The Exchanges

Q the founding story with Godin, and I spoke to many of your investors, Greg included, who suggests I discuss the pivot with you. So with that in mind, a real fundamental question for me always is, how do you distinguish between passion and vision for, in this case, maybe grub with us and the mission ahead, and then the realization when something's not working? How do you manage that balance?

A Well, we basically threw everything we had to solve social dining. The idea of meeting new people over dinner was a Great idea in theory, but just like with the eBay example, there is just too much friction in this marketplace. You have product friction where people might not like the menu because they're vegan or gluten-free, or the restaurant is too far, or the price point is too much, or more importantly, the social friction of being afraid to put yourself out there. What if no one shows up? What if it's all guys or all girls? And to combat these points of friction, we tried numerous tweaks, including creating a separate app called Grub Tonight to kind of solve Some of these friction points, but we just could never get mass market adoption. And through all these tests, our passion for the concept wane, but our drive for building a business never died. We know a bunch of founders who got burnt out by failed startups, and they ended up getting acqui-hired. But for Daishi and I, for some stupid and stubborn reason, we just never let that happen. So pivoting was the only option in our minds.

AI assessment note: “our passion for the concept wane, but our drive for building a business never died.”

Q total sense. When you do make the pivot there, you have to have the incredibly tough conversation with investors, and a real question for me that you clearly did so well was how do you get existing investors, as you said, raise 7.7 million there with Grubb with us, how do you get existing investors back on board for the new vision that wasn't maybe what they originally bought into?

A Luckily, pivoting from group dining to sneakers is very natural and logical, as you can imagine. Totally. Um, lots of synergies there, but to be honest, a lot of investors wrote us off. If I were them, I probably would have written us off too. I mean, we raised over seven million dollars and had only about one and a half million dollars left. I remember when we pivoted to GOAT, I called a bunch of them, told them about our idea, and asked them if they wanted basically their pennies on the dollar back. Thankfully, no one said yes, and they basically All said, Hey, this remaining money is worth more to you than to have it returned to us. So basically keep it and good luck. And that's what happened. I mentioned this previously, but the very fortunate thing for us is that since Greg was on our board from upfront who used to work at eBay, he was the only member on the board at that time. And when we were all incubating the sneaker idea together, he was very supportive of it because of his experience at eBay. And he told us, Hey, I'm going to protect you against the partners from upfront because I believe in this idea and I know it can be big, and for him at the time, it was so that we can create eBay two-point-o for the next generation of consumers.

AI assessment note: “I called a bunch of them, told them about our idea, and asked them”

Q and now to the scaling journey with goat into the global brand and marketplace that you are now today for sneakers. In terms of marketplaces, supply is always kind of front and center at the beginning. We had Paul at canvas on the show and he said, you should give up if you don't have differentiated supply. I'm really interested. How would you respond to this? Let's start with that.

A So yes, you do have to have... Incumbents, but that doesn't mean unique product. For example, our differentiated supply was frankly having sneakers that weren't fake. You go to eBay today and type in Yeezy, and about 30% of the listings aren't real. How does anyone justify spending 500 dollars on something when there's a chance the product they receive isn't authentic and or as described? So trust and safety is an important cornerstone for successful marketplaces. I mean, you look at StubHub and ticketing, CarMax and used cars, So I'd encourage founders not to stress out if they can't get truly differentiated supply, and just think about how to bring trust and safety to alter or enhance existing supply.

AI assessment note: “our differentiated supply was frankly having sneakers that weren't fake.”

Q total sense. When you do make the pivot there, you have to have the incredibly tough conversation with investors, and a real question for me that you clearly did so well was how do you get existing investors, as you said, raise 7.7 million there with Grubb with us, how do you get existing investors back on board for the new vision that wasn't maybe what they originally bought into?

