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Max's intro (00:00)
Hi everyone, this is Anu, partner at YC. Today we have Max Rhodes, founder and CEO of FAIR. FAIR went through YC's winter 17 batch and YC continuity also led FAIR series CDRON. Very excited to have you here, Max. Excited to be here. So we have a lot of questions from our Twitter audience, but I think we're going to touch on three topics, broad topics today. One is the early days of FAIR and two will talk about scaling and third will talk about fundraising and how you choose partners. So we'd like to start with the first one, which is the early days of FAIR.
Max'S Journey With Faire And Insights On Business Scaling
Leaving Square and coming up with the idea for Faire (00:34)
You know, it's not often we see companies trying to disrupt retail and local retail, especially given the strength of Amazon. So can you talk a little bit about how did you come up with the idea of FAIR and what were some of the early days like, which gave you conviction that there was something here to build? I went against the advice of almost everybody I knew and left Square about three years ago specifically to start a company and I explored a bunch of different ideas. And did everyone tell you not to leave Square? Everyone told me not to leave without like a burning need to start a company. Like don't start a company, just start a company. And I actually think in retrospect, they were probably right and I think we got kind of lucky. But I just plowed ahead and we explored three or four different ideas in the process. And it was actually around the third idea that we were exploring. We were trying to sell dental drills from Brazil. How did that happen? From Square to dental drills from Brazil. One of my co-founders had a connection in Brazil to this dental drill manufacturer. And it was like diamond coated and it didn't, it was supposedly didn't cause pain and it was quiet. And this was actually the moment where I realized this is why people tell you not to just go leave to start a company because you end, you can end up trapped with an idea that you're not really that excited about, but you feel this pressure to do it because it's what you set out to do. We actually started to try to raise money with it and it got bogged down in the legal questions of can we actually extract the IP from Brazil. And I remember being on the phone with Marcelo, my now CTO, after one of these hour long discussions where we were racking up crazy legal bills. And just saying like what are we doing? Why are we trying to sell dental drills? This is not what we should be doing. We know how to build software. That's what we did at Square. We built Square Capital. We built Cash App. This is what we know how to do. And so we made the very difficult decision for our third idea to just scrap it and start from scratch again and decided to work on what ultimately became fair. And the reason why we picked this idea was I had this experience of introducing this product called the Bluntumbrella to the US market. It's a sign umbrella from New Zealand. And I knew firsthand how painful the wholesale market was, how hard it was to get products into stores. In the whole time that I was doing Blunt, because I did it while I was on the side at Square, I kept going to these trade shows and kept thinking like there really should be a better way to do this. I wasn't sure if local retail had a future. You mentioned the whole Amazon thing. And to be honest, that was kind of where my hang up was. And so I started, I just decided, I know this problem exists. Like maybe it's a small market, but let's just start somewhere. And I started to dig into the data and lo and behold, local retail actually is making this comeback, which now is starting to get a little bit more attention now. But at the time, it was just sort of stitching together census data. Local bookstores have been coming back since 2011 since borders went bankrupt. Pharmacies are coming back. Grocery stores are coming back. You're seeing this renaissance of shop local in communities all across the United States. And so that, we started to build confidence that like, okay, maybe there is something here. Maybe there is a wave that we can ride here if we can figure out how to crack the actual problem itself, which is the wholesale problem. And so I started doing customer interviews. And it was in the customer interviews that we uncovered, I think a pretty interesting insight, which is if you ask a local retailer, if you ask like a small shop owner, what's your favorite part of your job? They'll say, finding new products. That's what gets them out of bed in the morning, connecting with makers, bringing new products into their stores. And that's what excites their customers too. It's that moment of somebody walks in and sees something, oh, this is so cool. Where did you get it? And that delight that they see in their customers, that's what it's all about for them. And then if you ask them, well, how many of the products that you carry are new? And most of the time, it'll be somewhere between 20 and 30%. And that was where I started to dig in of, well, why? And the answer always was because it's scary to bring on new products. If you're a local retailer and you're buying new products that you've never carried before, you don't know if it's going to sell. You don't have a relationship with a vendor, so they're not going to give you terms. So you're going to be shelling out your cash, which is a very precious resource for a small business. And if it doesn't sell, you're stuck. And so you're one bad buying season away from going out of business. And so they have a portfolio approach where they mostly stick with what they know is going to work and then occasionally spice it up with a few new things. Even though the new products actually generate a lot of sales. Yeah, exactly. When they get it right. When they get it right. And even though that's the fun part of the job, yeah, it's very important to get it right. I realize why nobody had ever figured out how to move this market online, it's because they're going to trade shows to solve inventory risk, to like get over that fear so that they can touch and feel the products and really feel good that this is something that's going to do well in my store. And that ultimately led to us thinking, well, how can we fix this? How can we help them fix their inventory risk? And that's where we really drew upon the square experience where we started thinking, you know, what has changed. And one of the big things that has changed is that all of this data about SMBs, about their inventory, about their social media presence, about who their customers are on both sides of the market, both makers and retailers, that's now available online.
