🎧🍌 Scaling Instacart to $10 Billion | Nilam Ganenthiran, ex-President
Growing 5x in five weeks, inside Amazon buying Whole Foods, almost running out of cash after the Series C, catching Uber's on the highway, advice for sitting on boards, and how to be customer obsessed
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Nilam Ganenthiran is the ex-President of Instacart, and currently the founder and CEO of Beacon Software.
He takes us inside key moments of his 8+ year journey at Instacart, joining as the 12th employee and helping scale the company to the public markets.
We talk tactics for customer research, building customer relationships, balancing strategy and execution, how to serve on and manage a board, what happened when Amazon bought Instacart’s biggest customer Whole Foods (which was 43% of its GMV at the time!), inside its COVID response that required a 6x increase in delivery drivers within a few weeks, surviving eight months of runway in 2015, his new company Beacon Software, his excitement around AI, and more.
Timestamps to jump in:
04:23 Inside Amazon acquiring Instacart’s biggest customer, Whole Foods
12:13 Lessons from quickly signing 8 of the top 10 grocers
13:06 Why grocers were slow to adopt ecommerce
15:29 Building “Shopify for grocers”
16:22 Sales = building relationships
19:05 Why Wegman’s is one of the best grocers in the world
20:43 Cold calling Wegman’s and signing them two years later
24:33 How to do customer research
26:59 Catching an Uber in suits on the highway
28:50 Why Instacart was possible back in 2013
30:36 Launching Instacart’s advertising network
38:46 Growing 5x in 5 weeks during COVID
45:20 How Nilam started angel investing
47:56 Advice for sitting on boards
50:00 The roles and incentives of a board member
54:03 Deciding when to keep going and when to give up
56:02 Nilam’s framework around optionality
59:17 Seven years of weekly redeye flights
1:00:30 Almost running out of cash 8 months after Instacart’s Series C
1:07:54 Why time is your scarcest resource & startups are default dead
1:10:00 Nilam’s new company, Beacon Software
1:11:28 Why he’s excited about AI
1:13:25 How AI makes human relationships more important
1:14:41 Turner’s investing lessons from family members
Referenced:
Nilam’s new company, Beacon Software
Find Nilam on Twitter and LinkedIn.
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Nilam, how's it going? Welcome to the show.
Nilam Ganenthiran:
Hey, Turner, great to be here. Thanks for having me.
Turner Novak:
Thanks for coming on. Excited to have you.
When I talked to about 10 different people, that we were going to do this episode, I told them, "Give me some topics we should dig into." I believe every single person said, "When Amazon announced that they were acquiring Whole Foods." That was a kind of crucible moment in your career and what you were doing.
Can you set the stage for what all happened there? And then, we can dig a little bit further into it?
Nilam Ganenthiran:
Oh, boy. You wanted to start me off on the hot seat.
Well, as I mentioned, Turner, excited to be here. This goes back to 2017. My wife and I had just welcomed our second child four days earlier, and-
Turner Novak:
Wow. I did not know that part-
Nilam Ganenthiran:
Yeah. I was on the road with Apoorva, our founder and CEO, and our CFO to meet a very large retailer on a Wednesday, I think it was. Or, call it Wednesday or Thursday.
Turner Novak:
Okay.
Nilam Ganenthiran:
We had one of the best meetings in Instacart's history, pitching this retailer who we'd been trying to get on the platform for five years at that point.
I remember high-fiving each other at the airport. Apoorva and Ravi heading back to San Francisco. Me heading back to Toronto, where I lived, and just feeling like I was on top of the world because we were about to hopefully sign a very large retailer.
I land in Pearson Airport in Toronto, and I get a text from my client, the CIO of Whole Foods. His name's Jason. He's now the CEO of Whole Foods. And, we're on this text thread together with Apoorva and John Mackey, the founder of Whole Foods.
He said, "Hey, guys, can we connect tomorrow morning?" I gulped. And, I just assumed it was something bad because it was a late night text from our largest client who accounted for 43% of our GMV at the time.
Turner Novak:
With no context-
Nilam Ganenthiran:
With no context. Yeah. It's one of those classic texts. I said, "Sure." We set up time to chat that next morning at 9:00 AM.
I grabbed my morning coffee, turn on the TV, hop on this conference call that they had set up. And, Apoorva was a bit late, and they were a bit late. I was flipping channels, and it landed on CNBC. And on the CRON was scrolling, "Amazon buys Whole Foods."
I text Apoorva, "You got to get on. I think I know what this is about."
Seconds later, he gets on, the Whole Foods founder and CEO gets on, the CIO gets on. They basically told us the news, that the world had just found out, that our largest competitor was buying our largest customer.
We took a moment to compose ourselves. They reassured us that, "Everything was going to be okay. That this won't affect our long-term partnership. We should continue to keep building," and I believed them. I believed that everything was going to be okay for that microsecond.
We hung up the phone, took a deep breath, and then the texts started coming. We got texts from investors. Texts from employees. Texts from our families.
And that's when it dawned on me that things were not going to be the same anymore.
We quickly gathered ourselves. We called a huddle amongst the senior most executive team at Instacart, and we split up tasks.
There was going to be a group of us that were going to deal with investors. There was a group that was going to plan out employee communications. And, there was another set that was going to work on our clients and our external comms. And, we got to work.
We called an All Hands for the company. I flew down to San Francisco that next week and presented at the All Hands. And you have to remember, we had a team of, call it 320 people, who had pledged their careers with us and who were all feeling a great sense of angst about what their own futures held.
They were getting questions from their parents and their spouses about, "Is the job that you dedicated yourself to going to amount to anything?"
So I got on stage and I started the conversation by saying, "This is the moment we've all been waiting for." A small group of us still laugh about this because-
Turner Novak:
Did you just make that up on the spot?
Nilam Ganenthiran:
I made it up on the spot, Turner, but I knew that's what the team needed to hear.
And funnily enough, as we flash forward, that ended up being the moment that Instacart was waiting fo. Because that served as the catalyst for us to be able to unite the rest of the North American grocery industry to adopt digital and adopt e-commerce, and most importantly adopt it with Instacart.
Turner Novak:
Were there any things you think you did right in terms of positioning all these stakeholders on the team, everyone to just say, "Okay. This is massive. We need to just completely shift and execute on it appropriately." Any key decision do you think that you guys made?
Nilam Ganenthiran:
Yeah. There are probably three big things.
I think the first thing is psychological and cultural. We did not allow ourselves to wallow in the pain of the moment that we were all feeling. We allowed ourselves maybe five minutes, and then got into action mode. And I think that is something that at its best, at Instacart, we had that culture. We started from where we stand and just pushed forward.
The second thing that we did right was we came up with language about the vision for the path forward. And this is I think underappreciated strategy in moments of crisis.
We worked with our board, and it was actually Sir Michael Moritz from Sequoia, who we were iterating with, who came up with this. We decided to position ourselves as the friend of the retailer. And it was almost us against them, and the them being Amazon Whole Foods. It was as much for us as it was for the external market. We needed a rallying cry to march against.
And then finally, we got really surgical around prioritization. We dropped everything else that the company was prioritizing and said, "The most important thing now is to bring on every major grocer in North America onto Instacart," which meant if you were working on something that didn't directly service that goal, you should probably stop and ask your manager what you can be doing to service that goal.