A Luckily, pivoting from group dining to sneakers is very natural and logical, as you can imagine. Totally. Um, lots of synergies there, but to be honest, a lot of investors wrote us off. If I were them, I probably would have written us off too. I mean, we raised over seven million dollars and had only about one and a half million dollars left. I remember when we pivoted to GOAT, I called a bunch of them, told them about our idea, and asked them if they wanted basically their pennies on the dollar back. Thankfully, no one said yes, and they basically All said, Hey, this remaining money is worth more to you than to have it returned to us. So basically keep it and good luck. And that's what happened. I mentioned this previously, but the very fortunate thing for us is that since Greg was on our board from upfront who used to work at eBay, he was the only member on the board at that time. And when we were all incubating the sneaker idea together, he was very supportive of it because of his experience at eBay. And he told us, Hey, I'm going to protect you against the partners from upfront because I believe in this idea and I know it can be big, and for him at the time, it was so that we can create eBay two-point-o for the next generation of consumers.

AI assessment note: “asked them if they wanted basically their pennies on the dollar back. Thankfully, no one said yes”

Q Can I ask, having scaled supply so successfully, what advice would you have for maybe other marketplace founders looking to scale from zero to one on the supply front?

A So we did it with a very hacky solution, and you have to do unnatural things and unscalable things in the In the beginning, we were the only seller since no seller would wanted to list on code because we were unknown. So what we did is that we went to Home Depot and bought a bunch of different tiles. So you see, you have like the wood tile, those one foot by one foot tiles, the wood tile, the ceramic tile, the aluminum tile. And back then we still took seller photos and the seller photos showed up on the app. So we would use the same exact product, but just replace the background tile and When we took the photos, so it looked like we had a bunch of different sellers in homes with wood tiling and ceramic tiling, but really it was just us taking those pictures in our office with a one-by-one tile. So it was just kind of hacking supply to get from zero to one.

AI assessment note: “you have to do unnatural things and unscalable things”

Q Yeah, no, I love that with Greg, but kind of speaking of Greg and the investors, kind of moving matter to the investor base that you have, I'm really interested, as time's gone on, you've had an immense array of investors wanting to invest in the company, How do you approach and think about the investor selection element, Eddie?

A So for me, one of my most impactful investors has been Maynard Webb. He's actually the former COO of eBay and on the boards of Salesforce, Yahoo, Visa, you name it. So this guy has seen some stuff and he invested in us in the very beginning at the tail end of YC. And what I love about him and how we select investors now is that even when we were failing, And he was super busy on all these demanding corporate boards. We Skyped every week for a few months so that he could give me advice and tell me all his awesome startup and corporate stories. So I just look for that in investor. And with Maynard, my crowning achievement is that a few weeks ago, he visited me at one of our flight club stores in New York, and he bought his very first pair of Jordans.

AI assessment note: “So I just look for that in investor.”

Q and now to the scaling journey with goat into the global brand and marketplace that you are now today for sneakers. In terms of marketplaces, supply is always kind of front and center at the beginning. We had Paul at canvas on the show and he said, you should give up if you don't have differentiated supply. I'm really interested. How would you respond to this? Let's start with that.

A So yes, you do have to have... Incumbents, but that doesn't mean unique product. For example, our differentiated supply was frankly having sneakers that weren't fake. You go to eBay today and type in Yeezy, and about 30% of the listings aren't real. How does anyone justify spending 500 dollars on something when there's a chance the product they receive isn't authentic and or as described? So trust and safety is an important cornerstone for successful marketplaces. I mean, you look at StubHub and ticketing, CarMax and used cars, So I'd encourage founders not to stress out if they can't get truly differentiated supply, and just think about how to bring trust and safety to alter or enhance existing supply.

AI assessment note: “I'd encourage founders not to stress out if they can't get truly differentiated supply”

Q the founding story with Godin, and I spoke to many of your investors, Greg included, who suggests I discuss the pivot with you. So with that in mind, a real fundamental question for me always is, how do you distinguish between passion and vision for, in this case, maybe grub with us and the mission ahead, and then the realization when something's not working? How do you manage that balance?