Changes to SMBs in the past five years (07:05)
Really for the first time ever, it's changed over the last five years. It's only in the five years. Why did it, what prompted it to happen on in the five years? SMBs started adopting social media. So they started really relying on Instagram, Facebook. And then they started adopting cloud based point of sale systems, Square, Shopify, before Square, most point of sale systems were on premise systems. And so the data lived on a server inside the store, if they even used a point of sale system. And a lot of times it was just like paper and pen with a cash register. So it was this confluence of social media e-commerce presence as well was a new thing with Shopify. So it was this big wave. And we a little bit made the bet based on our experience from Square that we could take on the inventory risk for these stores and eventually build machine learning algorithms that would predict what would sell where and actually get better at managing inventory risk for the store looking across thousands of stores than what you could do if you're an individual store owner. Yeah. And it's actually fascinating because at YC we often say, especially that early in the batch, it's about founder market fit. So it's about solving your own problem which you had from your experience having launched Blonde de Brilaz and the unique experiences you all shared from Square to really understand the SMB market. Now, you know, some of the things you described as part of the unique insight, which was like people like to touch and feel, people want to manage inventory risk, you know, still exist even if you move online. So can you explain what is fair?
What is Faire? (09:05)
What does it do? And how does it help solve some of those? Yeah, of course. Good question. If you don't have that context, it's important. So fair, it's a wholesale marketplace. We connect small retailers, one to 10 location stores, the kind of stores that you'd find on Main Street all across the United States that are coming back. And then we have makers, craft brands, smaller manufacturers on the other side, kind of the maker revolution types of folks. And we connect them together with this wholesale marketplace. So rather than going to trade shows or hiring sales reps and doing this all face to face or over, you know, with pen and paper, they move their whole business online and, you know, it works just, it's like a wholesale version of Amazon. And the key insight or the key differentiator for us is actually something that's been used in consumer e-commerce for decades to move consumers online. It's free returns. So we're just replicating that playbook that's been used before. So that's how they do the touch and feel, because you give them free returns or a set duration. Yeah, exactly. And I think the free returns matters more in our business, even than it does in the consumer business. Because of that inventory risk that I was talking that I was referring to earlier, it's also harder to manage. So free returns really would not have been possible even five years ago, I think. But with all of this data, we're able to predict what sales were. And that's how we're actually able to. So the better matching will help you also solve for that. I don't see a share. But then you offer returns so that they still have the touch and feel. That's right. That's right. So it's a value proposition that both draws the retailers in. And then it also actually makes the system smarter. And it then turns into another value proposition, which is we are seeing what's selling, what's being returned. And we can then use that data to help retailers make smarter buying decisions. So if you come in and you place an order and you return part of it, we then know the types of products that don't do well for you and we'll recommend you other products that are more likely to do well. Yeah. And so what is your vision for fair? What do you think happens to local retail five years from now or 10 years from now, given what you are trying to do?