Turner Novak:
Just from a strategic perspective, why did you decide that was the best thing to do?
Nilam Ganenthiran:
We had such heavy customer concentration. They accounted for so much of our volume. And frankly, Instacart wouldn't be who we are today if it weren't for that early relationship with Whole Foods Market. They were a very demanding, discerning, and high quality retailer. And, we learned so much building Instacart in the early days with them. So, we were comfortable with that customer concentration.
But then when the transaction was announced with Amazon, you naturally have to wonder what your future holds. And hence, diversifying our revenue streams became a really important thing to do.
Turner Novak:
It probably would've been just over the next five years you were going to get there, but it-
Nilam Ganenthiran:
That's exactly right, Turner. It became one of those things that we thought naturally was just going to happen with the passage of time. But, we had to become more thoughtful and deliberate about driving adoption with, we called it, Main Street grocers.
Turner Novak:
So who would you kind of bucket, then, in that category of those big players that you got signed up over the next couple months? Any key ones?
Nilam Ganenthiran:
Yeah. So, I got on a plane and didn't step off for what felt like a year, at a minimum, flying to all parts of the country, talking to great grocers who we had good relationships with, but hadn't yet broken through with, like Kroger, like Albertsons.
We expanded our partnership with Costco. We added Aldi. We scaled our relationships with some of the largest regional grocers like HEB, Publix, Wegmans. We signed Loblaw in Canada.
So essentially, I'm forgetting the exact stat, Turner, but I think by the end of that period we had eight of the top 10 grocers in North America signed.
Turner Novak:
So you mentioned you had some of them kind of onboard, but not fully. Were people dipping their toes in, "Maybe, we should do this digital thing." I don't know how they thought about it at the time.
Why had retailers not signed up, yet? What was the pitch to them and the urgency to get them to?
Nilam Ganenthiran:
Yeah. It's a great question. It's almost difficult to imagine this world that wasn't that long ago, especially sitting on the other side of COVID. Today we're sitting and grocery e-commerce is so much a fabric of how we all handle our lives that we can't remember a time, I think, when grocery e-commerce was just not normalized.
So, the biggest consideration for these large grocers in adapting e-commerce was, "Is this really a thing, or is this just something for a small segment of the population?"
Turner Novak:
Really?
Nilam Ganenthiran:
Yeah. As crazy as that sounds. I think the Amazon Whole Foods transaction showed North America that they needed to take grocery e-commerce seriously. Because these retailers are very smart, and they had seen what Amazon had done for the other areas of retail as they entered and expanded from books and media to other segments.
And, they had too much pride of authorship. Many of these chains have been around for four generations, some five generations. They were not going to let what happened to a bunch of other industries in retail happen to them. So, the biggest thing we had to get over was the inertia around offering e-commerce to customers. That was thing one.
Thing two was, "Are you a friend or foe?" So we had to not only sell that we were a friend, but also build product to gain trust with our retailers. And that actually led us to a bunch of innovations, including launching something that's come to be known as Instacart Enterprise, where Instacart built a set of white label products and tools and retailer enablement technology to actually help grocers come online on their own domains with their own apps, with tools in store, to be able to digitize the in-store experience, as well. And you flash forward today, it's still remains a big part of Instacart's strategy.
Turner Novak:
So that business specifically, it's kind of like Shopify for grocery stores? Or it's like vertical SaaS for running a grocer?
Nilam Ganenthiran:
That's exactly right. Yeah. That's actually how we described it at times. It actually is Shopify for groceries. And you have to remember, pre-Amazon Whole Foods, that was just not something we thought the grocery industry needed.
We were a B2C marketplace that worked with grocers to get them on an aggregated platform to offer their groceries for sale to admittedly a pretty small group of the population at that time.
Post Amazon Whole Foods, we became a retailer enablement technology provider that had a marketplace that built white label apps and websites, that built a bunch of technology to take the grocery store and digitize it in a way that Amazon could.
Turner Novak:
When I was talking to people about this episode, we were going to have this conversation, a lot of them described you as being... I don't know the best word, but extremely customer obsessive. You were so good at understanding what your partners, customers, retailers, what they all needed.
What is your approach, or what do you think is a good approach, if you want to truly get to know a potential customer?
Nilam Ganenthiran:
First of all, that's very kind. Thank you for saying that, Turner. It's a very nice thing to say.
I would say, I didn't grow up in sales. I think the best customer relationships are where you don't actually think of the person on the other side of the table as a customer.
So, my approach has always been about building relationships. And I think that's actually served me well, not just on the Instacart side, but with recruiting, with companies that I've invested in, across the board. So the way I treat my "customers" is the same way I treat someone who I'm recruiting. And, it starts with a few core principles.
The first is, "I'm never going to lie to you. I may not need to tell you everything, but I'm never going to lie to you."
The second is, "If I don't think it's at least a medium, if not long-term win for you, I shouldn't be bringing it to you." And if I don't actually believe that, I just don't believe that zero-sum relationships are built to last. And if you're trying to build a company over multi decades, stuff breaks down when you're trying to optimize for the deal at hand.
Then, the third principle is, "I want to make sure when this deal is done, we'll continue to have a relationship, even if we're both at a different company." The thing that makes me happiest about the comment you made, which again was so kind, is I still have relationships with almost all my clients from Instacart, which makes me happy.
Turner Novak:
Yeah. That's interesting. We'll get into, a little bit later, what you're doing now, but maybe that'll come into play for you later in your career, too.
Are there any interesting stories with landing some of those deals, getting in front of customers? I need to ask if you have any crazy examples of stuff that you did to just really get in front of people, get them to take Instacart seriously, take you seriously, and just give you the time of day.
Nilam Ganenthiran:
I talk to a lot of young entrepreneurs. I think people often seek a silver bullet or some sort of magic answer to how to sell or how to get your first few customers. And honestly, it all comes down to the grind.
So to give you an example, one of the best grocers, not just in the country, but I think in the world, is in upstate New York and it's called Wegmans. If you've not been to a Wegmans store, please go the next time you're in the Northeast. It's just an unbelievable experience.
Turner Novak:
What major states or cities? Just upstate New York, or-
Nilam Ganenthiran:
So New York, Pennsylvania, DC, Maryland, Virginia, Massachusetts.
Turner Novak:
Okay. I'm trying to think I've ever been. I don't know if I've ever been. I definitely recognize the name, though.
Nilam Ganenthiran:
Yeah. The closest into New York City is in Brooklyn, which is also a great store, but smaller than the rest of their stores. The average Wegmans does, I don't know the exact stat, but probably four to five times the volume of a regular grocery store.
Turner Novak:
Why?
Nilam Ganenthiran:
They have a broader selection. They have the nicest stuff, but they cater to a full range of socioeconomic backgrounds.
Honestly, I could go spend two and a half hours in a Wegmans. Yeah. It's one of those types of experiences. You look forward to it.
Growing up in the grocery industry, starting as a cashier at 16, I've known about Wegmans forever. And, I've always wanted them on the Instacart platform. But as you'd imagine, when you have such a delightful in-store experience and you are a family run, family owned company, that is, I think in the fourth generation of family control now, fourth or fifth, you want people coming into your store, generally, because that's your point of differentiation.
