230. Crisis Coverage w/ David Rabie – Finding PMF, Raising Series B, and Navigating a Startup Amidst the Pandemic

230. Crisis Coverage w/ David Rabie - Finding PMF, Raising Series B, & Navigating a Startup Amidst the Pandemic
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David Rabie of Tovala joins Nick on a special Crisis Coverage installment to discuss Finding PMF, Raising Series B, and Navigating a Startup Amidst the Pandemic. In this episode, we cover:

  • I was just checking and we had you on the show back in March of 2016… that was over 4 years ago, pre-launch, during your Kickstarter campaign.  So crazy how much time has passed.  Can you refresh us on the origin story of Tovala…
  • We’ve invested in the pre-seed, seed, Series A and now Series B round… and we’re fortunate to have a front row seat while  you and the team built an amazing company but bring the audience up-to-speed on the last few years… what have been the key milestones/inflection points?
  • Your revenue was strong, hovering near mid seven figures ARR, until Q3 2019 when it took off at a growth rate like I’ve never seen… accelerating past $10M ARR and continue a rapid growth rate, even during the crisis.  What changed that caused the ramp?
  • How do you define PMF and when did you know you reached it?
  • What tech companies do you compare yourself to and how do you measure up?
  • North Star Metrics?  LTV, Payback, Yearly Spend, Retention?
  • Overall, how has the crisis affected your business?
  • What are the major levers/measures you’ve taken to reduce cost?
  • Talk to us about raising the B round — and How it was trying to raise as the pandemic hit?
  • Let’s talk about what’s next for Tovala…  On the oven side of the business… currently consumers have to purchase your smart steam oven — a countertop device similar to a toaster oven.  What does the future look like on the hardware side and is the Tovala countertop steam oven always going to be necessary to enjoy Tovala food?
  • And the food itself… what are some options available to expand meal kits available beyond just Tovala’s kitchen? Any other strategic partnerships or growth channels that are high priority opportunities for you after closing the B round?
  • Greek chicken and vegetable pita… Any plans for breakfast or lunch?
  • From my family members… When are you going to have a pizza or a hamburger?
  • How would you describe your leadership style and the culture you’ve established at Tovala?
  • What advice would you have for founders building a D2C tech company?

Guest Links:

Transcribed with AI

Intro 0:03
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
David Rabie joins us today from Chicago. David is co founder and CEO of Cabala tovala delivers the most valuable resource back to its customers time. Their automated home cooking system creates restaurant quality meals at the push of a button. No more cooking no more cleaning. tovala is the future of food. At new stack. We’ve witnessed their ascent firsthand from the idea stage to today at over eight figures of ARR. David always a pleasure to chat. Welcome back to TFR.

David Rabie 0:50
Thanks for having me, Nick. It’s exciting.

Nick Moran 0:53
So I was just checking in. We had you back. We had you on the show back in March of 2016. So that was over four years ago. That was pre launch. You were running a Kickstarter campaign at the time. It’s kind of crazy how much time has passed. But refresh us on you know, the origin story of tovala.

David Rabie 1:10
Yeah, yeah, life was a lot simpler four years ago. But I was thinking about it, and there was still a lot of pressure, then it’s just, it’s a different set of challenges that we’ve got today. Yeah, I mean, look, the business. The idea came from a personal pain point that I had of wanting home cooked meals, and not having enough time to do it anymore for myself and I grew up eating home cooked food around the table. And, you know, always felt like getting a home cooked meal for dinner was the best thing that we could do for ourselves, and you know, the most tasty and the healthiest. But if you look at everything on the market, and I went and tried everything, I felt like nothing really came close to home cooked meal, the best thing you the closest thing you could do was buy a meal kit, but it didn’t solve the problem with time, because you still have to go do all the chopping and prepping and cooking and cleaning. And so the vision really was how do we get as close as humanly possible to all of the best elements of a home cooked meal, but remove all of the pain points, whether that’s the planning process, the cleanup, or the actual cooking. And I feel like we’re at a stage now where we’re executing on that vision. It’s a reality. And now it’s just about getting the word out to more and more people.

