🎧🍌 From Zero to $150 Million Revenue in Two Years with Odeko Founder and CEO, Dane Atkinson
The magic formula for selling to SMBs, when you shouldn't listen to customers, doing things that don't scale, how to navigate pivots with your board, and advice for first-time founders.
Dane Atkinson is the Founder and CEO of Odeko, the all-in-one operations partner for local businesses. It’s one of the most under covered startup stories, going from zero to $150 in revenue within two years.
Dane has spent his entire career building products for small businesses, and this episode starts with a masterclass on SMB’s. Dane shares his magic formula and when you should and shouldn’t listen to your customers.
Odeko made a huge change to its business model a few months before COVID hit, which shut down all their customers (coffee shops) for seven months. The second half of this episode takes us inside the roller coaster going from a few million in revenue, down to zero, and then rocketing to $150 million two years after re-launching.
This is already the fastest listened-to episode of 2024 from all the sharing on socials, and I haven’t even sent this email yet! I hope you enjoy.
Timestamps to jump in:
03:54 Why every small business starts as a dream
05:03 SMBs: consumer product with enterprise sales cycles
06:54 Doing things that don’t scale
09:01 Biggest mistakes selling to SMBs
13:52 The magic formula for SMBs
22:05 When you shouldn’t listen to customers
25:16 Lessons running Squarespace for four years
27:12 Why simplicity is better for SMBs
28:58 How Squarespace ran the very first podcast ads
35:35 Lessons messing up his second company
37:46 How to demote an employee
50:30 Coming up with the idea for Odeko
52:05 Why VCs screw their portfolio companies
54:58 How to navigate pivots with your board
58:49 Surviving COVID lockdowns
1:04:27 From zero to $150m+ revenue in 2 years
1:12:10 Advice for first-time founders
1:14:18 Re-designing the food system
1:15:29 Why our food is so bad for our health
1:16:17 Empowering local makers
1:19:19 Why Odeko’s capital intensive approach has better margins
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Dane, how's it going? Welcome to the show.
Dane Atkinson:
Thank you, Turner. I'm happy to be here.
Turner Novak:
I'm happy to have you, too. I think we're going to hit on a couple of different topics.
First big one, you have spent, really, the bulk of your career, almost all of your career serving small businesses. I thought we could kind of do, almost, like a master class on SMBs, how to build startups for them, how to serve them. And I know one of the things you mentioned in the past is it's almost a formula to it. I don't know what the formula is, but I'm curious just how do you think about building products for SMBs?
Dane Atkinson:
SMBs are one of the most powerful parts of humanity. It's where 90% of inventions come from, and it employs 60% of the population. It captures pretty much all the dreams. Like anyone who starts a small business, they weren't doing it because they needed to, they need a job, or they wanted to go work at Goldman. They're doing it because it's a dream. They dreamed of making something better, or selling a cool scarf, doing a photo system, having a coffee shop, whatever it might be.
So they tend to be magnificent people. Almost none of them from a business background, for the most part, so they operate very differently than an enterprise sales cycle or a consumer sales cycle. And this is kind of why they become this mysteriously hard to access cloud, which scares off a lot of investors because it's this 30 million business-deep morph out there, that no one quite knows how to act to.
Turner Novak:
So it kind of turns into... It's like you're selling to an individual, super small ticket sizes, but it's selling to a big corporation that takes forever to close. That ends up being a pretty tough nut to crack.
Dane Atkinson:
Yeah, that's actually, part of the formula. Anyone who's building a product for that space has to think of their usability as consumer. You're building a consumer tool. You're basically, building Facebook. There isn't reliable expertise to lean on. They're not Excel jockeys. They haven't come from one kind of background or another, so simplicity there has to be incredibly high, yet it has to be as powerful, as oracle. They're not looking just to do simple things. They're looking to actually run a material business on whatever the hell you're doing.
So you have this weird stratum where you're trying to bring a ton of function to bear, at the same time to making it super easy to use, which is not easy. Then many entrepreneurs get caught on one side of the spectrum or another, and don't really end up solving the fit for those customers.
Those customers are also amazingly honest because they perform like a consumer, which seems like a curse, at the front end, but it's actually an amazing gift because when you start a small business or your own ad company, or whatever else and you're selling to the enterprise, you win with charisma, in the beginning. It's like, "Buy the CEO." You're bribing your way in. And in small business, one of the things in my own formula is I always create a council of customers in the official bullshit VC terms.
But essentially, I will find the first four, or five customers, and I will do anything to get them to use me because I need the data, and I need to know what we're doing right or doing wrong. Like Joe Coffee, in my most recent company, we screwed them over a hundred times. It was just horrible, the worst journey for them, but they stuck with us because we just kept on fighting to lean in. And you get an incredible amount of intelligence.
Turner Novak:
So you almost do these irrational things that don't scale, not profitable. You'll never be able to serve thousands, tens of thousands of customers like that, but it's just you do whatever you can. And, like you said, get the data, and figure out what they need.
Dane Atkinson:
Yeah, 100%. And they become your friends. Like Pearl B at Squarespace, she sold knitting goods, and she was one of our first customers, and we're still friends. Diamond Candles at SumAll. They sold candles with a diamond in it, and they became my friends. Joe and Birch Coffee are, the same ones for Odeko, where you need people at the beginning who will share with you where you're wrong, because it's incredibly important. And almost across the board, I'll give them equity, I'll get free, I'll clean their laundry. I'll go down to... I'll do anything and have done anything to help them where I can help them, and get them to be part of the family. Because also the problem is, with VCs is they're... Well, there's lots of problems with them, but they're not terribly gifted with tie-in.
So, they all have the same checklists they got to run through, and not only is that customer cohort the keystone to figuring out what the hell to do, but they're also going to be reused, over, and over, again. They're like, "Oh, yeah. Meet a customer, see what they like." And the VC will spend an hour, and think that's representative of the whole population, but they're actually totally bribed. It's very funny, like when we did Odeko, had some of our new, early investors go by, and meet some of our customers. And, basically, I gave the customer the script to what to tell the VC when they walked in because the customer's such a good friend.
Turner Novak:
Yeah, doesn't everyone do that? Even on the enterprise side, you're always going to give them talking points.
Dane Atkinson:
But enterprise seems more... I think the investors are less aware of the manipulation inside of a small business, because they just seem like you're talking to a coffee shop owner. Like, "This guy's not going to tell me something."
Turner Novak:
Yeah, "He doesn't know anything. I'm this smart VC that has..."
Dane Atkinson:
He doesn't know about money and investment. He's just a guy, running his business, which is insanely silly.
Turner Novak:
Yeah. Completely opposite, actually.
Dane Atkinson:
Totally, 100%. And they're actually, in a way, easier because they don't have all the governance problems that getting an enterprise customer to say, "You're the best thing ever," would run into. The flip side of the thing where they are really rough, because they won't waste their money on something that doesn't work, they won't waste their time on something that doesn't work, is that you have this amorphous cloud to continue to iterate on your product.
And one of the real risks as the founder is you'll think you've caught product fit too early. My last company, SumAll, which had a half a million small businesses on it, so it was pretty substantial. We totally screwed the business up. I totally screwed this up.
Turner Novak:
What happened?
Dane Atkinson:
I'd just got out of running Squarespace, so the investment community was bullish. They're like, "You can't do anything wrong." Which is stupid because I do tons of things wrong. So they're like, "Just go, go, go." And we built a product that gave small businesses their data, and it was beautiful, stunning, and worked really well.
And the customers loved it, absolutely loved it. They would spend all day on it. They would look at their income stream, and the number of likes they had, and the friends they had, but they wouldn't pay a penny for it. Why would you? It's your own data. I can't use the data. They didn't connect the value proposition because again, that's the gap between consumer and business.
They couldn't do an ROI calculation. And no small business can do an ROI calculation. That's another one of the hacks. So we got caught up in the fact that we're adding 50,000 small businesses a month, which is a lot. But the business model didn't work. So that's one of the things that you have to be really sensitive to when you're approaching small business is trying to actually, continue to iterate till you really get that product market fit.
The contrary to it was Squarespace had the product market fit down. We made people feel beautiful about themselves. They could tell their story, it really resonated. And for that, it fit their mental model, like "I'm paying for rent. I'm paying for advertising. I'm paying for something, already." So it was much easier for them to put money to it, which meant that flywheel worked really well.