So, getting them to adapt Instacart, at first was extremely difficult. I had a great relationship with one of the senior leaders there, who'd been there forever, and had built that relationship frankly, by calling headquarters and just figuring out who to talk to.
Turner Novak:
Wait, wait, so. I mean, I'm a millennial. I'm-
Nilam Ganenthiran:
Yeah.
Turner Novak:
... 33. That's not something I've done very often.
Nilam Ganenthiran:
Yeah.
Turner Novak:
How do you do that?
Nilam Ganenthiran:
Cold calling is a superpower. I tell my wife, "I want to get our kids to cold call." Once you start doing it, you realize it's actually not that hard. Again, you're just having conversations with people and people like talking to people.
So anyway, I developed a relationship with this gentleman named Tom Denardo, who's still there and is still a friend. I think the world of him. And he and I would just talk and I'd say, "Tom, the next time I'm in Rochester, I'm going to come see you."
And every quarter, I would drive from Toronto to Rochester. It's about four, four and a half hours, and sit in the parking lot. And then, I'd text Tom or call him and say, "Hey, I'm outside. Can I come and see you?" Most of the time he would entertain me, and we'd have a great meeting.
And the funny thing is, flash forward maybe two years of doing this and working and building an understanding from Tom about, "What is so special about Wegmans and what needs to be different about them coming online versus every other grocer we'd done in the past," gave me the ammunition to come up with both a product as well as a proposal that made sense for them.
They came online with Instacart and frankly, they're one of Instacart's best customers. Even today. We invented a lot of stuff together with Wegmans that we then took to a lot of other grocers. It's one of the relationships I'm proudest of, but it probably started in that parking lot in Rochester.
Turner Novak:
So, what'd you do? What was the proposal or the solutions?
Nilam Ganenthiran:
It's honestly so multifactorial. These are the epitome of enterprise relationships. Your contracts are very, very thick, and there's lots of different edge cases you're trying to solve for.
Because if you think about it, what Instacart needed to solve was bringing that magic of walking through the cheese aisle in a Wegmans, where you've got 80 different types of cheese and someone offering you free samples. How do you bring that online? It's not just throwing up a picture of-
Both:
Kraft-
Turner Novak:
... cheese.
Nilam Ganenthiran:
... singles. Yeah. You can't do that, so.
Turner Novak:
And then, I heard Meijer was another interesting one.
Nilam Ganenthiran:
Yeah.
Turner Novak:
At a trade show? What's the story there?
Nilam Ganenthiran:
Yeah. You're from Grand Rapids. Right, Turner?
Turner Novak:
Yeah. I have a couple friends that have been at Meijer for a long time.
Nilam Ganenthiran:
Meijer was a very hard one to crack. In fact, we'd gone through the contracting process with them multiple times and got stopped at the finish line. So, there were multiple times I told the company we were about to sign Meijer. We'd have an All Hands getting prepared, and then something would break down at the last minute.
Eventually, there's this great trade show in the grocery industry. It's called the FMI Conference. And, I would just go to it specifically with the goal of finding the Meijer CEO. And he was, I think, the chair of the conference. So, I'd sort of wait outside the conference room where I knew he was speaking and just find a way to get to him.
And I thought he forgot, but recently he told people at Instacart that he remembers me harassing him in the hallways of this conference. So it all worked out. We ended up bringing Meijer on board, and they're a great partner.
Turner Novak:
So I've heard, too, that you do a ton of research before you meet a customer. You get... I don't know what it is, but you just know what their problems are. You almost know it more than they do.
How do you do customer research? And then how do you tailor your approach? In a lot of these cases, you're kind of reaching out, cold calling, showing up in front of them, just how do you get ready for those moments?
Nilam Ganenthiran:
I think it goes back to what we were talking about earlier, Turner. I don't think of them as customers. I'm genuinely interested in their business and their story. And my wife jokes, "You just like gossip." So, I think of it almost as gossip. Right?
Turner Novak:
Okay.
Nilam Ganenthiran:
"How many generations has this chain been in this family and who are the folks that have been around for the ride the longest and what is their roles beyond their titles and what parts of the business do they enjoy doing the most? What has their career journey been?"
And all of that is not, I think, done the wrong way. It's a parlor trick to be able to just present facts back to a customer. We're all smart. We're all human beings. People get that. That's not the intent. The intent is actually to understand what's actually important to the person on the other end of the table.
Let me give you an example. If you're dealing with a public company that has had multiple rough quarters, or quarters that they've gone sideways, and you get a sense that the C-suite is under the gun and needs quick sales and a quick return, that's a different pitch than if you're trying to pitch a generational company that is just focused on legacy and preservation of value created and long-term compounding.
There it's about brand identity. There it's about protecting the integrity of their relationship with their customers. So, understanding those nuances I think is pretty important.
Turner Novak:
It sounds like there's almost both of those with Instacart, where Whole Foods was public at the time.
Nilam Ganenthiran:
Yeah.
Turner Novak:
And then, some of these other grocers were multiple generation-
Nilam Ganenthiran:
Yes.
Turner Novak:
... businesses.
Nilam Ganenthiran:
Yeah. And even public companies, you can't paint them all with the same brush. Right? It's the nuances around, "Are you a public company that-
Turner Novak:
Do you pay a dividend?
Nilam Ganenthiran:
Yeah, yeah. Exactly. Or, "Are you a growth stock?" Right?
Turner Novak:
Yeah.
Nilam Ganenthiran:
In the case of Whole Foods at its prime, it was a growth stock. It was valued at a higher multiple than any other grocer on the public market, so they needed to keep growing.
Turner Novak:
Yeah.
So, I have one other crazy story. I can't remember who brought this one up, but you apparently were on the way to a big customer meeting. I think you ended up closing them, it sounds like. But, you got a flat tire.
Nilam Ganenthiran:
Yes.
Turner Novak:
What happened there?
Nilam Ganenthiran:
Yeah. We were on the highway. I think it was in Pittsburgh. One of the best parts about building Instacart was it exposed me to lots of parts of the US that I would've never been to. I think I've been pretty much to every state in the country and every province in Canada, pretty much, trying to talk to grocers or CPGs in these places.
And, I was in a car in Pittsburgh on the highway. And it wasn't just a flat tire, the axle broke. So, we literally just dropped to the ground. It was crazy scary-
Turner Novak:
Rental car, or-
Nilam Ganenthiran:
Yes. In a rental car.
Turner Novak:
Okay.
Nilam Ganenthiran:
When your axle breaks, you can't even move it to the side.
Turner Novak:
Can you tow it, or-
Nilam Ganenthiran:
No.
Turner Novak:
Did you have to get picked up?
Nilam Ganenthiran:
We had to get picked up. Yeah. And then we got an Uber to pick us up on the highway, which was a really interesting experience. And, we were all wearing suits because sometimes these are corporate environments, you have to suit up.
So picture us sweating on the highway, hoping we don't get run over by a car, waiting for an Uber. I don't even think there was Uber X at the time. I think we were waiting for an Uber Black.
Turner Novak:
Okay.
Nilam Ganenthiran:
It was quite the scene.