Nick Moran 2:26
Yeah, so we’ve first invested, I mean, this is a long time ago, even having the podcast conversation, I think at the time, I was alpha testing tovala. And it was like a Frankenstein, you know, toaster oven where you retrofitted you know, a water basin to the side of it. And it was like the first demonstration of the product working this is you know, pre launch. So we’ve invested in the pre seed the seed series A now that now the B round. We’ve been very fortunate to have a front row seat, you know, while you’ve built this amazing team in this amazing company. But you know, help us bring us up to speed on the last few years here. So a lot has transpired. What were the big key milestones and inflection points? Yeah,

David Rabie 3:11
it’s a it’s a lot. That’s happened, I’d say, you know, we launched in the middle of 2017. So, you know, just over a year after our Kickstarter campaign launched, yep. And we launched with a true MVP. So you know, a very, very MVP oven menu with five options available every week, an app that had relatively limited functionality, you know, and it was a team of 13 of us, really, that launched the business. And the idea was, let’s get to market as fast as possible. Let’s validate, you know, a bunch of our assumptions, let’s figure out what we got wrong. And then let’s quickly go iterate on it, as opposed to spending three or four years in our own silo building hardware, and then releasing it and, and it’s too late at that point to go iterate. And so it’s been a pretty long journey, I’d say since we launched but the one thing that has held true is this idea of us delivering ingredients that are pre prepped, and somewhere between totally wrong, par cooked, and then leaving about a minute of work in the hands of our customers. And then they cook it automatically. that magic moment has kind of held true and hasn’t really changed that definitely improved. But the basis of our whole product was true at the MVP level. And and it’s true now just in a better way than it was that

Nick Moran 4:32
so that the system is certainly optimized for the companion meal kit system that you guys offer, right? But this this oven is not just exclusive to that it’s got capabilities beyond that. Can you talk us through sort of, you know, the developments you first have with Trader Joe’s and then, you know, some of the other capabilities that the oven can do beyond the meal kit. Yeah,

David Rabie 4:57
and I’d say this is a philosophical decision. Brian and I made early on that we felt like the hardware should have utility outside of our meals. Because people would want that. And if we didn’t enable it, people would go figure out how to do it on their own. And at the end of the day, like, if people are using our product, even if they’re not ordering our meals, they’re still engaging with our service and getting value out of it. And so we believed that it would help people with the purchase decision up front. And then it would also help people keep the oven on their countertops. And now we’ve got about three years of data validating that so whether it’s toasting a piece of bread, which which people do all the time in the oven, and it doesn’t really well, because it has some steam, or, you know, cooking a recipe from our mobile app, and there’s, you know, over 100 Now, from soft boiled eggs to a spatchcock chicken, to what you alluded to, which is some of the frozen grocery products that cook on the platform. So you could go buy an Amy’s burrito, or, you know, a whole bunch of different products. And all you do is scan the UPC code, and the oven knows how to cook it automatically. And, you know, all of these things have kind of been developed over time since we launched and now the oven has a ton of utility outside of our meals. You know, and, and it validates that initial thinking that Brian and I had.

Nick Moran 6:16
Yeah, personally, I love it, because I’ve been a customer for years now, right customer of the meal kits. And then each week, I throw 12 eggs in the oven and soft boiled them. You know, they’re done in like, in 12 ish minutes, I think. And they’re perfect. The other thing that I’ve found myself doing, you know, maybe once a week is I’ll just grab a single portion of salmon or a single portion of marinated chicken at Whole Foods or Mariano’s. And I pop it in the oven, and it cooks it perfectly. You know, the app is, as you mentioned, has all these pre designed cooking routines that knows how to cook chicken breasts perfectly knows how to cook a cut of salmon perfectly. And it’s really changed the way I eat for the better because I’m, you know, a much less apt to go and just grab that quick, you know, casual, fast, casual takeout, or whatever junk I was eating for lunch. Now I actually eat much healthier, and it’s more delicious because it’s hot and perfectly done.

David Rabie 7:26
That’s right. Yeah, I mean, what what we find is most people are replacing food delivery or takeout with tovala. It’s it’s not that they were avid Blue Apron customers, and now they’re switching to Tamala. You know, it’s people that maybe tried Blue Apron or HelloFresh, because they were interested in the idea of cooking and it appealed to them. But at the end of the day, they were just too busy to cook weeknight after week, night after week night. And so they resort to delivery because it’s it’s really the best alternative. If you want to get something quickly that is warm, and that tastes good. But but the the reality with delivery is, you know, generally you’re out the door 20 $22 A person, the food arrives, lukewarm, it doesn’t arrive hot, you have to make that decision every single time, you know, where do I want to order from what do I want to order? And then you know, you don’t have real great portion control or know what’s going into your food. So there’s all of these compromises that you make. But again, you know, what’s the best solution on the market. And so once people discover Tamala, that’s typically what gets removed from their routine.