And even to today, you can leave those businesses running on autopilot, and they'd still pump out money. Because once the formula works, the formula just works. You don't need to fight for the formula anymore. Same thing with Odeko, we don't fight to get shops. It just works. When you get the formula going, it goes. You have to make sure the formula is a fully functioning one, not just one that you think, "Maybe."
Turner Novak:
So, when you describe product market fit in the sense of an SMB, is it a tangible you're generating revenue for them that is clearly a magnitude higher than the cost, or you're saving them time or cost in some aspect? How do you define it?
Dane Atkinson:
So, from a business standpoint, you need to make sure that you're generating revenue, as the company servicing small business. Because the vote they'll give with money is very different than the vote they'll give with enthusiasm, and care, and curiosity, because, for them, money is hard. To get an SMB to pay you money is stupidly hard. And part of it's because they have incredibly limited time. Founders feel the same thing, that you get to work all day long, every day, and not even get to half your list.
It is actually the same exact problem if you open a coffee shop, same exact problem if you opened up a photography studio, same exact problem if you open up anything else. You just have no time because you're filling in everything, yourself. So they're very hard to get the attention up. And they can't do an ROI in their heads. They don't tend to come from a mathematical background, so if you go in, and say, "Well, Odeko started out as an AI platform four years ago when that was not cool." Then you go in and be like, "Hey, we can actually tell you, Joe, what to order so you don't throw shit out at the end of the night. And we can tell you what to order so you can make more money."
And I think we did the mathematics on it, and we're saving $5,000 a door, a month. They didn't want to pay 100 bucks for it because they don't trust it. Everyone says, "You're making tons of money. Look at all the time you're saving."
An enterprise customer, there's someone there who's got an FP&A team who will figure out, "Oh, my God. We're saving money, and it scales across our platform, and this is totally worth it." In a small business, they're like, "I don't feel it. This is month two. My ordering is already working well. Why would I be paying for this? So it's incredibly hard to get to them pay. And they also run these different filters.
You can see it. If you sit with a customer, and you ask them to pay for a thing, that enthusiasm they have for whatever you're bringing to them will hit this invisible barrier. It's almost like as they reach down for their wallet, there's a glass shield, because they know they're going to get SaaS fees over and over and over and over again. And they look at their bill, at the end of the month, and they're like, "Why do I have all these freaking services? I just can't stand them anymore." So, there's this little genie that pops up, when they're going for the wallet, and says, "Stop. Do you really need to do this?" And even though, before, they're like, "I love your product. I'm so..."
Turner Novak:
It's almost like a magnet. You know when you try to put two ends of the same side of a magnet together? It just doesn't connect.
Dane Atkinson:
So the formula to get small businesses to pay is you have to intersect something that they're spending money on already. Because then it feels like savings, and man, do small businesses love savings, because it's immediately tangible. So you're coming in, and you're able, in our world, to save on the price of a bottle of Oatly or if you're saving on a marketing spend, or if you're doing something that has a non-extended ROI, not a time savings, performance savings. These things can come into something that they're already tracking.
It doesn't require, "Okay, if I'm saving five hours a day..." Which, also, small businesses, a classic problem for them is they never estimate their own time. It's hilarious. If you ever ask them, "How much does it cost to make that pen?" And they'll be like, "My cogs are two cents so it's two cents." I'm like, "Didn't you spend any time on it?" "Well, does that count? What do you mean? My time matters?"
Turner Novak:
And it's crazy, that's their most constrained resource, usually, is just time.
Dane Atkinson:
100%. But they use that as the infinite pool to apply to problems. It's like being overcapitalized. It's like, "Throw time at it." So time savings, they'll feel it, and they'll appreciate it, but they'll have a really hard time paying for it. They won't do the obvious math in your head. You think they got to think of themselves as worth 30 bucks an hour, right? So if I'm saving them two hours, saving them 60 bucks, they're going to them 10 bucks. They don't do that. It's just, "Those are two hours I had at the end of the night, anyways, so I'm not..." But if you come to the same thing, and be like, "We'll make this five bucks cheaper where you get done." Done. That's a calculation I can transform in my head.
Turner Novak:
Yeah, they're, probably, I would hope, hawking their bank account. It's something they check pretty consistently, so if you can keep their bank account from going down too fast or go up faster, there's probably an easier sell to be done.
Dane Atkinson:
The bank account is definitely their language of love. And it's... Well, that, and reliability, and actually giving a crap about them, because not many people do. They're often the stepchild of industry because it's like, "Oh, I built this in an enterprise tool. I'm going to try to scale it down to small business." That's almost insulting to them, into a degree. But they are number phobic. Literally.
Most founders in the small business world have come at it with passion, and almost artisanal tastes. They see something beautiful out there that they would like to exist, and they're now driving to it. And they're very quickly coming up to speed with how the mathematics of business work. It's not entirely true.
Small business is also data lakes, it's a bad term, or AI, it's not actually accurate. If you break it down, there's a ton of different categories in it. So if you're doing SOHO, meaning a small office, home office, that's even more extreme. They're literally living on their own personal bank accounts to get a little bit bigger. And they're kind of in that three to 15 people. They'll have a better understanding in their bank account. They will be, hawkishly watching it like that, but they still don't really get the math there, so it's kind of wild. It's not until they get to the 30, 40 people that they just somehow build some financial infrastructure.
Turner Novak:
Yeah, so it's really usually it starts with some kind of passion or artistic creation, trying to bring something, like a new experience or a new thing to the world, and then the sophistication kind of evolves from there, whatever level they are on that side.
Dane Atkinson:
Universally, it starts as a dream. And the dream doesn't always have to be... I think there's a big portion of the small businesses who wish to make their universe better. It can also just be, "It's my best option. I'm not fit inside of the..." I've got ADHD. I cannot sit inside of a giant corporation.
And there are people who just don't have optionality to go work at Chase, or anywhere else. They need this. From a ratio standpoint, those people end up having actually slightly better math. Those are kind of like the franchise owners. "I bought my Dunkin' franchise, and I'm kind of making it work." A small coffee shop is, almost universally, "I think this town could use a community center. I want to build the next version of a church for my community, and that's going to be a coffee shop." Or, "I found something amazing, and I just fell in love with ramen, and I want to share my love of ramen with my community."
Or "I've been a fan of photography my whole life, and my dream is that it actually pays for my living, so I'm going to push on that." And, as much as, in a way... I don't mean to be hard on small business, I just want people who are building companies more to understand that psychology, underneath it, they are some of the very best people you will ever come across. They're honest, they're pragmatic, and they want a better world.
So, you can get a lot of resonance in the way you approach that customer. That customer also much more sore than a big business. The problem with big business, to a degree, and we could go on this quite a ways, but it's removal of decision making from implementation, from execution problems. Because the shareholders aren't the ones making the decisions that are... In many case, the shareholders are shareholders. Beyond that, they can get away with doing really bad things.
When you get down to the person who owns the scarf company, they actually care that the scarf's not burning down the planet. They care. Because they feel much closer to that decision. Their decisions are better. So as a customer base, they can make you a better business because they're actually going to care. And if you want to make a business that's not detrimental to earth, that's a great customer to go after, because if you're saying, "I'm going to make a way for plastic to be better," they will give you an extra 3% of revenue because they actually live for that. And eventually Starbucks is going to push you the other way and be like, "We really don't care. Give us a 3% discount." And it's not because the person there doesn't care, but the person they're reporting to, it's then washed away. That concern is washed away.
Turner Novak:
Yeah, it's almost like their identity is tied into the product or the business, so it's like it's one. So, they take everything personally, but that can be a very good thing, at the end of the day.
Dane Atkinson:
100%. That's something that founders will do, too, so they should resonate, especially, first time founders. I've been doing this for frigging way too long, so now I think of my companies as kids, which is actually much healthier.
Turner Novak:
Okay.
Dane Atkinson:
And that's already probably too committed, because I want my kid to do well, but I know that I'm more shepherd than I am controlling them. When you build the first company, you've reached into your soul and your heart, and you've wedged out something. And then you put a name on it. And it's like your being, it's you. And that is also what the small businesses have done. They've taken that dream, and they've poured in their soul, poured in their blood. And they care about it, and what it says about them. It is them. It's an extension of them. It's incredibly unhealthy, and it makes you make, as a founder, horrible decisions.