Turner Novak:
Hopefully, the Uber didn't cancel on you.
Nilam Ganenthiran:
Yeah. That would've been great.
Turner Novak:
“I'm not doing that.”
Nilam Ganenthiran:
Yeah.
Turner Novak:
I've had that before.
I've had three cancels in a row trying to get to the airport or something.
Nilam Ganenthiran:
Yes.
Turner Novak:
They don't want to go-
Nilam Ganenthiran:
That's when you get the cancels.
Both:
Yeah.
Turner Novak:
I mean, any other crazy story’s? What's probably the most non-traditional thing you've ever done to just show up and meet someone?
Nilam Ganenthiran:
Yeah. When we were looking for our first grocery customer-
Turner Novak:
This is signing them to a specific contract versus the shoppers were just going and picking out products?
Nilam Ganenthiran:
Yes. Exactly. We just raised our Series A. We were testing into the model of having grocers pay us a fee to sit on the marketplace. We had just launched Chicago, so it was September of 2013. And I had just started in the company, and we were experimenting with ways to generate revenue.
So, I'd fly down to Chicago because it was our second market, and we didn't want to experiment with anything in San Francisco, which was home base. And I'd just go try to talk to grocers, whether they were large or small.
And, the funniest thing was the amount of context shifting that was required. I remember, I'd have eight meetings in a single day. I'd have a meeting with the CIO of Walgreens. And then, I would get in the rental car and go to, literally, a local fruit and vegetable provider called Stanley's Fruits and Vegetables, where the owner didn't want to have a smartphone because he was worried the government would be watching him.
Turner Novak:
No way.
Nilam Ganenthiran:
So, the context shifting of having to speak to a traditional corporate executive. And then, your next meeting he told me, "Just text me the contract terms."
Honestly, it was a real thrill because no two days were the same, no two meetings were the same. That's actually probably why I stayed as long as I did at Instacart, no two days were the same.
Turner Novak:
I think one thing that I've heard you also were pretty paramount in was just getting this whole advertising business at Instacart up and running. Can you just quickly explain to us how that worked? I guess it might be kind of confusing to some people, and then we can get into the nuance of it.
Nilam Ganenthiran:
Yeah. So, Instacart today generates hundreds of millions of dollars of profitability through ads, which are served on Instacart. The vast majority of those ads are paid search products, where if you search for a keyword like cookies, Oreos may show up as the first or second item and have a little featured flag on it.
I'd been thinking about ads from the earliest days of thinking about Instacart. And, I pitched the idea to Apoorva when he was starting the company. I still have the deck. Long-term, we always knew there would be an advertising business that was possible once you had the grocery demand on an e-commerce platform.
My background, Turner, after working grocery stores, I worked at Proctor and Gamble. And, I was a marketer at Proctor and Gamble, trying to get people to buy soap and toilet paper and diapers.
Turner Novak:
Just maybe, we sidetrack a little bit. So, what did that consist of? Was it mostly in stores, online?
Nilam Ganenthiran:
Yeah. I used to sell to Walmart, almost 100% in store. Then, I was the brand manager of IAMS pet food, if anyone has pets.
And from the point of view as a marketer, I always knew that if groceries came online, as a marketer, it's the dream product because then you could target customers with ads at the moment they were purchasing. So, we always knew Instacart would have an ads product. The how and when we didn't know.
Little known fact is we'd been trying to do ads on Instacart since 2013. Our first ever advertisement was with a company called Hood Brands that does milk up in the Northeast. They do dairy products, and they gave us a 50 cent coupon off anyone who would buy Hood products. I think we made all of $38 on that promotion.
I think that early signal that ads weren't working had us not do ads for a long time. We came back to it in 2015, 2016.
The reason advertising is such an important part of Instacart, the biggest knock on our business, for the last 10 years, is that no one could do grocery e-commerce profitably. We were building a business from the ashes of Webvan and Kozmo.com.
And we did two, maybe three big things different. First, rather than trying to own the inventory ourselves and go direct that way, we partnered with the existing infrastructure, and hence didn't need to build hundreds and thousands and now tens of thousands of warehouses.
The second thing we did differently was we leveraged underutilized labor force by having them partner with us as personal shoppers, using their smartphones to be able to pick and deliver groceries on behalf of grocers.
Turner Novak:
Yeah. Which Webvan couldn't do. Mobile phones, or smartphones didn’t exist.
Nilam Ganenthiran:
Exactly. And, the gig economy was not yet prevalent. Those two, I think, people get.
But, the third and probably biggest lever was we realized you could build a massive advertising business that was highly relevant to the CPG advertiser. Give them great data of when they spend money on this ad, this is how many sales come back the other side. We took our time, and we built that to what it is today.
Turner Novak:
And, isn't trade spend just kind of... They don't even call it advertising? Historically, it's been called trade spend, where you basically as a supplier to a store, you kind of pay a little bit extra to get prime placement in the store on a shelf, which is kind of advertising.
Nilam Ganenthiran:
Yes.That's right.
Turner Novak:
To your point, it's offline. I think the thing I've heard is about 50% of it works, and the only thing is they don't know which 50%.
Nilam Ganenthiran:
Yes. So, they spend the full amount.
Some of this was timing and luck, as well. I think we were building Instacart's advertising business after Amazon had built a very successful advertising business, but not for groceries.
So no one had done product placement the way that Instacart did, but Amazon had proven that that model works for all kinds of other categories. And while we were already live, we learned a lot observing how advertisers interacted with that product, and that helped really bring something for grocery that made a lot of sense.
And now today, everyone's got what they call retail media. Everyone's got their own. Amazon's got a giant business. Walmart has a giant business around this. So, yeah.
Turner Novak:
Yeah. I'm trying to think of what year was that? And then, how big? Was Amazon a billion in ad revenue, yet? Or, probably close.
Nilam Ganenthiran:
They were pretty close. They weren't reporting it at the time, but that was what we suspected. Yeah.
Turner Novak:
Okay. Yeah. It was still that “other revenue” bucket that randomly got really big. And then, suddenly people are like, "Holy cow
Nilam Ganenthiran:
"Wait a minute. Why is this growing so fast?"
Turner Novak:
$30 billion in ad revenue eventually, a couple years later.
Nilam Ganenthiran:
Crazy.
Turner Novak:
And then, how did you get advertisers bought into this because you kind of got to kickstart this now. What was the strategy? It was mostly CPG companies. Correct?
Nilam Ganenthiran:
Yes, yes. We went to folks, like my old employer Proctor and Gamble, Pepsi, Coca-Cola. And, we experimented with all kinds of different models.
So as I mentioned, our first product was actually coupons. So, "Buy Breyer's ice cream, get 50 cents off." The customer gets a discount on the product. We get a little bit of money for serving that coupon.
Then, we experimented with samples. So because we had people delivering stuff to grocers, we'd throw in an extra.
And, I remember our first sample ever was something called Coca-Cola Life. If anyone remembers that, it's a green Coke. I think it's called Life, but it was a green Coke can. And, we threw these samples in. It was a nice little business.
But none of those were scalable in the same way as the featured product, which is a search product. I guess we stumbled upon the same thing Google had figured out many years earlier, "Search is an amazing business."