Nick Moran 8:35
Yeah, I know, we’re gonna talk about this a little later, but pre crisis, my wife works full time I work full time, we have a two and a half year old toddler. And very frequently, we just didn’t have time or the energy to make food when we got home to you know, it’s been 45 minutes an hour to cook. I like to cook but not after a really long day where I’m commuting. So this was, you know, huge for us in our family in changing kind of the way we how healthy we are the time we spend with our with each other. Prior to the crisis. And since the crisis, my life has kind of gotten more complicated, because even though we’re at home all the time, there’s just it’s very hard to kind of watch our toddler who needs constant attention and, you know, get get the daily tasks done. So it’s actually we’ve, we’ve increased our meal subscriptions since since the pandemic hit which is maybe counterintuitive, but we have even less time and we’re not as inclined to order the takeout right now. With everything going on. Yeah,

David Rabie 9:42
it’s it’s pretty common behavior that we’re seeing across most of our customers, I would say which, you know, like you said feels counterintuitive, but I think there’s just you know, people have a lot of things that they have to deal with at home and a lot of our customers have young kids and now all this And they also have to figure out lunch, where, where before lunch was, you know, they had their own solution, whatever that was at the office, now they’re stuck with another five, five meals, they have to figure out every week. And so it is super common. We’ve seen most of our customers increase the size of their meals, their meal orders since the crisis hit, and it has held pretty steady. I think it’s also that, you know, relying on delivery multiple times a week becomes very expensive. And so, you know, it’s yet another reason why our customers are increasing their orders. So David,

Nick Moran 10:32
your revenue was strong, hovering near mid seven figures Arr, until q3 of last year, 2019 took off, like a rocket, like a growth rate I haven’t witnessed in this business, you know, accelerating past 10 million Arr, you’ve continued a rapid growth rate, even during the crisis, during this crisis? What changed that cause this ramp?

David Rabie 11:00
You know, it was a lot of different things. I think, you know, from the very beginning, I alluded to this, we really had that magic of, of people sticking with the service. And so our retention has always been great. And we’ve got such a unique value proposition, this, this idea of, you know, scanning a barcode, and you get a home cooked meal, it really attracted people to our website. And so it was kind of that middle part of the journey of, hey, I’m interested in Tamala, but I’m not sure I want to buy it, where we were struggling. And so, you know, we went back to basics and did a ton of insights work to really understand what are those barriers to adoption, and let’s go try to solve them one by one by one. And, you know, there were two major things we did. One, you know, kind of to put an umbrella over, it was a complete rebrand. So we changed our our messaging, our visual design, you know, everything about how we communicated about the brand. And it was this big shift from being very feature forward to really leaning into time savings. And so now, if you come to our website, it is all about this idea of saving time. And, you know, Laird, behind it are these beautiful pictures of food. And it was it was a subtle, but very important change to, you know, before you’d come to our website, and it was just this beautiful, gleaming picture of an oven. And the reality is, you know, our customers, when they come to our website, they’re not really in the market for a countertop oven, they’re looking to solve this dinner problem. And, you know, the way we message things now just resonates a lot more strongly than what we had done beforehand. So, you know, that was, that was one of the critical changes that, you know, was felt throughout the whole buyer journey. And the second one was around pricing structure. So, you know, historically, we priced the product at 349. If you want to just the generation two oven, or you could get the oven for 249, if you are willing to commit to purchasing 100 meals in your first year with us, so it was a really high barrier to entry. And we’d implemented that pricing pretty early on in our journey when we just didn’t have great data. And, you know, as we spent more years with our customers, we understood, it really didn’t take that many meals to build a habit. And so we’ve restructured the pricing. And today, that commitment is six orders in your first six months. And the upfront price is 299 on its own 199 With this commitment. And so it was a subtle shift to the pricing structure, and then a $50 cut to the upfront price. And those actually made a massive difference in terms of getting people that were thinking about it to actually end up buying. And so you know, between those two, we really set ourselves up for rapid rapid growth over the back half of 2019. And, you know, it’s continued throughout the course of this year. Love it.

Nick Moran 14:06
Yeah, I’ve, I’ve noticed a shift. Because a lot of people in my network are aware of Devala even non tech folks, right people, neighbors, for instance, and friends. And I’ve noticed the shift in the way that they talk about tovala It used to be Oh, the oven company, right? And now it’s like, oh, the the dinner meal kit, right? They automate everything. And just that that subtle shift, I think has has changed a lot, right? Because so many people were resistant, I think to buy in because they saw this, you know, this new machine on their desktop, what am I going to do with this thing? And the rebranding and the RE messaging, you know, to save time and really automate the process of dinner I think is has it’s really appealing to the life they’ll benefit,

David Rabie 15:00
talk totally, totally. And kudos to our CMO, Leslie for overseeing that and really pushing on the importance of brand and messaging, it can feel a little amorphous. But those, those subtle differences make such a big, big impact particularly on on a product that is so new to the world. And you really need to help people frame it and understand it within the context of their lives. And I think you hit the nail on the head, what your friends are saying is what we want people to say when they talk about the product, as opposed to, hey, it’s it’s this oven business, this oven company.