I remember my very first company, which is like 25 years ago, I was sitting on a park bench with a really good friend, I was like, "You can only have 2% of the company." Because I actually thought I was shaving my soul off. I didn't think about it as, "This is a collaboration." I thought about that company being the company I'd have in 80 years, so why would I give away a big hunk of the company to my friend who's been helping me? He won't even talk to me anymore. I send him a note every single year for the last 20 years because I was just such an asshole at the time, not knowing what the right percentage is. So, collaboration and being together in things, and it's not actually your soul.
But to the idea of small business, when you're engaging with them, you're engaging with what is their hearts, which can be fantastic. So once you start getting these ideas in your head, like, "I need to approach them like they're a consumer tool, and I need to bring a lot more power to bear than I would in a consumer tool." You need to find a way that their ROI is obvious, and not obfuscated in any kind of fashion. "I would love to intersect revenue that's coming in. I need to speak to their dream. I can't just speak to the business application. I need to show that I'm aligned to their hopes and dreams as well." And once you get that formula going, and, then you continue to test and work through, you can find a system that actually works.
Another problem with working with small business is they're like us founders, they're optimists, to a degree, so they can be really bad guides to your product. Because they all want a better world too, so they'll tell you, "Oh, it'd be amazing if this could hover. Oh, if you can fly, you could have drones deliver coffee. It'd be awesome." And you're like... I interviewed 30 customers. They all want flying drones.
Turner Novak:
Are you serious, really?
Dane Atkinson:
We've had that example in coffee. Everybody wants you to solve what they think are the better world for it. Which can be hard, building a product, because the enterprise customer is a little more direct with, "We just need money out of this, so give us money." And a small business has a much bigger dream, so finding a way to filter that feedback, and get to things that really matter. And, then, use the test of actually them breaking that inverted magnetic polarity to get to their wallet and give you money. That is the engine you know you've got when you make it work.
Turner Novak:
Yeah. So, how do you not get caught in that what a small business thinks that they want versus what you should actually build in the product? Have you found a way to cut through and get that right?
Dane Atkinson:
Yeah, so I think there's a lot of different ways to approach finding product market fit, and each of us have a different technique. So, I've seen people do it with the most insane mathematical spreadsheets, which speaks great to VCs, because they can talk to almost the same language. For me, it's a sparkle in the eye. I need to come to them and pitch them something, and see them suddenly say, "Yeah, that's my life's being changed." I've hit that insane bow.
And another part of the problem with humanity right now, and it's going to be so much worse with AI running rampant, is you can't make incremental improvements anymore in life and make it a business. You have to make quantum shifts. It's got to be massively better to get through the noise of opportunity and things for them to do to get attention. So, you really need to find something that gets that sparkle.
Same thing for Odeko, Odeko was as I said an AI platform, and it made a difference, but it didn't create that sparkle. So we figured that what they actually needed was a franchise underneath them. They needed a commissary they could tap into. They needed a truck to deliver the stuff reliably instead of throwing at their door. They need to come to their store and be loaded.
So, it was a young company way against the investor base, the board and even the rest of the team. We're like, "You're crazy to want to do this. It is nuts to want to actually get a truck when we're selling software and drive around and deliver goods." But that's where I saw the spark, when the owner went into their coffee shop in the morning and was ready to go, they're like, "Yeah, this is now the better business. They've made my life better." No matter what you had to do to get there, it's worth it.
Turner Novak:
You were the CEO of Squarespace for about four years. It was really one of the, I don't know how to... the first modern website, I guess. It was just a very good product. What was that like? Any learnings running Squarespace for four years?
Dane Atkinson:
Tons. That was a great experience, and it was a very different climate that is now. So, when Squarespace started, it was really a blogging platform, RSS feed system, which it's now a service tool for everything. So one of the first lessons I got made really in part from that experience was if you build something that works really, really well and it definitely does large thing, it can then do almost everything. So trying to build... Sometimes you run into entrepreneurs and they're like, "I'm going to build a tool that does everything. It's a POS, it's an ERP. It's like this." And that is... God bless them. I don't know how they do it. Just doing one thing right is super hard.
And for Squarespace, when it was a blogging platform and we added in the photo module and the blank page module, it just went crazy. It just crossed some sort of chasm where everyone's like, "Oh, this is a wedding site." They just started using it for things that you'd never originally purchased imagined. Also what's kind of lost in the history book is the secret sauce to Squarespace in the beginning, which is no longer Consequential with AWS and everything else out there, was uptime. If you were building a site on WordPress or GeoCities or whatever the hell the tool was back then or Drupal, which was one of our competitors. And when I was there when you have 2008 and '12 were coming, you actually have reliability.
So Squarespace's power was it was always up and it made you beautiful. It made you feel like your business was beautiful or whatever your endeavor was. And that was I still think what differentiates it in the market for everybody else, is it actually is very, very much an engine of grace. It's not just getting your information out there. Where there's a lot of other tools now that do a lot of different portions of the publishing world, but Squarespace still owns that.
Turner Novak:
Yeah, it almost reminds me of maybe what Instagram did with photo editing where it just made it super simple. You took a picture and you uploaded it, and it looks like a well-edited, well-shot picture.
Dane Atkinson:
100%. In that same climate, they were fighting against Flickr and some tools that didn't have that care. There was no filter. You were just publishing your crappy photos, and Instagram made them better. Squarespace made your little boutique sewing store look great. It made Purl Bee look fantastic.
Turner Novak:
I use it for my website for Banana Capital. It's nothing fancy, but it looks a lot nicer than it would if I did not use Squarespace, so I like how simple and accessible it is, but it still looks good.
Dane Atkinson:
That was the formula. That was the mission. What I was most excited about was: how could we make people feel pretty about themselves? And in my long journey for advocacy for small business, it's trying to rebalance the global platform versus the independent door. And at the time, if you went to Banana Republic's site, it was fantastic. If you wanted to sell your own clothes, it was craptastic.
So, any way that you could level that out so people felt like you were in the same ballpark at all made a huge difference to the success of somebody. There were so many stories that we learned there. White space marketing, that's another thing that founders will run into, which is: once you get the formula, how do you get more visibility to it?
And we discovered that Squarespace at the time was actually kind of an educational sell. It was so far past the experience you'd find in WordPress or something else because it actually allowed you to create your site dynamically. We needed to get a long-form sales process, so Squarespace is literally the first serious podcast advertiser. And we won over some industry titans at the time, like Kevin Rose and Leo Port. And they just loved the product, honestly loved the product, and then talked about it in that format. And they created a visibility that we couldn't have gone by just doing ad on Google. Who would believe in an advert back then being, "Build your own website."? Yeah, sure, I need to hire designer do that.
Turner Novak:
Yeah, it sounds like a scam almost.
Dane Atkinson:
Yeah, totally. It's never going to work. I have my name on a white background.
Turner Novak:
So, you were one of the first big podcasts advertisers then?
Dane Atkinson:
Literally the first.
Turner Novak:
Really?
Dane Atkinson:
We were at that day running around meeting all the hosts. At the time, they were not celebrities in the same way that they're today. We'd sit on stage, I'd sit in the background and I'd rebuild people's websites while Kevin Rose was doing his spiel. So the site would come together.
And we tried all sorts of weird promos. We'd throw iPads off roofs, and have audiences catch up on them or we gave away the first... On Twitter, I think we were 7% of Twitter's traffic for three months because we were the first ones to give away content, free iPads from these different podcasts and stuff. Man, it works. It's something that entrepreneurs have to get to. So many entrepreneurs don't think of their product in the extension of their go-to-market strategy. And I know a lot of VCs are sensitive that because they can see how businesses get caught up.
But the more you can internalize it upfront and figure out: what is the method that we need to use to communicate our product? And we needed Leo Laporte to spend... And he would spend three or four minutes on a show explaining how they built their website with us, which made it possible. Even when we did This American Life, we did a bunch of shows that didn't have podcasts. That was 60 seconds, but Ira Glass saying, "Here's how you build a website," made that audience suddenly be like, "Oh, maybe it is doable. I'll go give it a shot," kind of thing.
Turner Novak:
Yeah. How did you decide that podcasts were a good medium to advertise on? Because I'm just thinking back 10 years ago, I guess maybe a little more than 10 years ago, there was no podcast advertising market. How did you figure out this was the right go-to-market for it?