Turner Novak:
Yeah. And so, that's essentially what it is today. To your point-
Nilam Ganenthiran:
That's the bulk of it. We've expanded dramatically. There's display products. I think they still do sampling and couponing. But, the bulk of the business is still search.
Turner Novak:
So it's basically, if I'm Oreo or if I'm some cookie brand, and somebody searched cookies or chocolate chip cookies-
Nilam Ganenthiran:
Do you want to show up first?
Turner Novak:
Yup. And so, I don't have to pay if I don't want to. People will still probably buy the product, but if I want to be at the very top.
Nilam Ganenthiran:
Yes.
Turner Novak:
So, it's the same business model as Facebook with Newsfeed, Google-
Nilam Ganenthiran:
Yes.
Turner Novak:
Those are two of the most valuable companies in the world.
Nilam Ganenthiran:
That's right.
Turner Novak:
Those are pretty good businesses.
Nilam Ganenthiran:
That's right. These are pretty good businesses.
Turner Novak:
Well, then when you think about it, it's all underpinned by you own this "shitty, logistics-in-person. That’s pretty hard to get all that up and running, so then you just kind of
Nilam Ganenthiran:
Yes. And, that's the moat. Right?
You do the hard work to serve customers. And then, you figure out, "Who else benefits from you serving those customers?" And then, find a way to have win-win commercial relationships with them.
That framework of, "Do the hard work, who's benefiting from that hard work, and how can I then participate in that benefiting?"
Turner Novak:
Yeah. It's like the Holy Grail of business enterprise value creation.
So then, I think another big, general moment of time in Instacart's history was COVID.
Nilam Ganenthiran:
Oh, boy. Well, we grew 5x in five weeks. And we were not small before COVID.
So, Turner, I think when COVID hit, we basically quickly realized we needed to stop everything else everyone was doing in the company and enter what we described as wartime.
The only two other times the company had been in wartime was one, when Amazon bought Whole Foods, which we talked about. And two, a couple of years earlier to that, when we almost ran out of money and needed to get to unit economic profitability.
We were lucky in that we had the culture and mechanisms to be able to pivot the business and pivot the team to very quickly mobilize around a hard problem. And, COVID was probably the hardest problem we had to solve, just like it was for everyone else operating in this environment.
To give you some context on the scale, we had to go from 100,000 folks picking and delivering groceries on a weekly basis for customers, which seemed like a big number, to 600,000 in probably four weeks.
We had to go from 1,200 agents answering customer and shopper queries, in our customer and shopper service lines, to 16,000 at peak. It might even be higher than that. I might be misremembering. Yeah.
Turner Novak:
1,200 to 16,000.
Nilam Ganenthiran:
16,000.
Turner Novak:
Okay. So, it was like 10x.
Nilam Ganenthiran:
That's right. I'm having flashbacks of friends texting me saying, I can't get through to the customer service line." That was because we were probably in the midst of scaling this up. We had to go from accounting for, call it 5% of a grocery store sales to, in some cases, all of their sales.
Turner Novak:
Really? Because they were probably just closed.
Nilam Ganenthiran:
Many of them were closed.
Turner Novak:
And, they were relying on you to-
Nilam Ganenthiran:
Absolutely. As I reflect on those moments, I think about the fact that we were all holed up. Everyone was extremely scared of what was in store. And, I'm just so proud that our teams were able to creatively solve problem after problem after problem to be able to get groceries to customers. And, that's all the way up and down the company, down to our personal shoppers.
And by problems, Turner, I think you'll remember the world ran out of hand sanitizer. So we were the first to actually go and contract with a distiller, I believe in Louisiana, to be able to get distilled alcohol and turn it into hand sanitizer because in some states, our personal shoppers were not allowed to deliver groceries without having hand sanitizers. Other states said, "You need to have masks to be able to deliver groceries."
And of course, we needed our shoppers to be safe, but where do you find masks when there were no masks to be around? So, we contracted with someone to stitch masks, turn cloth into masks. So these were the types of problems we were knocking down, felt like on an hourly basis.
I was on the phone a lot with various city councils because one of the underappreciated parts of the COVID experience, which again I hope none of us ever go through again, was how disjointed the regulatory and government responses were.
You had federal mandates, state mandates, city mandates, that sometimes were conflicting with each other. Grocery stores didn't know if they could be open and what hours they could be open. We didn't know if our shoppers could safely be there.
We created an expert panel of health experts to be able to help guide us because we were not getting fulsome information from the people we thought we should be getting information from.
Looking back, obviously I'm very proud of what we achieved because we stayed up and running. We kept the site up. We delivered billions of dollars of groceries on behalf of our retailers. We created jobs at a time when lots of our personal shoppers were being laid off from other hospitality industries, like the hotel industry and restaurant industry. So there was a lot of good that we did, but it was really hard.
Turner Novak:
Yeah. I'm just remembering those times, just crazy.
Nilam Ganenthiran:
Yes.
Turner Novak:
Just insane. And the thing is, we just didn't even really know the gravity of COVID. There's definitely some cases where we probably overcorrected, but we kind of had to. We just didn't know.
Nilam Ganenthiran:
We didn't know. Yeah.
Turner Novak:
If you could go back to that time, specifically, anything you'd do differently? I don't know if these are necessarily mistakes, but just anything that you wish you could have just done a little bit differently.
Nilam Ganenthiran:
Yeah. I think the big one I think about is, because we became so good at stopping everything else and investing in the crisis at hand, there was a chance that we could have done a little bit more on investing in the long-term, while also solving for COVID.
And it's easy to say in retrospect because at the end of the day, a lot of our competitors actually were not available during that time. They might not have taken as stark a view of prioritization. But I do often wonder if we could have kept a few big projects on the burner while we were running our COVID response to make sure that in a post COVID world we continued to thrive.
Luckily, as I look back, the business is great even today, and so it doesn't seem to have hurt anything. That is one that I have second guessed myself on.
Turner Novak:
Yeah. I'm trying to think, remembering back on that time, I don't know how scaled the Uber groceries, DoorDash groceries, Whole Foods Amazon I feel like didn't really have it cracked yet.
Nilam Ganenthiran:
They were not cracked, yet.
Nilam Ganenthiran:
Amazon and Walmart didn't have the same capacity we had. They were trying the best they could, but everyone was having capacity issues.
Turner Novak:
You were scaling up while everyone else was like, "We just can't. We're just not doing it."
Nilam Ganenthiran:
Yeah. I would say Amazon and Walmart started to catch up, call it two, three weeks in, but it felt like every day we were all living a week.
Turner Novak:
One thing I really wanted to hit on was Angel investing. At what point did you start starting to get involved with some founders, outside of just being an employee?
Nilam Ganenthiran:
About four years into my journey at Instacart, I started having people reach out to me for introductions, to ask my advice. And, I didn't-
Turner Novak:
This is 2017.
Nilam Ganenthiran:
This is about 2017, maybe 2016, 2017.
And, I didn't really know what advice I had to offer. And I'm like, "Why are these people asking me?"
And those conversations tended to be with young entrepreneurs, similar in ambition, aspiration, and skillset as Apoorva in 2012, when I started talking to him. That gave me a lot of energy.