Nick Moran 15:36
So I want to sort of unpack the beat around a little bit and get your thoughts on that. But before we do that, a couple couple quick questions on your journey. You know, how do you define product market fit? And, you know, when did you know that you had reached it?

David Rabie 15:54
We I can’t tell you how many hours of conversation we spent trying to define product market fit everyone’s you know, if you Google it, there’s so many different definitions. And, you know, the one that we really, really latched on to was that you have a product where there’s more demand than you can fulfill. And we felt like That was the ultimate bar. We knew we had product market fit on the retention side, if you will, because our retention was so strong. But it was it was the growth piece. And, you know, we had a period of a few weeks in, you know, that q3 q4 time period, and it’s happened even this year, where there was too much demand. And we had to curb our sales. And, you know, when that happened, we all realized that we had it. And it was a pretty special feeling, I would say, and it really helped focus us. You know, I think until you have product market fit, it makes sense to try a bunch of different things and keep pivoting and testing. And then once you’ve got it, you know, it’s all about focus.

Nick Moran 17:00
What tech companies do you compare yourself to? And how are you measuring up against them?

David Rabie 17:08
The companies we look at most closely in terms of comparison are Keurig and peloton. You know, the business of selling a consumer hardware product with a service component attached to it, whether that’s a consumable like Keurig or software like peloton, I think there’s a ton of analogies, you know, with with messaging, and how do you how do you sell this upfront product? How do you price it? How do you build a moat around what you’re doing just just a lot of similarities there. So those are the businesses we look at most closely. On a metrics basis, it’s not exactly one for one, I think, with coffee, and then you know, with the exercise equipment retention is inherently stronger than it is with food. And so, you know, when we’re looking at that side of the business, we might look at slightly different pumps, but at a higher level, from a strategic standpoint, those are the two we look at most closely. What

Nick Moran 18:04
are the sort of the North Star metrics that you’re trying to optimize around? You know, it’s not just Arr, right? There’s LTVs, there’s paybacks. There’s yearly spend per customer, there’s retention metrics, you know, what, what are kind of the, the major ones that that you guys focus on in trying to optimize? Yeah, you hit

David Rabie 18:23
the nail on the head on a bunch, I’d say, customer acquisition cost is one that we look at super closely. And basically, on a daily basis. Growth and sales is another one that we’re looking at every single day, I’d say, retention is something we monitor, you know, with a slightly bigger lens, it’s not a daily thing. You know, we’re tracking it closely. But we’ve got a lot of data there. And so it’s more about watching out for signals that something is changing, we look at average order value on a weekly basis. I think those are those are the main ones that there’s a lot of internal ones around production that we’re looking at whether it’s error rates, in our packout process error rates on our packaging, and our shipping, we’re looking at customer satisfaction ratings on customer service, we look at meal ratings every single week. This is part of us. So we do a weekly stand up with our whole company every Monday, and the first 10 minutes of it are basically spent running through all of these metrics. So that everyone on the team has visibility into you know, are we hitting our targets, what’s working, what’s not working, etc?

Nick Moran 19:34
I have to imagine that some of these metrics are significantly better than comps, right without naming specific companies. I mean, the LTVs and the yearly spend numbers. I mean, eating dinner is just such a high and it’s such a frequent use case. And the you know, the price per meal is is quite high. It’s a lot different than you know some For a subscription where I pay five bucks a month, right, this is each individual meal is about $12. And my family does three meals a week. So two meals per night, at three meals a week, that’s six meals. That’s, that’s a lot of good revenue each week. So I have to imagine that you stack up really well against against some of the cops.

David Rabie 20:23
Yeah, I mean, it’s, it’s part of the magic of the business, when you take a high weekly spend, combined with strong retention, and you know, inherently sticky product that is habit forming, you have a very high LTV. And so it’s part of what makes the business really special. And if you couple that with the fact that we believe it really has mass market appeal, and you can see that once you look at our demographics, we feel like the opportunity to build something enormous, is pretty special. So yeah, you You nailed it, how

Nick Moran 20:59
is the crisis affected the business so far?