Max’s vision for Faire (11:25)
Yeah, I think that I think that local retail has some big advantages over particularly big box retail, but even over Amazon. And the reason for that is these retailers have spent the past 50 years figuring out how to compete with larger competitors that have larger sortments, lower prices. And the ones that survived were the ones who evolved and figured out how to offer more curated assortment, better experiences. A lot of the things that people are now talking about is the future of offline shopping. That's what local retail has been doing for the past 20 years. And that's why they're doing well. At the same time, they've evolved. The industry around them has not because the technology energy is basically ignored this whole space, sort of assuming Amazon's coming. It's going to go away. Like I did two years ago when I was kind of hesitant to move into it. And so what I believe we're going to do is we're going to accelerate the shop local movement by basically eliminating a lot of the advantages that big box competitors have traditionally had over retailers. If you're a big box retailer, one of the ways that you made life hard for small retailers is you had more data. So you had your your assortment's much more optimized. There was less cost in your supply chain. So you could offer lower prices. You were able to get capital. So you had larger assortment. And these were things that smaller retailers never had. You also actually have free returns. Big box retailers have had free returns for decades. It's called buybacks. And so we're leveling the playing field for these small retailers. And so you have the tandem advantage of this seismic shift in consumer sentiment towards shopping local and then the leveling the playing field with technology. And I think the future of retail is going to be local. If you look back over thousands of years, trade and retail was about community. Trade is what brought us together in the first place. I would trade some pots to somebody who may be a great blacksmith. And that was the economy. It was local. It was about community. And I think over the course of the past 100 years, we lost that a little bit. And I think that people are craving a return to that. And I think we can help use technology to support that revival of community and that revival of local shopping. No, I agree. I think the shop local movement is real. And also access to unique supply is real. And you're also saying a lot of makers, individual makers, trying to establish themselves in that regard. So I think that movement is definitely happening. Now, let's think about your one for fair. So a lot of fun, quite a few founders have a really good vision and a clarity of thought. But when it comes to execution, you still have to go through the ups and downs of the motion.
Finding product/market fit (14:40)
So talk about the first year at fair. Right from when you went through YC demo day and post demo day, when did you really start thinking you have some early signs of product market fit? You clearly had founder market fit. But when did you really actually see that? I would say it came in waves. There were definitely early signals. Customers, they would lean forward in customer interviews. And then I remember our first order, I brought a printed sheet of paper with just the names of the products and the prices. And I said, if I let you buy this on consignment where there's no inventory risk, do you want it? And the retailer said, yes, I want all of it. So that's how you made your first sale? Not on a website, not on this vision that you have laid out for fair. Okay. So you took a print out and went with store was this. Wink SF in Noe Valley. Okay. Okay. Yeah. And that was the way we got most of our first, probably 10 customers came that way. As we started to try to scale the business, we definitely started to have doubts because it just was feeling too hard. Like I could just through sheer force of will, sit somebody down and get them to buy the products. But once we tried to sell sales, it was, yeah, it became, it became more difficult. And once we hired a couple more salespeople, you know, it just every time we added a little bit more friction to the process, the excitement and the conversion rate and everything just started to deteriorate. So did it start to slow down? Did it manifest into slower growth or was it that you could imagine? A little bit, but it wasn't accelerating and it just, we could feel it. It didn't quite feel like this is it. It didn't have the reflection point where you hit escape velocity. Exactly. And so we played around with a bunch of different value props. We did away with the net 60 payment terms or the net 90 payment terms. We started trying discounts. And I remember at one point we were at a trade show and I was, I literally was trying to give the products away. And it turns out trade shows are a terrible venue for us because the customers tend to be a little more old school and they just didn't want it. They didn't want to buy online and, Well, they're trying to see other products that are available. Exactly. They're there to touch and to feel. They're not there to order on a computer. We went to the New York Now trade show, which was actually where I originally got the idea of launching blunt umbrellas. And it was there that we were trying all these dumb value propositions, just throwing stuff against the wall, trying to sell a dollar for 90 cents. And I called Daniele, one of my co-founders, and I said, it's not working. I think we should go back to the try before you buy inventory risk thing because all these other things aren't working.