Dane Atkinson:
We didn't know. It just seemed... Like with everything. You just had to try a lot of stuff. To me, it felt like it was an opportunity to get a Jordan-like link for a penny on the dollar at the time. Because I don't think that they realized that they were becoming micro-celebrities in a real right. So their endorsement, it just felt more honest.
When you're listening to a podcast, you're not listening to NBC News that feels bribed. Like when people watch your show, they're hopefully feeling like they're getting a real story of a founder, not like something packaged. That was true back then too. So being able to get a celebrity to actually endorse your product for 14 grand. I remember we sat in our office down in Soho, and the first show came there, we spent all of our extra money on it. I think it was like a $14-15,000 spent, which is laughable in the journey of the company.
Turner Novak:
But it was probably big at the time, right?
Dane Atkinson:
It was our entire monthly marketing budget. It was the big bet. Would this actually work? And I think it was Kevin Rose, he was sitting on a couch, and he did a really great spiel because we like wined and dined him. And it was binary. Our revenue just quantumed up. It was an unmistakable direct impact. Yeah, this is a great channel. Squarespace is still a huge sponsor in this space and it's taking that mode into the Superbowl ads and everything else because getting alignment with folks people believe would tell the truth matters.
Turner Novak:
Yeah, that's true. Now that I think about it, I definitely can recall just seeing Squarespace ads in the Superbowl over the last decade. I can't really remember what the ads were, but I think that's good because I really don't remember most Superbowl advertisers, so I think that's effective. And I use it anyways for my website, so I'm a customer, and I've been a customer for a while.
Dane Atkinson:
It's subliminal but powerful. And that's an incredible power, the company has always has known what it wants to be. It wants to be beautiful, and it wants to help people tell their story. And it adds a whole line to that, even if they're not stuck in everyone's heads, I think they reinforce that idea.
Turner Novak:
Were you around when you started doing the Superbowl ads?
Dane Atkinson:
No, we’d gotten pretty big while I was there, but Squarespace has become a very big business since. And I think they've been doing ads for five or six years almost, and I left in the early 2012 or '11.
Turner Novak:
Yeah, I think I saw... Reading the Wikipedia page the other day, I have no idea how accurate, but I think you guys started in '12 or '13 maybe.
Dane Atkinson:
Of Superbowl ads?
Turner Novak:
I think so, yeah. Just a footnote to the conversation. It's not the biggest takeaway for listers.
So you talked a little bit about SumAll, the company you did after Squarespace. And you just left Squarespace and were like, "I got to build this thing." If I'm remembering it, that's kind of how it went down.
Dane Atkinson:
My long-term arc is I would like to see small business be in a better position against the bigger platforms. Squarespace has its piece that pie, and I was off to make the next one, which at the time it felt like... And as I said, I kind of screwed SumAll up for a lot of reasons.
But the idea... And again, it was a good business. We raised tens of millions of dollars. We had hundreds of thousands of customers. They found itself a decent exit. It just wasn't the same kind of outcome, and that was because I got addicted to the growth curve without really pushing the product market fit in a way that I'm talking to people right now.
We also tried... I'm a huge believer that the culture of a company is more important than the strategy because the great culture continuously iterates on the strategy and product. So, we went buck wild with the company design, which I've come back off of a little bit.
But we had fully transparent salary. So we hire you, Turner, we send an email to whole team being like, "We hired Turner. He's going to do all this great stuff for us, and he's making $80,000." I think we went overboard in that fashion, and learned a lot. We had our teams vote up their leadership. So my exec team and even myself, I came up for vote every six months. The team could vote me down as their CEO and they would vote up their bosses every six months, so the team would change a lot. But there were so many amazing learnings on just how to get humans to work well together that came from that chapter.
Turner Novak:
So do you recommend the voting or no?
Dane Atkinson:
No, I don't do that anymore, but I think that the generic company design is flawed because it's only upward accountable, not downward accountable. So the way we try to do it now is we try to make sure that the teams have a lot of say in how their leaders are recognized, and it's not a singularly just your boss's boss's boss making those decisions.
The thing that we found that was so great is that when the team members could fire you, you cared about their opinion more than my opinion, because I couldn't really fire you. So, the leaders just worked their teams really well.
Another amazing thing that came out of it was there's this Peter principle in life, which I'm sure everybody knows, you get pushed past your skillset one degree beyond it.
Turner Novak:
Just until you fail basically.
Dane Atkinson:
Until you fail or ideally you don't fail, but you eventually become good enough to do that role. But usually what that means is you get forced to “company-up”. You'll get a role that's beyond you and you'll kind of screw it up. And then you're like, "Fuck, I don't even like this job” or “I'm not very good at it”, so my option is to go do this at another company, which is kind dumb.
A nice thing about having it be your team is when I would come to somebody and be like, "Hey, you're not doing the job right. I think you got to go try something different," it would feel like you're getting smacked and you're getting demoted. And it was just really hard.
When your crew in the kitchen was like, "Dude, you are not the lead chef. Get back here on the line and start sous-chefing," it was so much easier to take. I was like, "Okay, great, I'll do that. Someone else get out there." I didn't like managing people. It's a pain in the butt. I'll do my bit.
So I think that those are takeaways that we keep using for companies, like you don't have to be only accountable to the people above you and you don't have to stick in a role that you don't like. It's totally okay to go back and forth.
Turner Novak:
How do you have that conversation with someone? Let's say you promoted me to being an engineering director or something and I'm probably better as in IC, how would you have that conversation with me to make sure that it goes as positive or good of an outcome as possible?
Dane Atkinson:
So using those learnings, we make that conversation much more around the team than the leader. So if I'm having a conversation with you, it's more, "Turner, we caught up with the team. They loved it when you were kind of acting as VP of Engineering. You really got their loyalty. They're really driving it hard, but they feel like you're not giving them the strategy and the guidance that they need. And here is what Jane said, here's what Mike kind of feels. And they want you back in the team."
Turner Novak:
And you usually name other people?
Dane Atkinson:
Yeah, because at the end of the day, we are all in a single kitchen together making meals. It somehow gets lost in the sense of ego that everyone has these layers and they shouldn't interact with each other, and I thought that was kind of crazy. We're in foxholes at startups life, so sharing... But the way normally that conversation would be is like, "Hey Turner, I don't think this is working out. I think we could be much better as just a VP of Engineering and CTO, and that may be hard, but we'd like you to stay and we understand if you have to go." Definitely a decent way of doing it, but it's tough for you because then you feel like you've failed and you got to go back.
I learned it’s better to do it as, "Your team wants you back. They think that... They're missing the one-on-ones. We've not been able to fill that role. And then you haven't stepped into helping them understand the strategy. And why don't you go check with Jane and here's what they all say."
And then it's more like you're moving around that kitchen, you're not losing it. And another thing that I've done that's worked out very well from a scale building standpoint, because I've been lucky enough to take companies through a lot of different iterations of growth, is you have to be careful at the very beginning when you're like four or five people to make sure you leave room for those conversations down the road because teams never ever stay the same. It's the craziest thing. Everyone has different parts of the system that they like and thrive in, but they all feel like, "if we're a 500 person company, I should still be the CMO, even though I started as the CMO." And sometimes it happens. I've had admins become the COO of 200 person teams. It's all just a weird way it rolls. You just never really know, but you need to set yourself up.
So, the way I do those first assignments of like, "Hey, you're CTO right now, here's what that means. That means you are responsible for architecture, responsible for team leadership." So, that when you get a little later on the company and you can be like, "You have these seven things you're doing, I think we need to put two of them to somebody else because you're stretched really thin. So you're no longer going to be doing one-on-ones, you're no longer going to be doing architecture." So it doesn't feel like I failed at the idea of being a CTO. It just feels like my portfolio, what I have to do, is shrinking. And then it's much easier to be like, "Now your portfolio is, you do great team development, but you don't really do this piece, so we're going to try to get somebody in to do that." It takes what should be not a problem, but we're just monkeys, and we get all wrapped up in everything, it makes it easier to see, "I still do important things in the company, I just don't have to hold onto the idea that I'm leader of everything."
Turner Novak:
So then how would you approach the logistics of, yeah, I'm a VP of Eng, you're probably the CTO, I probably get a raise, and then I need to go back to VP of Eng. Do you usually have to adjust comp? How do you approach that?