David Rabie 21:03
I mean, it’s we’ve had a lot of things to deal with. And I’d say for every business, you know, first thinking about your own people, and how to manage safety and, and people’s emotions, as we’re in this very, you know, stressful environment where there’s a lot of unknowns and misinformation, I think that was kind of our first priority, and a lot of ways is just taking care of our own people. And, and shortly, you know, behind that is making sure our customers are taken care of, and those, you know, to the extent we can go hand in hand, and so, you know, I’d say internally, we were a pretty remote, liberal company to begin with. And so a lot of people were comfortable working from home, it’s definitely been a shift to have everybody working from home. And you know, we’ve really upped the level of communications, and you know, really increase the amount of video comms. And so I feel like we’re, we’re doing as good a job as we can and, you know, are changing things on a regular basis as we get more information, and just taking it day by day. So that’s one side. And then I’d say, on the customer side, we talked about this a little earlier, but from our current customers, we saw a massive increase in demand, just ordering more and more meals. And we also saw a lot of reactivations, from paused customers, we saw our skip rates come down. So basically, every metric trended positive, and it happened very, very quickly. And so for a period of probably a couple of weeks, we had to turn off new acquisitions, you know, we turned off our advertising spend. So new acquisitions were a lot lower than they typically are, just to make sure we could fulfill all of the orders from our current customers. And, and do so in a safe manner. So that was, you know, called the first couple of weeks of the crisis. And then, as we got our feet out from under us, we did start to turn on our advertising spend, and, you know, more advertising spend with pretty strong organic growth. And so adoption from new customers has been really through the roof. You know, our thesis has always been that this product is is a better solution, on an average weekday than delivery. And I think what’s happened with COVID, is it’s just accelerated that for a lot of people, I think people are just getting there a lot faster than they would have otherwise. And so, you know, it’s, it’s been an accelerant for our business. And, and what we tell our team and keep telling them is, we’re just fortunate, and we’re grateful the crisis could have just as easily killed our business if we were doing something different. And so let’s let’s be grateful for the situation that we’re in.

Nick Moran 23:43
Yeah, when I want to talk about the fundraise, but, you know, what, what are the major levers or measures that you’ve taken over the past year or so to cut cost? And in expand margin?

David Rabie 23:58
Yeah, I mean, I think we’ve, we’ve focused our efforts primarily on the food side, that’s the biggest revenue driver for us and just took it piece by piece. So if you think about the four biggest drivers, primary drivers of cost on our meals, there’s the shipping cost, the labor cost, the food cost, and the packaging cost. And I’ll talk about two of them. So the first on food, you know, the big thing that we did in 2019, was just bring more data to our culinary team so they could understand the connection between the most popular meals and the cost of those meals. And then the next level of what does it cost to actually produce each individual component of every meal, not just from a food cost standpoint, but a labor cost standpoint. And so just having all that data allow the culinary team to make much more cost efficient and labor efficient menus without compromising meal quality at all. So that was one really big change and and we still have a lot to do there. And then secondarily on ship thing, we had launched the business from one facility where we were renting space from another food company. And we’d launched it nationally because we did that Kickstarter campaign. And so for a big chunk of our customers, we were air shipping food product to get to them. Knowing that over time, we would phase that out. And once we moved into our own facility, towards the end of 2018, we were able to start running refrigerated line haul trucks to different parts of the country. And, and over the course of about a month, month and a half, erase all of the air shipments. And so that made a huge difference to our overall margin profile. So those those were two of the biggest things and, you know, similarly on packaging and labor, there was a lot of work done to help us improve our margins in a pretty big way.

Nick Moran 25:47
Great. So let’s jump into it. Talk to us about raising this B round. You know, how was it trying to raise as the pandemic pandemic was hitting? And sort of, you know, how did the entire process? How did it go for you guys?

David Rabie 26:05
Yeah, I mean, I’d say it was, it was not, it was not a planned, we weren’t planning to have to do it through this difficult time period, I think going into this fundraise, we felt like, relatively speaking, it would be a smooth fundraise, because the business was doing so well. And the pandemic definitely threw us and tons of other companies for a loop. And again, going back to that message of being grateful, you know, fortunately, we had a strong story to tell through the pandemic, you know, I think we’d be sitting in a very different spot, if our business was not doing well, because of the changes that have occurred. And so, you know, it still made it very challenging. I think, as we went through the process, there are a lot of different funds that very quickly, you know, seemingly overnight went from open for business to not open for business at all, and just focused on triaging their own portfolio. And doing that first. And then even once that was done, and firms felt comfortable about that, there were a lot of firms still sitting on the sidelines, because of the amount of uncertainty and just not feeling comfortable as to what this world is going to look like when we come out of it. And, and wanting to just kind of put a pause on new investments. And so we felt a lot of that, you know, we had a lot of funds get really close, and then internally, those funds decided to stop making new investments or to shift their focus, you know, 100% on their current portfolio that happened to us numerous times. Which is, which is hard to deal with Emotionally, I would say for, for me, for the team, when when you feel like you’re there, and then all of a sudden, you’re back at square one. But we were really fortunate to find a great partner in in Finistere ventures. And, you know, we’ve known them for the last couple years, and they had a lot of experience in the food space, not just investing but also operating. And so, you know, they saw what we see with Devala. And I think the crisis really only helped crystallize that for them. And so, you know, in that sense, the crisis was helpful. But, you know, on the whole, I think, obviously, things would have gone a lot smoother if, if we weren’t in this in this pandemic.