Switching to try before you buy (17:40)
And he said, yes, let's do it. I think you're right. And so that gave you more convection. Yeah. Yeah. We were on the same page that he also felt like something was off. And we went in that morning to the trade show booth and 9am retailers started showing up and I started pitching try before you buy. And they started seeing the products that we had. Literally in one day. You just switched. One day. We sort of wandered in the wilderness for a few months, trying different value propositions. And honestly, not maintaining our conviction while Olivia was building up the assortment. And it turned out the reason that we were struggling was we just didn't have enough supply. We didn't have the right supply. The value proposition was amazing, but without the supply, it didn't matter. And when you combined the two together on that morning, it was magic. And how much did the growth change after that? Oh, it was overnight. Overnight. Yeah. And you could, again, you could see it in their faces. People were spending hours shopping on the site and buying and placing big orders. And I called Danielle and I said, this is it. Like we did. Yeah. Yeah. And we were invite only at that point. We'd been all hand-to-hand combat sales. And we decided, this is it. Let's open it up. Let's launch. And so it took us about two weeks to rebuild the website and pull it out of invite only. The dangard we have a website from printouts. Yeah, exactly. Advanced a little bit from there. And I was funny enough on my honeymoon, the week that we launched. It always happens. It always happens that, yeah, you're always on your honeymoon. Some honeymoon. And I remember like sort of sneakily checking the metrics from the Galapagos. And it was just green, just all green every day, 10%, 15%, 20%, 30%. And we went from doing $100,000 in sales in August to a million in October. Oh, wow. Just in a span of three months. Not even three, two. That's really good. I think many companies in YC, we've seen who have actually found really strong product market fit, like go through one of those defining moments. And if I remember for Instacart, it was actually switching from search for a tomato to search by a store. Wow. I didn't know that. It was literally, because people buy groceries by looking at a store. If you're buying shampoo, you know, whether you want Pantene or something else, but your groceries, you know, whether you go to Trader Joe's or Whole Foods or Safeway. And so switching to buy store search like dramatically changed the buy. Yeah, it's little things. And I remember asking Mike Moritz at Sequoia event, who obviously an amazing investor and has seen a lot, I think was on the board of Instacart.
What separates the great companies (20:50)
Yes, he's still on the board. Yeah. And I asked him like, what sets apart the great companies from, you know, those that don't do as well. And he thought about it for a minute. And then he said, constant application of force. They have a vision and they just keep pushing against it. And I think that's a great way to describe. That's part on, because I think one of the founders, you know, last week, he told us this, which is from the outside, it feels like we were genius in figuring out all the strategy, but only the inside. We know we tried 100 things and the one thing that worked. We didn't know what's going to work. That's right. So I think like that's a great way to like, you know, move from the early day story to scaling people management. Because clearly now you have very strong product market fit. And you are, how many people do you have right now? A little over 100. A little over 100. Okay. So the second phase of company building is really about scaling people management, right? And especially scaling yourself as a CEO. What has been your biggest learnings so far, as you've scaled as a CEO?
