evolve into something more transactional and more marketplace driven.
Nick Moran 28:44
And then the former scenario, I guess that would be more for b2b but the workflow tool as sort of a precursor to marketplace, do you come across that as well?
Speaker 1 28:53
Yeah, um, I think so. I mean, in the SAS businesses that we’ve focused on in the b2b businesses that we focused on, I’m trying to think through some of the marketplace businesses that we’ve looked at. I mean, there have been I saw a sort of interesting b2b marketplaces. But, you know, I think that the underlying fundamentals still apply even from a consumer mindset, or business mindset. It’s really about understanding sort of the dynamics on both sides, being able to do the matching and then ensuring that you have profitable transactions.
Nick Moran 29:31
With both sides situations where there’s multiple business models layered on top of each other right company might have SAS revenue, plus marketplace, you know, percentage of transaction revenue. Do you find it is it hard to parse kind of, you know, the signal when there’s too many business models layered on top of each other? And I find that that can happen at the earliest stages often, you know, founders will have multiple business models involved in Then it’s tough to kind of figure out where to double down and focus.
Speaker 1 30:03
Yes, I think that’s a great point. I mean, I do think at the earliest stages, some simplicity around business model is actually a good thing. I think founders can get very distracted with a lot of different business model ideas and want to test a lot of business model ideas. But I think that really waters down the overall business. And I think you’ve got to be able to, you know, kind of double down and really dig into what the business model is early on and prove that that works. And if it doesn’t work, okay, you can try other things. But I think trying too many things at once, both from a consumer standpoint, and a business standpoint, I don’t think makes a lot of sense. Yeah, it’s
Nick Moran 30:46
tricky, because you guys do SAS investing as well as marketplace investing, which is, which is nice, but in a lot of cases, there will be investors that specialize just in SAS, for instance, or just the marketplaces that if you go to them with Well, half of our revenue is run rate, you know, based on GMV and take rates, whereas the other half is based on licenses, it’s tough to get that pure place as investor, you know, to get to get excited. And then, you know, speaking of GMV, you mentioned take rates around 20%? Plus, are there GMV levels that tend to qualify a startup to be ready for a seed round?
Speaker 1 31:24
Um, you know, instead of GMV, I think I’m much more focused on the unit economics and what the net revenue per transaction is, I think GMV can hide a lot of things. Um, and so, you know, a TaskRabbit or GMV included all of the reimbursements. Meaning if your Tasker went to the grocery store and spent $200, that was part of GMV because it ran through the system. Um, so I think it really depends on the business, but I’m much more interested in looking at like, what is the breakdown of the unit economics? per transaction? You know, what does the supply side get paid? What is the demand side pain? Where’s the take right, in between, you know, what are your cost of goods sold? What do you actually net and take home as a company? Perfect.
Nick Moran 32:17
What what sort of general advice on you know, marketplace investing? Have you come across, you know, in your experience that was super powerful for you that you have now incorporated into your approach?
Speaker 1 32:32
You know, I think more so than specific advice, although I do have some, it was the the marketplace operators that I surrounded myself with that I think really made a difference because I was learning on the job. You know, I had never built or worked for a marketplace company before I built TaskRabbit. And so it was a huge learning curve. But surrounding myself with people like Simon Rothman, who, you know, was the who ran eBay Motors. And that car buying and selling marketplace on eBay. Rob Chesney, who we both know based out of Chicago, was a longtime adviser to me at TaskRabbit. Also from eBay, Laurie Norrington, he was the president of eBay sat on my board for a long time. These are really brilliant marketplace minds who had built these playbooks before. And what I realized in talking to all of them is that marketplace businesses are really complicated. And you, you know, Laurie would describe marketplaces as a whack a mole. So you, you know, figure out how to, you know, push down one side of the equation and one side of the marketplace, and then, you know, a big whack amole pops up on the other side, right? And then you’re trying to push down that side. So it’s like this crazy game of Whack a Mole with marketplace businesses all the time. And, you know, that makes them really complicated and also makes them really fun to operate, right? Because it’s so dynamic, and everything’s always changing. And so I think just surrounding myself with other people that had built marketplaces before, was super, super important. Because of the complexity, and I could dive so deep with those advisors, I could dive so deep with Simon and be like, Okay, here’s like the one challenge on the supply side, like I’m trying to figure out, and it was never a conversation about that one challenge. It was like, the 10 other levers that affected that one thing.