Nick Moran 28:17
So that was a relationship that you had developed over multiple years.

David Rabie 28:21
It was it was I think it had been a couple of years since we first met them and met them through a friend here in Chicago, Luca at farmer’s fridge. They’re also investors in that business. And, you know, I think, one of one of my mentors, one of our investors, Jason, helter always says, investors like to invest on a line and not on a dot. And so I think for Finistere, you know, seeing our business evolve over the course of a year and a half, two years, really allowed them to see that, you know, we delivered on what we said we would, and our team has continued to execute, and I think just help them get conviction a lot faster than if it was a new relationship that we started from the ground up. How did

Nick Moran 29:01
you manage potential B investor relationships, you know, over the past couple of years? Is it keeping them in the loop on your investor updates? Is it you know, a series of phone calls every once in a while, you know, what was what was your standard operating procedure with prospective investors?

David Rabie 29:20
Yeah, it’s not a it’s not a regular thing. I worry about clogging. inboxes unnecessarily when it’s just the kind of, you know, monthly update on business, we keep that for our current investors. I’d say it’s probably more of a quarterly thing or BI quarterly, where whether it’s it’s me taking trips out to the West Coast and East Coast and using that as a reason to meet with people and update them in person, or big milestone events. So for example, we launched on QVC I think it was September of last year. So you know, we shared that with a lot of potential investors so they could tune in and and use that as an opportunity to get up to speed on the business. And so you know, I think it’s, I wish it was more formulaic and was just hey, we’ll send an email every month, I just personally have found that that’s, that’s not the best way to to keep people’s attention. And instead, it’s, you know, staying on top of your list. And as the opportunities arise, reaching out to maintain contact, I love it.

Nick Moran 30:17
So David, let’s talk about what’s next for Tamala. And maybe we’ll start with, you know, the oven side of the business. So currently, consumers have to purchase your smart steam oven. It’s a countertop device, similar to like a toaster oven. What is the future look like on the hardware side? And is the tovala countertop steam oven always going to be necessary to enjoy Devala? Food?

David Rabie 30:43
Yeah, it’s it’s a good question. I’d say, you know, without revealing too much there, there are things that we’re planning on the hardware side over time. But, you know, at our core, I think the product experience as it stands today will be the product experience for Tamala. For a long time. There’s a lot of improvements planned, I think, you know, on the hardware side, there’s features that we’re contemplating and, you know, we can talk about the food side and the software side. But, you know, to touch on what we were talking about earlier, we’ve got product market fit, people love our product. And so we have no plans to do any fundamental shifts, and what we’re doing today.

Nick Moran 31:22
What are you thinking about? That could be additive? Do you have any partnerships that are public, on the hardware side that you can disclose? Yeah,

David Rabie 31:30
we’ve partnered with LG Electronics, announced that, you know, mid last year and the idea there is that LG will be able to use the tovala IQ software to automatically cook to valo meals. And so it opens up, anyone that is buying a full size oven, whether you’re moving into new home or remodeling or your your oven dies, and you need to replace it, it opens up that large customer base to cooking Devala meals, it’s a slightly different experience, you have to do it through your phone, as opposed to a scanner that’s on the oven, and the meals take a little longer to cook, because these are larger ovens that don’t heat up quite as quickly. But it’s still a great experience. And so, you know, we’ll continue to invest in that relationship and build it up. And, you know, it’s in a relatively small scale right now. But I think over the course of 2020 and 2021, that scale will probably grow.

Nick Moran 32:27
And what about the food itself? What are some of the options available to expand meal kits? You know, beyond just the tovala? Kitchen?

David Rabie 32:37
Yeah, it’s it’s a, it’s an interesting question. So you know, today, there’s 15 different items on the menu every week, we’ve got gluten free items, vegetarian items, lots of different proteins. And then we alluded to it earlier, but there’s about 700, frozen grocery items where you can scan and cook those automatically. So, you know, I’d say on the frozen grocery side, we will continue to expand that that pool of of items. And that will happen gradually over the course of this year. And then in terms of the Tamala meals, there’s a lot of different paths we can go. One thing we launched in q1 of this year was an option to customize some of the meals and sub in a different side, if that suits you better. And that’s been very well received. You know, our customer, customers have asked for everything from premium proteins to breakfast, to dessert, to kids meals to family meal. So there’s a lot of different paths we can go. And, you know, I think the end state vision is that we’ve got all of those. And now the job on us is to figure out which ones we prioritize and, and which ones do we launch this year?