And what I found was, the day-to-day job at Instacart was so all consuming, just having other things to think about outside of Instacart and other people's problems to help solve was very refreshing. It almost felt like a hobby.
And that led me to joining some boards, to see if I could be helpful in that capacity. And more and more, as resources allowed, investing personally in the next generation of start-up.
Turner Novak:
And you even did a couple, at least one that I know for sure. You joined the board before even raising money.
Nilam Ganenthiran:
Yes.
Turner Novak:
It sounds like you almost created the board to have you on it.
Nilam Ganenthiran:
Yes. Yeah.
Turner Novak:
How did that come about? And then, what's the point of doing that, even in the first place, if there's no company, yet?
Nilam Ganenthiran:
Yeah. That was a special founder. His name is Nick Narodny, a founder and CEO of a company called Aalto. And he was introduced to me actually by a close friend, Raphael Corrales, who introduced me to Instacart.
Rafa and I were neighbors at business school. Rafa was a great founder, went on to be a VC. Now, is a very successful early stage VC. And, Rafa introduced me to Nick, really, in the earliest part of the Aalto journey to help Nick with thinking through marketplaces, thinking through company building.
And, I just fell in love with the types of conversations we were having. And, I knew I wanted to be involved and help him build and scale the company. And, that ended up leading to a board role and multiple rounds of financing.
Turner Novak:
Okay. And then when you're on a board, what do you usually do? Just how do you think about best practices-
Nilam Ganenthiran:
Yeah, yeah. This is probably an obvious statement, but in case it's not. There are different types of roles you play as a board member, depending on the type of company that you're a board member of and who you're representing.
So, I've had the very good fortune of being an independent board member, of being a board member who's represented a large investor, from my time working at D1 Capital, and a board member, sort of, who served as a partner to the founder.
Today, obviously my time is my scarcest resource as it is for all of us. But, I am fortunate to sit on the board of a great family run retailer called Discount Tire. It's actually the largest tire retailer in America.
There, my role is as an independent board member who brings insights and experiences from the outside world to support the family and the management team, to ensure that Discount Tire's future-proof for the next generation. There, my role is to bring insights and experiences from what I've done, to support the family and the management team to future-proof the business for the next generation.
I serve on the board of the largest aviation mechanic institute in the country. It's called AIM. There, I met the chairman of the business and developed a relationship with him. And, our mission there is to train the next generation of vocational trades.
And, I also have the opportunity to sit on the board of multiple non-profits and the largest B2B marketplace. It's a venture backed company called Udan, in India. So a whole diversity of boards, and my role in each is actually quite different.
Turner Novak:
So one question, this is from KJ Singh. I believe you sat on his board.
One of the things he said you're pretty good at is just knowing how to communicate to all these different stakeholders. What do you think he meant by that? How do you think about doing that if you're a board member?
Nilam Ganenthiran:
Yeah. So, it all goes back to viewing people as people, first, and trying to understand their objectives. So when we talked about the role of the board member, I mentioned it's different depending on what hat you're wearing. And, one of the things I've tried to help entrepreneurs with is thinking through that before they go into a board meeting.
You've got a set of folks on the other end of the table. They all have their own objectives for that meeting. Success for them looks different depending on whether they're investors, what stage of investment they came in at, their own views of how this company fits into their career goals. And I think you have to not placate everyone, but you have to understand that so that you actually have a framework and a lens to view their comments with.
Because everyone's going to be colored by their own biases coming into a boardroom, me included. And, I think the job of a founder is to be able to filter through all of that to figure out, "Okay. I've got all your input. What is the best thing for me to do to maximize the long-term value of this business?"
Board members are not there to make decisions for you. They're there to help you bring in other perspectives to get sharper on the decisions you do make.
Turner Novak:
And some of them might own all preferred shares, with the liq prefs. Some might own all common, but they’re up 100x, but they might not clear the pref stack. ... with the current value of the company. And, there's a lot of different cases where everyone has different opinions.
Nilam Ganenthiran:
Exactly. If you think about it, for the founder in most cases, this is their life's work. And definitionally, all of their eggs are in this one basket versus depending on the specific investor.
It could be a part of a very large portfolio, but it's actually not about the company the investor represents. It's about that individual. Is this the company that they are banking on to make partner, and is this the thing that they want to make sure goes really well? Or, is it one of many?
Turner Novak:
Yeah. Is this the thing that's going to get them promoted? Is this a big check. You know?
Nilam Ganenthiran:
Everyone's human, at the end of the day.
Turner Novak:
Yeah. If they need to do something with their position in your company to their partnership, how do you arm them to better make the right decision with the rest of the team? Whether it's, "This is strategic changes we're doing. Am I going against the broader group that this person's may be a little bit junior on," thinking about all that kind of stuff, too.
Nilam Ganenthiran:
This may be controversial, but my approach with this is... And again, I by no means get it right myself, but what I endeavor to do is, I think the best thing we all can do in a boardroom is assume that everyone else is really smart.
And, the reason I say that is I can't tell you the number of boardrooms I've been in where it is clear that one side has an opinion on something that is colored by certain biases, but doesn't want to expose those biases clearly before they start presenting their opinion.
So even just saying things like, "Look, I know from my perspective this is going to sound like it's self-serving, but X." It just lowers the defensiveness from other people around the table before you have a difficult conversation.
Turner Novak:
That's fair. And then another question, maybe it's somewhat related. Maybe you have some experience with KJ on this, and actually you kind of talked with this a little bit with Instacart stuff.
How do you decide to try new ideas? How do you decide between sticking with something when you pivot, when you give up, when you keep trying, something that maybe isn't quite working, but strategically it's an important thing to figure out? How do you kind of thread that needle?
Nilam Ganenthiran:
Yeah. Look, I think the most obvious thing to say is you have to have a framework of decision-making, and you have to bring a lot of data into these types of decisions, especially around strategy shifts. That's the obvious part.
What I've found in practice is founders and operators need to trust their instincts. I think there's a famous Bezos line, I'm not going to get it right, but it's something along the lines of, "When the data and your instinct conflict, trust your instinct," or some version of that.
And, I think about that a lot because those are the tough decisions. That's what you get paid to do. As the CEO of a company, as a founder, you're paid to make a choice when the right answer is not clear.
So when you're thinking about a big strategy shift, seek out lots of different opinions, bring in lots of data. If it's something that you're doing in response to a competitor, really arbitrate the other side of your argument. You want to launch a new product line, take the point of view of not launching the new product line and really own that. Then, just sit on it and listen to your instincts.
And the reason I say that is, I don't really know how cognitively this works, but I think your mind is soaking up all these inputs and is actually processing it to get to the right answer. At least, that's how I've thought about it. And most of the time that instinct ends up being what you should have done. It might not lead to the right commercial outcome, but X post it usually leads to the right path chosen.
Turner Novak:
So then in terms of building for the long term, how do you do something to give yourself optionality while still focusing on just whatever the most strategic priority is?
Nilam Ganenthiran:
One of the things I've learned in the last few years is that I historically have overvalued optionality.
Turner Novak:
Overvalued?
Nilam Ganenthiran:
Overvalued optionality.
Turner Novak:
Okay. I feel like you usually hear the opposite.