Nick Moran 34:38
I love that advice, I found myself, we have kind of a philosophy here at new stack, but I found myself talking to our founders frequently about, you know, finding those operators that are 24 months, 36 months, 48 months ahead of where you’re at, you know, the mentors that are 2030 years older than you that did it, you know, decades into decades ago, that’s fine. But the best mentors are not even me. Right? I can give you some general advice, but it’s really the people that are doing what you’re doing that are in the trenches that are a couple of years ahead.
Unknown Speaker 35:11
Nick Moran 35:15
Um, you know, I’ve seen a number of consumer marketplace businesses that start with this auction style format, you know, where vendors are bidding for consumers business, like thumbtack, for instance, I’m sure you’re familiar. And then they flip the model, right to more of like an affiliate or referral based model, where the consumer enters the specs for for a job, those leads are then sent to vendors, and then the vendors reach out individually. I just had this experience, you know, two, two years ago, for our annual event, I put a job on Thumbtack for a photographer, and I got all these different bids, and they’re all in one place, and people were bidding each other down, I selected the one that was best. And then last year for our annual event, I did the same thing. And it was this different process where I filled out all the specs, and I started getting emails from all these different vendors. So you know, the question, I guess is, you know, why have we seen this shift overall? And, you know, how does that change the way that you view the business, as a marketplace, sort of this this transaction interface layer?
Speaker 1 36:18
Well, I can tell you, we made a big shift at TaskRabbit, we started out as an auction bidding based model in 2008, inspired by eBay. So if you needed someone to pick up your dry cleaning, you’d say, hey, I need someone to pick up my dry cleaning, I’m willing to pay this much money, and then other people would bid on it. And we’d make the matches based on that, the number of bids in that job. That got us so far. But the problem with that model is that there’s a lot of friction, it’s not very fast, there’s no way to instantly book someone for your needs. So particularly with errands and tasks, things like picking up dry cleaning, you don’t want to spend two hours, you know, figuring out who’s gonna pick up your dry cleaning, you just want someone to pick up the dry cleaning, right? So I think that as the consumer shifted, in the age of sort of this instant gratification, I’d say in 2010 2011 2012, it became apparent that we also needed to shift our model away from an auction bidding based model. And to be more booking focused and more transactional. I think, you know, you mentioned thumbtack, I think other companies that were born around the same time have also had to make those shifts over time, because the consumer expectation is very, very different from where we all started. And so for us, it became it became, you know, connecting people in real time to get small jobs, tasks and errands down and to do the real time approach, you have to gather a lot of information upfront from the supply side to understand how you can match them. Wow. So for our taskers, you know, we have them put in their hourly rates for it 40 different categories, because if you’re picking up dry cleaning, that might be a different hourly rate, than if you’re going to, you know, install a wall mounted television set, right? And so 40 different categories, they set hourly rates, then they draw the geographic location of where they’re willing to accept jobs from. So do they want to work in their neighborhood? Are they willing to drive to the city, different times a day mean, many, many different levels of detail around geography. So there’s some complexity there. And then there’s the actual skills that these taskers have. So there’s a lot that we gathered on the back end to try to make a more seamless booking process happen on the front end. You know, I like to describe really great marketplace experiences, as an iceberg. You only see as the consumer, the very tip of the iceberg when you’re putting in, you know, your job or whenever you’re interacting with the marketplace. But underneath there should be a lot of depth. And it should get really, really complicated to be able to make those matches happen in a really efficient and timely way. And so, I mean, that’s actually another thing that I look for is like, how much can you encapsulate from the end user experience, and actually do ahead of time or on the back end or asynchronously to provide a really seamless experience. And so I do think you see marketplace businesses evolving, and trying to encapsulate more and more and do it asynchronously so that you’re able just to hit the speed and expectations of matching that consumers have got
Nick Moran 39:56
it you know, out of curiosity was Was there a healthy The percentage of jobs being done on TaskRabbit for you know, setting up various IKEA stuff, was that part of the motivation in their interest in acquire?