Nick Moran 33:43
Are you open to licensing arrangements and, you know, working with groceries, for instance, like having a Mariano’s brands that people could walk in and, and grab for the night?

David Rabie 33:56
I think that’s that’s further down the line. I think figuring that out is pretty complicated. And it’s a very different use case than what we have. So, you know, I do envision that happening at some point in time. But it’s it’s probably three to five years out.

Nick Moran 34:11
What about other strategic partnerships are growth channels that are high priority opportunities for you guys after closing the B round? Yeah,

David Rabie 34:20
I mean, I think part of the plan is just to scale up what we’re doing today. And so you know, we’re having a lot of success on D to C through some paid channels. We’ve seen a lot of success on QVC. And so we want to grow that significantly. We’re also on Amazon, we want to grow that, you know, pre COVID, I would have said, we’re going to start experimenting with a little bit more brick and mortar, you know, in a few different forms and fashions. And I think, unfortunately COVID Is is going to slow down that part of this business. And so it’ll be about testing additional digital channels, and we’ve got a whole host in our pipeline. You know, currently we’re running some tests on Pinterest and on Reddit, and seeing some early success there. But there’s a lot more to test TV is another one where we’re extremely bullish. And, you know, it’s really just about the rollout of these, because we feel like each of them will play up a pretty important and unique part of the buyer journey.

Nick Moran 35:20
And you guys partner with some food influencers as well. Right, and specific diets and, and whatnot that have used Devala and promote it to sort of their, their community. Yeah,

David Rabie 35:35
that’s right under my, my colleague, Nicole is kind of overseeing our influencer program. And, you know, we really ramped that up in q4 of last year, getting the product in the hands of, of several different kinds of influencers. And, you know, it is one thing to hear about the product, it’s another thing to come to our website, but to actually experience it and see it on video is is really impactful. And so that’s actually worked really well for us. And so we’re getting smarter about what are the types of influencers that work best. But that will continue to be a part of our overall marketing mix.

Nick Moran 36:10
You know, some of the new recipes that have come out, the meal kits that have come out that you can order are are awesome, right? There’s this burrito that came out, I just saw on the list, you know, coming up this week, and next week, you’ve got these grilled chicken and vegetable pitas. You know, it’s really cool to see the way the menu has expanded and the different options that you can make available. I’m curious, you know, what are the plans going forward? With respect to that? You know, do you have, you know, other recipes, or my family has been asking, you know, when are they going to do a pizza? Or when are they going to do a hamburger? And, you know, I’d have my own curiosity. I’m kind of interested in like a breakfast option, just like a really quick thing I could pop in, you know, when I wake up in the morning. Give us a sense for some of your plans there.

David Rabie 36:57
Yeah, I mean, I’d say there’s, there’s a lot that the culinary team is is exploring, and it’s this balance of, you know, what do people want to begin with? And then what can we afford to put on the menu and keep that $12 price point? What works from a labor standpoint? And then injecting new process? Right, so it lets breakfast is a great example. I think, at some point, we will do breakfast, it’s just a matter of when, but it’s it’s a pretty large undertaking, beyond just the culinary side of Alright, how do these meals cook in? Its avala? But, you know, how do we price them? How much rotation is there in the menu? How does the packaging work? Everything we’ve built to date is really centered around the Tamala dinner experience, or, you know, you can repurpose for lunch, but kind of the same form factor of meals. And so once you inject some change there, it is a pretty big, big undertaking. And so I think, for now, we’re still in the phase of, let’s figure out what out of all of these options we want to prioritize this year, and then we’ll roll that out. But I will say there is something fun and new coming on the protein side, in q2. So you’ll see that as that is the first new new thing that you’ll experience coming up

Nick Moran 38:13
here. Awesome, awesome. As a customer, I’m excited. So shifting gears just a bit, you know, I know some folks that work in your organization. And I’ve also, you know, I’m embedded in the Chicago community. So I, you know, I see people at events, pre COVID. And I see people at events frequently have some chats, and a lot of people have spoken very highly of the culture at tovala. And your leadership style, specifically, how would you describe your own leadership style in in, in the culture that you’ve established it to? Well?