Dane Atkinson:
That is actually a grateful thing to do, because if you don't adjust comp, you fire them. What most companies do is they fire the person. It's telling them that they've got food in their mouth. And this was a skill we didn't exercise until my chapter at SumAll. Because of the transparent salary, the most amazing thing happened, is people would come in, especially men, especially White men, they come and be like, "I'm the best engineer ever," or, "I'm the best salesman ever." Because they would be much more comfortable pushing themselves forward, so they would get a higher salary. And then they would sit in the kitchen and everybody else would be like, "Why the hell are they making that kind of money? That is just silly." So you would do the same thing. You'd be like, "Hey, you advertised yourself as being a senior director here. You're actually not. And this is what Jill's making. She's making this, so it doesn't make sense for us to be paying you 40% more than what Jill's making. So we'd love you to stay. I think that's the right place to put it."
You have that same conversation. And honestly, a lot of times people get in that Peter system and they think that they want to run people or run the company or run everything it's a rough job. Those jobs are not easy. So there's an amazing grace to saying, "I don't actually want that path. I got to that fork on the road and I don't want to take that fork. I didn't like it. Not only was I not good at it, but that made it even harder for me. I didn't like it. I would like to just go back on being an incredibly technically gifted person." Or whatever it might be. Take the other door. That, or leave the company.
Turner Novak:
I think you can almost glamorize the managerial type of role because the compensation is maybe so high and there's elements of it that seem gray from the outside, but if you don't actually like it might not be worth it.
Dane Atkinson:
No, it's its own skill. It's not something you've ever trained for and it's not something that's really well-supported. Very few companies have good infrastructure to teach you how to be a manager, teach you how to do one-on-ones, so you're fighting your own way and it's gnarly.
And the compensation thing's a ruse too, because classically the people who are a manager are in a better position to negotiate because they have more visibility. But if your company is somewhat transparent, then you're the one making the sales or the partnerships or the technology or something else, you should be in a similar from a comp standpoint. You should not be disadvantaged. But some people are like... That's one of the things that came out of that same chapter.
We had a very awkward human, love him, great person, who we never would have guessed was a great manager. But he took the slot for six months and no one ever let him out because he loved coordinating, he loved distributing information, he loved sharing what was happening. Which you could never tell on a resume that this person would be good at it, but that actually was their sweet spot. When you've had plenty of people like, "Well, I've been leading this forever, forever. It's time for me to run a bigger group." And that didn't work.
Turner Novak:
And it's kind of interesting that generally, in order to get to that point, you have to be a really good individual contributor. Generally you got to kind of work your way up. But it's strange, someone might be a terrible, terrible IC, but an amazing manager and they might never get to that point or it takes forever.
Dane Atkinson:
That's one of the big holes in our system. It's also one of the things that from a founder standpoint, if I can give some founder advice, almost all of us had something we were really good at when we became a founder. We were really good at marketing or engineering or something else. You got to let it go. You do.
The role of being a founder is to navigate the company's strategy and to excite people about what it's going to be and to build a culture internally and externally that thrives. And it's not to be the engineer is not to be the market person. You can still work those muscles, but what happens so often is the founder gets a significant imposter problem. I do too. I did too. I should be the best at everything because I'm theoretically the top of everything. I should do everything. I should be able to do everything all the time and be amazing at it.
And then it just makes everybody's life horrible. In my first company way back, decades ago I was such a micromanager that people just wouldn't do anything in the room. We had floors of a building and they would literally scream out, "Dane's coming," and then they pretend to work because I just thought I could do it all and I would jump in on everybody's business. And they were like, "Why bother? If he's going to come by and do it, why am I going to bother doing it?" It kills everyone around you.
I think one of the biggest formulas for my success has been: I know I suck at almost everything, and I'm actually okay with it. That might be an extreme way of putting it, but there's definitely people better at many of the internal functions. And just internalizing in your head, "It's okay to singularly be the owner of the narrative, to be the catalyst at the end." That is actually a substantial enough role in value creation.
If you can do that, the company can thrive. Don't try to be the best at everything else. And understand that you have to let others get what you don't think is perfect because the way you do things is different than others, and be…
A friend of mine who was the CEO of Getty, he has this line: "If someone does 80% of what you think they should do, it's 120% because they just did it differently than you did it." And you're so used to just stomping on people because you're like, "Oh, there's this little gap." Actually that gap might be better than when you're realizing it's just different than your view. Celebrate those successes. Don't try to stop. But as a founder you're always like, "Oh, but I could have added... I would put an extra page with extra graphics on it. I would've..." Relax.
Turner Novak:
Thinking about adding an extra page with an extra graphic on it, they might've made the title different that cost them to click on the page so there's way more traffic on the page in the first place. So they did better than you did.
Dane Atkinson:
Yeah. And every time you put in your own idea, you cost the company.
Turner Novak:
Really?
Dane Atkinson:
Totally. Because you... This happened in many of my journeys where you'll accidentally demotivate somebody because you think you've got a great idea. So you'll come by and be like, "No, no, no, I think we'll have more success with this copy version."
So, the danger and the risk of being a CEO is you kind of have to find that balance between letting your strategic thinking fit in, because that's what you're responsible for. "It is probably better for us to get more customers right now than revenue," whatever that might be, versus the directive of an idea. Because once you start doing that from a team member’s standpoint, what's the point? They're not valuing my contribution, I'm just going to slowly back off. It can be toxic.
But it's super hard, because as a founder, you feel like you're responsible for the total outcome of the ship. So you want to grease the floors and tighten the ropes and do all these things all the time. But if you do, then no one else is doing it. It's rough. Great though. Again, being a founder is one of the hardest jobs out there, but it's one of the best ways to grow as a person, because you have to face the things you suck at. I have to look in the mirror and be like, "I'm the one screwing all this up. What am I doing wrong? How do I get better at it?"
Turner Novak:
Yeah, that's fair. Another way I've heard of it described before is you hire people that are better than you at things and then it's actually easier to let go of the marketing, because you're like, "I know Dane's better than me. He is going to do it. I would mess this up, so it is entirely on him. I picked him to do this. I know he is going to do a good job." And then that way it's a little easier to just let go of it because you know that they're an expert and you're not.
Dane Atkinson:
It should be. That is the why, the advice, and we should always hire. It is shocking how often people will stand in their own way. They'll be like, "Why do I hire someone who's better than me because then what am I doing?" But even if it's just subtle internally. Then I hired someone that's better than me, but I think they're not doing it quite the way I would do it, so I want to mess with them.
That imposter thing is no joke. That feeling like you need to be validated even as a founder is no joke. The desire to see your DNA pressed on everything is there. It's crazy how often you'll see someone like, "I got this great person," and then they just don't hire them, or if they hire them, then they mess with them until they're not actually able to do what they want to do.
Turner Novak:
Yeah, it almost defeats the purpose at that point.
Dane Atkinson:
Yeah. And if you look at the people who've been really successful, you can see they've all kind of gotten away from that. They're not in those weeds. So as a young founder or starting out, you can see the pattern recognition of those jobs was not running every piece of the business. You get great people to do great things and you add your strategic input, but it's really, really hard to do. It's so hard to do on a day-to-day basis.
Turner Novak:
So I think moving into Odeko where you're doing that, I really want to get a good chunk of time on that, because I think it's a super interesting story. Starting from the beginning, how did you come up with the idea initially?
Dane Atkinson:
So I think this is another founder truth. So many great potential founders get stuck on, "I need the perfect idea. It's got to be top-down spreadsheets. Got to say it's amazing. I've just got to love it with myself. I can't do anything." Unwind most of the companies out there, and they did not start with what they do today. They were a blogging platform and now their general purpose website builder. So my way to start is always, this is for me, and there are the other motivated people, find a customer you're willing to work for that you think deserves your work. Start with an idea, because you need to have some kind of plan, but just expect it to change.
So when we started Odeko, I've had a coffee shop, I've had a bar, I've had all these things. I've got ADHD. I knew that community had just never gotten a lot of tech. And we saw our friends at Square running rampant in that world. I think the POS was just finally getting penetration into the brick and mortar cloud-based solution, not some sort of ancient, localized service. Now is the time we can do something. And we just want to make them succeed, which was incredibly important. Because another thing that happens, and this is a fault to VCs, so God bless you for sharing this kind of stuff, VCs accidentally screw all their companies-
Turner Novak:
Yes/ [laughing]
Dane Atkinson:
... because they seem to bind the founder and the first thing they said they would do. So, so many founders are like, "I told my investors I was going to do an AI for predicting inventory, and it's not working." But they don't do that. They just try to make the AI work and try to make the AI work. They just hit the same piece of wall instead of going three feet to the left and trying something different.