A Well, we basically threw everything we had to solve social dining. The idea of meeting new people over dinner was a Great idea in theory, but just like with the eBay example, there is just too much friction in this marketplace. You have product friction where people might not like the menu because they're vegan or gluten-free, or the restaurant is too far, or the price point is too much, or more importantly, the social friction of being afraid to put yourself out there. What if no one shows up? What if it's all guys or all girls? And to combat these points of friction, we tried numerous tweaks, including creating a separate app called Grub Tonight to kind of solve Some of these friction points, but we just could never get mass market adoption. And through all these tests, our passion for the concept wane, but our drive for building a business never died. We know a bunch of founders who got burnt out by failed startups, and they ended up getting acqui-hired. But for Daishi and I, for some stupid and stubborn reason, we just never let that happen. So pivoting was the only option in our minds.

AI assessment note: “through all these tests, our passion for the concept wane, but our drive”

Q No, I couldn't agree more. I think the most valuable thing is your time, so I think that's pretty inconsiderate. But I do have to ask, given the many rounds that you've said there that you've been through, what would be your biggest fundraising advice to maybe an angel investment in the early days who's kind of starting out on the fundraising journey? What would that advice be?

A So actually, when we were out of YC with Rob with us, we were a pretty hot deal, and we were raising our seed round, and we got money from anyone we wanted, from First Round Capital, Andreessen Horowitz, Ashton Kutcher, SV Angel. At that time, Paul Graham took us aside and said, hey, you're one of the few companies in every batch that has the opportunity to raise a series A. So we took that to heart, and we told our investors, hey, actually, we're going to raise a series A. We went out to raise, and we actually got a five million dollar offer from a top tier VC, and it was sitting for us, waiting for us at the table, and, you know, we saw the valuation. It was a fair valuation, but we actually said, Hey, you know what? We're going to kill it. We're going to hit all our metrics, and we're going to raise our Series A in 12 months at crazier valuation of this, so we're going to pass. And Paul Graham actually said, are you sure? You don't know what's going to happen with the startup journey, but we were so headstrong and foolish that we said, no, we're going to pass on the Series A. We're just going to do a seed so we can raise a bigger round in the future. Lo and behold, 12 months later, we go back to that same investor for a Series A, and our metrics weren't exactly what we said they were going to do, and they said no. So, For me, the advice would be, if you get great terms with …

AI assessment note: “if you get great terms with a great investor, just take the money.”

Q Can I ask, where do you think many go wrong? You said about kind of half YC falling apart because of co-founder issues. Where do you think many, and where do you see many go wrong?

A One place where I see that it goes wrong is ego, to be honest. When we saw our Y Combinator batch, there was a lot of people who wanted to be CEO because that was the position to be, rather than saying who's the best person to be CEO. I remember we had that conversation early, and we decided that I would be the CEO because I was just a better fit at the time to be CEO, and it was funny, when we did the upfront partner meeting for our Series A, I went out to go to the restroom, and one of the partners looked at Daishan kind of behind my back and said, who's the CEO? And Daishan immediately said, And that really solidifies kind of just our relationship and how our understanding and just communicating with each other what responsibilities each other has.

AI assessment note: “One place where I see that it goes wrong is ego, to be honest.”

Q No, I couldn't agree with you more. That must have been a humbling experience going back to them. At what moment in your life has served as an inflection point, and changed maybe the way you think?

A This goes back to junior high again, when basically the first person, non-family member, to ever make me cry was my junior high science teacher, Mr. Edwards. I wanted to Because for some reason, I was one of the smarter kids in the class, and I wanted to be cool and be kind of like the rest of everyone, so whenever he would ask me a question, I would just, like, pretend not to know it, and he knew I knew it, so he sent me straight. He basically yelled at me in front of everyone, sent me to the principal office, the first time I've ever seen the principal's office, and just said, what are you doing? You're clearly very capable. Stop acting dumb, and so he worked with me for the next few months, and just, he made me love the sciences, and I Did computer science afterwards, and just, I think that was a big inflection point for me to just, like, really, it's okay to stand up for yourself and do good and believe in yourself.

AI assessment note: “that was a big inflection point for me to just, like, really”

Q Can I ask, where do you think many go wrong? You said about kind of half YC falling apart because of co-founder issues. Where do you think many, and where do you see many go wrong?

