The Exchanges

Q Alright, so sometime in 2012, you decide to move to Los Angeles to really build this business up. So, Basically, it is a, it's a test prep business, but you wanted to turn it into a software product?

A Yes. And so the, the primary reason was though the test prep kind of business model, the tutoring business model allowed us to get traction quickly and, you know, had real margins and we were able to get it to a certain scale. Um, we thought about how we could actually scale it beyond that. Like how do you scale a physical tutoring business to a 1002 thousand, really hard to do. So we're like, okay, we got to go software. Um, and so the reason we moved to LA was there's a small incubator in LA that essentially said, well, you know, we will write you a 25,000 dollar check. To go build the software around this. So instead of, you know, a giant tutoring business, we can actually have like a recurring subscription sort of software business. So that was the idea. The long story short was that did not work. Given who our customer was, you know, like a high performing student with, you know, parents that they want to figure out a way to get their students to get great scores. They didn't want to just pay for software. They wanted to look a, so a kid who got 2400 on the SAT in the eyes and sit their kid next to that kid and say, learn from this person. Um, and so even though the software we built Kind of had the same pieces that, um, the Excel sheet and the tutor did. People ended up preferring the tutor. So we realized that early on, ended up essentially dropping the software model en…

AI assessment note: “Yes. And so the, the primary reason was though the test prep kind of business”

Q right. You now had about a couple hundred people to deliver boxes to. And so tell me about that. Like, were you, did you, I don't know, like rent a U-Haul truck and drive to a bunch of different farms and then bring the stuff back to your apartment? Or did you like rent a space and start to like hand pack the boxes? Tell me about that first order.

A So that's almost exactly what I did. Um, I very quickly signed a lease on a small warehouse space in North Philly. I purchased two industrial refrigerators, I think from Costco, put it in the warehouse space. I was like, this is where I'm going to store at least the things that should be kept cold, like apples. So I had a warehouse space. I then went and drove to all these farms and started to pick up inventory to fulfill the 400 plus orders. Um, Three times a week, I'd go out, rent a U-Haul in the morning, drive out two and a half hours to the farms, spend the entire morning and afternoon collecting all the produce, drive back to the fulfillment center. And what I am doing is the first kind of 10 to 15 boxes, I packed on my own, and I actually delivered them myself. But I very quickly realized, while I could do the sourcing and those pieces, the fulfillment and the logistics was going to become impossible to do solo. So I put up initial job listings on Craigslist.

AI assessment note: “So that's almost exactly what I did. Um, I very quickly signed a lease”

Q And so tell me what, what was the new idea? What was it going to be?

A So it was somewhat of a technology idea. We created a gigantic Excel spreadsheet tagging thousands and thousands of SAT and ACT questions. We then used this to essentially create a personalized, uh, A program for kids who wanted to get much higher scores in the SAT and ACT, and so what we'd end up doing is, the program was you take a diagnostic test at first, we will then take that diagnostic test, see which 30 questions you missed, go to our bank of tagged, you know, 10,000 questions, and essentially go and build you a 10 week program personalized to the exact types of questions that you had been missing on your diagnostic. You know, early on we thought we were going to monetize this by building software.

AI assessment note: “We created a gigantic Excel spreadsheet tagging thousands and thousands of SAT and ACT questions.”

Q At what point, because this is now the fall, early winter of 20 18, do you go out and look for real money? Because you got about 150,000 from Edward, your sort of first investor, but you needed to raise a couple million at this point.

A Yes, and between kind of the end of the summer of 20 18 and the end of the year, between August and December, we kept growing at that same clip. So by the time December rolled around, we had a couple thousand customers. And The warehouse was getting packed. Um, I had gone from one packing shift to two packing shifts, so we had a, a six a.m. to two p.m. shift of packing orders, and we had a two p.m. to 10 p.m. shift for packing orders to the warehouse. Um, we got from two refrigerators to five refrigerators, so the business was growing. Um, and so in October, probably late October, I reached out to a guy by the name of Patrick, who was at a new fund called Green Oaks Capital. Patrick had been my desk mate at Apollo. The other thing I forgot to mention probably is when I built that landing page for these customers to sign up, they signed up into a subscription.

AI assessment note: “in October, probably late October, I reached out to a guy by the name of Patrick”

Q After, like, how much you spend. Okay. Yep. So, all right, you have now momentum, and you've got a lot of people and investors who are committed to this, and COVID hits. In March of twenty-twenty, how, how many, had you already gone into New York? Were you in that market at that point?