A VC who sees that and releases the stress being like, not I going, "How many sales you getting?" But, "How's the customer doing? Are they succeeding? What else do you want to try to..." Get them off that mindset of I'm stuck in this loop I promised that I would do and thinking more broadly.
So Odeko's first model is not at all the business we do today. Our first product-
Turner Novak:
It was the predictive inventory reordering.
Dane Atkinson:
It was amazing. It was the most amazing thing ever. We had massive infrastructure to understand the future of a coffee shop. We could predict it within 15 minutes, a week out literally how many coffees somebody's going to have. It was super sharp and-
Turner Novak:
It was accurate.
Dane Atkinson:
95% within three days, 90% within seven days of what people would buy in a coffee shop, literally every 15 minutes based off of weather and street traffic.
And they're like, "Who cares?" I thought it was great, but the customer was like, "Awesome, but people throw the pastries at me, and I don't have milk three days out of the week because they didn't deliver it. I don't care that it's great."
I was sitting in a coffee shop with The Birch owner, and the paper company literally walked in at 9:00 o'clock with this giant new boat pushing through the customers. And the barista's like, "Oh god." And that was the real problem.
Turner Novak:
So you were basically just pure software and you were still working with all these kind of third party vendors that were maybe actually delivering the products when they were supposed to get there, but maybe not?
Dane Atkinson:
Yep. We were doing automatic order placement using the guidance of technology and it just didn't make the real difference, so we switched to a totally different business model.
I had a mutiny inside the team. It was the worst idea possible. Had to kind of run it as my own skunkworks, which is crazy as a multi-time founder. And the VCs are like, "Oh, you're going to destroy your valuation. It's going to be absolutely atrocious. No one's going to want bet on you because it's going to have a human in a vehicle. And then your gross margin is going to drop down."
But we raised $150 million and have gone on to be fairly big in the last three years because we switched the model, because it was the magic the customer actually needed, which stuck. And that's one of the things that makes founders amazing is if they could find a way to make something magical happen, then they do have the insanity because we're all crazy to push through it.
Turner Novak:
So this is a question from Jeff Richards who is at GGV. I don't think he's on your board. I think Hans is, so I guess Jeff is kind of maybe one degree removed. He suggested, and I actually don't know the backstory behind this, he suggested asking: how do you navigate those investor pivots? What did you do to convince people that you're going to completely change the business and get everyone comfortable?
Dane Atkinson:
We are very fortunate in our board that we're able to have that conversation. They were to say, "I'm an idiot," and I was able to say, "Look, let's try it and see," and they decided to go for it. That is not a universal. And Snackpass being a great example of not having a say, bad board, but they were like, we're going to skunkwork this product and not that they want it, becomes the main product.
Turner Novak:
Restaurant, point of sale, vertical SaaS basically. Yep.
Dane Atkinson:
And that's true for... I cannot tell you how many stories of innovation happy to be done a little bit around the board because the conservancy in investor base. Great investors don't think they know the business and when you find it, your investors as an incredibly powerful filter just to watch how they interact with you.
One of my favorite investors is Rob Haines, who was somewhat legendary. He was first round, he was first in Square, first in Uber, all these different places. His mindset is back the founder, it's going to work. And then the way he tells me I'm an idiot, because he does it all the time, literally just yesterday told me I'm dumb at certain things, is he does it in a non-direct fashion.
He's like, "Listen, you may know what... The plan you have may be great. I've just seen this pattern. If you don't brush your teeth every day, things start to fall apart in your teeth. I've just seen this pattern. If you're going down this road, you think it's going to work, but it doesn't always work. But you might be right. You may actually be on the right page." He's kind of letting you off the hook of that perceived commitment to your model, to your plan, to your numbers. And a great investor won't necessarily hit you on the mathematics of what's happening, but will try to understand the things that are getting there. Because as soon as you get into this thing of... It's such a mess up thing and God bless you for doing this because the founders need to understand this, your investors are actually the smaller cap table owners.
Turner Novak:
The smaller cap table? What do you mean by that?
Dane Atkinson:
You will get 10% to 15% of the company in your first series, so 80% of the company is everyone else, but because you get together with them and you put together this deck and you hand it up to them and then they read the deck, and they're like, "Well, what about page six and this number?" it creates this dynamic that you work for them, but you're not. You're on the same side of the table, you're both looking at the company, and you're both trying to make it work.
So when you see that dynamic happening and people are asking questions, you have to break that pattern. And if they ask you something then you talk about as if you're both focusing on it, not like, "Oh, it's all going great, we'll check it, come back," that relationship is dangerous because now all of a sudden you've got an uninformed boss, you've basically made them the new CEO and you're kind of now the COO trying to deliver into it.
It's really, really, really risky. Another great hack I do is if anyone asks me those questions, I'll give them back homework. Be like, "Oh, really great. Why don't you do a market study on the adjacencies to our space?"
Turner Novak:
They probably hate that.
Dane Atkinson:
They do because well, it's means that they're also feeding into the system, but that also means we're both feeding into the same conversation. We're both looking at the business as a group together trying to make it succeed, not as our operators and your investors and we're trying to make it succeed for you.
Turner Novak:
Ththe reason we connected was my friend Tim Griffin, who at least publicly, it's the only company you've ever acquired. He was doing kind of an adjacent type of company. Yeah, I saw you nod your head, but from what I saw on Crunchbase, obviously whatever's public is public.
Anyways, so you acquired his company called Cloosiv. He was doing basically point of sale for coffee shops. And I remember when COVID hit, for him it was the craziest roller coaster. And you're doing a similar type of thing, a little bit more hands-on and intensive.
I'm assuming you similarly have a very interesting COVID story. Can you just talk us through that first day and then the following months and a year or so? How did that all go?
Dane Atkinson:
This chapter has been one of the more dynamic: COVID, inflation, supply chain. It's been nuts. But yeah, COVID was... And this happens, you can't control the outside world, you can only control how you react to it. When it hit, we had just figured out our model.
Turner Novak:
Had you done that more capital intensive actually delivering the products?
Dane Atkinson:
We got our first little warehouse. We started figuring it out. Then COVID came around and we're like...
Turner Novak:
That's terrible timing. Yeah.
Dane Atkinson:
It was terrible timing and we were in hospitality, and hospitality literally froze.
Turner Novak:
Just shut off.
Dane Atkinson:
Yeah, it went from thriving daily business to zippo. And I was one of those many... I've had these all on the journey. There was many existential moments where you're like, "Do we just close?"
Turner Novak:
Really?
Dane Atkinson:
"Is it over?" Oh, totally. We sat around. Pete was our COO at the time. Him and I were sitting alone in an office no one else around being like, "I don't know, should we just bag up and go?" We added some team. We cut the team in half right off the bat, which I think that turned into being the right move. Always being aggressive on those choices even though they suck, can create the space then to bring people back and ended up being in a better place.
And the rest of the team, basically had them sell coffee to hospitals. We started a website. People would order coffee, and then we would buy it from the shops that were still trying to be open and bring them to the hospitals because we had trucks and stuff like that. So it kept everybody busy.
Turner Novak:
Like wholesale delivered to the hospitals or literally cups like lattes?
Dane Atkinson:
So consumers would be like, "I want New York hospitals to have the benefit, and I want my coffee shop not to die." So they'd buy $200 in coffee and then we'd go deliver $200 in coffee to the nurses and doctors and patients and everybody at the hospitals, which gave us some goodwill when we reopened seven months later.
But yeah, we were dead. And Tim actually, he may not say it, but he kind of saved our bacon too. We needed to raise money. We were at the cycle. We needed to raise money when COVID hit, like, "Oh yeah, awesome. Who'd bet on this now?"
Turner Novak:
How much runway did you have?
Dane Atkinson:
Not much. I think we had four or five months. I don't know. It was on the other side of COVID that we thought we would be in a great spot.
Turner Novak:
Well, I guess I'm curious, how big was the business the day before COVID happened?
Dane Atkinson:
The day before COVID happened, our new business model was humming. We were probably going to do millions of dollars in that year, which was basically our first year. We were like 40 people, raised maybe 20 million at that point.
Turner Novak:
And then it just went to zero?