Nilam Ganenthiran:
Yeah. So at Instacart, I mean, I constantly used phrases like, "Let's kick the can down the road so we can make the decision later," because that means you get more data. So, that's a very well-worn strategy on like, "Get all the inputs." If you don't need to make the decision now, just wait because you'll get more inputs.
The second well-worn strategy is pick the path that gives you the most future optionality. And, I like both of those things. I'm not arguing against them. But personally, what I found is optionality is overrated because chances are you actually don't even care about those other options. You're keeping them open just for the sake of feeling better, just for the sake of not making the harder decision now, that you know is the right decision.
The other thing I've learned is optionality actually can be a drain on your mental load as a decision maker. Again, as a CEO, you're paid to make decisions, and there's only so many good decisions you can make in a day. And when you have something as an open decision, it's sort of looming over you, and it's taking up bandwidth that could otherwise be used to make the option that you chose work.
An undervalued part of strategy is how much of strategy is actually execution. So, why not just use that brain space to execute better?
Turner Novak:
So then, what is the right balance of optionality and just one main focus?
Nilam Ganenthiran:
Again, to use another Bezos decision framework, if it has characteristics of a two-way door decision, where it's reversible without too much pain, just make a decision and move on.
Turner Novak:
Because you can just go, a week later, "That didn't work. We're just not doing this.”
Nilam Ganenthiran:
A week, a month, a year later. If it is a one-way door decision, then try to keep the option open as long as possible. That's one framework.
A second framework is, "Will you have the option later to make a call?" And if you will have the option later to launch a new product line, to enter a new geography, literally take it off the list and don't bring it up for six months. But if the option's going to disappear, don't fool yourself into believing that door is always going to be open, so.
Turner Novak:
Yeah. That makes sense. How do you figure out if it's going to be there again, or not?
Nilam Ganenthiran:
That's a judgment call. Yeah. It's a judgment. And, that's where the data matters. So, that's where I do think having a framework and collecting as much intel as possible. Having folks have their ear to the ground about what your competitors are doing, what way the market's going, I think is super important.
Turner Novak:
All right. So one other question that I got from a bunch of people, how many red-eye flights have you taken in your life?
Nilam Ganenthiran:
So, a little bit of context and background. I live in Toronto with my wife and two kids. I joined Instacart when our daughter, Sitha, was born, three weeks later. And, we never moved to San Francisco because every year I thought it might be the last year for Instacart.
I joined at 12 people. So, I had such fear of something going wrong, that I just never had the guts to move because I'm like, "Ah, is this thing going to be around next year?"
Obviously, that became an irrational fear at some point in the company's journey. But as a result, we never moved our family. And, I ended up traveling back and forth between Toronto and San Francisco on a pretty much weekly basis for seven of the eight years I was there.
So to answer your question on red-eyes, I flew home Thursday night almost every week for seven years. Some of those weeks I was going other places. So, it's definitely north of 200.
Turner Novak:
I didn't want to miss this because you hit on this earlier. There was this other kind of crucible moment in Instacart's history where you had to get profitable.
Nilam Ganenthiran:
Yeah.
Turner Novak:
When was that?
Nilam Ganenthiran:
It was 2015.
It was a few months out. It was about eight months later, but we raised our Series C, which was at a $2 billion valuation, $220 million round. And, we felt like we were kings of the world. I believe it was Fortune or Forbes Magazine named us the Most Promising Company in America.
Turner Novak:
Wow.
Nilam Ganenthiran:
It's like the Madden cover.
Turner Novak:
Yeah. Oh, yeah. The curse?
Nilam Ganenthiran:
Yeah. Eight months later, post that, we went from being top of the world to really being in a pretty difficult financial situation. We were losing north of $15 a delivery. So every time you ordered on Instacart, we might as well have been stapling $15 to that bag of groceries. We had pretty significant opex bloat. The economic model was not working.
Turner Novak:
How did that happen? You just raised $220 million bucks. I'm sure investors were like, "Stamp of approval. That business looks good."
Nilam Ganenthiran:
Yeah. I think the big learning is it's not the job of the investors to run the company. So that stamp of approval is a moment in time validation, but you shouldn't view it as anything other than they are giving you money and to be good stewards of their money and return more money.
And, I think where people get tripped up is when they mistake that as something more than that like, "We must be doing something right." No. Absolutely not. The only people who can determine whether you're doing something right is your end customer.
At that moment, Instacart was serving lots of customers at an increasing rate because we were growing really, really fast, which meant we were burning more money every single day.
Turner Novak:
So as you grew, you were losing more money.
Nilam Ganenthiran:
That's correct.
Turner Novak:
That's the worst case scenario. So was it because you were opening new cities, adding new shoppers, and retailers?
Nilam Ganenthiran:
All of the above.
Turner Novak:
The network was dense enough, or-
Nilam Ganenthiran:
The whole algorithm was tuned towards growth. We were coming out of a time where the capital markets were rewarding growth at all costs. And, we lost the handle of how quickly we were growing, which means we lost track of burn.
Turner Novak:
So, this was eight months after the Series C, raised $220 million. How many months of runway did you have left at this moment you guys realized this?
Nilam Ganenthiran:
Probably, 14.
Turner Novak:
14. Okay. So, you had a little bit of time.
Nilam Ganenthiran:
I say probably because I think it was less than that, but I think we were correcting so quickly. Imagine a leaky boat and you take as many buckets as possible, and you're just trying to get the water out. So, it probably was like eight at that specific moment of pain.
Turner Novak:
Okay. That's pretty close depending on how severe it was.
Nilam Ganenthiran:
That's pretty close. And what we did was, we had a board meeting where our board was quite surprised by the state of the company's financials and gave us some pretty real feedback about our prospects for raising more primary capital with that type of profile.
And then, we got to work. We looked under every couch cushion. We did the big things. We did the small things. We did the cultural things to save pennies and dollars. And we reset the company to, I think, the way it should always have been because we're serving the grocery industry, to one where pennies really matter.
So examples of small things we did, people recycled their laptops. We stopped having snacks in the office. We cut the dinner service. So, those things don't actually change the economic profile of a company when you've raised as much money. But culturally, they send a strong signal.
Some of the hardest things we did was we had to let go of a few of our team members. Very, very painful. I still think deeply about that moment. And it was a great lesson in not over hiring.
Some of the big things we did were renegotiating major retailer contracts that were uneconomic, relooking at fees that we were not charging the customer for. For example, certain grocery stores charge for bags, others charge for bottle deposits. We were not collecting appropriately for those things.
Turner Novak:
The retailer was getting the money, but it was basically coming from Instacart?
Nilam Ganenthiran:
Correct. We went on a mission to take every penny in the P&L seriously.
Within six months we got back to unit economic profitability, which meant every time we delivered groceries, we made money to cover quarter expenses.
Turner Novak:
Nice. That's a pretty big shift.
Nilam Ganenthiran:
That was a big shift.
Turner Novak:
Yeah. To maybe put more context to it, generally when you have eight months of runway left, that doesn't mean you have eight months. It means you have about two.
Nilam Ganenthiran:
That's right.
Turner Novak:
Or maybe, a little bit more than that, but it's pretty grave.