A We were in New York. So, so by March of twenty-twenty, we were in most of the kind of northeastern states, and we had opened up some of the west coast as well via that Salt Lake City facility. So, we were You know, semi-national in a lot of ways, but by that point in time, and it opened up a lot of different geographies, uh, and COVID hit. We, um, I mean, I think most businesses, uh, can, can say this, like, we were woefully unprepared for COVID, and specifically, I just think the, the, the volume of demand, uh, and how quickly it came, um, between March and April, our customer base almost doubled. You know, even an additional five percent in demand or 10% in demand in our business Requires, like, meaningful planning and execution, because we have to go get more inventory, get more boxes, make sure we have the warehouse space, logistics capacity, and that's for five or 10% of incremental demand.

AI assessment note: “We were in New York. So, so by March of twenty-twenty, we were in most”

Q But you didn't stay at that job very long, like, I think less than a year. So, so why, I mean, what, what happened?

A Um, so, so yes, I only lasted nine months there. So it was nothing about the firm itself or the experience. Um, I just got the itch to go do something else on my own, and I could not get rid of it. You know, most of my job was looking at these, you know, I'd say companies between fifty million dollars revenue and three hundred million dollars revenue. Um, and so by the end, my job was to go and like analyze them, underwrite them, and go and figure out whether Apollo would, would lend to them. Every single time that I would sit there and look at one of these pitch decks and build a model, I was like, I wish that I were on the other side. And so it got to a point where I was like, gosh, like, it's not like I don't like working here. I just, this itch is so strong that I feel like I have to go do something on my own. Um, and I reconnected with Darwish, who was my co-founder for Altair Prep. And funny enough, he essentially had the exact same itch, and he was like, gosh, I'm sitting here working in finance, thinking back to our Altair Prep days, and we did some things wrong, we did some things right, like maybe we should give that another go.

AI assessment note: “I just got the itch to go do something else on my own”

Q All right, so you've got this business going, Horizons, and I, and I mean, it's doing well. What, what happened to it?

A So, it's funny because you think that we would make the same mistake twice, but the big realization for Horizons again was we were like, okay, we have this thing at a couple hundred students a year, but going from zero students to a hundred students was easy. We couldn't see a world in which to go from a hundred to 500 or 500 to a thousand students. Without like multiple years trying to scale to multiple locations, multiple cities. Um, and I think we still could have done it, but I think, you know, both of us looked at each other and said, like, do we actually want to be scaling a physical, another physical tutoring, you know, education business? Um, and this is probably early. Um, we were doing horizons for three years now. It's a profitable business. We were making money from this, which is awesome, but it's really hard to scale and. Um, there was a period of time where we actually took on a few 100,000 dollars of external capital. We returned it two months later, the entire amount, because we looked at the type of businesses was, and we were like, this is not something that can withstand venture style funding. Like it just doesn't make sense. And so rather than disappoint a bunch of investors who want to see a, a 10 X on a, on a tutoring business, let's just give the capital back. And so maybe we should go look to see if we could do other things.

AI assessment note: “let's just give the capital back. And so maybe we should go look”

Q Other brands, like, that do the same thing?

A Other direct consumer brands that they're like, if you have a direct consumer dog food company or cat food company or smoothies, you know, any brand that does perishable direct consumer deliveries, I think our realization over the years has been like the third party infrastructure today for that is not very good. Um, third party infrastructure is still designed for ambient widget delivery. It's not designed for food. Um, And so I think what we have today, besides the grocery platform, you know, the items, the customer demand, I actually think what we have built that is in some ways even more valuable is the leading perishable fulfillment of logistics infrastructure nationwide. Um, and so we're starting to allow other brands to kind of piggyback off of our investments over the years.

AI assessment note: “we're starting to allow other brands to kind of piggyback off of our investments”

Q And how did you recruit them? How did you find them? Did you look for people with experience in food, people who worked at Whole Foods? Like, who were they?

A Yep, so the first director of ops hire that we had, she was a woman with, um, Specifically experience running a food fulfillment center. Um, one of the decisions that I made early with hiring some of these roles was I did not go super senior with my hires. And it was actually something that I kind of disagreed with multiple times with some of our investors over the years who oftentimes would encourage me to go like, hey, hire, you know, hire like the super fancy chief operating officer from XYZ, Uh, e-commerce company like early, and I never did that. I actually ended up hiring folks that were right for the stage that we were in today, not for the stage that we'd be at in three years. Um, there's pros and cons doing that, and I think for me, I needed someone that could do the job, not someone who could sort of build infrastructure and go hire teams to go do the job. And so the first director of hops, the ops that we hired Um, she had done the job. She knew how to manage a two-shift, you know, 30,000 square foot warehouse with some food.

AI assessment note: “she was a woman with, um, Specifically experience running a food fulfillment center.”