Dane Atkinson:
Yeah, it went 100% to zero.
Turner Novak:
Really?
Dane Atkinson:
Right to zero. Every coffee shop was literally mandated to close, so our customers were out of business.
Turner Novak:
So, how did Tim save you guys?
Dane Atkinson:
Tim saved us because Tim's business exploded. He had a decent business. He was doing a couple million bucks in GMV and all the sudden he was doing $10 million in GMV because the coffee shops that weren't in cities that weren't mandated to close had to do order ahead. Just had to, needed an order ahead platform.
But Tim's quite clever. He knew this was going to be a long mess for a while. So we got together, we were like, "We're both two boats in a sea that's getting turned over really, really fast. I think if we get together and we bind our boats together, we'll probably get to the other side of the storm." And Tim was like, "Yeah, that makes sense."
And that narrative of sharp upright business that stopped in an instant, and the sharp upright business that could last, and somehow those two things came together, let GGV and some of our other great investors take a second bet on us, which was amazing that they actually did during that cycle.
And it worked out, we’re now 20x the valuation that we were then as we kind of got through it, just because on the other side we got the benefit of constantly fighting, never surrendering, getting to the place that all the coffee shop were like, "We don't want to go back to the old distributors. When we open up, we want to do things differently."
So, we just got an incredible swell of customers on the flip side of it. So much so that we kind of screwed Tim over and screwed ourselves over. Tim and I are very good friends, but we couldn't invest in everything at once.
It was very hard as such a small team, because we went from I think $1 million to $40 million in revenue in the course of a year and then $100+ million the year after. So it was a lot of growth and just needed a ton of resources, so we couldn't push everything at the same time.
And Tim had to go from a team of five to a much, much bigger team running it, so that was the learning curve too. He would be a good guest I think for you. He's definitely done the startup journey.
Turner Novak:
We're definitely really good friends, I would say.
So, you basically went from a couple million to zero to then two years later over $100 million in… this is revenue, right?
Dane Atkinson:
Yep.
Turner Novak:
That's probably the fastest growing non-AI company or at least in the top one percentile.
Dane Atkinson:
We won a few lists. We didn't actually... Strategically, and this was an experience I've had in the past, once people know your model works they get after it, so we just kept ourselves quiet. We should have been on a bunch of those things. We're just like, "Don't tell them our numbers because we don't want to reveal the model works." Now that you can't get capital, we can tell everybody, because you would -
Turner Novak:
Yeah, and there's a lot of capital out there that wants good businesses to invest in, so it's almost like it's flipped where it's like, "Hey, we cracked it. We're on top."
Dane Atkinson:
Totally. Now we can share the story, we can do podcasts, we can say how has worked because we put a lot of money into build the country's footprint on the other side of the coin.
Turner Novak:
So then when you were just navigating this post-COVID, just shocking back up to the business is doing well again, how did you prioritize what to do? What did you lean into? Any new specific products? And then maybe it might actually be helpful, what actually is the business today? Because I don't think we've ever hit on that. What is the Odeko, the current product offering?
Dane Atkinson:
So the vision for Odeko is to allow coffee shops and QSRs to survive against the franchises and global platforms. That's the spiel to it, but the truth of it is our customers use us as infrastructure layer mostly for their marketplace. So we have a marketplace inclusive trucks and drivers that loads coffee shops across the country every morning with the stuff they need to sell.
Turner Novak:
This is kind of like back of house, inventory, supplies.
Dane Atkinson:
Incredibly back of house, incredibly old school with a lot of tech to make it actually work. So our coffee shops will build out a schedule of inventory they need because our buying power and our efficiencies are so much higher and we're able to do it in a better planetary fashion. It's cheaper. As to my point earlier, small business has a very easy time saving money.
So customers go on, they save money, they save a ton of time. Our reliability is actually, tech reliability, it's 99.95%, so your business is going to be stable. That's what we do.
But from a prioritization standpoint, that's a great question, because I've gone against the grain a lot and it has hurt me a lot, but it's also I still think the right choice.
So, if you look at the companies that have had the long enduring success, they got something really right that worked very, very well. Whether it's posting 140 characters or a nice photo of you or like in Squarespace, uptime was it or in Shopify transacting your credit cards without fail. That was the core.
For us, our core has been make sure people's shelves are ready to go in the morning, which is a lot to do with it, but it's been a massive amount of pressure to launch financing and FinTech and all the things that we know we can do, the rest of that franchise tooling that we've held recently, we started to and we're seeing the right attachment rates, because if you do something right and you speak in the language that they appreciate, customers, they'll give you more.
If you make that flip too early, I think you end up making everything subpar and it all stops growing. It all fails. You need something that is the core magic. You need search in order to get ads and everything else. You need something to really work.
So for three years we've been just pounding on building that infrastructure and technology to do it against the grain of what everyone else has wanted us to do. But yeah, it works really well.
Turner Novak:
So you built this almost like low margin logistics delivery business at the end of the day, unsexy. I'm sure that was scary for VCs investing in, but because you built that 99.995 whatever percent reliability, they run their business on you. So then you can say, "Hey, you're using all our software, transaction volume." You've probably got, like you said, lending credit type of products. I'm assuming that's pretty high margin or attractive revenue?
Dane Atkinson:
Yep. The distributor model is sucky, but it's also worth noting that that world is so insanely backwards that there is just like an infinite GDP / TAM available to anyone who's fixing it. So, we're definitely not done with that, but for sure we are able to add more stuff to the formula because the formula works.
Turner Novak:
Well, it's kind of like it's a low margin hard to compete in business that when you nail it and you can layer on higher margin revenue on top of, it's just so hard to beat. If I wanted to compete against you, like me right now, start a company, what would I do? You've got the entire customers' P&L captured. How do I steal that?
Dane Atkinson:
Anything is stealable, but it would take a lot. We are a very heavy moat company, in the sense getting to it is tricky. But it was not... We had to resist the pressures throughout years to get here. And even people like Rob who's nudged me, he just told me yesterday, "I've been nudging you for years now to put more software in the customer." I'm like, "But we release a feature update every week, but I agree."
But it doesn't matter in what people consider the non-sexy distribution infrastructure. The ability for them to better manage their payments on that and better understand what they should sell is really powerful in our world, but it doesn't resonate to the high gross margin allure that the investment community thrives on.
Turner Novak:
But I'm assuming, so you kind of have back of house, I'm just thinking, all their cogs probably run through you. I don't know if this is out there yet, but I'm assuming on the roadmap some type of payroll compensating employees?
Dane Atkinson:
So it's interesting, again, our mission is to see those shops succeed. There are a bunch of payroll platforms that are not bad for coffee shops. Historically it's been an atrocious place. And some of those will probably partner or acquire companies to service that.
Where we are incredibly well-powered is because the fact that we have a team going into your buildings enabled us to do things that no one else can do. We can verify that you don't have a stove, and get you great insurance. We can give you equipment at a financing rate that's insane because we can come and take it back.
There are a lot of things that are in our world that our crazy idea of actually having a truck have made us better at than anyone else that's purely in the software world. Some of the software stuff is going to be better because Square and Toast and all have much bigger footprints and they're able to negotiate things differently, but they don't have the same degree of access. So, there's a point where a coffee shop will want to get the most value from the community, trying to help them succeed, and we'll have bottom half and they’ll have the top half.
Turner Novak:
Yeah, so it sounds like you're capturing things that touch cogs, inventory, things that touch CapEx, maybe, just the heavier harder things like we said.
Dane Atkinson:
Yeah, and we're in a better place to do financing too, which you think that you would go to the POS side, but the POS has only the ability to transactions. We actually have all their revenue running through us, so we're in a really good place to lend them startup capital and other things. That intersection is all over the place. God bless it though. Painful to have gotten here, but yeah.
Turner Novak:
Is there any advice you'd give to a founder who... And Tim specifically, this is his quote, he's like, "You're a magician, just like the way you've kept it alive." Any advice you'd give to a founder just like navigating the intense roller coaster ups and downs? Or is there something that you think is the reason that you are able to navigate it, superpower of some kind?
Dane Atkinson:
My neurology helps me a lot. I don't get stuck in things because I've got the tenting span of a fly, so I'm able to move forward. I think nothing's a straight line. It's advertised by the long-term founders as it being a straight line. It's certainly advertised by the investment community, is like, "Oh we bet on Square. It became a gigantic company. It was all fine." But everyone knows it is not. It is up and down and there are moments where you're going to die or succeed.