Speaker 1 40:10
So it’s funny because from nearly the very beginning Ikea furniture assembly was always the number one job on TaskRabbit Wow. And it was like, Yeah, eight years in a row. Um, so, you know, in the end, in hindsight, I guess it’s not a surprise that we ended up, you know, doing the deal to be acquired by them. But of course, there was a whole long tail of other jobs and tasks that were also posted.
Nick Moran 40:36
What sort of key advice or lessons would you give to founders that are approaching the exit process
Unknown Speaker 40:42
Speaker 1 40:44
Yes, so I think, um, you know, for founders approaching the exit process with strategics, and support and just understand, is there alignment around values, company values between the strategic and your company? I think for me, that was really important understanding that IKEA really focused on sustainability, it’s a family owned business, you know, they have a really strong mission to improve people’s lives. So I think those things are important in ensuring a successful partnership, whether that be a short term, you know, business partnership, or a long term acquisition.
Nick Moran 41:24
Awesome. We I know, you pride yourself on efficiency, do you have any efficiency hacks or tips for investors young in their career?
Speaker 1 41:33
Well, you know, I’ve, I’m young in my career as an investor. Um, so I’ve been doing this now, three years, I think, for me, you know, the learning curve on investing was just around the sourcing, and the triaging and getting started. And I think, you know, you tend to find a cadence and you find sort of patterns that you as an investor that really resonate with you that you’re drawn to. But just the amount of inbound and the amount of pitches that you look at, it’s like, so overwhelming in the beginning. But then I think you start to hit your stride. So I’m not sure if I have actually a an efficiency hacker shortcut for that. But I would just say, you know, every investor is probably a little bit different, in what resonates with them and what they’re looking for, particularly based on their experience and background. So maybe just figuring out what is important to you, what’s going to resonate with you as an investor? What are your priorities? And then because it is so overwhelming, you know, I think in the beginning, with the number of pitches and the number of companies that come in the number of founders that come in just being have those clear criteria sort of ready and at hand to make decisions on whether or not you’re going to be the best partner for them. Leah, what
Nick Moran 42:55
resources have you found particularly valuable that you’d recommend a listen, listeners can be a book blog video article?
Speaker 1 43:02
Yeah, I mean, early on, I really love this book called founders at work. It was written by Jessica Livingston over a decade ago, I think it’s still super applicable today. I read it when I was first getting started. I think for me, it made me feel not so alone. As a founder. Getting to hear the founder stories, the early days was really, really helpful. So that’s what I always recommend. We are what
Nick Moran 43:25
do you know you need to get better at?
Speaker 1 43:29
Oh, my God, a lot of things. So many in particularly now in this new world we live in. I thought it was a good multitasker. It’s like impossible to get everything done now. Yeah. What do I need to get better at? You know, I get really, really excited about people. And if I fall in love with a founder, it’s really hard for me to pass on the company. And I think sometimes that may not always be the right decision, right to invest in, in founders that you fall in love with. If you know the business models and market and all those other things aren’t quite right. But I think I have so much empathy as a founder coming in I you know, I’ve been in their shoes before coming from their their vantage point. So that’s probably an area I could probably get a little bit better at.
Nick Moran 44:22
And then finally, Leo, what’s the best way for listeners to connect with you
Speaker 1 44:28
reach out via email. It’s just Lea. Chatfuel capital.com
Nick Moran 44:32
Well, this was such a pleasure. Thanks so much for the time. I know that you’ve got young ones at home, and it’s really challenging, but I’m so glad that that Brian drafted linked us up and thanks so much for joining us today.
Unknown Speaker 44:43
Yeah, me too. Thanks so much for having me.
Nick Moran 44:51
That will wrap up today’s episode. Thanks for joining us here on the show. And if you’d like to get involved further, you can join our investment group for free on a AngelList head over to angel.co and search for new stack ventures. There you can back the syndicate to see our deal flow. See how we choose startups to invest in and read our thesis on investment in each startup we choose. As always show notes and links for the interview are at full ratchet.net And until next time, remember to over prepare, choose carefully and invest confidently thanks for joining us.