Scaling as a CEO (22:00)
One or two things that you'd love to share with the other founders. So it's been an interesting experience for me because I came from a product management background. I had just a tiny bit of people management experience at the tail end of my time. How many people did you manage at score? My last team, I think I had seven or eight. But that was for maybe six months. Prior to that, it was just all product teams. And when you're a product manager, you're not managing people. You're managing through influence and you're managing through, you know, just convincing people desperately to try to do what you want them to do. And so it took me some time to figure out what was different about people management. And I think one of the things that I really struggled with was I didn't know what kind of relationship I was supposed to have with the people who worked for me. Can you elaborate on that? Yeah, as a product manager, it's all about building really strong relationships and building trust and building credibility to get people to listen to you. And as a founder CEO, especially, people will listen to you no matter what. Up to a certain point, obviously. But sometimes there's a lot of authority sometimes to a fall. Yeah. And they're worried about bringing it up with you. Yeah. Yeah. And I didn't know how to negotiate that. And it felt uncomfortable at times. And I think the thing that I really struggled with was, is it okay to build relationships with the people that work for you? You mean relationships outside of work, like friendly relationships? Yeah. And just like, I kind of, I think I put up this wall. I had a couple early experiences where we had to let a few people go. And that was really, really hard. And I think that led me to feel uncomfortable building a relationship. Because if I have a relationship, then I'm not going to feel comfortable giving direct feedback or potentially having to make a really hard decision if I have to. And I ended up hiring an executive coach, Schifali, at the recommendation of one of our board members, Kirsten Green, who walked into our office at our first board meeting and pulled me aside afterwards. And she said, "I think you need to lead a ship coach." Because I think everyone's terrified of you. And I love Kirsten. She's amazing. Yeah. She's amazing. Yeah. And so I hired a leadership coach and I worked with her and I read a book called Radical Cander. I think that was really transformational for me because Radical Cander, basically, the whole premise is you have to build relationships with the people that work for you. Because you need that trust. Because without that trust, they're not going to feel comfortable speaking up. They're not going to feel comfortable being held accountable for results. I think the word for it is "anoxiously aggressive." When you give feedback and you don't have a relationship, you're being obnoxiously aggressive. And it really puts a person in a defensive place. If you give feedback when you have that relationship, there's trust. They know that you have their best interests at heart. They're going to take it well and they're going to implement it. Feedback is a gift, right? Feedback is a gift. But then it's delivered well. It's taken well. Yeah. And the stronger that your relationship is with the person, the easier it is to give that feedback. And so that made a big difference for me. I calmed down a lot.
Calming down (26:00)
Talk about that. When you say calm down a lot, I often think it's really hard to be a founder. I think we talked about this briefly before. This started, which is, this one part of the day, something goes well and this another part of the day, something doesn't go well. So what's the secret behind coming down? How do you calm down? So there are some tactical things that I do. I meditate. Every morning at 8 a.m. I lead a meditation for 10 minutes using Headspace with anywhere from 5 to 15, 20 people at the company. That I found helps a lot because it just makes you more aware of your own state of mind. So part of it is just developing that awareness of being mindful of your own state of mind because I was so stressed out that first year and a half. And that was also part of what created that wall is like I didn't even feel like we could talk about anything other than work because if we weren't thinking about work, then we might fail. Yeah. I remember when we did the CVC around and I think you had taken up two week vacation, someone on your team message just saying, "I think we had to exchange docs." And someone said, "Max has finally taken some time off." It was my honeymoon, which was five days and I was checking metrics more than I should have. And that was basically it for that first year and a half. And yeah, there was just that feeling of so many, I'm sure every founder is familiar with that, like existential dread that you carry around and that is a weight that weighs on the whole company and it weighs, especially on the people that report to you. And I think it hinders performance. I think that it really, people can't do their best work when they're under that much stress. And then honestly, part of it was we kind of got through the woods. Yeah, beautiful and strong product market. Yeah. And we figured out the business model and it became less about survival and it became more about how big can we make that this, which is a lot more fun and a lot less stressful. So part of it was circumstantial, I think. And then part of it was just sort of coming to terms with if it fails, so what? Yeah. Yeah. You know, like letting go of that fear of, you know, if it fails, so what? I'll pick myself back up and I'll try it again. Because I can't imagine doing anything else. I really, really love this job. And so if I have to do it again, I'll do it again. And that also I think was helpful. Yeah, I mean, I think Jack and his advice to Sarah and the note that he published on Twitter did say it's okay to fail publicly. Yeah. So let's talk about people because that's clearly the next element of scaling, right?