David Rabie 38:48
That’s a good question. I think, you know, a lot of it is the entire team. It’s definitely not just me. And it’s, it’s the leadership team as well. I think from the beginning, you know, you often hear of companies thinking about culture, as a thing they need to think about at some point when it becomes a problem. And, you know, when Brian and I first started working together, a lot of our conversations were about culture. And they continued to be as even as we were a team of three and four and five, and I’d say, probably 25 to 50% of our conversations every week, revolve around culture and people. And so I think the first order of business is caring about it, and prioritizing it as something that’s really important. And, you know, it manifests itself in everything, right? It’s how do you communicate? What do you do? How do you spend your time? Where do you sit in the office? How do you hire? You know, every little detail I’d say particularly from the leadership team, every action every word is interpreted by your people, as a manifestation of your culture and what’s important to you, and it’s a pretty scary thing to realize. When you do have that realization, but that’s the reality, and so better to be aware of it than to be blind to it. And I think, you know, the fact that it is so important to us and that we care so much about our people. That’s, that is really the crux of it. I don’t there isn’t rocket science to developing an amazing culture, I think it really starts with a place of empathy and care. Man, I, you know, to be frank, I still think there’s a lot of work for us to do. I think as, as we’ve grown, there, there are gaps and holes that have surfaced, and I think it happens in every organization. But, you know, again, it comes back to prioritizing it, because it’s pretty easy to just brush it to the side and say, well, let’s just get our work done. But at the end of the day, we built the company to be a place that we want to stay forever, and we want our people to be happy and stay forever. And so the only way to do that is to prioritize the culture.

Nick Moran 40:55
Yeah, I think it was, it was actually Jason Hellz, or your, your lead investor on the on the last round that said to me, at one point, giving some advice, you know, you can either put strict controls on your people and lock them in, and, you know, bar all the doors and keep them in that way. Or you can open all the doors and create, you know, great culture and empower them in and then they, you know, they stay with you and they thrive and they grow out of choice, instead of necessity.

David Rabie 41:24
Yeah, I mean, I think the I like to cite this principle of autonomy, mastery, and purpose. And the name of the behavioral psychologist who came up with it is escaping me right now. But thinking about those three things as the primary drivers to happiness in the workplace. And it makes sense, right? It’s like if people are given freedom to make decisions and have responsibility, if they’re given the ability to become experts at what they do. And if their work ladders up to a higher purpose, if you have those three things, in general, you’ll be pretty happy at work, particularly once your basic needs around salary, benefits, etc, are met. And so we try to really, really push that on our entire team and on, you know, the next level of leaders so that they’re pushing that onto their people. And it goes all the way down throughout the organization. And, and a part of that is also being transparent and sharing that these are our intentions and, and just being transparent in general, with our team through the good and the bad. And I think that that shows that we trust our people, which again, ladders back up to this idea of autonomy. So it all kind of ties together.

Nick Moran 42:38
David, what what advice would you have for founders that are building a DTC tech company?

David Rabie 42:47
Um, that’s a great question. I think it depends on on what stage of the journey they’re in. I think if they’re just kind of thinking about whether they should do it or not, the advice is pretty simple. It’s just take that first step and do something, I think it’s, it’s really hard to take that first step, but once you do it, it becomes a little easier. And I think if it’s, if it’s someone that’s closer to where I am in the journey, I think one of the things we learned at YC is the importance of persistence and grit. And it’s, it is a long, long journey, I think, to success and being persistent, is, I think, maybe the most critical trait to success when you’re starting your own thing.

Nick Moran 43:29
Well, David, I can’t tell you how many investors in Chicago and on the coasts that I spoke with tovala, I spoke about to follow with, and how many people said, you know, that’s just so hard. Building that business, you know, it’s like three businesses in one you need a software, you know, DSC e commerce company, you need, you know, a hardware oven company, and then you need to build, you know, this, this culinary arm with amazing meals, and many people just said, Nick, this is way too hard. I don’t think they’re gonna make it. And I can’t tell you how proud I am to call myself an investor and have watched you and Taryn and the rest of the end, Brian and the rest of the team. Take on just incredible challenges across many different dynamics. And, and, you know, bash through barriers and achieve a level of success, at least in terms of high level metrics that I’ve never witnessed. I think you’re, you know, you’re a great role model for, for young founders, on how to do really hard things and do them well. And the hardest problems from my standpoint are, you know, the ones that that we want to invest in here at new stack and we just want to find really amazing people to partner with to take on those really hard challenges. So I just applaud you And I appreciate you spending the time today talking through the story. And, you know, sharing some of your your thoughts and in your journey with the folks in the audience.

David Rabie 45:07
Thank you so much, Nick, that that means a lot. And I’d say part of what makes the journey great is having investors like you along for the ride. And they are to appreciate the journey and to help us through it. So thanks for thanks for being such a strong supporter from day one. Awesome.

Nick Moran 45:22
Well, best of luck with everything as you know, this, this crisis evolves. But you know, thanks again for the time and we’ll talk soon. Thanks, Nick. Take care take care.

That we’ll 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 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