And then also, it's not like suddenly you go from eight to unlimited. You kind of see, "Okay. Now, we have nine. Now, we have 10." So, you kind of get to see the light at the end of the tunnel, generally. It's not like a binary black and white. There's a little bit of gray.
Nilam Ganenthiran:
That’s right. Once we were able to execute that turnaround, we went back to the investor community with a business that was growing, that was stable economically, that had a team that knew how to operate in a low margin environment.
We had signed a bunch more retailers, we had started the ads business, and we were able to successfully raise a new round of capital that fueled the next chapter of Instacart's growth.
So I think a big lesson for me, but also I think more broadly is, the capital markets should be thought of as an accelerant to a working business, not a bailout of a business that isn't working.
So, our investors treated us the right way. They forced us to get disciplined, and then they gave us more fuel to get to our next step in the ladder.
Turner Novak:
What advice would you give to Nilam in 2013, joining Instacart as employee number 12, similar to that situation. Future rocket ship, or maybe you don't know. But, what advice would you give to just nail that?
Nilam Ganenthiran:
Look, there were so many things I did wrong.
Turner Novak:
Okay. Like what?
Nilam Ganenthiran:
I think everything from going too fast when we should have been patient, and being too patient when we should have gotten faster.
Turner Novak:
How do you decide in those moments?
Nilam Ganenthiran:
Yeah. Again, I think a lot of it comes from experience and just having some reps lived. In terms of what advice, I think the thing we did right was we knew time was our most precious resource. And, I think people forget that.
I'm a big fan of Ramp and just the way they have the number of days since Ramp has existed. I think that's one of the coolest things because I think people forget. You're default dead when you're building a start-up. You're in this race against time and your competitors, they're the incumbents. They're default alive.
Turner Novak:
Yeah. They can literally not show up for a year and the business will just kind of keep going. Exaggerating a little bit there, but-
Nilam Ganenthiran:
No. I mean, not far from the truth. I remember obsessing about this concept when I was at Instacart. And, we used to describe it as a tunnel. "When would I get to the other end of the tunnel where we were default alive?"
And for us, it happened a few months before COVID hit, just by dumb luck. Q4 of 2019 was when we became profitable as a company.
And then, when COVID hits and you're profitable in every way as a company, just ends up being a huge accelerant to your business versus anything else. You do not have the luxury of taking risks.
So going back, I think the big thing I'd say that we did right and I wouldn't change, is we knew time was our scarcest resource. In a similar vein, I think I got complacent at times when things were good.
I look at the generational companies, Microsoft, Nvidia, Facebook, Shopify, and the things that they seem to do right is they don't feel like they've won ever. It's never over. There's no tunnel. The entire journey is the tunnel.
Turner Novak:
It's just underground.
Nilam Ganenthiran:
It's just your underground and every day you grind hard. That's the ethos I want to do for whatever comes next.
Turner Novak:
So, what is coming next?
Nilam Ganenthiran:
I'm excited. A few months ago we started a new company, Beacon Software.
Beacon's focused on partnering with great vertical markets, software founders, and entrepreneurs, who have built businesses that service really specific niche markets with purpose-built software.
Beacon partners with them to bring technology, capital, and resources to bear, to take those businesses, acquire them, and take them to the next level so that they can fulfill their full ambition.
Turner Novak:
So, is this private equity firm or how would you describe it?
Nilam Ganenthiran:
No. We are a permanent evergreen capital vehicle. We're building a new kind of software company. We're doing it with an acquisition first model. So, we're buy and build versus I think the contrast to private equity. That model is more focused on buy and sell.
Turner Novak:
You have an indefinite hold period.
Nilam Ganenthiran:
We do. And, I think that's a part of the magic of the Beacon model. Thus far, that seems to be what's resonating with entrepreneurs who've spent sometimes decades building great businesses and serving their customer base. They want to make sure that their legacy is protected and enhanced.
Turner Novak:
Yeah. What are you most excited about in the next, I don't know, decade? Just with everything that's going on in the world right now. Anything that gets you really excited?
Nilam Ganenthiran:
I'm really optimistic about the potential for generative AI to improve all of our lives. It's funny because my friends laugh. I'm generally not viewed as the most optimistic person. But on the topic of AI, I just think it's going to make my children's lives a lot easier. And, I think it's going to unleash a level of human productivity that we've not seen before, clearly. Little things. You know?
One of the things we're doing at Beacon, we're an in-office model. As I'm walking around, I've asked the team to always have ChatGPT open on another window, just to train themselves for whatever tasks they're doing. Be it writing a memo, writing an email, looking at a spreadsheet, to just prompt themselves to say, "Can I use ChatGPT to make this easier?" I think we're all going to have to relearn how we work, and the sooner we do it the better.
I had another conversation with a friend where I was saying, "I think I'm working more now because of AI, because I'm only focused on the fun stuff." Before, you're doing a lot of work that felt like drudgery and administrative tasks. I'm now getting more quickly to the fun stuff, which is the insights, the strategy. Yeah. It's like all dessert.
Turner Novak:
Yeah. It's just this new evolution of how software works and how we interact with it. You think of what a investor does in Excel, today, the year 2024. There's a lot of work that goes into it, but imagine trying to do that before a spreadsheet existed. You're on a piece of paper, trying to make these calculations. You can't even-
Nilam Ganenthiran:
You can't. Yeah.
Turner Novak:
So, it just completely changes how you operate. So then it's like, "How does AI change the way that we interact with computers and do our job?" It will hopefully just make us more efficient-
Nilam Ganenthiran:
It'll make us more efficient, and I think it'll allow us to place a premium on the thing that's always mattered, going back to the top of the conversation, human relationships.
So, where is there going to be Alpha going forward? I think it's in human relationships. So, we should all be investing in those.
Turner Novak:
Yeah. And I like the tip, too, about just keeping ChatGPT open in a window. I know you told me to do that, too. I've been trying to. It's helpful to just run it through. I think my mother-in-Law does a good example.
I think I told you we live with my in-laws. And, she has her computer up, anytime I walk by, ChatGPT is always open.
Nilam Ganenthiran:
Whoa. That's awesome.
Turner Novak:
And it's always just the asking question. She does survey research methodology. She basically designs surveys for collecting data-
Nilam Ganenthiran:
Yeah. That's perfect for that. Right?
Turner Novak:
I mean, she was an Amazon early adopter. In '97. Early Instacart customer. She's always an early adopter, It's an interesting trend. I always pick on her. I was like, "What's my mother-in-law doing?”
Nilam Ganenthiran:
What's your mother-in-law doing? Everyone talks about what their kids are doing. Yeah. You've got a better one.
Turner Novak:
Well, I mean, I do both. It's the kids, the in-laws. You got to span the gap. My wife is always ahead on stuff, too. Sometimes they start using things before I do. I live in Michigan. This is not the tech bubble. These are normal Americans. "What's the technology and the software they're using?
For me, my cheat code is like, "Okay." They're actually using the things that people will use because they solve a problem or make them more efficient. Not just because a famous person is talking about it or shilling it to start using it. That’s kind of my unique advantage that I have.
Nilam Ganenthiran:
Exactly. You see Main Street.
Turner Novak:
Thank you so much for coming on. This has been an awesome conversation.
Nilam Ganenthiran:
I had so much fun, Turner. Thanks for having me.
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