Faire's first hires (29:10)
One, you figured out strong product market fit. You have a very good business model and a vision that can really, you know, if the company is able to realize it's full potential, it can be a huge opportunity in enabling more legal retail. But it comes down to the team at the end of the day, right? And you're scaling from 20 to 70 to now about 100 and probably in a year and another 100. So who were your first 10 hires? Our first hire, her name was Katie. She was a she's our founding designer. She was there from the very beginning. I knew that design was going to be really important for us. I knew our customers were designers. I knew from Square that design is so important in small business because small business owners act just like consumers. They make decisions emotionally. If it's not easy, yeah, they're done. And so I knew that we needed to build a great experience. I knew it needed to be beautiful. I knew we wanted to create a strong brand because I'd seen that work at Square. Yeah. I know you guys have a very high bar for design because your office looks so beautiful. Yeah. It looks like a local radio star. Yeah. That's Katie. So one of your first key hires were design. Yeah. Design was probably the really, really important hire. And outside of engineering, who were any of the other key hires you made in your first hire? So another really important hire was this woman Olivia. She came from Bain and Company Management Consulting Firm and she sat me down in the first interview and she said, "This is how your business works." And she waited out. She was right. It was like spot on. She understood it. And it's a complex business to really get all of it. And she managed the assortment? So she started out managing the assortment. And she did a phenomenal job with that. And really, we were missing that. That was without her figuring that out. I don't know what happens because we just did not know what our retailers wanted because that wasn't, we knew small business. I knew the problem from the wholesaler perspective, but I didn't shop enough in local stores. That was one of the key missing ingredients. That is an important point. Because all three co-founders, I don't know how much experience you had shopping local retail. And you needed someone early on. We really needed somebody who had that. And she brought that. Once we were starting to scale and we were live, she took over Facebook advertising. And she'd never done Facebook advertising before. And we tried to use a contractor and it was a mess and it wasn't working. And she just took it over. And like a week later, we were doubling our growth rates through Facebook advertising. And at that moment, I was still product manager and CEO. And it wasn't working. And Danielle and Marcel were telling me, "You were doing a terrible job as a product manager. We need a higher product manager. I didn't want to hire an experienced product manager because I think in early-stage startups, it's really hard to find a strong outside PM. And so I decided, let's give Olivia a shot. And she became our first PM. Oh, fantastic. Yeah. And when you get the right hire, they actually scale really well. Yeah. And honestly, she's now better than I ever was, which is a really, really cool thing. That's awesome. Let's talk about, so that's the first 10 hires, which is really important in the early days of the company. And every company has this unique story. So clearly in your case, it was both the design as well as the assortment plus your PM, which Olivia brought, which was key. Right. Actually, like some FinTech startups, when I asked them, I think both in Stripe and Brex case, the CFO and the GC were part of their first-time hire. So, you know, depending on the company and the space you're in, it's important that they're part of the first-time hires. But let's switch gears a little bit to execs, right? Because that's the second hardest thing that a company really struggles with.
Faire's first executive hire (33:10)
Who is the first outside executive that you hired and talk a little bit about the interview process and how long it took you to get them? I read somewhere that an executive, the way you define an executive is somebody who consistently wows you with insights and results and doesn't need to be managed. Yes, that's right. I think it's a pretty good. I usually say if you have a working executive team, the CEO can go on vacation for a month and not much will happen. Not no much negative impact. I think that's right. And maybe when you come back, actually, you're it's like crazy. But the first person we hired outside who came in and was just immediately that was this woman, Shan, who we actually tried to hire in January of 2017 and she turned us down. She and I were in the same class at Bain. That's right. She was, she ran customer support at Tepingo and content at Tepingo. We interviewed her, I mean, I knew her well and we put her through a pretty rigorous interview process where she came in and met with four or five people on the team. We had her spend a day on site doing a bunch of exercises with us and sort of digging into the work because I knew her as a friend and I did and then we did pretty thorough reference checks. I talked to four or five people that worked with her at Tepingo and all of them said, you know, she is a, they said, she's just a force of positivity and enthusiasm. She's phenomenal with process and that and she knows how to run a customer support team. We missed her the first time around, she turned us down and