I think the thing that potentially has been helpful from just the way I'm built is flexibility. Don't hold onto any sacred cows. You want to win for your customer, and to win for your customer, you need to be there. You need to be there the next day. So whatever it takes to get to that next chapter, whatever change and model and approach and dilution and whatever you need to do, do it because you want to build...
Again, it depends what you want to build. I started out saying, "I want to build something that makes the community better." Some people start off wanting to make tons of money. Nothing wrong with that either, but it would change your decision tree.
Whatever your North Star is, you need to make the compromise and choices to get to that North Star. My North Star is I'd like to see every coffee shop, pizza shop actually be able to compete against the world that they're facing, the Domino's and Dunkins and win. That would be great. That'd be an awesome tombstone. No problem, that we'll do whatever it takes.
So yeah, we've had to pivot through COVID, through financial crisis, through hyper growth, hyper profitability, everything just all over. It's only I think just trying to be very flexible as a founder that you got a shot at it.
Turner Novak:
So one thing I'm super curious about, I saw you mentioned it kind of offhand in an interview before, so I wanted to ask you a little bit more. You said you think we should re-engineer the food system, which we talked a little bit before we started recording, I agree, there's a lot of ways to improve it. And it's fascinating, you're running this company that touches food or some kind of input into what goes into our body, so what did you mean?
Dane Atkinson:
It has not changed since Babylonian days? It's a very antiquated system, very limited technology along the way. Not a lot of thoughtfulness in how to better align to its consumers has made the environment, the product options, the process all bad. It's shockingly so. We were just... One of the big reveals in the Odeko journey was like a single-door shop would be ordering from a last mile distributor that was then ordering from a regional distributor that was then ordering from a national distributor that was then ordering from a maker. And every single one of those things added 30-40% cost of the product, which is bananas and so unhealthy, because then you have this six-leg trucking process. And it's just that no one sort of thought-
Turner Novak:
Think about time to ship, probably so much length between when it was actually grown to when someone eats it. Even more complexities in there.
Dane Atkinson:
The pastries in some of our global competitors are often six months old, just to give you a sense of how long those supply lines can take. It's just shocking how poor that is.
Turner Novak:
And you change the materials that go into the products to make them last long, correct? It's almost more of: how long can the product last versus is this actually a good thing to eat put in your body?
Dane Atkinson:
That's not the concern. The concern is can we make it taste good enough that you think it's good to eat, and then your neurology kicks off being like, "Oh yeah, I got sugar and calories." But I would not eat any of them personally.
But it was also not hard to do. We get local bakers. And the problem local bakers had is they had to sell, they had to run accounting, they had to run payroll, they had to run all these things and we just do it all for them. We're like, "Make these pastries and we'll pick them up at 2:00 AM, and we'll get them to the shops, and they'll have a fresh pastry."
Turner Novak:
And you've already got the logistics network.
Dane Atkinson:
Yeah. We're their glue in it. We're able to do composting. We're like, "Hey, we're at these doors. You guys have spent coffee grounds, let's go give that back to the soil system, because we're leaving the door." We just launched a new milk two weeks ago called Barista Milk, which we found a way to do with a company called Neutral that carbon offsets the cows just by helping them digest the food better, not having to ground the soil, so there’s no carbon footprint.
Turner Novak:
Less methane.
Dane Atkinson:
Totally, less methane. And the milk is suited for coffee. And because we actually go straight from the farm, straight to the coffee shop, not do any of this weird whack-a-mole. The coffee shops are getting it like 20% less than they would than normal milk, and the farm gets more. It's all healthier because...
One of the funniest things, when you look at that same chain, often people are paying in credit cards, so you get 3%, 3%, 3%, 3% plus all the different infrastructure delays. It's insane. Same thing for paper. We built printers in our buildings so you could put the logo on a cup in the last mile.
But the way it used to work is you cut down a tree in Canada, send it to China and you send it to Iowa, and they put a million cups together with your logo on it and you put it in a warehouse, and you drag off it over the year.
So you're basically air conditioning cups for a year, so you could have the logo on your door versus just put it on the last minute, so you can not have to have that entire loop existing just to get it done.
And it seems to be for everything. It's like literally everything was designed around just scale in consideration of the environmental impact containers that are just thrown out. We were stunned at how ineffective that overall system was, and just how paper different it is. And it may not be the sexiest thing, because... Really, I've gone from building tech companies to managing a milk line. I did a really weird thing, but you can also all of a sudden have... We'll do a 100,000 gallons a month. You can suddenly affect the world much more meaningfully when you fix these broken systems.
Turner Novak:
So did you actually create your own Odeko private label milk?
Dane Atkinson:
Now we don't want to... We're careful not to compete with our makers. So we have found what the customer wanted and we've worked with farms to make that product for them, which is a much better solution for them than the Texas milk. Because a lot of the milk people buy is from Texas because they've got just mass manufacturing. They'll truck it thousand miles to your coffee shop, which is not good in anything.
Turner Novak:
So you really lean into the: how do we be the logistics layer? And leverage that to make this thing more efficient and solve problems.
Dane Atkinson:
More efficient and more at the end of customer. We build a marketplace that's very locally oriented, so the local farms, our farms are always within 20 miles of our cities. They're sometimes a bit further, but they're really close. And our bakers are right there, and you can tap into that local stuff. And then for the national folks, we're not running through this weird chain, we just drag from the source. That has made us much more effective, and then given us and the shops much more margin to work with. We were just lost and credit card charges between layers and stopovers and buildings and renew sales people in the county and stuff.
Turner Novak:
Yeah, if you just think about four layers, 3% credit card via each layer, you cut 12% of costs by just not running a credit card four times.
Dane Atkinson:
Literally, which is crazy.
Turner Novak:
Why has it not been fixed yet? Why are we still using all these different layers of distributors? Is there a legacy evolution of the industry type of issue going on?
Dane Atkinson:
I don't know. When we first got there, it was like if I was going to quit, I'd just walk around and consolidate the buying power of any kind of customer and renegotiate that. I talked to, again, Rob, and people were like, "Yeah, no one knew why the cabs didn't have an app. No one could figure out..." In hindsight, why hasn't someone come to the space? It not being a sexy industry and being very opaque has made it hard for technologists to really dive in and start to make changes in it.
Also, it's horizontally designed, which was somewhat surprising to us because it's very bad from the basket size mathematics. So, if you were originally the dairy provider, you would sell to the school, the hospitals, the coffee shops and the restaurants, which means that you had to have them all buy 500 bucks per delivery, so everyone's buying a ton of milk.
You don't necessarily have to... It's sitting on the shelf for like a week and a half and it's just not healthy, because they don't have the rest of the basket. But by being the commissary, so to speak, for coffee, we give you everything, so our operational costs are fractional compared to the horizontal players.
But diving in on this, it's not an easy thing and it takes a ton of capital and it takes a vertical alignment, I think, to re-figure it out. But there's way more to do. The coffee bean line is bad, the fish manufacturing is horrible, all of that. There's a million opportunities to improve the way food works from just the operational pathway of it. If any else wants join in, please do.
Turner Novak:
So, was milk really your first product that you've tried to crack this local sourcing for?
Dane Atkinson:
The paper thing was actually first because it just seemed insane that you'd have warehouses full of paper. Milk is a big one. Working with our vendors, like the composting, finding ways to get rid of that cycle. And in our future we see the ability to close loop a lot of these things. Sadly, even with our new milk, we'll go through 5,000, 6,000 jugs a day. And where do those go? They go straight to the ocean kind of thing. They're just waste. Doesn't need to be. We can close container and use the same stuff over and over again. Again, getting a footprint and actually trying to make the system better gives you a lot of opportunities to make somewhat meaningful impacts to the cycle.
Turner Novak:
Yeah, so you remove these layers from the system, which always cuts costs, but then gives a better experience, maybe increases profitability for everyone involved and then better for the planet seems like.
Dane Atkinson:
Substantially better for the planet, for the customer, for everybody, not just something that wasn't... When you're working horizontally, you couldn't make that work. Or why would you innovate? Because you're making money just doing the thing that's been done for 80 years.
Turner Novak:
Yeah, you're a billionaire, you're on your yacht. Why do you give a shit about the customer at that point? You're so removed.
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