A One place where I see that it goes wrong is ego, to be honest. When we saw our Y Combinator batch, there was a lot of people who wanted to be CEO because that was the position to be, rather than saying who's the best person to be CEO. I remember we had that conversation early, and we decided that I would be the CEO because I was just a better fit at the time to be CEO, and it was funny, when we did the upfront partner meeting for our Series A, I went out to go to the restroom, and one of the partners looked at Daishan kind of behind my back and said, who's the CEO? And Daishan immediately said, And that really solidifies kind of just our relationship and how our understanding and just communicating with each other what responsibilities each other has.

AI assessment note: “One place where I see that it goes wrong is ego, to be honest.”

Q Yeah, no, I love that with Greg, but kind of speaking of Greg and the investors, kind of moving matter to the investor base that you have, I'm really interested, as time's gone on, you've had an immense array of investors wanting to invest in the company, How do you approach and think about the investor selection element, Eddie?

A So for me, one of my most impactful investors has been Maynard Webb. He's actually the former COO of eBay and on the boards of Salesforce, Yahoo, Visa, you name it. So this guy has seen some stuff and he invested in us in the very beginning at the tail end of YC. And what I love about him and how we select investors now is that even when we were failing, And he was super busy on all these demanding corporate boards. We Skyped every week for a few months so that he could give me advice and tell me all his awesome startup and corporate stories. So I just look for that in investor. And with Maynard, my crowning achievement is that a few weeks ago, he visited me at one of our flight club stores in New York, and he bought his very first pair of Jordans.

AI assessment note: “how we select investors now is that even when we were failing”

Q on, want to discuss an element that we've Maybe forgotten in the pivoting process discussion that we've had, which is the founder relationship itself, often one of the main causes for startups failing. What do you think is so core to your relationship with Daishun and kind of a founder's relationship that can stand such upheaval as a full-scale pivot? What do you think is kind of those core pillars?

A Yeah, I have a fun story to tell you, but before that, you know, half our white combinator batch broke up right after the batch because of co-founder issues, so this is a huge and important thing. Daichi and I, we've known each other for 15 years now, so we're an old married couple, and we complement each other so well, but it wasn't like that in the beginning. I remember one day when we were starting our startup journey, building a startup, there's all these natural tensions that you might not talk about, but we decided to all play basketball with our friends one day, and for some reason, we were on opposite teams, and for some reason, we were guarding each other. So naturally, on the court, those startup tensions Came out and we started getting more and more physical, started pushing each other, started banging into each other when we were driving to the lane, and it turned into a full-out brawl where we were throwing each other to the ground, and our friends had to separate us. They were so scared at what was going on, and we were furious at each other, and the sad and ironic thing is that, I mean, well, the game stopped right then and there, but the sad part is that we drove together to the basketball court So we had to sit in the same car to drive back home and we got in the car. Friends were so worried, but I should not look at each other and we were just like ready to ge…

AI assessment note: “You have to be so aligned with your founder. You're going to get through”

Q on, want to discuss an element that we've Maybe forgotten in the pivoting process discussion that we've had, which is the founder relationship itself, often one of the main causes for startups failing. What do you think is so core to your relationship with Daishun and kind of a founder's relationship that can stand such upheaval as a full-scale pivot? What do you think is kind of those core pillars?

A Yeah, I have a fun story to tell you, but before that, you know, half our white combinator batch broke up right after the batch because of co-founder issues, so this is a huge and important thing. Daichi and I, we've known each other for 15 years now, so we're an old married couple, and we complement each other so well, but it wasn't like that in the beginning. I remember one day when we were starting our startup journey, building a startup, there's all these natural tensions that you might not talk about, but we decided to all play basketball with our friends one day, and for some reason, we were on opposite teams, and for some reason, we were guarding each other. So naturally, on the court, those startup tensions Came out and we started getting more and more physical, started pushing each other, started banging into each other when we were driving to the lane, and it turned into a full-out brawl where we were throwing each other to the ground, and our friends had to separate us. They were so scared at what was going on, and we were furious at each other, and the sad and ironic thing is that, I mean, well, the game stopped right then and there, but the sad part is that we drove together to the basketball court So we had to sit in the same car to drive back home and we got in the car. Friends were so worried, but I should not look at each other and we were just like ready to ge…

AI assessment note: “You have to be so aligned with your founder. You're going to get through”