I kept checking in, texting her, meeting with her. I met with friends of friends to try to like get her. That's some little stocky. Yeah. Yeah. It was a little creepy by, you know. That's not what I've heard a lot of CEOs do that. Yeah. Yeah. It's, I do think somebody said that the best CEOs never lose candidates. Yeah. Well, they lose, but they, you know, like you, they keep trying. That's the mentality. That's the mentality that you just don't lose a candidate and that stuck with me and that was the approach that I chose. I knew Shan, I knew Shan was the person for this role. We, customer support was going to be so important for us, especially as he started to scale and I knew we needed her. We needed somebody who was warmer and could really be a positive force of energy. And more calm. And more calm. Yeah. Shan, not exactly calm, but, okay, got it. But, but she's warm and she's just, you meet her and she just fills the room up with, with warm in somebody who could scale customer support. And she came in and we were, we were in a tough spot by the time she joined on customer support side, you know, turnaround times were out of control. We were hearing all over the place from everyone that people were complaining about. Our, our NPS score was going down and within like a month, we had 12 customer supporters and they were all amazing. We went from three to 12. And in a month, maybe, maybe two months. Yeah. And how did the NPS change? And immediately NPS stabilized customer satisfaction scores shot up. And while, while she was scaling up, we unlocked this growth channel that where we went from doing, she joined in June and we were doing like 1.5 million or maybe one, maybe two million and in sales a month in sales a month and three months later, we were doing seven. Yeah. And normally through those periods of growth, like I saw it, this happened to Coinbase, this happened a little bit at Square where you just customer support all these balls apart. Yeah. It's the one that is the one that is the one that you're in. Yeah. And for us, it actually got better. Yeah. Our metrics improved through that period. And that was, and then after that, she took on our warehouse where we deal with returns, like just, I can keep throwing more and more out at her. She's about to go and maternity leave for four months, which will be an interesting experience. As long as the processes are in place, she's in a scale really fast. I actually think it's going to be fine. Because she's hired really well in her neither, which is another definition, another thing that executives, and I haven't had to worry about customer support or anything that she's focused on at all since she joined. Great. So, you know, we talked about early days scaling people, want to switch topics a little bit to fundraising. In the evolution of a company, at different points in time, company does need capital to scale for growth.
Fundraising and fundraising advice (37:55)
How did you think about fundraising and what did you look for a partner each time you approached fundraising? Well, from the very beginning, we knew that this was going to be a business where capital was going to be a weapon because of the payment terms and the consignment model. We started thinking about fundraising pretty early. We raised before we even had a product. We raised a little bit of capital with the idea that the business model was going to require that. And then we raised again after YC. You raised your city's day pretty quickly, right? So, yeah. So, we did our pre-seed or whatever you want to call it these days. It was like 500k. Yeah, I don't know what it is anymore. In December of, right before we started, working on it full-time, in December of 2016. And then we raised our seed in March of 2017, right after YC. And we raised from Sequoia, Co-Sla, and a little bit from Kirsten at Forerunner. And then six months later, right after that inflection point, where we went from 100 to a million, we raised our RA from Co-Sla and then Kirsten stepped up in Co-LAD. I find fundraising to be a pretty big distraction. I like making the process quick and short and just getting back to work. And if we can create a really quick competitive process, all trade maybe a little bit of upside on the margin to be able to run the process quick and find a partner that we built a relationship with that we feel really good about. And so, that's what we did with the B. We knew capital, especially heading into the holidays, was going to be important. We didn't want to get stuck in a place where we were throttling growth. It felt like, and it continues to be the case, that the opportunity in front of us was even bigger than we realized. And so, we really wanted to build up a war chest and take advantage of the opportunity ahead of us. And so, we ended up raising, in the span of about three months, about $100 million. But what advice would you give a founder if they came to you and said, "Daddy, you've had good, great success with fundraising." What would be the one or two tactical or pieces of feedback or advice you'd give a founder? Momentum is really important. Take advantage of momentum in the business and raise when you've got a lot of momentum. I also think one other thing you guys had where was actually the clarity of thought and vision on how to build a big business and what it is. Many years out, not just the CO versus next year, which I think a lot of founders actually don't spend as much time. And so, you can get caught up even in growth runs about metrics, which is very important. But that's about performance to date. And the question about potential really relies on how articulate you are with the vision. Having a big vision, and that's something that I learned from Jack at Square. Jack was always thinking just huge about what Square could be. Even it was just a little card reader. He was talking about how we were going to change the world. And that's something that we've tried to do, which I think, that's just what gets me out of bed in the morning. But I think it also helps with fundraising because that's what gets investors excited. The other thing I will say is, not all money is created equal. And we've been really careful about bringing on partners that where there's trust, where I feel like they can really help us in some meaningful way, where I like spending time around them. That's like you're going to end up spending quite a bit of time around your investors. So you want to feel good about that. And then I do think that the brand name matters. That was something Tony from DoorDash told me early on was, it sounds kind of like, it sounds like a kind of a, I don't know, like an annoying thing to optimize for. But it really does make a big difference to how. Why do you think it matters? So in big brand name investors, it matters with recruiting. Yeah, that's true. It's very true. Where people are looking for signals and then it matters for follow on rounds. You can create this halo around your company, this excitement, this hype around your company that I think can be really powerful. Especially given self-fulfilling prophecy. Especially given Silicon Valley is so competitive, even for talent, right? Like you can just hire engineers that you want. Yeah, don't underestimate the importance of winning talent. That's, and raising a lot of capital from the right, from the right investors can really help with that. Got it. Great. So we'll do a very small rapid fire round from some of the Twitter questions that we've had from our followers.
Discussion On Max'S Field Of Study At Yale
Ryan McCarthy asks - Why did Max study history at Yale? (43:00)
One Twitter follower, Ryan McCarthy wants to know, why did you study history at Yale? I do believe that history repeats itself. If you can develop pattern recognition around the way things have unfolded in the past, you can actually predict the future to a certain extent. It's actually even more true in investing. Yeah. Yeah. Knowing history is super important. Yeah, I bet that's right. And so, yeah, really understanding of having a firm grasp of the past, I think, gives you more of an ability to understand the present and to lead a great life. If you know where things are headed, especially if you want to be an entrepreneur, I think that can be, it can actually be really powerful. Yeah. Well, fair is bringing local commerce back. Yeah. Yeah. The second question is, why do you think Square Cash went on to become a successful app?
Max'S Analysis On Square Cash'S Success
Why does Max think Square Cash became a successful app? (44:00)
I think that it was first of all really focusing on the experience and nailing the experience. The day before we were supposed to launch, Jack made us delay launch by two days in order to change the color of the app because he thought the color was too drab, and people were freaking out about it. Who knows if that ended up actually being the thing that led to Cash's success, but it was that sort of obsession about the details of the experience, particularly on the consumer side, really being in the details and recognizing that all you have is the experience at the end of the day. That is all that customers know you for. In opposition to that is we recognize that the product isn't just the product. Yeah. The product is the network. And so particularly after we moved to the native experience and got rid of the email client, which had a bunch of friction in it, we launched a really aggressive referral program where we were losing a lot of money. And honestly, a lot of us, including me, sort of wondering like, does this really make sense for Square as we're about to go public to be losing all this money? And Brian, Grassdonia, and Jack, to his credit, just constant application of force, just like kept going and said, we're never going to have a shot if we don't have people using this thing. And once we got it off the ground and really invested, that's when the power of network effects started to kick in. And once we were off the ground and made that bet, we were able to do all sorts of things with monetization. So it was having that clarity of vision and focusing on the experience and recognizing that you need a big network. And the product isn't just the software. For us, the product with FAIR, the product is the products. It's the assortment. Correct. It was not that obvious with Square Cash for the network angle, because Venmo has a strong network. And so what do you think made Square Cash still pull that off? Different network. We tapped into just a different network. It felt like Venmo was everywhere, because all of our friends used Venmo. And that freaked people out. But Venmo was only tapping into the 1% of the population that went to Ivy League schools and were fresh out of college, because it started at Penn. And so it just dominated and spread really rapidly in that kind of millennial yuppies. And then Cash is everywhere else. And as now, I think on pace to be bigger than Venmo, because that market's actually bigger. Great. Awesome. Well, thank you so much, Max. Thank you for your time. Thank you.